0000950120-01-500190.txt : 20011010
0000950120-01-500190.hdr.sgml : 20011010
ACCESSION NUMBER: 0000950120-01-500190
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20011005
ITEM INFORMATION: Other events
FILED AS OF DATE: 20011009
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NORTHWEST NATURAL GAS CO
CENTRAL INDEX KEY: 0000073020
STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924]
IRS NUMBER: 930256722
STATE OF INCORPORATION: OR
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-15973
FILM NUMBER: 1754603
BUSINESS ADDRESS:
STREET 1: 220 NW SECOND AVE
CITY: PORTLAND
STATE: OR
ZIP: 97209
BUSINESS PHONE: 5032264211
8-K
1
form8k.txt
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OCTOBER 5, 2001
Date of Report (Date of earliest event reported)
[LOGO] NW NATURAL
NORTHWEST NATURAL GAS COMPANY
(Exact name of registrant as specified in its charter)
Commission File No. 0-994
OREGON 93-0256722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 N.W. SECOND AVENUE, PORTLAND, OREGON 97209
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (503) 226-4211
Part II. OTHER INFORMATION
Item 5. Other Events
On October 5, 2001, Northwest Natural Gas Company ("NW Natural") and
Enron Corp., an Oregon corporation ("Enron"), entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") providing for the acquisition, by a
wholly owned subsidiary of NW Natural (now named Northwest Energy Corporation,
but which will be finally named at a later date) formed to serve as a holding
company ("Holding Company"), of all of the issued and outstanding common stock
(the "PGE Shares") of Portland General Electric Company, an Oregon corporation
and wholly-owned subsidiary of Enron ("PGE"). The transaction is expected to
close in the fourth quarter of 2002, following the receipt of required
regulatory approvals as well as the approval of NW Natural's shareholders.
To facilitate this transaction, NW Natural, Holding Company and a
'wholly-owned' subsidiary of Holding Company have entered into an Agreement and
Plan of Merger and Reorganization (the "Plan of Merger") whereby NW Natural will
become a subsidiary of Holding Company. Following the establishment of the
holding company structure, Holding Company will acquire the PGE Shares, and, as
a result, will own two operating utilities - PGE and NW Natural. Pursuant to the
Plan of Merger, each outstanding share of common stock of NW Natural will be
converted into one share of common stock of Holding Company. NW Natural's
outstanding shares of preferred stock and preference stock will remain
outstanding. Holding Company will have two classes of common equity - common
stock and Class B common stock. Each class of common equity will have identical
rights in all respects except that the Class B common stock is non-voting. Each
share of Class B common stock will be convertible at any time into one share of
common stock except that the conversion cannot result in any holder of such
converted stock beneficially owning 5% or more of the outstanding shares of
common stock.
Under the terms of the Stock Purchase Agreement, Enron will sell PGE
to Holding Company for $1.8 billion, comprised of $1.55 billion in cash and $250
million of equity securities to be issued to Enron ($50 million in the form of
common stock and Class B common stock of Holding Company and $200 million in the
form of FELINE PRIDES(SM) of Holding Company). In addition, a $75 million
payment obligation from Enron to PGE, remaining from Enron's purchase of PGE in
1996, will be cancelled. PGE will retain its approximately $1.1 billion in
existing debt and preferred stock.
The cash portion of the purchase price will be raised through loans to
Holding Company from commercial banks and institutional lenders arranged,
pursuant to a written financing commitment (the "Financing Commitment"), by
Merrill Lynch and Credit Suisse First Boston. The Stock Purchase Agreement
provides that, if the closing has not occurred by December 8, 2002, NW Natural
and Holding Company have the obligation to use their best efforts to obtain an
extension of the Financing Commitment or enter into or extend a new financing
commitment which provides for similar financing and Holding Company shall accept
any such extended Financing Commitment or new financing commitment if the
2
funding conditions and other terms are not materially adverse to Holding Company
in comparison to the Financing Commitment originally issued.
The number of shares of Holding Company's common stock and Class B
common stock that Enron shall receive shall be determined by dividing $50
million by the average market price of NW Natural common stock for each of
twenty consecutive trading days ending on the third trading day prior to the
closing date; provided, however, that the aggregate number of shares shall be no
more than 2,295,257 and no less than 1,877,938. The aggregate number of shares
of Holding Company common stock to be issued at closing shall be equal to 4.9%
of the outstanding shares of common stock as of the closing date and the
remainder of shares to be issued will be Class B common stock.
Holding Company will issue $200 million in FELINE PRIDES(SM) to Enron
as a portion of the purchase price. The FELINE PRIDES(SM) will consist of 4
million shares of preferred stock of Holding Company with a liquidation value of
$50 per share, together with a forward purchase agreement of Enron to purchase
Class B common stock of Holding Company at a price determined as described in
the Stock Purchase Agreement.
Upon the closing of the acquisition, Holding Company and Enron shall
enter into a Securityholders and Registration Rights Agreement which will grant,
among other things, Enron the right to designate up to two individuals to serve
on Holding Company's board of directors, and certain registration rights, which
will restrict Enron's disposition of securities issued by Holding Company.
The Stock Purchase Agreement contains certain covenants of the parties
pending the consummation of the transaction. Generally, Enron must cause PGE to
carry on its business in the ordinary course consistent with past practice and
use all reasonable efforts to preserve intact its present business
organizations and goodwill. The Stock Purchase Agreement also contains certain
restrictions and limitations on PGE with respect to, among other things,
dividends on and repurchases of its capital stock, issuance of securities,
amendment of charter documents, acquisitions, dispositions, indebtedness,
capital expenditures, compensation and benefits, nuclear operations, contracts,
the solicitation of employees and accounting matters. Subject to certain
exceptions, cash dividends on, or repurchases of, PGE common stock between
October 5, 2001, and the closing date are limited to the sum of (i) the
aggregate amount of consolidated net income of PGE for the period from
January 1, 2001 through the closing date and (ii) $104.2 million.
The proposed transaction is subject to certain customary closing
conditions, including, without limitation, (i) the absence of any injunction,
order, law or regulation preventing consummation of the sale of the PGE Shares,
(ii) receipt by Enron, NW Natural and Holding Company of required regulatory
approvals, (iii) the approval of NW Natural's shareholders, (iv) the
availability of the debt financing described above on the conditions stated in
the Stock Purchase Agreement, (v) performance of obligations of Enron and NW
Natural pursuant to the Stock Purchase Agreement, and (vi) the accuracy of
Enron's and NW Natural's representations and warranties. Required regulatory
approvals include the Oregon Public Utility Commission, the Washington Utilities
and Transportation Commission, the Federal Energy Regulatory Commission, the
3
Nuclear Regulatory Commission and the Securities and Exchange Commission. The
Holding Company will be exempt from registration under the Public Utility
Holding Company Act of 1935, as amended.
The Stock Purchase Agreement may be terminated under certain
circumstances, including termination by either party if (i) the closing shall
not have occurred on or before December 8, 2002 or, if required regulatory
approvals are not obtained on or prior to December 8, 2002, the first business
day which is 18 months after the date of the Stock Purchase Agreement or (ii)
any of the required regulatory approvals have been denied by a final and
nonappealable order, judgment or decree. The Stock Purchase Agreement may be
terminated by NW Natural if there is a breach or violation by Enron of any
covenant, representation or warranty which resulted in a material adverse effect
in respect of PGE and such breach or violation is not cured by the earlier of
the closing date or within 30 days of notice to Enron. The Stock Purchase
Agreement may be terminated by Enron if there is a material breach or violation
by Holding Company or NW Natural of any covenant, representation or warranty and
such breach or violation is not cured by the earlier of the closing date or
within 30 days of notice to NW Natural.
The Stock Purchase Agreement, the Plan of Merger, the form of
Securityholders and Registration Rights Agreement, the terms of the FELINE
PRIDES(SM) and the press release issued in connection therewith are filed
herewith as Exhibits 10.1, 10.2, 10.3, 10.4 and 99, respectively, and are
incorporated herein by reference. The description of the agreements and terms
set forth herein do not purport to be complete and are qualified in their
entirety by the exhibits hereto.
Forward-Looking Statements
--------------------------
This report and other presentations made by the Company from time to
time may contain forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and other statements which are other than statements of
historical facts. The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a reasonable
basis. However, each such forward-looking statement involves uncertainties and
is qualified in its entirety by reference to the following important factors
that could cause the actual results of the Company to differ materially from
those projected in such forward-looking statements: (i) prevailing governmental
policies and regulatory actions, including those of the OPUC and the WUTC, with
respect to allowed rates of return, industry and rate structure, purchased gas
and investment recovery, acquisitions and dispositions of assets and facilities,
operation and construction of plant facilities, present or prospective wholesale
and retail competition, changes in tax laws and policies and changes in and
compliance with environmental and safety laws and policies; (ii) weather
conditions and other natural phenomena; (iii) unanticipated population growth or
decline, and changes in market demand and demographic patterns; (iv) competition
for retail and wholesale customers; (v) pricing of natural gas relative to other
energy sources; (vi) unanticipated changes in interest or foreign currency
4
exchange rates or in rates of inflation; (vii) unanticipated changes in
operating expenses and capital expenditures; (viii) capital market conditions;
(ix) competition for new energy development opportunities; and (x) legal and
administrative proceedings and settlements. All subsequent forward-looking
statements, whether written or oral and whether made by or on behalf of the
Company, also are expressly qualified by these cautionary statements.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for the
Company to predict all such factors, nor can it assess the impact of each such
factor or the extent to which any factor, or combination of factors, may cause
results to differ materially from those contained in any forward-looking
statement.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
10.1 - Stock Purchase Agreement, dated October 5, 2001, by and
among Enron Corp., Northwest Natural Gas Company, Northwest
Energy Corporation and Enron Northwest Assets, LLC.
10.2 - Agreement and Plan of Merger and Reorganization, dated as
of October 5, 2001, among Northwest Natural Gas Company,
Northwest Energy Corporation and Northwest Energy Sub Corp.
10.3 - Form of Securityholders and Registration Rights Agreement.
10.4 - Terms of FELINE PRIDES(SM).
99 - Press Release of Northwest Natural Gas Company issued
October 8, 2001.
5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHWEST NATURAL GAS COMPANY
(Registrant)
Dated: October 9, 2001 /s/ Mark S. Dodson
---------------------------------------
President and
Chief Operating Officer
6
EXHIBIT INDEX
Exhibits Description Page
10.1 - Stock Purchase Agreement by and among Enron Corp.,
Northwest Gas Company, Northwest Energy Corporation
and Enron Northwest Assets, LLC dated October 5, 2001.
10.2 - Agreement and Plan of Merger and Reorganization,
dated as of October 5, 2001, among Northwest Natural
Gas Company, Northwest Energy Corporation and
Northwest Energy Sub Corp.
10.3 - Form of Securityholders and Registration Rights
Agreement.
10.4 - Terms of FELINE PRIDES(SM).
99 - Press Release of Northwest Natural Gas Company issued
October 8, 2001.
7
EX-10
3
exhibit101.txt
EXHIBIT 10.1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and among
ENRON CORP.,
ENRON NORTHWEST ASSETS, LLC,
NORTHWEST NATURAL GAS COMPANY
and
NORTHWEST ENERGY CORPORATION
October 5, 2001
TABLE OF CONTENTS
-----------------
ARTICLE I
SALE AND PURCHASE OF THE SHARES
Section 1.1 Sale and Purchase of the Shares.................................2
Section 1.2 First Alternative Procedure for Sale and Purchase of Shares.....2
Section 1.3 Second Alternative Procedure for Sale and Purchase of Shares....3
Section 1.4 Assumption of Enron Merger Obligation...........................4
Section 1.5 Determination of Numbers of Shares of Common Stock and Class
B Common Stock..................................................4
Section 1.6 NW Natural Change of Control Adjustment.........................5
ARTICLE II
CLOSING
Section 2.1 Closing.........................................................5
Section 2.2 Closing Transactions............................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization and Qualification..................................7
Section 3.2 Subsidiaries....................................................8
Section 3.3 Capitalization..................................................8
Section 3.4 Authority; Non-Contravention; Statutory Approvals; Compliance...9
Section 3.5 Reports and Financial Statements...............................10
Section 3.6 Absence of Certain Changes or Events...........................11
Section 3.7 Litigation.....................................................11
Section 3.8 Tax Matters....................................................11
Section 3.9 Employee Benefit Plans and Labor Agreements....................12
Section 3.10 Environmental Protection.......................................14
Section 3.11 Regulation as a Utility........................................15
Section 3.12 Insurance......................................................15
Section 3.13 Status of PGE Nuclear Facility.................................15
Section 3.14 Purchase for Investment........................................16
Section 3.15 Due Diligence..................................................16
Section 3.16 No Knowledge of Breach.........................................16
Section 3.17 Contracts with Enron...........................................16
Section 3.18 Limitation of Representations and Warranties...................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF NW NATURAL AND PURCHASER
Section 4.1 Organization and Qualification.................................17
Section 4.2 Capitalization.................................................17
Section 4.3 Financing Commitment...........................................19
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance..19
Section 4.5 NW Natural SEC Reports and Financial Statements................21
Section 4.6 Absence of Certain Changes or Events...........................21
Section 4.7 Litigation.....................................................21
Section 4.8 Tax Matters....................................................21
Section 4.9 Employee Benefit Plans and Labor Agreements....................22
Section 4.10 Environmental Protection.......................................24
Section 4.11 Regulation as a Utility........................................25
Section 4.12 Insurance......................................................25
Section 4.13 Purchase for Investment........................................25
Section 4.14 Due Diligence..................................................25
Section 4.15 No Knowledge of Breach.........................................25
Section 4.16 Limitation of Representations and Warranties...................25
ARTICLE V
CONDUCT OF BUSINESS OF PGE AND PGH II
PENDING THE CLOSING
Section 5.1 Ordinary Course of Business....................................26
Section 5.2 Dividends and Repurchases......................................26
Section 5.3 Issuance of Securities.........................................28
Section 5.4 Charter Documents..............................................28
Section 5.5 Acquisitions...................................................28
Section 5.6 No Dispositions................................................28
Section 5.7 Indebtedness...................................................28
Section 5.8 Capital Expenditures...........................................28
Section 5.9 Compensation, Benefits.........................................29
Section 5.10 Cooperation, Notification......................................29
Section 5.11 Insurance......................................................29
Section 5.12 Permits .......................................................29
Section 5.13 Nuclear Operations.............................................30
Section 5.14 Discharge of Liabilities.......................................30
Section 5.15 Contracts......................................................30
Section 5.16 Certain Actions................................................30
Section 5.17 Non-Solicitation...............................................31
Section 5.18 Accounting Matters.............................................31
ARTICLE VI
CONDUCT OF BUSINESS OF NW NATURAL
PENDING THE CLOSING
Section 6.1 Ordinary Course of Business....................................31
Section 6.2 Dividends and Repurchases......................................32
Section 6.3 Issuance of Securities.........................................32
Section 6.4 Charter Documents..............................................32
Section 6.5 Indebtedness...................................................32
ii
Section 6.6 Compensation, Benefits.........................................32
Section 6.7 Cooperation, Notification......................................33
Section 6.8 Insurance......................................................33
Section 6.9 Permits........................................................33
Section 6.10 Discharge of Liabilities.......................................33
Section 6.11 Contracts......................................................33
Section 6.12 Certain Actions................................................34
Section 6.13 Accounting Matters.............................................34
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information..........................................34
Section 7.2 Regulatory Matters.............................................35
Section 7.3 Cooperation; Best Efforts......................................36
Section 7.4 Public Announcements...........................................36
Section 7.5 Employee Benefit Plans.........................................36
Section 7.6 Expenses.......................................................39
Section 7.7 No Breach, Etc.................................................39
Section 7.8 Directors' and Officers' Indemnification.......................39
Section 7.9 Insurance......................................................39
Section 7.10 Corporate Name.................................................40
Section 7.11 Related Party Contracts........................................40
Section 7.12 Tax Matters....................................................40
Section 7.13 Evidence of Financing Availability.............................44
Section 7.14 Information Supplied...........................................44
Section 7.15 NW Natural Shareholders Meeting................................44
Section 7.16 Registration Statement.........................................44
Section 7.17 Rights Plan....................................................45
Section 7.18 California Receivables.........................................45
ARTICLE VIII
CONDITIONS
Section 8.1 Joint Conditions to Obligations of the Parties.................46
Section 8.2 Conditions to Obligations of NW Natural and Purchaser..........47
Section 8.3 Conditions to Obligations of Seller and Enron NW Assets........48
ARTICLE IX
TERMINATION
Section 9.1 Termination....................................................48
Section 9.2 Procedure and Effect of Termination............................49
ARTICLE X
MISCELLANEOUS
Section 10.1 Non-Survival of Representations, Warranties, Covenants
and Agreements.................................................50
iii
Section 10.2 Brokers .......................................................50
Section 10.3 Notices .......................................................50
Section 10.4 Miscellaneous..................................................51
Section 10.5 Interpretation.................................................51
Section 10.6 Counterparts; Effect...........................................51
Section 10.7 Parties in Interest............................................51
Section 10.8 Specific Performance...........................................52
Section 10.9 Governing Law..................................................52
Section 10.10 Disclosure Schedules...........................................52
Exhibit A: Agreement and Plan of Reorganization and Merger
Exhibit B: Form of Securityholders' Agreement
Exhibit C: Financing Commitment
Exhibit D: Form of Amended and Restated Articles of Incorporation
Exhibit E: Term Sheet Regarding FELINE PRIDES
iv
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated October 5, 2001 is
by and among ENRON CORP., an Oregon corporation ("Seller"), ENRON NORTHWEST
ASSETS, LLC, a Delaware limited liability company ("Enron NW Assets"), NORTHWEST
NATURAL GAS COMPANY, an Oregon corporation ("NW Natural") and NORTHWEST ENERGY
CORPORATION, an Oregon corporation and a wholly-owned subsidiary of NW Natural
("Purchaser"). Capitalized terms used herein shall have the meanings ascribed to
them in Annex A hereto, unless otherwise expressly provided in this Agreement.
Seller, Enron NW Assets, NW Natural and Purchaser are referred to individually
as a "Party," and collectively as the "Parties."
R E C I T A L S:
NW Natural, Purchaser, and Northwest Energy Sub Corporation, an Oregon
corporation and a wholly-owned subsidiary of Purchaser ("Merger Sub") have
entered into an Agreement and Plan of Reorganization and Merger dated as of the
date hereof, a copy of which is attached hereto as Exhibit A (the "NW Natural
Merger Agreement"), which provides for the merger of Merger Sub with and into NW
Natural, with NW Natural being the surviving corporation in such merger (the "NW
Natural Merger"), pursuant to which each issued and outstanding share of common
stock, par value $3-1/6 per share ("NW Natural Common Stock") will be converted
into one share of Common Stock and upon consummation of the NW Natural Merger,
NW Natural will become a subsidiary of Purchaser;
Seller owns all of the issued and outstanding common stock, par value $3.75
per share (the "PGE Shares") of Portland General Electric Company, an Oregon
corporation ("PGE");
Enron NW Assets holds an option to purchase all of the PGE Shares from
Seller (the "PGE Option") pursuant to an Option Agreement dated as of May 7,
2001 (the "PGE Option Agreement");
Portland General Holdings, Inc., an Oregon corporation and a wholly-owned
subsidiary of Seller ("PGH"), owns all of the issued and outstanding common
stock, par value $1.00 per share (the "PGH II Shares") of PGH II, Inc., an
Oregon corporation ("PGH II");
Purchaser desires to purchase, and Seller and Enron NW Assets desire to
sell, the PGE Shares, subject in all respects to the provisions of this
Agreement; and
Purchaser desires to purchase, and Seller desires to cause PGH to sell, the
PGH II Shares, subject in all respects to the provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE SHARES
Section 1.1 Sale and Purchase of the Shares.
--------------------------------------------
(a) Sale and Purchase of PGE Shares. Upon the terms and subject to the
-------------------------------
satisfaction of the conditions contained in this Agreement, at the Closing, (i)
Enron NW Assets shall exercise the PGE Option to purchase the PGE Shares from
Seller, (ii) Seller shall sell, transfer and deliver to Enron NW Assets, and
Enron NW Assets shall purchase pursuant to the PGE Option Agreement, and accept
delivery from Seller of, the PGE Shares, and (iii) Enron NW Assets shall sell,
transfer and deliver to Purchaser, and Purchaser shall purchase and accept
delivery from Enron NW Assets of, the PGE Shares.
(b) PGE Purchase Price. The purchase price (for purposes of this Section,
------------------
the "PGE Purchase Price") to be paid by Purchaser to Enron NW Assets for the PGE
Shares shall consist of the following:
(i) $1,549,000,000 in cash, which (i) shall be adjusted as provided in
Section 1.6 and (ii) shall be paid as provided in subsection (g) of Section
2.2 (as so adjusted, the "PGE Cash Purchase Price");
(ii) 4,000,000 units of Feline Prides;
(iii) a number of shares of Common Stock to be determined pursuant to
the provisions of Section 1.5 of this Agreement; and
(iv) a number of shares of Class B Common Stock to be determined
pursuant to the provisions of Section 1.5 of this Agreement.
(c) Sale and Purchase of PGH II Shares. Upon the terms and subject to the
----------------------------------
satisfaction of the conditions contained in this Agreement, at the Closing,
Seller shall cause PGH to sell, transfer and deliver to Purchaser, and Purchaser
shall purchase and accept delivery from PGH of, the PGH II Shares.
The purchase price for the PGH II Shares shall be $1,000,000 in cash,
which shall be paid to PGH as provided in subsection (j) of Section 2.2
(the "PGH II Purchase Price").
Section 1.2 First Alternative Procedure for Sale and Purchase of Shares.
------------------------------------------------------------------------
Upon the terms and subject to the satisfaction of the conditions contained in
this Agreement and upon written notice delivered by Seller to NW Natural and
Purchaser not later than the 5th Business Day prior to the Closing Date (the
"Purchase and Sale Notice"), the sale and purchase of the Shares shall,
notwithstanding the provisions of Section 1.1, be completed as follows:
(a) Sale of the Securities. Purchaser shall sell all or such part of the
----------------------
Securities, as the Seller may direct in the Purchase and Sale Notice, to one or
more Designated Transferees, as Seller may direct in the Purchase and Sale
Notice, which shall purchase such Securities for cash in an amount per unit or
share as follows: (i) FELINE PRIDES: $50 per unit; (ii) Common Stock: the
2
Purchase Price Per Share; and (iii) Class B Common Stock: the Purchase Price Per
Share.
(b) Exercise of PGE Option. Enron NW Assets shall exercise the PGE Option,
----------------------
and, thereupon, pursuant to the PGE Option Agreement, Seller shall sell,
transfer and deliver to Enron NW Assets, and Enron NW Assets shall purchase and
accept delivery from Seller of, the PGE Shares.
(c) Sale of the PGE Shares. Enron NW Assets shall sell, transfer and
----------------------
deliver to Purchaser, and Purchaser shall purchase and accept delivery from
Enron NW Assets of, the PGE Shares.
(d) PGE Purchase Price. The purchase price (for purposes of this Section,
------------------
the "PGE Purchase Price") to be paid by Purchaser to Enron NW Assets for the PGE
Shares shall consist of the following:
(i) The PGE Cash Purchase Price plus the amount of cash paid by the
Designated Transferee or Transferees to Purchaser pursuant to subsection
(a) of this Section 1.2; and
(ii) the number of units of the FELINE PRIDES, Common Stock and Class
B Common Stock provided in clauses (ii), (iii) and (iv) of subsection (b)
of Section 1.1 reduced by the number of units or shares of each such class
of Securities issued and sold by Purchaser to the Designated Transferee or
Transferees pursuant to subsection (a) of this Section 1.2.
(e) Sale and Purchase of PGE II Shares. Upon the terms and subject to the
----------------------------------
satisfaction of the conditions contained in this Agreement, at the Closing,
Seller shall cause PGH to sell, transfer and deliver to Purchaser, and Purchaser
shall purchase and accept delivery from PGH of, the PGH II Shares.
The purchase price for the PGH II Shares shall be the PGH II Purchase
Price payable in cash, which shall be paid to PGH as provided in subsection
(j) of Section 2.2.
(f) Seller Risk. If for any reason, any Designated Transferee fails to
-----------
perform its obligations under this Section 1.2, the sale and purchase of the
Shares to be purchased by such Designated Transferee shall be completed, as
applicable, pursuant to Section 1.1, in which case the provisions of this
Section 1.2 shall no longer apply, or pursuant to Section 1.3, in which case the
provisions of this Section 1.2 shall be deemed to be modified as set forth in
Section 1.3.
If the PGE Option is exercised prior to the Closing Date, Enron NW Assets
will be bound by and perform all of the obligations of Seller under this Article
I and Article II hereof. The exercise of the PGE Option shall not otherwise
relieve Seller of its obligations hereunder.
Section 1.3 Second Alternative Procedure for Sale and Purchase of Shares.
-------------------------------------------------------------------------
If for any reason, Enron NW Assets does not, at the Closing, exercise the PGE
Option or fails to complete the purchase of the PGE Shares after exercising the
PGE Option and
3
(a) No Notice. Seller does not deliver the Purchase and Sale Notice
---------
pursuant to Section 1.2, the purchase and sale of the Shares shall be completed
as provided in Section 1.1 except that:
(i) The provisions of subsection (a) of Section 1.1 shall be deemed to
be and read as follows: "Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement, at the Closing, Seller shall
sell, transfer and deliver to Purchaser, and Purchaser shall purchase and
accept delivery from Seller of, the PGE Shares." and
(ii) the payment of the PGE Purchase Price contemplated by subsection
(b) of Section 1.1 shall be made to Seller rather than to Enron NW Assets;
or
(b) Notice. Seller does deliver the Purchase and Sale Notice pursuant to
------
Section 1.2, the purchase and sale of the Shares shall be governed by Section
1.2 except that:
(i) The provisions of subsection (b) of Section 1.2 shall no longer
apply;
(ii) the provisions of subsection (c) of Section 1.2 shall be deemed
to be and read as follows: "Seller shall sell, transfer and deliver to
Purchaser, and Purchaser shall purchase and accept delivery from Seller of,
the PGE Shares"; and
(iii) the payment of the PGE Purchase Price contemplated by subsection
(d) of Section 1.2 shall be made to Seller rather than Enron NW Assets.
Section 1.4 Assumption of Enron Merger Obligation. Effective as of the
-------------------------------------------------
Closing Date, Purchaser shall assume from Seller, and shall indemnify Seller,
Enron NW Assets and any Designated Transferee for, all obligations in respect of
the Enron Merger Obligation for the period from and after the Closing Date. From
and after the date of this Agreement, the Seller will make no further payments
of principal or interest with respect to the Enron Merger Obligation, the amount
of which as of September 30, 2001, was $71,969,288.
Section 1.5 Determination of Numbers of Shares of Common Stock and Class B
--------------------------------------------------------------------------
Common Stock. The aggregate number of shares of Common Stock and Class B Common
------------
Stock to be issued by Purchaser to pursuant to Section 1.1, Section 1.2 or
Section 1.3, as applicable, shall be the quotient resulting from the division of
$50,000,000 by the Average Market Price of NW Natural Common Stock as of the
Closing Date; provided, however, that the aggregate number of shares shall be no
more than 2,295,257 and no less than 1,877,938. The aggregate number of shares
of Common Stock to be issued at the Closing to Enron NW Assets, Seller or any
Designated Transferee, as applicable, shall be equal to 4.9% of the outstanding
shares of Common Stock as of the Closing Date (giving effect to the NW Natural
Merger and the issuance of shares of Common Stock and Class B Common Stock
pursuant to this Agreement), rounded down to the nearest whole number of shares,
and the remainder of the shares to be issued to such entities shall be shares of
Class B Common Stock.
4
Section 1.6 NW Natural Change of Control Adjustment.
----------------------------------------------------
(a) Prior to the Closing: If a NW Natural Change of Control occurs on or
--------------------
prior to the Closing Date, at Closing the PGE Purchase Price shall be payable
solely in cash. Such PGE Purchase Price shall consist of the PGE Cash Purchase
Price plus $250,000,000, but shall not include any FELINE PRIDES, Common Stock
or Class B Common Stock, and neither Article II nor the remainder of this
Agreement shall be deemed to include any references to such Securities or to the
Securityholders' Agreement. In such event, Section 1.2 shall no longer be deemed
to apply, and, if any Purchase and Sale Notice shall have theretofore been
delivered pursuant to Section 1.2, such Purchase and Sale Notice shall be deemed
to be of no further force or effect, and the entire PGE Purchase Price shall be
paid, in the alternative, to Enron NW Assets pursuant to Section 1.1 or to the
Seller pursuant to subsection (a) of Section 1.3, as applicable.
(b) After the Closing: If:
-----------------
(i) at or prior to the Closing Date, NW Natural has agreed to, or the
Board of Directors of NW Natural has not rejected a transaction that, if it
were consummated or became effective, would constitute a NW Natural Change
of Control,
(ii) such transaction has not been consummated or become effective on
or before the Closing Date, and
(iii) such transaction is consummated or becomes effective after the
Closing Date,
then at any time beginning five Business Days after the consummation or
effective time of such NW Natural Change of Control, Enron NW Assets, the
Designated Transferee or Seller, as the case may be, shall have the option, but
not the obligation, by delivering written notice of exercise to Purchaser, to
require Purchaser to purchase from Enron NW Assets, the Designated Transferees
or Seller, as the case may be, all, but not less than all, of the Securities of
Purchaser issued at the Closing for an aggregate purchase price of $250 million
in cash, without interest thereon but increased by an amount equal to all
accrued but unpaid dividends on the FELINE PRIDES payable at the closing of such
sale. At the closing of such sale, the party or parties exercising the option
shall deliver the certificates representing the securities being sold, duly
endorsed in blank, free and clear of all Liens, together with all required tax
transfer stamps attached, against payment of the purchase price by wire transfer
of immediately available funds to an account or accounts designated in writing
by the party or parties selling such securities.
ARTICLE II
CLOSING
Section 2.1 Closing. The closing of the purchase and sale of the Shares
-------------------
(the "Closing") will take place at the offices of Vinson & Elkins L.L.P., 2300
First City Tower, 1001 Fannin, Houston, Texas, as soon as reasonably practicable
but in no event later than 20 Business Days following the date on which the
conditions specified in Article VIII (other than the conditions which by their
terms are only capable of being satisfied on the Closing Date) have been
satisfied or waived, unless another time, date and place is agreed to in writing
by the Parties. The date of the Closing is referred to in this Agreement as the
"Closing Date."
5
Section 2.2 Closing Transactions. At the Closing, the following events
--------------------------------
shall occur, each event being (i) conditioned on the occurrence or waiver of
each other event and (ii) being deemed to have occurred simultaneously with the
other events, except that the events described in clauses (a), (b) and (c) below
shall be deemed to have occurred immediately prior to each other event listed
below:
(a) Amended and Restated Charter. NW Natural and Purchaser (including their
----------------------------
respective Boards of Directors) shall take all applicable actions under
applicable law duly to adopt and approve the Amended and Restated Charter and
pursuant thereto Purchaser shall file with the Secretary of State of the State
of Oregon the Amended and Restated Charter, including Articles of Amendment with
respect to the Preferred Shares.
(b) NW Natural Merger Agreement. Merger Sub shall merge with and into NW
---------------------------
Natural pursuant to the terms of the NW Natural Merger Agreement and in
connection therewith each outstanding share of NW Natural Common Stock shall be
converted into one share of Common Stock of Purchaser.
(c) PGE Option. To the extent required under Section 1.1 or 1.2, Enron NW
----------
Assets shall exercise the PGE Option and purchase the PGE Shares in accordance
with the terms of the PGE Option Agreement; Seller will deliver to Enron NW
Assets the PGE Shares by delivering the certificates representing the PGE Shares
duly endorsed for transfer or accompanied by appropriate stock powers duly
endorsed for transfer, in favor of Enron NW Assets or its designee.
(d) PGE Shares. As and to the extent required under Section 1.1, 1.2 or
----------
1.3, Enron NW Assets and Seller shall deliver to Purchaser the PGE Shares by
delivering the certificates representing the PGE Shares duly endorsed for
transfer or accompanied by appropriate stock powers, in favor of Purchaser.
(e) Securities. To the extent required under Section 1.1 or subsection (a)
----------
of Section 1.3, Purchaser shall issue and deliver the Securities to Enron NW
Assets or Seller or, to the extent required under Section 1.2 or subsection (b)
of 1.3, Purchaser shall sell the Securities to each Designated Transferee as
required by the Purchase and Sale Notice and, in any such case, shall deliver to
Enron NW Assets, the Seller or the Designated Transferees, as appropriate, the
Securities by delivering the certificates representing each class of such
Securities so sold by delivering the certificates registered in the name of such
entity as is entitled thereto duly executed on behalf of Purchaser and
authenticated by Purchaser's stock transfer agent.
(f) Payment for Securities. To the extent required under Section 1.2 or
----------------------
subsection (b) of Section 1.3, each Designated Transferee shall pay the purchase
price of the Securities it is required to purchase as set forth in the Purchase
and Sale Notice by wire transferring such amount, in lawful money of the United
States of America in immediately available funds, to such account of Purchaser
as Purchaser shall have designated by written notice to Seller.
(g) PGE Cash Purchase Price. If either Section 1.1 or subsection (a) of
-----------------------
Section 1.3 applies, Purchaser shall pay the PGE Cash Purchase Price by wire
transferring such amount, in
6
lawful money of the United States of America in immediately available funds, to
such account of Enron NW Assets or Seller as Seller shall have designated by
written notice to Purchaser.
(h) Modified PGE Cash Purchase Price. If either Section 1.2 or subsection
--------------------------------
(b) of Section 1.3 applies, Purchaser shall pay the PGE Cash Purchase Price, as
modified by clause (i) of subsection (d) of Section 1.2 or by subsection (a) of
Section 1.6, as applicable, by wire transferring such amount, in lawful money of
the United States of America in immediately available funds, to such account of
Enron NW Assets or Seller as Seller shall have designated by written notice to
Purchaser.
(i) PGH II Shares. Seller will cause PGH to deliver to Purchaser the PGH II
-------------
Shares by delivering the certificates representing the PGH II Shares duly
endorsed for transfer or accompanied by appropriate stock powers duly endorsed
for transfer, in favor of Purchaser;
(j) PGH II Purchase Price. Purchaser will pay the PGH II Purchase Price by
---------------------
wire transferring such amount, in lawful money of the United States of America
in immediately available funds, to such account as Seller shall have designated,
on behalf of PGH, by written notice to Purchaser;
(k) Enron Merger Obligation. Purchaser will deliver to Seller documentation
-----------------------
regarding the assumption of the obligations in respect of the Enron Merger
Obligation for the period from and after the Closing Date pursuant to Section
1.4 of this Agreement in form reasonably satisfactory to Seller; and
(l) Securityholders' Agreement. Enron NW Assets, any Designated Transferee
--------------------------
and Seller shall, to the extent they acquired any Common Stock, Class B Common
Stock or FELINE PRIDES pursuant to Article I execute and deliver, and Purchaser
shall execute and deliver, the Securityholders' Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that:
Section 3.1 Organization and Qualification.
-------------------------------------------
(a) Seller. Seller is a corporation duly organized, validly existing, and
------
in good standing under the Laws of the State of Oregon.
(b) Enron NW Assets. Enron NW Assets is a limited liability company duly
---------------
formed, validly existing and in good standing under the laws of the State of
Delaware.
(c) PGE and PGH II. Each of PGE, PGH II and their respective subsidiaries
--------------
(i) is a corporation or limited liability company duly organized or formed,
validly existing and in good standing under the laws of its jurisdiction of
organization, (ii) has all requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, and (iii) is duly qualified, licensed or admitted to do
business and is in good standing to do business in each jurisdiction in which
7
the nature of its business or the ownership or leasing of its assets and
properties makes such qualification necessary.
Section 3.2 Subsidiaries. Section 3.2 of the Seller Disclosure Schedule
------------------------
contains a description as of the date hereof of all subsidiaries and other joint
ventures of PGE and PGH II, including the name of each such entity, the state or
jurisdiction of its incorporation or organization and PGE's or PGH II's interest
therein, as the case may be. Except as disclosed in Section 3.2 of the Seller
Disclosure Schedule, all the issued and outstanding shares of capital stock or
membership interests, as the case may be, of each subsidiary of PGE and PGH II
are validly issued, fully paid, nonassessable and free of preemptive rights and
are owned directly or indirectly by PGE or PGH II, as the case may be, free and
clear of any Liens, and there are no outstanding subscriptions, options, calls,
contracts or other commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating any such
subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of its capital stock or membership interests, as the case may
be, or obligating it to grant, extend or enter into any such agreement or
commitment.
Section 3.3 Capitalization.
---------------------------
(a) Shares. The authorized capital stock of PGE consists of 100,000,000
------
shares of PGE Common Stock and 30,000,000 shares of PGE Preferred Stock. The
authorized capital stock of PGH II consists of 10,000 shares of PGH II Common
Stock. Subject to any repurchases of PGE Common Stock after the date hereof
permitted by Section 5.2, there are 42,758,877 shares of PGE Common Stock issued
and outstanding, all of which are owned by Seller, and 300,000 shares of the
7.75% series of PGE Preferred Stock issued and outstanding. There are 1,000
shares of PGH II Common Stock issued and outstanding, all of which are owned by
PGH. Subject to any repurchases of PGE Common Stock after the date hereof
permitted by Section 5.2, there are no shares of capital stock held in the
treasury of PGE or PGH II. All of the outstanding shares of capital stock of PGE
and PGH II are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights and are owned free and clear of any Liens. Except as
set forth in Section 3.3(a) of the Seller Disclosure Schedule, there are no
outstanding subscriptions, options, calls, contracts or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating Seller, PGE, PGH or PGH II or any Designated
Transferee to issue, deliver or sell, or cause to be issued, delivered or sold,
shares of the capital stock or other voting securities of PGE or PGH II or their
subsidiaries or obligating Seller, PGE, PGH or PGH II or any Designated
Transferee to grant, extend or enter into any such agreement or commitment.
(b) Voting Debt. As of the date of this Agreement, no bonds, debentures,
-----------
notes or other indebtedness of PGE, PGH II or any of their subsidiaries having
the right to vote (or which is convertible into or exercisable for securities
having the right to vote) (together, "PGE Voting Debt") on any matters on which
shareholders may vote is issued or outstanding nor are there any outstanding
options obligating PGE, PGH II or any of their subsidiaries to issue or sell any
PGE Voting Debt or to grant, extend or enter into any option with respect
thereto.
8
Section 3.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
--------------------------------------------------------------------------
(a) Authority. Seller and Enron NW Assets have all requisite power and
---------
authority to enter into this Agreement and each Ancillary Agreement and, subject
to the Seller Required Statutory Approvals, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each Ancillary Agreement and the consummation by Seller and Enron NW Assets
of the transactions contemplated hereby and thereby have been or, in the case of
the execution and delivery of the Securityholders' Agreement and the performance
thereof by the Seller, Enron NW Assets and each Designated Transferee, if any,
will be prior to the Closing duly authorized by all necessary corporate or
organizational action on the part of each of them. This Agreement and the PGE
Option Agreement have been duly and validly executed and delivered by Seller and
Enron NW Assets and the Securityholders' Agreement will have been duly executed
and delivered prior to the Closing by each of them and each Designated
Transferee, if any, to the extent that they are intended to become and do become
parties thereto. Assuming the due authorization, execution and delivery of this
Agreement and the Securityholders' Agreement by NW Natural and Purchaser, this
Agreement and each Ancillary Agreement constitutes or will prior to the Closing
constitute the legal, valid and binding obligation of Seller, Enron NW Assets
and each Designated Transferee, if any, to the extent they are intended to
become and do become parties thereto, enforceable against each of them in
accordance with their terms. Seller has heretofore delivered a true and complete
copy of the PGE Option Agreement to Purchaser.
(b) Non-Contravention. Except as disclosed in Section 3.4(b) of the Seller
-----------------
Disclosure Schedule, the execution and delivery by Seller and Enron NW Assets of
this Agreement do not and the execution and delivery of the Securityholders'
Agreement by Seller, Enron NW Assets and each Designated Transferee, if any, to
the extent that they are intended to become and do become parties thereto will
not, and the consummation of the transactions contemplated hereby and thereby
will not, violate, conflict with or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of payment, termination, cancellation, modification or
acceleration of any obligation under, or result in the creation of any Lien upon
any of the properties or assets of PGE or PGH II or any of their respective
subsidiaries or, to the Knowledge of Seller, of any of PGE's or PGH II's joint
ventures (any such violation, conflict, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "PGE Violation") under, any
provisions of (i) the articles of incorporation, bylaws or similar governing
documents of Seller, Enron NW Assets, PGE, PGH II or any of their respective
subsidiaries or joint ventures or any Designated Transferee, (ii) subject to
obtaining the Seller Required Statutory Approvals, any Law, Regulation or Order
of any Governmental Authority or Court applicable, directly or indirectly
through their properties and assets, to Seller, Enron NW Assets, PGE, PGH II or
any of their respective subsidiaries or any Designated Transferee or, to the
Knowledge of Seller, any of PGE's or PGH II's joint ventures, or (iii), subject
to obtaining any required third-party consents or other approvals disclosed in
Section 3.4(b) of the Seller Disclosure Schedule (the "PGE Required Consents"),
any note, bond, mortgage, indenture, deed of trust, license, franchise, Permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Seller, Enron NW Assets, PGE, PGH II or any of their respective
subsidiaries or any Designated Transferee or, to the Knowledge of Seller, any of
PGE's or PGH II's joint ventures, is now a party or by which any of them or any
9
of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such PGE Violations as would not have,
in the aggregate, a PGE Material Adverse Effect.
(c) Statutory Approvals. Except as disclosed in Section 3.4(c) of the
-------------------
Seller Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent, finding by or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement or the
Securityholders' Agreement by Seller, Enron NW Assets or any Designated
Transferee to the extent that it is an intended party thereto or the
consummation by Seller, Enron NW Assets or any Designated Transferee of the
transactions contemplated hereby or thereby, the failure to obtain, make or give
which would have, in the aggregate, a PGE Material Adverse Effect (the "Seller
Required Statutory Approvals"), it being understood that references in this
Agreement to "obtaining" such Seller Required Statutory Approvals shall mean
making such declarations, filings or registrations, giving such notices,
obtaining such consents or approvals and having such waiting periods expire as
are necessary to avoid a violation of applicable Laws. Notwithstanding the
foregoing, authorizations, consents, or approvals of Governmental Authorities
necessary for the exercise of the PGE Option shall not be deemed to constitute
Seller Required Statutory Approvals if, in the absence of such authorizations,
consents or approvals, Seller has obtained all authorizations, consents or
approvals necessary for the consummation by Seller of the sale of the PGE Shares
pursuant to Section 1.3 and the other transactions contemplated by this
Agreement.
(d) Compliance. Except as disclosed in Section 3.4(d) of the Seller
----------
Disclosure Schedule or as disclosed in the PGE SEC Reports filed prior to the
date hereof, neither PGE nor PGH II nor any of their respective subsidiaries
nor, to the Knowledge of Seller, any of PGE's or PGH II's joint ventures is in
violation of, or has been given notice or been charged with, or, to the
Knowledge of Seller, under investigation with respect to, any violation of, any
Laws (including any applicable Environmental Laws), Regulations or Orders of any
Governmental Authority or Court, except for violations that, in the aggregate,
would not have a PGE Material Adverse Effect. Except as disclosed in Section
3.4(d) of the Seller Disclosure Schedule, PGE, PGH II, their respective
subsidiaries and, to the Knowledge of Seller, PGE's and PGH II's joint ventures
have all Permits necessary to conduct their respective businesses as currently
conducted, except those which the failure to obtain would not, in the aggregate,
have a PGE Material Adverse Effect.
Section 3.5 Reports and Financial Statements.
---------------------------------------------
(a) PGE SEC Reports and Financial Statements. The filings required to be
----------------------------------------
made by PGE since January 1, 1999 under the Securities Act, PUHCA, the Atomic
Energy Act, the Exchange Act, applicable Oregon Laws and Regulations and the
Power Act have been filed with the appropriate Governmental Authority charged
with administration of such Laws and Regulations, and such filings complied in
all material respects with all applicable requirements of the such Laws and
Regulations. The PGE SEC Reports, including any financial statements or
schedules included therein, at the time filed did not, and any forms, reports or
other documents filed by PGE with the SEC after the date hereof will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
10
The PGE Financial Statements have been prepared in accordance with GAAP (except
as may be indicated therein and except with respect to unaudited statements to
the extent permitted by Form 10-Q of the Exchange Act) and fairly present the
consolidated financial position of PGE as of the respective dates thereof and
the consolidated results of operations and cash flows for the respective periods
then ended, subject, in the case of the interim financial statements, to normal,
recurring audit adjustments.
(b) PGH II Financial Statements. The consolidated financial statements of
---------------------------
PGH II set forth in Schedule 3.5(b) of the Seller Disclosure Schedule (the "PGH
II Financials") fairly present the consolidated financial position of PGH II as
of the respective dates thereof and the consolidated results of operations of
PGH II for the respective periods then ended, subject in the case of interim
financial statements to normal, recurring audit adjustments.
Section 3.6 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------------------
the PGE SEC Reports filed prior to the date hereof or as disclosed in Section
3.6 or 3.7 of the Seller Disclosure Schedule, since June 30, 2001 (i) PGE, PGH
II and their respective subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice and no event has
occurred that has had, and no fact or condition exists that would have or, to
the Knowledge of Seller, is reasonably likely to have, a PGE Material Adverse
Effect, and (ii) none of PGE, PGH II and their respective subsidiaries has taken
any action that would have been prohibited by Article V hereof had this
Agreement been in effect at the time of such action.
Section 3.7 Litigation. Except as disclosed in the PGE SEC Reports filed
----------------------
prior to the date hereof or as disclosed in Sections 3.7, 3.8, 3.10 or 3.13 of
the Seller Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings pending or, to the Knowledge of Seller, threatened, nor, to the
Knowledge of Seller, are there any investigations pending or threatened,
against, relating to or affecting PGE, PGH II or any of their respective
subsidiaries, and (ii) there are no Orders of any Court or Governmental
Authority applicable to PGE, PGH II or any of their respective subsidiaries,
except for any of the foregoing under clauses (i) and (ii) that individually or
in the aggregate would not have a PGE Material Adverse Effect.
Section 3.8 Tax Matters.
------------------------
(a) Tax Returns. Except as disclosed in Section 3.8 of the Seller
-----------
Disclosure Schedule and except for such matters as would not have a PGE Material
Adverse Effect: (i) all Tax Returns that are required to be filed on or before
the Closing Date by or with respect to PGE, PGH II or any of their respective
subsidiaries have been or will be duly and timely filed and all such Tax Returns
were (or if such returns have not been filed, will be) true, correct and
complete; (ii) all Taxes that are shown to be due on such Tax Returns have been
or will be timely paid in full; (iii) all Tax withholding requirements imposed
on or with respect to PGE, PGH II or any of their respective subsidiaries have
been satisfied in full in all respects; (iv) there are no Liens for Taxes upon
the assets of PGE, PGH II or any of their respective subsidiaries, except for
Liens for Taxes not yet due; (v) no assessment, deficiency or adjustment has
been asserted in writing with respect to any such Tax Return; (vi) there is not
in force any extension of time with respect to the due date for the filing of
any such Tax Return or any waiver or agreement for any extension of time for the
assessment or payment of any Tax due with respect to the period covered by any
such Tax Return; and (vii) none of PGE, PGH II and their respective subsidiaries
11
is a party to any agreement that could obligate it to make any payments that
would not be deductible under Section 280G of the Code.
(b) Non-Foreign Status. None of Seller, Enron NW Assets, or the Designated
------------------
Transferees, is a foreign corporation or non-resident alien individual subject
to FIRPTA withholding under section 1445 of the Code and Treasury Regulations
promulgated thereunder.
Section 3.9 Employee Benefit Plans and Labor Agreements.
--------------------------------------------------------
(a) Documents. Each Benefit Plan of PGE, PGH II or any of their
---------
subsidiaries is listed in Section 3.9(a) of the Seller Disclosure Schedule
(collectively, the "PGE Benefit Plans"). Seller has made available to NW Natural
true and correct copies of each of the following, to the extent applicable, with
respect to each PGE Benefit Plan: the most recent annual report (Form 5500)
filed with the IRS, the plan document, the trust agreement, if any, the most
recent summary plan description, the most recent actuarial report, and the most
recent determination letter, if any, issued by the IRS.
(b) Administration. Each PGE Benefit Plan has been administered in
--------------
accordance with its terms and provisions and in compliance with ERISA, the Code
and any other applicable Laws except for such noncompliance as would not, in the
aggregate, have a PGE Material Adverse Effect. Except as set forth in Section
3.9(b) of the Seller Disclosure Schedule, since June 30, 2001, there has been no
material change to any PGE Benefit Plan.
(c) Qualification. Each PGE Benefit Plan intended to be qualified under
-------------
Code Section 401 satisfies in form the requirements of such section except to
the extent of amendments that are not required by Law to be made until a date
after the date hereof.
(d) Actions. There are no actions, suits, or claims pending (other than
-------
routine claims for benefits) or, to the Knowledge of Seller, threatened against,
or with respect to, any PGE Benefit Plan or its assets that could reasonably be
expected, in the aggregate, to have a PGE Material Adverse Effect.
(e) Administrative Matters. To the Knowledge of Seller, except as set forth
----------------------
in Section 3.9(e) of the Seller Disclosure Schedule, there is no matter pending
(other than routine qualification determination filings) with respect to any PGE
Benefit Plan before the IRS, the Department of Labor, the PBGC or any other
Governmental Authority.
(f) Termination. As to each PGE Benefit Plan subject to Title IV of ERISA,
-----------
(i) no notice of intent to terminate such Benefit Plan has been given under
Section 4041 of ERISA, (ii) no proceeding has been instituted under Section 4042
of ERISA to terminate such Benefit Plan, (iii) no liability to the PBGC has been
incurred (other than with respect to required premium payments), and (iv) the
assets of the PGE Benefit Plan equal or exceed the actuarial present value of
the benefit liabilities, within the meaning of Section 4041 of ERISA, under the
PGE Benefit Plan, based upon reasonable actuarial assumptions and the asset
valuation principles established by the PBGC.
(g) Seller Plans. With respect to any employee benefit plan, within the
------------
meaning of Section 3(3) of ERISA, that is not listed in Section 3.9(a) of the
Seller Disclosure Schedule but that is sponsored, maintained, or contributed to,
12
or has been sponsored, maintained, or contributed to within six years prior to
the date hereof, by Seller or any Commonly Controlled Entity, (i) no withdrawal
liability, within the meaning of Section 4201 of ERISA, has been incurred, which
withdrawal liability has not been satisfied, and (ii) no liability to the PBGC
has been incurred by any Commonly Controlled Entity, which liability has not
been satisfied.
(h) Retiree Medical. Except as set forth in Section 3.9(h) of the Seller
---------------
Disclosure Schedule, no PGE Benefit Plan provides retiree medical or retiree
life insurance benefits to any Person upon retirement or termination of
employment, other than as required by the provisions of Sections 601 through 608
of ERISA and Section 4980B of the Code.
(i) Multiemployer Plans. None of PGE, PGH II or any of their respective
-------------------
subsidiaries contributes to or has an obligation to contribute to, and has not
within six years prior to the date of this Agreement contributed or had an
obligation to contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA.
(j) Vacation. The vacation policies of PGE and PGH II provide for carryover
--------
of vacation from one calendar year to the next as described in Section 3.9(j) of
the Seller Disclosure Schedule.
(k) Noncontravention. Other than as set forth in or disclosed in Section
----------------
3.9(k) of the Seller Disclosure Schedule, the consummation or announcement of
any transaction contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or further acts or events) result in any (i)
payment (whether of severance pay or otherwise) becoming due from PGE, PGH II or
any of their respective subsidiaries under any applicable PGE Benefit Plans to
any officer, employee, former employee or director thereof or to the trustee
under any "rabbi trust" or similar arrangement, or (ii) benefit under any PGE
Benefit Plan being established or becoming accelerated, vested or payable,
except for a payment or benefit that would have been payable under the same
terms and conditions without regard to the transactions contemplated by this
Agreement.
(l) Labor Unions. To the Knowledge of Seller, as of the date hereof, there
------------
is no current labor union representation issue involving employees of PGE or PGH
II or any of their respective subsidiaries and no activity or proceeding of any
labor organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees. Except as disclosed in
the PGE SEC Reports or as disclosed in Section 3.9(l) of the Seller Disclosure
Schedule: (i) neither PGE, PGH II nor any of their respective subsidiaries is a
party to any collective bargaining agreement or other labor agreement with any
union or labor organization; (ii) there is no unfair labor practice charge or
grievance arising out of a collective bargaining agreement or other grievance
procedure against PGE, PGH II or any of their respective subsidiaries pending
or, to the Knowledge of Seller, threatened that has, or reasonably may be
expected to have, a PGE Material Adverse Effect and (iii) there is no strike,
dispute, slowdown, work stoppage or lockout pending or, to the Knowledge of
Seller, threatened, against or involving PGE, PGH II or any of their respective
subsidiaries that has or, reasonably may be expected to have, a PGE Material
Adverse Effect.
13
(m) Common Control Plans. There is no act, omission or condition that could
--------------------
result in liability for PGE, PGH II or Purchaser, or any of their respective
subsidiaries, with respect to any plan sponsored, maintained, contributed to or
required to be contributed to by Seller or by any entity (other than PGE, PGH II
or their respective subsidiaries) under common control with Seller within the
meaning of Section 414(b)(c) or (m) of the Code or Section 4001 of ERISA that
would be a PGE Benefit Plan if it was sponsored, maintained or contributed to or
required to be contributed to by PGE, PGH II or any of their respective
subsidiaries.
Section 3.10 Environmental Protection.
--------------------------------------
(a) Compliance. Except as disclosed in Section 3.10 of the Seller
----------
Disclosure Schedule or as disclosed in the PGE SEC Reports, PGE, PGH II and each
of their respective subsidiaries has been and is in compliance with all
applicable Environmental Laws, except where the failure to be so in compliance
would not have a PGE Material Adverse Effect. Except as disclosed in Section
3.10 of the Seller Disclosure Schedule or as disclosed in the PGE SEC Reports,
neither PGE, PGH II nor any of their respective subsidiaries has received any
written notice from any Person or Governmental Authority that alleges that PGE,
PGH II or any of their respective subsidiaries is not in compliance with
applicable Environmental Laws, except where the failure to be so in compliance
would not have a PGE Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in Section 3.10 of the
---------------------
Seller Disclosure Schedule or as disclosed in the PGE SEC Reports, each of PGE,
PGH II and their respective subsidiaries has obtained or has applied for all
Environmental Permits necessary for the construction of their facilities and the
conduct of their operations, and all such required Environmental Permits are in
good standing or, where applicable, a renewal application has been timely filed
and is pending agency approval, and PGE, PGH II and their respective
subsidiaries are in compliance with all terms and conditions of all such
Environmental Permits, except where the failure to obtain or be in such
compliance would not have a PGE Material Adverse Effect. Except as disclosed in
Section 3.10 of the Seller Disclosure Schedule or as disclosed in the PGE SEC
Reports, to the Knowledge of Seller, there are no pending Environmental Permit
proceedings or Environmental Permit renewal proceedings that are reasonably
likely to result in the imposition of more stringent terms or conditions in said
Environmental Permits that would have a PGE Material Adverse Effect.
(c) Environmental Claims. Except as disclosed in Section 3.10 of the Seller
--------------------
Disclosure Schedule or as disclosed in the PGE SEC Reports, there is no
Environmental Claim pending, or to the Knowledge of Seller, threatened against
PGE, PGH II or any of their respective subsidiaries that, if adversely
determined, would have a PGE Material Adverse Effect.
(d) Orders. Except as disclosed in Section 3.10 of the Seller Disclosure
------
Schedule or as disclosed in the PGE SEC Reports, neither PGE, PGH II nor any of
their respective subsidiaries is subject to any Order of any Court or
Governmental Authority pursuant to any Environmental Law that would have a PGE
Material Adverse Effect.
(e) Releases. Except as disclosed in Section 3.10 of the Seller Disclosure
--------
Schedule or as disclosed in the PGE SEC Reports, there has been no Release of
any Hazardous Material that would be reasonably likely to form the basis of any
Environmental Claim against PGE, PGH II or any subsidiary of PGE or PGH II,
14
except for Releases of Hazardous Materials the liability for which would not
have a PGE Material Adverse Effect.
(f) Predecessors. Except as disclosed in Section 3.10 of the Seller
------------
Disclosure Schedule or as disclosed in the PGE SEC Reports, there are no
Environmental Claims pending or, to the Knowledge of Seller, threatened, or any
Releases of Hazardous Materials that would be reasonably likely to form the
basis of any Environmental Claims with respect to any predecessor of PGE, PGH II
or any subsidiary of PGE or PGH II, that would have a PGE Material Adverse
Effect.
Section 3.11 Regulation as a Utility. PGE is subject to regulation as a
------------------------------------
"public utility" by the OPUC pursuant to the Laws of the State of Oregon and is
subject to regulation as a "public utility" by the FERC pursuant to Part II of
the Power Act. PGE is not subject to regulation as a public utility, public
utility holding company or public service company (or similar designation) by
any other state in the United States or by any foreign country. PGE is a
subsidiary of Seller, which is exempt, pursuant to Section 3(a)(1) of PUHCA, and
SEC Rule 2 thereunder, from regulation under PUHCA and the SEC's rules
thereunder, except Section 9(a)(2) of PUHCA. Neither PGH II or any subsidiary
thereof is subject to regulation as a public utility, public utility holding
company or public service company (or similar designation) by the federal
government of the U.S. or any state or political subdivision thereof or any
foreign country.
Section 3.12 Insurance. Each of PGE, PGH II and each of their respective
----------------------
subsidiaries is, and has been continuously since the later of January 1, 1999
and the date of its formation, insured in such amounts and against such risks
and losses as are customary for companies conducting the respective businesses
conducted by PGE, PGH II and their respective subsidiaries during such time
period. Neither PGE, PGH II nor any of their respective subsidiaries has
received any notice of cancellation or termination with respect to any material
insurance policy. All material insurance policies covering the respective
businesses conducted by PGE, PGH II and their respective subsidiaries are valid
and enforceable policies.
Section 3.13 Status of PGE Nuclear Facility. Except as set forth in Section
-------------------------------------------
3.13 of the Seller Disclosure Schedule, the operation of the PGE Nuclear
Facility and the operations related to decommissioning of the PGE Nuclear
Facility have at all times been conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the failure to be
so in compliance would not have a PGE Material Adverse Effect. Such legal
requirements include, but are not limited to, the NRC license for the Trojan
Nuclear Plant pursuant to 10 C.F.R. Part 50, the NRC license for the Trojan
Independent Storage of Spent Nuclear Fuel and High-Level Radioactive Waste
(ISFSI) pursuant to 10 C.F.R. Part 72 and Siting Statutes of the State of Oregon
at ORS 469.320 (formerly Section 4 of Chapter 609, Oregon Laws of 1971) (the
term "PGE Nuclear Facility" includes both the Trojan Nuclear Plant and the
Trojan ISFSI Facility). Neither the operations of the PGE Nuclear Facility nor
the operations related to decommissioning of the PGE Nuclear Facility are the
subject of any outstanding notices of violation or requests for information from
the NRC or any other agency with jurisdiction over such facility. PGE maintains,
and is in compliance with, emergency plans designed to protect the health and
safety of the public in the event of an unplanned release of radioactive
materials from the PGE Nuclear Facility, and the NRC has determined that such
15
plans are in compliance with its requirements. Liability insurance to the full
extent required by applicable Laws for non-operating nuclear facilities and
consistent with Seller's view of the risks inherent in the decommissioning of
the PGE Nuclear Facility remains in full force and effect regarding such
facility, and the amount of such liability insurance has been approved by the
NRC. Plans for the decommissioning of the PGE Nuclear Facility, and for the
storage of spent nuclear fuel, conform with the requirements of applicable Laws,
and PGE has funded such plans to the extent required by applicable Laws. The
Decommissioning Plan is a true and correct copy of the decommissioning plan
approved by the NRC, which plan has been amended through Revision 6 as permitted
by NRC regulations. The Trojan co-owners, PGE, the City of Eugene (acting by and
through the Eugene Water & Electric Board) and PacifiCorp (collectively, the
"Trojan Co-Owners"), have severally agreed to fund their shares of all
decommissioning costs relating to Trojan, and neither Seller nor PGE, PGH II nor
their respective subsidiaries has any reason to believe that the Trojan
Co-Owners will not fund such decommissioning costs in the future. The Trojan
ISFSI Final Safety Analysis Report is a true and correct copy of the safety plan
submitted to the NRC in accordance with NRC requirements. Except as disclosed in
Section 3.13 of the Seller Disclosure Schedule, Seller has no intention of
varying PGE's operations from those described in the Decommissioning Plan and
the Trojan ISFSI Final Safety Analysis Report and neither Seller nor PGE has any
other material commitments (whether written or oral) to Governmental Authorities
with respect to the PGE Nuclear Facility.
Section 3.14 Purchase for Investment. Seller and Enron NW Assets are
------------------------------------
acquiring the Securities for their own accounts, for investment only, without a
view to distribution, as that phrase has meaning under the Securities Act and
the Regulations thereunder. Seller and Enron NW Assets understand that the
effect of the representation and warranty made herein is that the Securities
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from registration is available at the time of any
proposed sale or other transfer thereof.
Section 3.15 Due Diligence. Seller is experienced in the evaluation of
--------------------------
companies such as NW Natural and Purchaser and the securities thereof. In making
the decision to enter into this Agreement and consummate the transactions
contemplated hereby, Seller has relied solely on its own independent
investigation of NW Natural and upon the representations and warranties and
covenants in this Agreement.
Section 3.16 No Knowledge of Breach. Seller does not know, as of the date
-----------------------------------
of this Agreement, of any breach of warranty or any misrepresentation by NW
Natural or Purchaser hereunder.
Section 3.17 Contracts with Enron. Section 3.17 of the Seller Disclosure
---------------------------------
Schedule sets forth, as of the date hereof, a correct and complete list of all
material contracts between PGE, PGH II or any of their respective subsidiaries
and Seller and its subsidiaries (other than any subsidiary of Seller that is a
subsidiary of Seller only by virtue of being a subsidiary of PGE or PGH II) (the
"Related Party Contracts").
Section 3.18 Limitation of Representations and Warranties. EXCEPT FOR THE
---------------------------------------------------------
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE III, SELLER AND ENRON
NW ASSETS ARE NOT MAKING ANY OTHER REPRESENTATIONS OR
16
WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE
SHARES OR THE BUSINESS, ASSETS, OR LIABILITIES OF PGE AND PGH II.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF NW NATURAL AND PURCHASER
NW Natural and Purchaser jointly and severally represent and warrant to
Seller that:
Section 4.1 Organization and Qualification.
-------------------------------------------
(a) NW Natural. Each of NW Natural, and the subsidiaries of NW Natural
----------
(including Purchaser) (i) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, (ii) has
all requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, and (iii)
is duly qualified, licensed or admitted to do business and is in good standing
to do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary.
(b) Purchaser. Purchaser is a newly organized corporation, and has not
---------
conducted or engaged in any business or transaction other than in connection
with the NW Natural Merger Agreement and this Agreement.
Section 4.2 Capitalization.
---------------------------
(a) NW Natural. The authorized capital stock of NW Natural consists of
----------
60,000,000 shares of NW Natural Common Stock, 2,000,000 shares of NW Natural
Preference Stock, and 1,500,000 shares of NW Natural Preferred Stock. As of
October 4, 2001, there are 25,159,375 shares of NW Natural Common Stock issued
and outstanding, and a total of 5,236,558 shares of NW Natural Common Stock have
been reserved for issuance pursuant to the 7 1/4% Convertible Debentures due
2012, outstanding stock option, dividend reinvestment and stock-based incentive
plans, and the outstanding share purchase rights described in the NW Natural SEC
Reports. Of the authorized NW Natural Preference Stock, there are issued and
outstanding 250,000 shares of $6.95 Series Redeemable Preference Stock, stated
value $100 per share, and, of the NW Natural Preferred Stock, there are issued
and outstanding 90,000 shares of $7.125 Series Redeemable Preferred Stock,
stated value $100 per share. All of the outstanding shares of capital stock of
NW Natural are duly authorized, validly issued, fully paid, nonassessable and
free of pre-emptive rights. Other than as described in the NW Natural SEC
Reports or in this Agreement, there are no outstanding subscriptions, options,
calls, contracts or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement obligating NW
Natural or Purchaser to issue, deliver or sell, or cause to be issued, delivered
or sold, shares of the capital stock or other voting securities of NW Natural or
any of its subsidiaries or obligating NW Natural or any of its subsidiaries
(including Purchaser) to grant, extend or enter into any such agreement or
17
commitment. On the Closing Date, Purchaser will own all of the issued and
outstanding shares of NW Natural Common Stock, free of pre-emptive rights and
free and clear of any Liens.
(b) Purchaser.
---------
(i) Immediately prior to the Closing Date, the authorized capital
stock of Purchaser will consist of 10,000,000 shares of Purchaser Preferred
Stock, of which 4,000,000 shares shall have been designated Preferred
Shares, 65,000,000 shares of Common Stock and 15,000,000 shares of Class B
Common Stock, none of which shall be issued and outstanding other than 100
shares of Common Stock.
(ii) Pursuant to the NW Natural Merger Agreement, Purchaser will, upon
consummation thereof, (A) have issued, on conversion of the NW Natural
Common Stock, a number of shares of Common Stock equal to the number of
shares of NW Natural Common Stock then outstanding and (B) have reserved
for issuance a number of shares of Common Stock equal to, and for the same
purposes as, the number of shares of NW Natural Common Stock then reserved
for issuance.
(iii) On the Closing Date, the Preferred Shares will be validly
issued, fully paid and nonassessable and will have the rights and
preferences set forth in the Amended and Restated Charter and the Articles
of Amendment.
(iv) All of the shares of Common Stock issued and outstanding
immediately following the Closing (including the shares issued pursuant to
this Agreement) will be validly issued, fully paid and nonassessable and
free of pre-emptive rights and will have the rights set forth in the
Amended and Restated Charter.
(v) Immediately following the Closing, there will have been reserved
for issuance by Purchaser a number of shares of Common Stock equal to the
number of shares of Class B Common Stock outstanding, and all such shares
of Common Stock will be, when issued upon valid conversion and upon the
delivery of the shares of Class B Common Stock, validly issued, fully paid
and nonassessable and free of pre-emptive rights and will have the rights
set forth in the Amended and Restated Charter.
(vi) Other than as described in this Agreement, on the Closing Date,
there will be no outstanding subscriptions, options, calls, contracts or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any rights of conversion or exchange under any
outstanding security, instrument or other agreement obligating Purchaser to
issue, deliver or sell, or cause to be issued, delivered or sold, shares of
the capital stock or other voting securities of Purchaser or its
subsidiaries (including NW Natural) or obligating Purchaser to grant,
extend or enter into any such agreement or commitment.
(c) NW Natural Voting Debt. As of the date of this Agreement, there are,
----------------------
other than the 7 1/4% Convertible Debentures due 2012, which are convertible
into shares of NW Natural Common Stock, no issued and outstanding bonds,
debentures, notes or other indebtedness of NW Natural or any of its subsidiaries
(including Purchaser) having the right to vote (or which are convertible into or
exercisable for securities having the right to vote) ("NW Natural Voting
18
Debt") on any matters on which shareholders may vote, and there are no
outstanding options obligating NW Natural or any of its subsidiaries (including
Purchaser) to issue or sell any NW Natural Voting Debt or to grant, extend or
enter into any option with respect thereto.
Section 4.3 Financing Commitment. A copy of the written commitment,
--------------------------------
including the fee letter, from Merrill Lynch & Co. and Credit Suisse First
Boston (collectively and as amended from time to time with the consent of Seller
and NW Natural, the "Financing Commitment") to provide Debt Financing in an
amount of not less than $2.1 billion in the aggregate is attached hereto as
Exhibit C and the terms of such Financing Commitment are incorporated herein by
reference.
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
--------------------------------------------------------------------------
(a) Authority. NW Natural and Purchaser have all requisite power and
---------
authority to enter into this Agreement and the Securityholders' Agreement and,
subject to the NW Natural Required Statutory Approvals, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Securityholders' Agreement and the consummation by NW Natural
and Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of NW Natural and
Purchaser, except that (i) the consummation of the NW Natural Merger requires
the approval of holders of a majority of the outstanding shares of NW Natural
Common Stock pursuant to the requirements of the Oregon Business Corporation
Act, (ii) the issuance of the Securities pursuant to Article I requires the
approval of the holders of a majority of the shares of NW Natural Common Stock
cast in favor of or against approval of such issuance (the requirements under
clauses (i) and (ii), collectively, the "NW Natural Shareholder Approval") and
(iii) (A) the execution and delivery of the definitive agreements with respect
to the Debt Financing will require the approval of the Boards of Directors of
Purchaser, NW Natural, and, effective as of the Closing, PGE (but such approval
shall not be a condition to the obligations of Purchaser and NW Natural under
this Agreement) and (B) the execution and delivery of definitive agreements
relating to the FELINE PRIDES (including without limitation, the Articles of
Amendment setting forth the rights of the shares of Preferred Stock of Purchaser
included in the units comprising the FELINE PRIDES), will require the approval
of the Board of Directors of Purchaser, but such approval shall be a condition
to the obligations of NW Natural and Purchaser only to the extent provided in
Section 8.1(e). This Agreement has been, and the Securityholders' Agreement will
be at the Closing, duly and validly executed and delivered by Purchaser and,
solely with respect to this Agreement, by NW Natural, and, assuming the due
authorization, execution and delivery of this Agreement and the Securityholders'
Agreement by each party thereto other than NW Natural and Purchaser, constitutes
or will constitute the legal, valid and binding obligations of Purchaser and,
solely with respect to this Agreement, by NW Natural, enforceable against NW
Natural and Purchaser in accordance with their respective terms.
(b) Non-Contravention. Except as disclosed in Section 4.4(b) of the NW
-----------------
Natural Disclosure Schedule, the execution and delivery by NW Natural and
Purchaser of this Agreement do not and the execution and delivery by Purchaser
at the Closing of the Securityholders' Agreement will not, and the consummation
of the transactions contemplated hereby and thereby will not, violate, conflict
with or result in a breach of any provision of, or constitute a default (with or
19
without notice or lapse of time or both) under, or result in the termination of,
or accelerate the performance required by, or result in a right of payment,
termination, cancellation, modification or acceleration of any obligation under,
or result in the creation of any Lien upon any of the properties or assets of NW
Natural or any of its subsidiaries (including Purchaser) or, to the Knowledge of
NW Natural, any of its joint ventures (any such violation, conflict, breach,
default, right of termination, cancellation or acceleration, loss or creation, a
"NW Natural Violation"), under, any provisions of (i) the articles of
incorporation, bylaws or similar governing documents of NW Natural or any of its
subsidiaries or joint ventures (including Purchaser), (ii) subject to obtaining
the NW Natural Required Statutory Approvals, any Law, Regulation or Order of any
Governmental Authority or Court applicable, directly or indirectly through their
ownership of properties and assets, to NW Natural or any of its subsidiaries
(including Purchaser) or, to the Knowledge of NW Natural, any of its joint
ventures or (iii) subject to obtaining any required third-party consents or
other approvals disclosed in Section 4.4(b) of the NW Natural Disclosure
Schedule (the "NW Natural Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which NW
Natural or any of its subsidiaries (including Purchaser) or, to the Knowledge of
NW Natural, any of its joint ventures, is now a party or by which any of them or
any of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such NW Natural Violations that would
not have, in the aggregate, a NW Natural Material Adverse Effect and would not
have a material adverse effect on the ability of either NW Natural or Purchaser
to perform its obligations under this Agreement or reasonably be expected to
delay or otherwise interfere with the obtaining of the NW Natural Required
Statutory Approvals or the Seller Required Statutory Approvals.
(c) Statutory Approvals. Except as disclosed in Section 4.4(c) of the NW
-------------------
Natural Disclosure Schedule, no material declaration, filing or registration
with, or notice to or authorization, consent, finding by or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement or the Securityholders' Agreement by NW Natural or Purchaser or the
consummation by NW Natural or Purchaser of the transactions contemplated hereby
or thereby (the "NW Natural Required Statutory Approvals"), it being understood
that references in this Agreement to "obtaining" such NW Natural Required
Statutory Approvals shall mean making such declarations, filings or
registrations, giving such notices, obtaining such consents or approvals and
having such waiting periods expire as are necessary to avoid a violation of
applicable Laws.
(d) Compliance. Except as disclosed in Section 4.4(d) of the NW Natural
----------
Disclosure Schedule or as disclosed in the NW Natural SEC Reports filed prior to
the date hereof, neither NW Natural nor any of its subsidiaries (including
Purchaser) nor, to the Knowledge of NW Natural, any of NW Natural's joint
ventures, is in violation of, or has been given notice or been charged with, or,
to the Knowledge of NW Natural, is under investigation with respect to, any
violation of, any Laws (including any applicable Environmental Laws),
Regulations or Orders of any Governmental Authority or Court, except for
violations that, in the aggregate, would not have a NW Natural Material Adverse
Effect. Except as disclosed in Section 4.4(d) of the NW Natural Disclosure
Schedule, NW Natural, its subsidiaries (including Purchaser) and, to the
Knowledge of NW Natural, NW Natural's joint ventures, have all Permits necessary
to conduct their respective businesses as currently conducted, except those
which the failure to obtain would not, in the aggregate, have a NW Natural
Material Adverse Effect.
20
Section 4.5 NW Natural SEC Reports and Financial Statements. The filings
-----------------------------------------------------------
required to be made by NW Natural since January 1, 1999 under the Securities
Act, the Exchange Act, applicable Oregon Laws and Regulations, applicable
Washington Laws and Regulations and the Power Act have been filed with the
appropriate Governmental Authority charged with administration of such Laws and
Regulations, and such filings complied in all material respects with all
applicable requirements of such Laws and Regulations thereunder. The NW Natural
SEC Reports, including any financial statements or schedules included therein,
at the time filed did not, and any forms, reports or other documents filed by NW
Natural or Purchaser with the SEC after the date hereof will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The NW Natural
Financial Statements have been prepared in accordance with GAAP (except as may
be indicated therein and except with respect to unaudited statements to the
extent permitted by Form 10-Q of the Exchange Act) and fairly present the
consolidated financial position of NW Natural as of the respective dates thereof
and the consolidated results of operations and cash flows for the respective
periods then ended, subject, in the case of the interim financial statements, to
normal, recurring audit adjustments.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------------------
the NW Natural SEC Reports filed prior to the date hereof or as disclosed in
Section 4.6 or 4.7 of the NW Natural Disclosure Schedule, since June 30, 2001
(i) NW Natural and its subsidiaries (including Purchaser) have conducted their
business only in the ordinary course of business consistent with past practice
and no event has occurred that has had, and no fact or condition exists that
would have or, to the Knowledge of NW Natural, is reasonably likely to have, a
NW Natural Material Adverse Effect, and (ii) neither NW Natural nor any of its
subsidiaries (including Purchaser) have taken any action that would have been
prohibited by Article VI hereof had this Agreement been in effect at the time of
such action.
Section 4.7 Litigation. Except as disclosed in the NW Natural SEC Reports
----------------------
filed prior to the date hereof or as disclosed in Sections 4.7, 4.8, 4.10 or
4.13 of the NW Natural Disclosure Schedule, (i) there are no claims, suits,
actions or proceedings pending or, to the Knowledge of NW Natural, threatened,
nor, to the Knowledge of NW Natural, are there any investigations pending or
threatened against, relating to or affecting NW Natural or any of its
subsidiaries, and (ii) there are no Orders of any Court or Governmental
Authority applicable to NW Natural or any of its subsidiaries, except for any of
the foregoing under clauses (i) and (ii) that individually or in the aggregate
would not have a Purchaser Material Adverse Effect.
Section 4.8 Tax Matters. Except as disclosed in Section 4.8 of the NW
-----------------------
Natural Disclosure Schedule and except for such matters as would not have a NW
Natural Material Adverse Effect: (i) all Tax Returns that are required to be
filed on or before the Closing Date by or with respect to NW Natural or any of
its subsidiaries have been or will be duly and timely filed and all such Tax
Returns were (or if such returns have not been filed, will be) true, correct and
complete; (ii) all Taxes that are shown to be due on such Tax Returns have been
or will be timely paid in full; (iii) all Tax withholding requirements imposed
on or with respect to NW Natural or any of its subsidiaries have been satisfied
in full in all respects; (iv) there are no Liens for Taxes upon the assets of NW
Natural or any of its subsidiaries, except for Liens for Taxes not yet due; (v)
no assessment, deficiency or adjustment has been asserted in writing with
21
respect to any such Tax Return; (vi) there is not in force any extension of time
with respect to the due date for the filing of any such Tax Return or any waiver
or agreement for any extension of time for the assessment or payment of any Tax
due with respect to the period covered by any such Tax Return; and (vii) neither
NW Natural nor any of its subsidiaries is a party to any agreement that could
obligate it to make any payments that would not be deductible under Section 280G
of the Code.
Section 4.9 Employee Benefit Plans and Labor Agreements.
--------------------------------------------------------
(a) Listing. Each Benefit Plan of NW Natural or any of its subsidiaries
-------
(collectively, the "NW Natural Benefit Plans") has been administered in
accordance with its terms and provisions and in compliance with ERISA, the Code
and any other applicable laws except for such noncompliance as would not, in the
aggregate, have a NW Natural Material Adverse Effect. Since June 30, 2001, there
has been no material change to any NW Natural Benefit Plan.
(b) Qualification. Each NW Natural Benefit Plan intended to be qualified
-------------
under Code Section 401 satisfies in form the requirements of such section except
to the extent of amendments which are not required by Law to be made until a
date after the date hereof.
(c) Actions. Except as set forth in Section 4.9(c) of the NW Natural
-------
Disclosure Schedule, there are no actions, suits, or claims pending (other than
routine claims for benefits) or, to the Knowledge of NW Natural, threatened
against, or with respect to, any NW Natural Benefit Plan or its assets that
could reasonably be expected, in the aggregate, to have a NW Natural Material
Adverse Effect.
(d) Administrative Matters. Except as set forth in Section 4.9(d) of the NW
----------------------
Natural Disclosure Schedule, to the Knowledge of NW Natural, there is no matter
pending (other than routine qualification determination filings) with respect to
any NW Natural Benefit Plan before the IRS, the Department of Labor, the PBGC or
any other Governmental Authority.
(e) Termination. As to each NW Natural Benefit Plan subject to Title IV of
-----------
ERISA, (i) no notice of intent to terminate such NW Natural Benefit Plan has
been given under Section 4041 of ERISA, (ii) no proceeding has been instituted
under Section 4042 of ERISA to terminate such NW Natural Benefit Plan, (iii) no
liability to the PBGC has been incurred (other than with respect to required
premium payments), and (iv) the assets of the NW Natural Benefit Plan equal or
exceed the actuarial present value of the benefit liabilities, within the
meaning of Section 4041 of ERISA, under the NW Natural Benefit Plan, based upon
reasonable actuarial assumptions and the asset valuation principles established
by the PBGC.
(f) Sponsored Plans. With respect to any employee benefit plan, within the
---------------
meaning of Section 3(3) of ERISA, that is sponsored, maintained, or contributed
to, or has been sponsored, maintained, or contributed to within six years prior
to the date hereof, by NW Natural or any Commonly Controlled Entity, (i) no
withdrawal liability, within the meaning of Section 4201 of ERISA, has been
incurred, which withdrawal liability has not been satisfied, and (ii) no
liability to the PBGC has been incurred by any Commonly Controlled Entity, which
liability has not been satisfied.
22
(g) Multiemployer Plans. Except as set forth in Section 4.9(g) of the NW
-------------------
Natural Disclosure Schedule, neither NW Natural nor any of its subsidiaries
contributes to or has an obligation to contribute to, and has not within six
years prior to the date of this Agreement contributed or had an obligation to
contribute to, a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(h) Noncontravention. Other than as set forth in or disclosed in Section
----------------
4.9(h) of the NW Natural Disclosure Schedule, the consummation or announcement
of any transaction contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or further acts or events) result in any (i)
payment (whether of severance pay or otherwise) becoming due from NW Natural or
any of its subsidiaries under any applicable NW Natural Benefit Plans to any
officer, employee, former employee or director thereof or to the trustee under
any "rabbi trust" or similar arrangement, or (ii) benefit under any NW Natural
Benefit Plan being established or becoming accelerated, vested or payable,
except for a payment or benefit that would have been payable under the same
terms and conditions without regard to the transactions contemplated by this
Agreement.
(i) Labor Unions. To the Knowledge of NW Natural, as of the date hereof,
------------
there is no current labor union representation issue involving employees of NW
Natural or any of its subsidiaries or any activity or proceeding of any labor
organization (or representative thereof) or employee group (or representative
thereof) to organize any such employees. Except as disclosed in the NW Natural
SEC Reports or as disclosed in Section 4.9(i) of the NW Natural Disclosure
Schedule: (i) neither NW Natural nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor agreement with any union or labor
organization; (ii) there is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure against NW
Natural or any of its subsidiaries pending, or to the Knowledge of NW Natural,
threatened, that has, or reasonably may be expected to have, a NW Natural
Material Adverse Effect; and (iii) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or to the Knowledge of NW Natural, threatened,
against or involving NW Natural or any of its subsidiaries that has or,
reasonably may be expected to have, a NW Natural Material Adverse Effect.
(j) Common Control. There is no act, omission or condition that could
--------------
result in liability for NW Natural, or any of its subsidiaries, with respect to
any plan sponsored, maintained, contributed to or required to be contributed to
by any entity (other than NW Natural or its subsidiaries) under common control
with NW Natural within the meaning of Section 414(b)(c) or (m) of the Code or
Section 4001 of ERISA that would be a NW Natural Benefit Plan if it was
sponsored, maintained or contributed to or required to be contributed to by NW
Natural or any of its subsidiaries.
23
Section 4.10 Environmental Protection.
--------------------------------------
(a) Compliance. Except as disclosed in Section 4.10 of the NW Natural
----------
Disclosure Schedule or as disclosed in the NW Natural SEC Reports, NW Natural
and its subsidiaries have been and are in compliance with all applicable
Environmental Laws, except where the failure to be so in compliance would not
have a NW Natural Material Adverse Effect. Except as disclosed in Section 4.10
of the NW Natural Disclosure Schedule or as disclosed in the NW Natural SEC
Reports, neither NW Natural nor any of its subsidiaries has received any written
notice from any Person or Governmental Authority that alleges that NW Natural or
any of its subsidiaries is not in compliance with applicable Environmental Laws,
except where the failure to be so in compliance would not have a NW Natural
Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in Section 4.10 of the NW
---------------------
Natural Disclosure Schedule or as disclosed in the NW Natural SEC Reports, NW
Natural and its subsidiaries have obtained or have applied for all Environmental
Permits necessary for the construction of their facilities and the conduct of
their operations, and all such required Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency approval, and NW Natural and its subsidiaries are in
compliance with all terms and conditions of all such Environmental Permits,
except where the failure to obtain or be in such compliance would not have a NW
Natural Material Adverse Effect. Except as disclosed in Section 4.10 of the NW
Natural Disclosure Schedule or as disclosed in the NW Natural SEC Reports, to
the Knowledge of NW Natural, there are no pending Environmental Permit
proceedings or Environmental Permit renewal proceedings that are reasonably
likely to result in the imposition of more stringent terms or conditions in said
Environmental Permits that would have a NW Natural Material Adverse Effect.
(c) Environmental Claims. Except as disclosed in Section 4.10 of the NW
--------------------
Natural Disclosure Schedule or as disclosed in the NW Natural SEC Reports, there
is no Environmental Claim pending, or to the Knowledge of NW Natural, threatened
against NW Natural or any of its subsidiaries that, if adversely determined,
would have a NW Natural Material Adverse Effect.
(d) Orders. Except as disclosed in Section 4.10 of the NW Natural
------
Disclosure Schedule or as disclosed in the NW Natural SEC Reports, neither NW
Natural nor any of its subsidiaries is subject to any Order of any Court or
Governmental Authority pursuant to any Environmental Law that would have a NW
Natural Material Adverse Effect.
(e) Releases. Except as disclosed in Section 4.10 of the NW Natural
--------
Disclosure Schedule or as disclosed in the NW Natural SEC Reports, there has
been no Release of any Hazardous Material that would be reasonably likely to
form the basis of any Environmental Claim against NW Natural or any subsidiary
of NW Natural, except for Releases of Hazardous Materials the liability for
which would not have a NW Natural Material Adverse Effect.
(f) Predecessors. Except as disclosed in Section 4.10 of the NW Natural
------------
Disclosure Schedule or as disclosed in the NW Natural SEC Reports, there are no
Environmental Claims pending or, to the Knowledge of NW Natural, threatened, or
any Releases of Hazardous Materials that would be reasonably likely to form the
24
basis of any Environmental Claims with respect to any predecessor of NW Natural
or any subsidiary of NW Natural, that would have a NW Natural Material Adverse
Effect.
Section 4.11 Regulation as a Utility.
-------------------------------------
(a) Current Status. As of the date hereof, NW Natural is not subject to
--------------
regulation under PUHCA. NW Natural is regulated as a public utility by the FERC
and in the States of Oregon and Washington and in no other state. Neither NW
Natural nor any "subsidiary company" or "affiliate" (as each such term is
defined in PUHCA) of NW Natural is subject to regulation as a public utility or
public service company (or similar designation) by any other state in the United
States or any foreign country.
(b) Status After Transactions. Based on the representation in Section 3.11
-------------------------
that Seller is exempt from regulation under PUHCA pursuant to Section 3(a)(1) of
PUHCA, after giving effect to the transactions contemplated by this Agreement,
Purchaser would, at the Closing, be entitled to claim exemption pursuant to Rule
2 under Section 3(a)(1) of PUHCA.
Section 4.12 Insurance. NW Natural and each of its subsidiaries are, and
----------------------
have been continuously since the later of January 1, 1999, insured in such
amounts and against such risks and losses as are customary for companies
conducting the respective businesses conducted by NW Natural and its
subsidiaries during such time period. Neither NW Natural nor any of its
subsidiaries has received any notice of cancellation or termination with respect
to any material insurance policy. All material insurance policies covering the
respective businesses conducted by NW Natural and its subsidiaries are valid and
enforceable policies.
Section 4.13 Purchase for Investment. Purchaser is acquiring the Shares for
------------------------------------
its own account, for investment only, without a view to distribution, as that
phrase has meaning under the Securities Act and the Regulations thereunder.
Purchaser understands that the effect of the representation and warranty made
herein is that the Shares must be held by it indefinitely unless subsequently
registered under the Securities Act or unless an exemption from registration is
available at the time of any proposed sale or other transfer thereof.
Section 4.14 Due Diligence. NW Natural and Purchaser are experienced in the
--------------------------
evaluation and purchase of companies such as PGE and PGH II. In making the
decision to enter into this Agreement and consummate the transactions
contemplated hereby, NW Natural and Purchaser have relied solely on their own
independent investigation of PGE and PGH II and upon the representations and
warranties and covenants in this Agreement.
Section 4.15 No Knowledge of Breach. NW Natural and Purchaser do not know,
-----------------------------------
as of the date of this Agreement, of any breach of warranty or any
misrepresentation by Seller or Enron NW Assets hereunder.
Section 4.16 Limitation of Representations and Warranties. EXCEPT FOR THE
---------------------------------------------------------
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, NEITHER PURCHASER
NOR NW NATURAL IS MAKING ANY REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL,
STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE BUSINESS, ASSETS, OR LIABILITIES
OF NW NATURAL OR PURCHASER AND ITS SUBSIDIARIES.
25
ARTICLE V
CONDUCT OF BUSINESS OF PGE AND PGH II
PENDING THE CLOSING
After the date hereof and prior to the Closing or earlier termination of
this Agreement, Seller agrees, except as expressly contemplated or permitted in
this Agreement, or to the extent NW Natural and Purchaser shall otherwise
consent in writing, which consent shall not be unreasonably withheld, as
follows:
Section 5.1 Ordinary Course of Business. Seller shall cause PGE, PGH II and
---------------------------------------
each of PGE's and PGH II's respective subsidiaries to carry on their respective
businesses in all material respects in the usual, regular and ordinary course,
consistent with past practice, and shall cause PGE, PGH II and each of their
respective subsidiaries to use all reasonable efforts to (i) preserve intact
their present business organizations and goodwill, and preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them, (ii) subject to prudent management of workforce needs, keep available the
services of their present officers and employees as a group, (iii) maintain and
keep their material properties and assets in as good repair and condition as at
present, subject to ordinary wear and tear, and maintain supplies and
inventories in quantities consistent with past practice, (iv) with respect to
wholesale power and energy trading and transactions, comply with prudent
policies, practices and procedures with respect to risk management and trading
limitations, all to the end that their goodwill and ongoing businesses shall not
be impaired in any material respect at the Closing and (v) comply with all
applicable Laws, Regulations and Orders of Governmental Authorities and Courts
except for any violations under clauses (i) through (v) that, in the aggregate,
would not have a PGE Material Adverse Effect. For the avoidance of doubt, a
course of conduct between the date of this Agreement and the Closing Date the
primary purpose of which is to shift consolidated net income from a later
accounting period to an earlier accounting period or to shift consolidated net
loss from an earlier accounting period to a later accounting period shall not be
deemed to be in the ordinary course of business.
Section 5.2 Dividends and Repurchases.
--------------------------------------
(a) Restrictions on Dividends and Repurchases. Except as otherwise
-----------------------------------------
permitted by subsection (b) of this Section, Seller shall not permit PGE, PGH II
or any of PGE's and PGH II's respective subsidiaries to: (i) declare or pay any
dividends on or make other distributions in respect of any of their capital
stock, (ii) split, combine or reclassify any of PGE's or PGH II's capital stock
or the capital stock of any subsidiary of PGE or PGH II or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of PGE's or PGH II's capital stock or the capital stock
of any subsidiary of PGE or PGH II or (iii) redeem, repurchase or otherwise
acquire any shares of PGE's or PGH II's capital stock or the capital stock of
any subsidiary of PGE or PGH II other than intercompany acquisitions of capital
stock and redemptions of PGE Preferred Stock pursuant to its terms.
(b) Permitted Payments. The restrictions contained in subsection (a) of
------------------
this Section shall not prohibit, limit or restrict, on or prior to the Closing,
any of the following: (i) dividends by a direct or indirect wholly-owned
subsidiary of PGE or PGH II to PGE or PGH II, as the case may be, or another
direct or indirect wholly-owned subsidiary of PGE or PGH II, (ii) dividends
26
by a less than a wholly-owned subsidiary of PGE or PGH II consistent with past
practice, (iii) dividends on the PGE Preferred Stock outstanding on the date
hereof; (iv) dividends on, or repurchases of, PGE Common Stock in an amount not
to exceed, in the aggregate, $104.2 million (which amount equals the difference
between the net income (as defined below) of PGE for periods prior to January 1,
2001 and actual dividends paid to Seller in respect of such periods); (v)
dividends on, or repurchases of, PGE Common Stock in an aggregate amount not to
exceed the aggregate amount of Consolidated Net Income for the period from
January 1, 2001 through the Closing Date less any dividends on the PGE Common
Stock declared and paid by PGE during the period from January 1, 2001 to the
date hereof; (vi) dividends on, or repurchases of, PGE Common Stock in an
aggregate amount equal to the Specified Enron Merger Obligation Payments; (vii)
the transactions contemplated by Section 7.5(i); (viii) payments by any of PGE,
PGH II or their respective subsidiaries to Seller or its Affiliates in respect
of intercompany payables or accounts or their liability to Seller on account of
PGE or PGH II and their respective subsidiaries being a member or members of
Seller's affiliated group for federal income tax purposes and, if applicable,
any similar combined or unitary group for state income tax purposes other than
any liability arising by virtue of Treasury Regulations ss.1.1502-6 or any
similar state provision (the "Tax Sharing Payment"); and (ix) redemptions of PGE
Preferred Stock pursuant to its terms.
(c) Stub Period. At least five Business Days before the anticipated Closing
-----------
Date, Seller will provide Purchaser with Seller's calculation of the net income
of PGE for the period commencing on the day next following the date of the
consolidated balance sheet of PGE included in the last SEC Report to be filed by
it prior to the Closing Date (the "Last Balance Sheet Date") and ending on the
Closing Date (as estimated by Seller with respect to the operations through the
Closing Date and any other portion of such period for which historical financial
information is unavailable) (the "Stub Period"). In addition to any amounts that
may be otherwise paid as a dividend on PGE Common Stock or otherwise used to
repurchase shares of PGE Common Stock in accordance with the terms of subsection
(b)(v) of this Section 5.2 for periods on or prior to the Last Balance Sheet
Date, Seller may, subject to the limitations set forth in subsection (b)(v) of
this Section 5.2, cause PGE to pay a dividend to it or to repurchase PGE Common
Stock pursuant to clause (v) of subsection (b) of this Section 5.2 on or prior
to the Closing in an amount equal to the amount of net income reflected in such
calculation (less any dividends described in such clause). If Purchaser
disagrees with Seller's calculation of net income for the Stub Period, its sole
remedy in respect thereof shall be to refer the matter through Seller to PGE's
auditors within 15 Business Days after the Closing Date, who shall, upon
Purchaser' s request, calculate PGE's net income for the Stub Period. The
auditor's sole inquiry under such circumstances shall be with respect to the net
income of PGE for the Stub Period. The calculation of PGE's net income for the
Stub Period by its auditors shall be made within 45 days of such request and
shall be final and binding on the Parties. If such auditors determine that PGE's
net income for the Stub Period is more than 1% less than the amount calculated
by Seller, Seller will pay the amount of such difference to Purchaser (provided
that the amount of such difference was included in a dividend paid by PGE to
Seller on or prior to the Closing or was used to repurchase shares of PGE Common
Stock on or prior to the Closing.) If such auditors determine that PGE's net
income is more than 1% greater than the amount calculated by Seller, Purchaser
will, subject to the limitations set forth in subsection (b) of this Section
5.2, pay the amount of the difference to Seller. Payments required pursuant to
this subsection (c) of this Section 5.2 shall be made within two Business Days
27
of the delivery of the auditors' report. Purchaser will be responsible for all
out of pocket costs and expenses relating to the accounting review process
unless Seller is determined to have overstated net income for the Stub Period by
an amount equal to or greater than 5% of the net income reported by Seller for
the Stub Period in which case Seller shall be responsible for such costs and
expenses.
Section 5.3 Issuance of Securities. Except as disclosed in Section 5.3 of
----------------------------------
the Seller Disclosure Schedule, Seller shall not permit PGE, PGH II or any of
PGE's or PGH II's respective subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of PGE's or
PGH II's capital stock or the capital stock of any subsidiary of PGE or PGH II
of any class or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares of capital stock, other
than issuances by direct or indirect wholly-owned subsidiaries of PGE or PGH II
of securities to PGE or PGH II or to other direct or indirect wholly-owned
subsidiaries of PGE or PGH II.
Section 5.4 Charter Documents. Neither PGE nor PGH II shall amend or
-----------------------------
propose to amend its certificate or articles of incorporation or by-laws in any
way that would adversely affect the consummation of the transactions
contemplated by this Agreement.
Section 5.5 Acquisitions. Except as disclosed in Section 5.5 of the Seller
------------------------
Disclosure Schedule, Seller shall not permit PGE, PGH II or any of PGE's or PGH
II's subsidiaries to, acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets material to such companies
taken as a whole, other than in the ordinary course of business consistent with
past practice, not to exceed $20 million in the aggregate.
Section 5.6 No Dispositions. Except as disclosed in Section 5.6 of the
---------------------------
Seller Disclosure Schedule, Seller shall not permit PGE, PGH II or any of PGE's
or PGH II's subsidiaries to, sell, lease, license, encumber or otherwise dispose
of, any assets material to such companies taken as a whole, other than in the
ordinary course of business consistent with past practice, not to exceed $20
million in the aggregate.
Section 5.7 Indebtedness. Except as disclosed in Section 5.7 of the Seller
------------------------
Disclosure Schedule, Seller shall not permit PGE or PGH II or any of PGE's or
PGH II's subsidiaries to, incur or guarantee any indebtedness (including any
debt borrowed or guaranteed or otherwise assumed, including the issuance of debt
securities or warrants or rights to acquire debt) other than (a) an aggregate of
up to $550 million in short-term indebtedness outstanding at any time, (b)
long-term indebtedness incurred in connection with the refinancing of existing
indebtedness either at its stated maturity or at a lower cost of funds and (c)
up to $300 million in additional indebtedness.
Section 5.8 Capital Expenditures. Except as disclosed in Section 5.8 of the
--------------------------------
Seller Disclosure Schedule or as required by Law, Seller shall not permit PGE,
PGH II or any of PGE's or PGH II's subsidiaries to, make any capital
expenditures, other than capital expenditures to repair or replace facilities
destroyed or damaged due to casualty or accident (whether or not covered by
insurance) to the equivalent state prior to such casualty or accident. Section
28
5.8 of the Seller Disclosure Schedule includes estimated allocations of capital
expenditures by category. So long as the total amount of capital expenditures
for PGE and PGH II, respectively, are not increased, the level of capital
expenditures within the various categories listed in Section 5.8 of the Seller
Disclosure Letter may vary and new categories of capital expenditure may be
added in Seller's reasonable discretion, if no capital expenditures are moved
between years without the prior approval of NW Natural and Purchaser.
Section 5.9 Compensation, Benefits. Except as disclosed in Section 5.9 of
----------------------------------
the Seller Disclosure Schedule, Seller shall not permit PGE or PGH II or any of
PGE's or PGH II's subsidiaries to (a) enter into, adopt, amend or renew (except
as may be required by applicable Law), accept assignment of or increase the
amount or accelerate the payment or vesting of any benefit or amount payable
under, any employee benefit plan or other contract, agreement, commitment,
arrangement, plan or policy maintained by, contributed to or entered into by
PGE, PGH II or any of their respective subsidiaries, or increase, or enter into
any contract, agreement, commitment or arrangement to increase in any manner,
the compensation or fringe benefits, or otherwise to extend, expand or enhance
the engagement, employment or any related rights, of any director, officer or
other employee of PGE or PGH II or any of their respective subsidiaries, except
(i) pursuant to binding legal commitments and (ii) other than with respect to
executive officers of PGE or PGH II for whom this clause (ii) shall not apply,
for normal (including incentive) increases, extensions, expansions,
enhancements, amendments or adoptions, renewals or assignments in the ordinary
course of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to PGE, PGH II
and their respective subsidiaries taken as a whole or (b) enter into, amend,
accept assignment of or renew any employment, severance, special pay arrangement
with respect to termination of employment or other similar contract, agreement
or arrangement with any director or officer of PGE or PGH II or any of their
respective subsidiaries except, other than with respect to executive officers of
PGE or PGH II for whom this exception shall not apply, in the ordinary course of
business consistent with past practice.
Section 5.10 Cooperation, Notification. Seller shall: (a) Confer on a
--------------------------------------
regular and frequent basis with one or more representatives of NW Natural and
Purchaser to discuss the general status of PGE's and PGH II's ongoing
operations; (b) promptly notify NW Natural and Purchaser of any significant
changes in PGE's or PGH II's business, properties, financial condition or
results of operations; and (c) advise NW Natural and Purchaser of any change or
event that has had or, insofar as reasonably can be foreseen, is reasonably
likely to result in, a PGE Material Adverse Effect.
Section 5.11 Insurance. Seller shall cause PGE, PGH II and each of PGE's
----------------------
and PGH II's subsidiaries to, maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
customary for companies engaged in their respective businesses.
Section 5.12 Permits. Seller shall cause PGE, PGH II and each of PGE's and
--------------------
PGH II's subsidiaries to use commercially reasonable efforts to maintain in
effect all existing Permits pursuant to which PGE, PGH II or any of their
respective subsidiaries operate.
29
Section 5.13 Nuclear Operations. Seller shall not permit PGE or any of its
-------------------------------
subsidiaries to (i) breach any existing contract or arrangement for the disposal
or storage of spent nuclear fuel or components of the PGE Nuclear Facility or
(ii) obligate itself to the payment of decommissioning expenses for the PGE
Nuclear Facility or propose or adopt a budget for such decommissioning expenses,
which exceeds the decommissioning forecast set forth in Section 5.13 of the
Seller Disclosure Schedule, by an amount sufficient to produce a PGE Material
Adverse Effect when measured over the life of the payment obligation or budget
for such expenses. Seller shall not permit PGE to engage in, or enter into the
business of undertaking to engage in, the transportation, treatment or disposal
of radioactive waste generated by third parties. To the extent not prohibited by
applicable Laws, Regulations, Permits, facility licenses and agreements with
third parties existing as of the date of this Agreement, at all times prior to
the Closing, Seller shall make available to Purchaser, upon its request, any
existing information relevant to the operation or decommissioning of the PGE
Nuclear Facility and shall inform Purchaser promptly of any proposed material
changes to the Decommissioning Plan. If Seller is prohibited by agreement with a
third party from providing information to Purchaser, Seller shall use reasonable
efforts (including taking into account Purchaser's willingness to execute
appropriate confidentiality agreements) to obtain the consent of such third
party to the release of such information. In addition, upon reasonable notice,
Seller shall allow access by two individuals, designated by Purchaser, to all
portions of the PGE Nuclear Facility, affording those Persons the same degree of
access to facilities and information to the same extent afforded the Vice
President of Nuclear and Thermal Operations. Access by the individuals selected
by Purchaser shall be pursuant to existing procedures for access to the PGE
Nuclear Facility, including any completion of documentation, security clearance
and training normally required of PGE nuclear personnel.
Section 5.14 Discharge of Liabilities. Seller shall not permit PGE, PGH II
-------------------------------------
and each of PGE's and PGH II's subsidiaries to pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
(which includes the payment of final and unappealable judgments) or in
accordance with their terms, of liabilities (i) reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of such party included in PGE SEC Reports or the most recent
balance sheet included in the PGH II Financials, as the case may be, or (ii)
incurred after the date of such financial statements in the ordinary course of
business consistent with past practice.
Section 5.15 Contracts. Except as otherwise expressly permitted by this
----------------------
Agreement, required by Law or Regulation or in the ordinary course of business
consistent with past practice, Seller shall not permit PGE, PGH II and each of
PGE's and PGH II's subsidiaries to (i) modify, amend, terminate or fail to use
commercially reasonable efforts to renew any material contract to which PGE, PGH
II or any of PGE's or PGH II's subsidiaries is a party or waive, release or
assign any material rights or claims to such a contract or (ii) to enter into
any new material contracts.
Section 5.16 Certain Actions. Seller will not permit PGE, PGH II or any of
----------------------------
their respective subsidiaries to adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such liquidation or a dissolution,
30
merger, consolidation, restructuring, recapitalization or other reorganization,
except for mergers or consolidations between wholly-owned subsidiaries of PGE or
PGH II, respectively, and except for dissolutions contemplated by Section 3.2 of
the Seller Disclosure Schedule.
Section 5.17 Non-Solicitation. Seller agrees that, during the period
-----------------------------
beginning on the date hereof and ending one year after the Closing Date, neither
it nor any of its subsidiaries (excluding PGE, PGH II and their respective
subsidiaries) will, directly or indirectly, solicit for employment or attempt to
hire or hire for employment any Person identified in Section 5.17 of the Seller
Disclosure Schedule; provided, however, that the restrictions in this Section
5.17 shall not be applicable to any Person that is terminated without cause by
PGE, PGH II or any of their respective subsidiaries after the Closing Date; and,
provided, further, that general advertising of employment opportunities and
posting of employment opportunities on Seller's internal employee bulletin board
shall be permitted hereunder and such activities shall be deemed not to violate
the non-solicitation or attempt to hire provisions of this Section 5.17.
Section 5.18 Accounting Matters. Seller shall not permit PGE, PGH II or any
-------------------------------
of their respective subsidiaries to make any material changes in any of their
accounting methods, policies or procedures, including in calculating net income,
except as required by Law, Regulation or GAAP. In addition, neither Seller, PGE,
PGH II nor any of their respective subsidiaries will seek any Regulations or
rulings from any Governmental Authority regarding accounting methods, policies
or procedures of PGE or its subsidiaries without the prior written consent of
Purchaser.
ARTICLE VI
CONDUCT OF BUSINESS OF NW NATURAL
PENDING THE CLOSING
After the date hereof and prior to the Closing or earlier termination of
this Agreement, NW Natural and Purchaser agree, except as expressly contemplated
or permitted in this Agreement, or to the extent Seller shall otherwise consent
in writing, which consent shall not be unreasonably withheld, as follows:
Section 6.1 Ordinary Course of Business. NW Natural and each of its
---------------------------------------
subsidiaries shall carry on their businesses in all material respects in the
usual, regular and ordinary course, consistent with past practice, and shall use
all reasonable efforts to (i) preserve intact its present business organizations
and goodwill, and preserve the goodwill and relationships with customers,
suppliers and others having business dealings with it, (ii) subject to prudent
management of workforce needs, keep available the services of its present
officers and employees as a group, (iii) maintain and keep its material
properties and assets in as good repair and condition as at present, subject to
ordinary wear and tear, and maintain supplies and inventories in quantities
consistent with past practice, and (iv) comply with all applicable Laws,
Regulations and Orders of Governmental Authorities and Courts, except for any
violations under clauses (i) through (iv) that, in the aggregate, would not have
a NW Natural Material Adverse Effect. Purchaser will not conduct business or
operations other than in connection with the transactions contemplated hereby
and in the NW Natural Merger Agreement.
31
Section 6.2 Dividends and Repurchases. Neither NW Natural nor Purchaser
-------------------------------------
shall: (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock other than (A) dividends by a direct or
indirect wholly-owned subsidiary of NW Natural or Purchaser to NW Natural or
Purchaser or to another direct or indirect wholly-owned subsidiary of NW Natural
or Purchaser, (B) dividends by a less than a wholly-owned subsidiary of NW
Natural or Purchaser consistent with past practice, (C) dividends on NW Natural
Preferred Stock and NW Natural Preference Stock, (D) dividends on the NW Natural
Common Stock payable at approximately the same times as paid during the year
ended December 31, 2000 and in amounts per share not to exceed those paid on the
NW Natural Common Stock during the most recently completed fiscal quarter for
which a dividend has been declared except for increases to the dividend as may
be approved by the Board of Directors of NW Natural in the ordinary course and
consistent with past practice of dividend increases provided that such increases
are not inconsistent with the Debt Financing and cannot reasonably be expected
to delay the obtaining of, or increase the risk of not obtaining, the NW Natural
Required Regulatory Approvals, (ii) except as expressly contemplated by this
Agreement pursuant to the NW Natural Merger, split, combine or reclassify NW
Natural's 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 NW
Natural's capital stock; or (iii) redeem, repurchase or otherwise acquire any
shares of NW Natural's capital stock or the capital stock of any subsidiary of
NW Natural other than intercompany acquisitions of capital stock and redemptions
of NW Natural Preferred Stock and NW Natural Preference Stock as required by
their respective terms.
Section 6.3 Issuance of Securities. Except as disclosed in Section 6.3 of
----------------------------------
the NW Natural Disclosure Schedule, or as expressly contemplated by this
Agreement pursuant to the NW Natural Merger, NW Natural and Purchaser shall not
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock that ranks prior to or on parity with the
Preferred Shares or any class or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any shares of such capital
stock.
Section 6.4 Charter Documents. Except as expressly contemplated by this
-----------------------------
Agreement, neither NW Natural nor Purchaser shall amend or propose to amend its
articles of incorporation or by-laws in any way that would adversely affect the
consummation of the transactions contemplated by this Agreement.
Section 6.5 Indebtedness. NW Natural and Purchasers shall not and shall not
------------------------
permit any of their subsidiaries to, incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise assumed, including the
issuance of debt securities or warrants or rights to acquire debt) that would be
significantly inconsistent with the Debt Financing or cause a condition to
borrowing under the Financing Commitment not to be satisfied.
Section 6.6 Compensation, Benefits. Except as disclosed in Section 6.6 of
----------------------------------
the NW Natural Disclosure Schedule, NW Natural shall not and shall not permit
any of its subsidiaries to, (a) enter into, adopt, amend or renew (except as may
be required by applicable Law), accept assignment of or increase the amount or
accelerate the payment or vesting of any benefit or amount payable under, any
employee benefit plan or other contract, agreement, commitment, arrangement,
plan or policy maintained by, contributed to or entered into by NW Natural or
any of its subsidiaries, or increase, or enter into any contract, agreement,
32
commitment or arrangement to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement, employment
or any related rights, of any director, officer or other employee of NW Natural
or any of its subsidiaries, except (i) pursuant to binding legal commitments and
(ii) other than with respect to executive officers of NW Natural for whom this
clause (ii) shall not apply, for normal (including incentive) increases,
extensions, expansions, enhancements, amendments or adoptions, renewals or
assignments in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to NW Natural and its subsidiaries taken as a whole or (b)
enter into, amend, accept assignment of or renew any employment, severance,
special pay arrangement with respect to termination of employment or other
similar contract, agreement or arrangement with any director or officer of NW
Natural or any of its subsidiaries except, other than with respect to executive
officers of NW Natural for whom this exception shall not apply, in the ordinary
course of business consistent with past practice.
Section 6.7 Cooperation, Notification. NW Natural shall: (a) confer on a
-------------------------------------
regular and frequent basis with one or more representatives of Seller to discuss
the general status of NW Natural's ongoing operations; (b) promptly notify
Seller of any significant changes in NW Natural's business, properties,
financial condition or results of operations; and (c) advise Seller of any
change or event that has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in, a NW Natural Material Adverse Effect.
Section 6.8 Insurance. NW Natural shall and shall cause its subsidiaries to
---------------------
maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies engaged
in their respective businesses.
Section 6.9 Permits. NW Natural shall and shall cause its subsidiaries to
-------------------
use commercially reasonable efforts to maintain in effect all existing Permits
pursuant to which NW Natural or any of its subsidiaries operate.
Section 6.10 Discharge of Liabilities. NW Natural shall not and shall not
-------------------------------------
permit its subsidiaries to pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice (which includes
the payment of final and unappealable judgments) or in accordance with their
terms, of liabilities (i) reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes thereto) of such
party included in NW Natural SEC Reports, or (ii) incurred after the date of
such financial statements in the ordinary course of business consistent with
past practice.
Section 6.11 Contracts. Except as otherwise expressly permitted by this
----------------------
Agreement, required by Law or Regulation or in the ordinary course of business
consistent with past practice, NW Natural shall not and shall not permit its
subsidiaries to (i) modify, amend, terminate or fail to use commercially
reasonable efforts to renew any material contract to which NW Natural or any of
its subsidiaries is a party or waive, release or assign any material rights or
claims to such a contract or (ii) to enter into any new material contracts. For
purposes of this Section 6.11, prevailing market conditions and regulatory
policies will be taken into account when considering whether a contract
(including contracts relating to gas transportation, purchase, sale or storage)
33
is entered into, modified, amended, terminated or not renewed in the ordinary
course of business irrespective of whether such actions are consistent with past
practice.
Section 6.12 Certain Actions. Except as expressly contemplated by the NW
----------------------------
Natural Merger Agreement, NW Natural will not and will not permit its
subsidiaries to adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization, except
for mergers or consolidations between wholly-owned subsidiaries of NW Natural.
Section 6.13 Accounting Matters. NW Natural shall not and shall not permit
-------------------------------
its subsidiaries to make any material changes in any of their accounting
methods, policies or procedures, including in calculating net income, except as
required by Law, Regulation or GAAP. In addition, neither NW Natural nor any of
its subsidiaries will seek any Regulations or rulings from any Governmental
Authority regarding accounting methods, policies or procedures of NW Natural or
its subsidiaries without the prior written consent of Seller.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Seller shall cause PGE, PGH II and each
---------------------------------
of PGE's and PGH II's respective subsidiaries to afford to the NW Natural
Representatives, and NW Natural shall and shall cause each of its subsidiaries
to afford to the Seller Representatives, in each case, reasonable access, during
normal business hours throughout the period prior to the Closing Date, to all of
their properties, books, contracts, personnel, commitments and records;
provided, however, that (A) any such access shall not interfere unreasonably
with the operation of the business of PGE, PGH II nor any of their respective
subsidiaries or of NW Natural or any of its subsidiaries, (B) neither PGE, PGH
II or any of their respective subsidiaries nor NW Natural or any of its
subsidiaries shall be required to take any action that would constitute a waiver
of the attorney-client privilege and (C) neither PGE, PGH II nor any of their
respective subsidiaries shall be required to supply Purchaser with any
information that PGE, PGH II or any of their respective subsidiaries is under a
legal obligation not to supply and neither NW Natural nor any of its
subsidiaries shall be required to supply Seller with any information that NW
Natural or any of its subsidiaries is under a legal obligation not to supply.
During such period, Seller, on the one hand, and NW Natural, on the other hand,
shall furnish promptly to the other (i) a copy of each report, schedule and
other document filed or received by it or any of its subsidiaries with or from
the FERC, the NRC, the Department of Justice, the Federal Trade Commission, the
SEC, the OPUC, the WUTC or any other Governmental Authority with respect to the
transactions contemplated hereby and (ii) all information concerning themselves,
their subsidiaries, directors and officers and such matters as may be reasonably
requested by the other in connection with any filings, applications or approvals
required to be made or obtained from any Governmental Authority, Court or third
party in connection with the performance by such Party of its obligations under
this Agreement. All documents and information furnished pursuant to this Section
7.1 shall be subject to the Confidentiality Agreements; provided, however, that
Seller shall be entitled to disclose any such documents and information to a
potential Designated Transferee and its Representatives in connection with a
proposed issuance of Securities to such potential Designated Transferee pursuant
34
to Section 1.2 but such Designated Transferee or potential Designated Transferee
and its Representatives shall keep such information confidential on the same
terms as are applicable to confidential information provided to Seller
hereunder.
Section 7.2 Regulatory Matters.
-------------------------------
(a) HSR. As promptly as practicable but in any event not later than 120
---
days after the date of this Agreement, Seller and Purchaser and, if required, NW
Natural shall each file with the Federal Trade Commission and the Department of
Justice any notifications required to be filed under the HSR Act and the
Regulations promulgated thereunder with respect to the transactions contemplated
hereby. The Parties shall consult with each other as to the appropriate time of
filing such notifications and shall use their best efforts to make such filings
at the agreed upon time, to respond promptly to any requests for additional
information made by either of such agencies and to cause the waiting periods
under the HSR Act to terminate or expire at the earliest possible date after the
date of filing.
(b) Other Approvals. Seller, NW Natural and Purchaser shall cooperate with
---------------
each other (i) promptly (but in any event not later than 75 days after the date
of this Agreement with respect to filings with the OPUC, the WUTC, the SEC and
the FERC) to prepare and to file all necessary documentation, (ii) to effect all
necessary applications, notices, petitions and filings and to execute all
agreements and documents, (iii) to use their respective best efforts to obtain
all necessary permits, consents, approvals and authorizations of all
Governmental Authorities and (iv) to use their respective best efforts to obtain
all necessary permits, consents, approvals and authorizations of all other
parties, in the case of each of the foregoing clauses, necessary or advisable to
consummate the transactions contemplated by this Agreement (including the Seller
Required Statutory Approvals and the NW Natural Required Statutory Approvals) or
required by the terms of any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument to
which PGE, PGH II, NW Natural or Purchaser or any of their respective
subsidiaries is a party or by which any of them is bound. Neither Seller, on one
hand, nor NW Natural and Purchaser, on the other, shall be deemed to have
breached clause (i) of the immediately preceding sentence if any delay beyond 75
days is caused by any Person other than such party or parties and their legal
counsel, but, notwithstanding any such delay, Seller, NW Natural and Purchaser
shall use their best efforts to effect such filings promptly thereafter. Each of
Seller and NW Natural shall have the right to review in advance all filings to
be made by the other Party with any Governmental Authority in connection with
the transactions contemplated hereby, and each Party will make its respective
Representatives available to the other Party to discuss any questions or issues
raised with respect to such filings for a reasonable period prior to making such
filings.
(c) No-Action Letter. Seller agrees to prepare and file with the SEC a
----------------
request for the issuance by the SEC of a "no action" letter (the "No-Action
Letter"). The No-Action Letter shall be to the effect that, based on the
transactions and relationships contemplated by this Agreement, including the
issuance by the Purchaser of the Securities as provided in Article I, and the
Securityholders' Agreement, the SEC will not take any action to assert that
Seller, Enron NW Assets or any Designated Transferee will, upon consummation of
the transactions contemplated by this Agreement, become a "holding company" for
purposes of PUHCA or an "affiliate" of Purchaser or any "subsidiary" of
Purchaser (including PGE and NW Natural) for purposes of PUHCA.
35
Section 7.3 Cooperation; Best Efforts. Subject to the terms and conditions
-------------------------------------
of this Agreement, each of the Parties hereto shall use its best efforts to take
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable in accordance with applicable Laws and
Regulations to consummate and make effective the transactions contemplated by
this Agreement and to permit Purchaser to obtain the Debt Financing, including
using such Person's best efforts to ensure satisfaction of the conditions
precedent to the obligations of the Parties to this Agreement and the conditions
precedent to effectuation of the Debt Financing contemplated by the Financing
Commitment and the documentation required thereby. None of the Parties hereto
shall, without the prior written consent of the other Party, take or fail to
take, or cause any of their respective Subsidiaries to take or fail to take, any
action or enter into any transaction, including any merger, acquisition, joint
venture, disposition, lease, contract or financing, that (i) would reasonably be
expected to prevent or materially impede, interfere with or delay the
transactions contemplated by this Agreement, including the Debt Financing, (ii)
would be inconsistent with the Debt Financing or cause a condition precedent to
effectuation of the Debt Financing contemplated by the Financing Commitment and
the documentation required thereby not to be satisfied, (iii) would reasonably
be expected to delay the obtaining of, or significantly increase the risk of not
obtaining, any authorizations, consents, orders, declarations or approvals of
any Governmental Authority necessary to consummate the transactions contemplated
hereby or the expiration or termination of any applicable waiting period,
significantly increase the risk of any Governmental Authority entering an Order
prohibiting the consummation of the transactions contemplated hereby or
significantly increase the risk of not being able to remove any such Order on
appeal or otherwise or (iv) would result in Purchaser failing to qualify for an
exemption from registration under Section 3(a)(1) of PUHCA.
Section 7.4 Public Announcements. Seller, NW Natural and Purchaser shall
--------------------------------
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
or any of the transactions contemplated hereby and, subject to each Party's
disclosure obligations imposed by Law or any applicable national securities
exchange, (a) shall consult with each other with respect to any public
announcements or statements and (b) shall not issue any public announcement or
statement with respect to the transactions contemplated by this Agreement that
is inconsistent with any public announcement or statement previously made by
either Party without the consent of the other Party.
Section 7.5 Employee Benefit Plans.
-----------------------------------
(a) PGH Sponsorship. Prior to Closing, Seller shall have caused sponsorship
---------------
of the Portland General Holdings, Inc. Pension Plan and Portland General
Holdings, Inc. Voluntary Employees' Beneficiary Association and any related
trusts or other funding vehicles to be transferred to and assumed by PGH II and
PGE; PGH shall thereupon cease to be a sponsor of such plans. From and after
Closing, Seller and Seller's affiliates and subsidiaries (including PGH) shall
have no rights, duties, responsibilities or liabilities with respect to the
Portland General Holdings, Inc. Pension Plan and Portland General Holdings, Inc.
Voluntary Employees' Beneficiary Association or any related trusts or other
funding vehicles, and Purchaser agrees that, pursuant to their assumption of
sponsorship of such plans, PGH II and PGE shall assume all rights, duties,
responsibilities and liabilities with respect to such plans, and any related
trusts or other funding vehicles.
36
(b) Enron Savings Plan. The account balances (both vested and unvested)
------------------
under the Enron Corp. Savings Plan of the PGE Employees and of any other
individuals whose accounts were transferred into the Enron Corp. Savings Plan
pursuant to the merger into such plan of the Portland General Holdings, Inc.
Retirement Savings Plan shall be transferred to a qualified defined contribution
plan of the Purchaser as soon as practicable after Closing following receipt
from the IRS of confirmation that such transfer will not adversely affect the
qualified status under applicable provisions of the Code of the Enron Corp.
Savings Plan. Such transfer shall be in cash except that any outstanding
participant loans shall be transferred in kind.
(c) Enron ESOP. The account balances under the Enron Corp. Employee Stock
----------
Ownership Plan of the PGE Employees shall be distributed to them in lump sum
payments in cash or in kind as soon as practicable after Closing after receipt
by Seller from the IRS of confirmation that effecting such distributions will
not adversely affect the qualified status of such plan under applicable
provisions of the Code.
(d) Enron Medical and Dental Plans. After Closing, the Enron Corp. Medical
------------------------------
Plan for Active Employees, the Enron Corp. Medical Plan for Inactive
Participants, the Enron Corp. Dental Plan for Active Employees and the Enron
Corp. Dental Plan for Inactive Participants shall thereafter be liable for and
only for the payment of claims incurred prior to Closing by the PGE Employees
and the PGE Former Employees who were covered by such plans prior to Closing.
(e) Enron Flexible Benefit Plan. From and after Closing, the PGE Employees
---------------------------
shall no longer be permitted to make pre-tax contributions under the Enron Corp.
Flexible Benefit Plan but they shall be permitted to submit claims against their
medical reimbursement and dependent care flexible spending accounts under such
plan through the remainder of the calendar year including Closing but not for
any amounts in excess of the Closing date balances of such accounts.
(f) Comparable Benefits. For a period of not less than two years following
-------------------
the Closing Date, Purchaser shall provide or shall cause PGH II and PGE and
their subsidiaries to provide the PGE Employees and the PGE Former Employees
with employee benefits that are not materially less favorable in the aggregate
than those provided either (a) immediately prior to Closing to such individuals
under the Benefit Plans disclosed in Section 3.9(a) of the Seller's Disclosure
Schedule or (b) to similarly situated employees of NW Natural and its
subsidiaries; provided, however, that the foregoing shall not require the
continued maintenance of or prevent the amendment or termination of any
particular benefit plan except that during such two year period Purchaser shall
provide or cause PGH II and PGE to provide severance benefits for the PGE
Employees in amounts and upon terms and conditions that are no less favorable
than those that were in effect under the Portland General Holdings, Inc.
Involuntary Severance Plan as in effect on September 5, 1997 and the Portland
General Holdings, Inc. Outplacement Assistance Plan as in effect on September 5,
1997, and provided, further, that Purchaser's right to negotiate successor
collective bargaining agreements shall not be limited by this subsection (f) of
this Section 7.5.
(g) Prior Service. Each PGE Employee and PGE Former Employee shall be given
-------------
credit for all purposes under the Replacement Plans for all service prior to the
37
Closing with Seller and its affiliates and subsidiaries (including,
specifically, service with PGH, PGH II, PGE and their affiliates and
subsidiaries prior to their acquisition by Seller), to the extent such credit
was given under the Benefit Plans disclosed in Section 3.9(a) of the Seller's
Disclosure Schedule.
(h) Preexisting Conditions. No preexisting condition exclusion or
----------------------
limitation that was inapplicable under the applicable Benefit Plan immediately
prior to Closing shall be applicable with respect to the participation of any
PGE Employee or PGE Former Employee in any Replacement Plan that is a medical
benefit plan, but (i) the medical expenses incurred by a PGE Employee or PGE
Former Employee (or their spouses and dependents) during the portion of the year
prior to Closing shall be counted for purposes of the annual deductible of any
such medical benefit plan to the extent such expenses were similarly counted
under the applicable Benefit Plan prior to the Closing and (ii) the medical
expenses paid by a Benefit Plan of Seller and its affiliates and subsidiaries
that is a medical plan during the year in which Closing occurs for any PGE
Employee or PGE Former Employee (and their spouses or dependents) shall be
counted for purposes of any annual limits of such medical benefit plan.
(i) Executive and Director Plans. As promptly as reasonably practicable
---------------------------
after the date hereof, Purchaser and Seller will use all commercially reasonable
efforts to negotiate in good faith, execute and implement an agreement (the
"Plans and Trusts Agreement") regarding the Portland General Holdings, Inc.
Umbrella Trust for Outside Directors and the Portland General Holdings, Inc.
Umbrella Trust for Management (the "Trusts") and the assets held thereunder and
the Portland General Holdings, Inc. Management Deferred Compensation Plan, the
Portland General Holdings, Inc. Outside Directors' Deferred Compensation Plan,
the Portland General Holdings, Inc. Supplemental Executive Retirement Plan, the
Portland General Holdings, Inc. Retirement Plan for Outside Directors, the
Portland General Holdings, Inc. Senior Officers' Life Insurance Benefit Plan and
the Portland General Holdings, Inc. Outside Directors' Life Insurance Benefit
Plan (the "Plans") and the obligations becoming payable thereunder. Pursuant to
the terms of the Plans and Trusts Agreement, PGE and Seller shall undertake and
consummate one or more transactions (collectively, the "TOLI Transaction") prior
to Closing, that will have substantially the same economic effect to Seller and
PGE as if, simultaneously prior to Closing, without adjustment to the PGE
Purchase Price or the PGH Purchase Price: (i) PGE had distributed to Seller the
life insurance policies and other assets ("Policies") in the Trusts that are
earmarked for PGE's liability under the Plans in a manner such that the entire
amount of proceeds from the Policies shall be free from federal income tax to
the Seller, and distributed an amount of cash equal to the deferred tax benefit
(the "Deferred Tax Benefit") of the aggregate amount of the liabilities of the
Plans, such liabilities to be determined on a basis mutually acceptable to
Seller and Purchaser (the "Deferred Compensation Liability"); and (ii) Seller
had assumed, and was able to fully deduct for federal income tax purposes, the
Deferred Compensation Liability. The TOLI Transaction may consist of sales for
cash or notes, dividends, transfers, purchase price adjustments, or other means
or any combination of the foregoing (along with any necessary and advisable
amendments to the Trust agreements and any other ancillary agreements), Seller
and Purchaser agree to use all commercially reasonable efforts to agree on a
general structure for the TOLI Transaction not later than ninety (90) days after
the date hereof. The Parties shall use their best efforts to cause the TOLI
Transaction to be consummated in a manner such that PGE will not thereafter
38
realize any further economic impact related to the Plans, and Enron Corp. will
thereafter be responsible for and realize or incur all further economic benefit
or detriment related to the Plans; provided that the Parties will negotiate in
good faith to minimize transaction costs of the TOLI Transaction (including,
without limitation Taxes). Seller shall produce adequate security for Seller's
obligations in connection with the TOLI Transaction (including a pledge of the
Policies) (based upon annual valuations of the Deferred Compensation Liability
by a mutually acceptable third party), and shall be otherwise protected against
the bankruptcy of Seller or any affiliate thereof. The TOLI Transaction shall
include such other terms and provisions, agreements and commitments not
inconsistent with the foregoing as may be mutually agreeable to Seller and
Purchaser, and shall assure to Purchaser's reasonable satisfaction that there
are no adverse tax consequences to the participants in the Plans
Section 7.6 Expenses. Subject to Section 5.2 and Section 7.1, (a) all costs
--------------------
and expenses incurred by or on behalf of Seller, Enron NW Assets, PGE, PGH II or
any Designated Transferee in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller or Enron NW Assets, and (b) all
costs and expenses incurred by or on behalf of Purchaser or NW Natural in
connection with this Agreement and the transactions contemplated hereby shall be
paid by Purchaser or NW Natural.
Section 7.7 No Breach, Etc. No Party shall, nor shall any Party permit any
--------------------------
of its subsidiaries to, take any action that would or is reasonably likely to
result in a material breach of any provision of this Agreement or in any of its
representations and warranties set forth in this Agreement being untrue on and
as of the Closing Date.
Section 7.8 Directors' and Officers' Indemnification.
-----------------------------------------------------
(a) Survival of Indemnification. To the fullest extent not prohibited by
---------------------------
Law, from and after the Closing Date, all rights to indemnification now existing
in favor of the employees, agents, directors or officers of PGE, PGH II and
their respective subsidiaries with respect to their activities as such prior to
or on the Closing Date, as provided in their respective articles of
incorporation, bylaws, other organizational documents or indemnification
agreements in effect on the date of such activities or otherwise in effect on
the date hereof, shall survive the Closing and shall continue in full force and
effect for a period of not less than six years from the Closing Date, provided,
however, that, if any claim or claims are asserted or made within such six year
period, all such rights to indemnification in respect of any claim or claims
shall continue until final disposition of such claim or claims.
(b) Successors. If Purchaser, PGE, PGH II or any of their respective
----------
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then and in either such case, proper
provision shall be made so that the successors and assigns of Purchaser, PGE or
PGH II, as the case may be, shall assume the obligations set forth in this
Section 7.8.
Section 7.9 Insurance. Purchaser shall cause to be put in place as of the
---------------------
Closing Date insurance policies covering PGE and PGH II and their respective
subsidiaries to the extent such entities are included in Seller's policies as of
39
such date. Purchaser shall cause all surety bonds and letters of credit that
Seller or its affiliates (other than PGE, PGH II and their respective
subsidiaries) have entered into or provided on behalf of PGE, PGH II or their
respective subsidiaries and that remain outstanding on the Closing Date to be
replaced as of the Closing Date with no further obligation to Seller or such
affiliates. A list of the types of insurance coverage provided by Seller for PGE
and PGH II and their respective subsidiaries and the surety bonds and letters of
credit entered into or provided on their behalf, in each case as of the date
hereof, is set forth in Section 7.9 of the Seller Disclosure Schedule. From and
after the Closing, Purchaser shall assume, and indemnify and hold Seller
harmless for, all of Seller's obligations under the Guaranty Agreements and on
or prior to the Closing shall execute and delver to the beneficiary of the
Guaranty Agreements a replacement guaranty effective as of the Closing in a form
substantially identical to the applicable Guaranty Agreement.
Section 7.10 Corporate Name. Neither NW Natural nor Purchaser shall
---------------------------
acquire, nor shall PGE, PGH II or any of PGE's or PGH II's subsidiaries retain,
any rights to the name "Enron" (or any derivation therefrom) or any trademark,
trade name or symbol related thereto. As soon as reasonably practicable after
the Closing (and in any event, within 60 days after the Closing Date) Purchaser
will cause PGE, PGH II and each of their respective subsidiaries to remove the
"Enron" name (and all derivations therefrom), and all trademarks, trade names
and symbols related thereto from the properties and assets of PGE, PGH II and
each of their respective subsidiaries (including changing all signage relating
thereto). In addition, within 10 Business Days of the Closing Date, Purchaser
will change all of the legal names of the subsidiaries of PGE and PGH II to
delete from the name thereof the word "Enron."
Section 7.11 Related Party Contracts. Except as set forth on Section 7.11
------------------------------------
of the Seller Disclosure Schedule, Seller shall cause all of the Related Party
Contracts, including those entered into after the date of this Agreement, to be
terminated prior to the Closing.
Section 7.12 Tax Matters.
-------------------------
(a) Consolidated Returns. Seller shall cause to be included in the
--------------------
consolidated federal income Tax Returns (and in the state income Tax Returns of
any state in which consolidated, combined or unitary income Tax Returns are
filed) of the affiliated group of corporations of which Seller is the common
parent (the "Seller Group") for any period beginning on or after the date on
which PGE was first included in the consolidated federal income Tax Return of
the Seller Group (the "Beginning Tax Date") and ending on or before the last
date, respectively, on which PGE and its subsidiaries or PGH II and its
subsidiaries, whichever is relevant, are included in the consolidated federal
income Tax Return of the Seller Group (each, an "Ending Tax Date"), all items of
income, gain, loss, deduction and credit and other tax items ("Tax Items") of
PGE, PGH II and their respective subsidiaries that are required to be included
therein (taking into account the provisions of Treas. Reg.
ss.1.1502-76(b)(1)(ii)(B)), and shall cause such Tax Returns to be timely filed
with the appropriate taxing authorities, and shall be responsible for the timely
payment (and entitled to any refund or credit) of all Taxes (except for Taxes
resulting from any transaction not in the ordinary course of business occurring
on the Closing Date after the Closing) due with respect to the periods covered
by such Tax Returns. If requested by Seller on or before the Closing Date,
within 90 days after the Closing Date, Purchaser shall cause to be prepared and
delivered to Seller, for Seller's review and approval, pro forma Tax Returns
40
which include the Tax Items of PGE, PGH II and their respective subsidiaries for
the period ending on the relevant Ending Tax Date that are required to be
included in Tax Returns to be filed by Seller pursuant to this subsection (a) of
this Section 7.12.
(b) Separate Returns. With respect to any Tax Return covering a taxable
----------------
period ending on or before the Closing Date that is required to be filed after
the Closing Date with respect to any of PGE, PGH II and their respective
subsidiaries and that is not described in subsection (a) of this Section 7.12,
Purchaser shall cause such Tax Return to be prepared, shall cause to be included
in such Tax Return all Tax Items required to be included therein, and shall
cause such Tax Return to be filed timely with the appropriate taxing authority.
Seller shall provide Purchaser with the information necessary to prepare all
such Tax Returns. Purchaser shall deliver a copy of each such Tax Return to
Seller at least 30 days prior to the due date for the filing of each such Tax
Return to permit Seller to review and comment on each such Tax Return prior to
filing and shall make such revisions as are reasonably requested by Seller.
Seller shall pay to Purchaser, at least five days prior to the due date for any
such Tax Return, all amounts (except for Taxes resulting from any transaction
not in the ordinary course of business occurring on the Closing Date after the
Closing) that are shown as due on such Tax Return reduced by the amount of Taxes
expensed in determining Consolidated Net Income for purposes of subsection (b)
of Section 5.2, and Purchaser shall pay the amount shown as due on such Tax
Return and remit such amounts to the appropriate taxing authorities. Seller
shall be entitled to any refund for Taxes for any period covered by any such Tax
Return.
(c) Straddle Returns. With respect to any Tax Return covering a taxable
----------------
period beginning on or before the Closing Date and ending after the Closing Date
that is required to be filed after the Closing Date (a "Straddle Period Return")
----------------------
with respect to any of PGE, PGH II and their respective subsidiaries, Purchaser
shall cause such Tax Return to be prepared, shall cause to be included in such
Tax Return all Tax Items required to be included therein and shall furnish a
copy of such Tax Return to Seller. Seller shall pay to Purchaser at least five
days prior to the due date for the filing of any Straddle Period Return an
amount equal to the portion of the Taxes shown on such return that relates to
the portion of such taxable period ending on the Closing Date (a "Pre-Closing
Straddle Period") reduced by the amount of Taxes expensed in determining
Consolidated Net Income for purposes of subsection (b) of Section 5.2. For
purposes of this subsection (c) of this Section 7.12, in the case of any Taxes
that are imposed on a periodic basis and are payable with respect to a taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax that relates to the portion of such taxable period ending on the Closing
Date shall (1) in the case of any Taxes other than Taxes based upon or related
to income, receipts, sales or payroll, be deemed to be the amount of such Tax
for the entire taxable period multiplied by a fraction the numerator of which is
the number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire taxable period, and (2)
in the case of any Tax based upon or related to income, receipts, sales or
payroll, be deemed equal to the amount which would be payable if the relevant
taxable period ended on the Closing Date.
(d) Consistency. Any Tax Return to be prepared pursuant to the provisions
-----------
of subsection (b) or (c) of this Section 7.12 shall be prepared in a manner
consistent with practices followed in prior years with respect to similar Tax
Returns, except for changes required by changes in law or fact.
41
(e) Access to Tax Records. Seller shall grant to Purchaser (or its
---------------------
designees) access at all reasonable times to all of the information, books and
records relating to PGE, PGH II and their respective subsidiaries within the
possession of Seller or any member of the Seller Group (including workpapers and
correspondence with taxing authorities), and shall afford Purchaser (or its
designees) the right (at Purchaser's expense) to take extracts therefrom and to
make copies thereof, to the extent reasonably necessary to permit Purchaser (or
its designees) to prepare Tax Returns and to conduct negotiations with taxing
authorities. Purchaser shall grant or cause PGE, PGH II and their respective
subsidiaries to grant to Seller (or its designees) access at all reasonable
times to all of the information, books and records relating to PGE, PGH II and
their respective subsidiaries within the possession of Purchaser, PGE, PGH II or
their respective subsidiaries (including workpapers and correspondence with
taxing authorities), and shall afford Seller (or its designees) the right (at
Seller's expense) to take extracts therefrom and to make copies thereof, to the
extent reasonably necessary to permit Seller (or its designees) to prepare Tax
Returns and to conduct negotiations with taxing authorities.
(f) Transfer Taxes. Purchaser shall be responsible for the payment of all
--------------
state and local transfer, sales, use or other similar Taxes resulting from the
transactions contemplated by this Agreement.
(g) No Section 338 Election. No election shall be made under section 338 of
-----------------------
the Code or the corresponding provisions of any state Tax law with respect to
the purchase of the PGE Shares or the PGH II Shares.
(h) Indemnification for Taxes. From and after the Closing Date, Seller
-------------------------
shall protect, defend, indemnify and hold harmless Purchaser, PGE, PGH II and
their respective subsidiaries from any and all Taxes imposed on PGE, PGH II or
any of their respective subsidiaries (i) for any taxable period ending on or
before the Closing Date (except for Taxes resulting from any transaction not in
the ordinary course of business occurring on the Closing Date after the
Closing), (ii) with respect to any Pre-Closing Straddle Period or (iii)
resulting by reason of the several liability of PGE, PGH II or any of their
respective subsidiaries for Taxes pursuant to Treas. Reg. ss.1.1502-6 or any
analogous state, local or foreign law or regulation for periods beginning on or
after the Beginning Tax Date and ending on or before the Ending Tax Date;
provided, however, that Seller's liability under this paragraph shall be reduced
with respect to any item to the extent of the amount for which such item was
specifically identified and reserved in the financial statements referred to in
Section 3.5 and not taken into account in computing any Tax Sharing Payment and
by the amount of Taxes expensed in determining Consolidated Net Income for
purposes of subsection (b) of Section 5.2. Purchaser shall protect, defend,
indemnify and hold harmless Seller and each member of the Seller Group from any
and all other Taxes imposed on PGE, PGH II or any of their respective
subsidiaries.
(i) Tax Proceedings. In the case of any audit, examination or other
---------------
proceeding ("Proceeding") with respect to Taxes for which Seller would be liable
pursuant to this Agreement, Purchaser shall promptly inform Seller, and shall
afford Seller, at its expense, the opportunity to control the conduct of such
Proceedings. Seller shall have the right to initiate any claim for refund, file
any amended Tax Return or take any other action that it deems appropriate with
respect to such Taxes to the extent that such action does not adversely affect
Purchaser or PGE, PGH II or the respective subsidiaries of PGE and PGH II for
42
any taxable year beginning after the Closing Date. Any Proceeding with respect
to Taxes for a period which includes but does not end on the Closing Date shall
be controlled jointly by Seller and Purchaser.
(j) Tax Sharing Agreements. All tax sharing agreements with respect to or
----------------------
involving PGE, PGH II and their respective subsidiaries shall be terminated as
of the Closing Date and, after the Closing Date, PGE, PGH II and their
subsidiaries shall not be bound thereby or have any liability thereunder.
(k) Stock Option Chargeback. Notwithstanding anything to the contrary in
-----------------------
this Agreement and without reduction of any other amounts payable under this
Agreement, PGE shall annually pay Seller an amount equal to the federal tax
benefit of any tax deduction of PGE attributable to the exercise of Seller stock
options granted for services rendered to PGE. PGE shall pay any amount payable
pursuant to this subsection (k) of this Section 7.12 within 30 days of the date
that PGE, or the consolidated group of which PGE is a member, files the federal
income tax return reflecting deductions corresponding to such amount. PGE and
Enron shall enter into an agreement to give effect to this Section 7.12(k) and,
notwithstanding anything contained in this Agreement to the contrary, the
execution and delivery of such agreement shall not violate any other restriction
contained in this Agreement.
(l) Certain Matters Relating to Tax Benefits. If Seller is entitled to
----------------------------------------
receive a payment from Purchaser or PGE or to an adjustment of an amount
otherwise payable for, or on account of, any Tax benefit pursuant to Section
7.12(k) or Section 7.18, and Purchaser or PGE, as applicable, makes such payment
or adjustment in accordance with such applicable provision of this Agreement,
and all or any portion of the Tax deduction giving rise to such payment is
finally determined to be disallowed (or it is finally determined that PGE is
required to recognize a corresponding item of income), then Seller shall pay to
the party that made the payment or allowed the adjustment an amount in cash
equal to the amount of the lost Tax benefit corresponding to the disallowed Tax
deduction, together with interest thereon equal to the amount of interest, if
any, that Purchaser or PGE, as applicable, is required to pay to the applicable
Taxing authority by reason of the disallowance of the applicable Tax deduction
or the recognition of a corresponding item of income, not later than ten (10)
Business Days after the delivery to Seller by Purchaser or written notice of the
final determination of the disallowance of all or any portion of such Tax
deduction or the requirement that PGE recognize a corresponding item of income),
which notice shall include a copy of the applicable final determination. Seller
shall make such payment by wire transfer of immediately available funds to an
account designated by Purchaser in writing. In the case of any Proceeding
involving the proposed disallowance of a Tax deduction or proposed requirement
that PGE recognize a corresponding item of income, Purchaser shall promptly
inform Seller of such Proceeding, and shall afford Seller, at its expense, to
participate in the conduct of the Proceeding, it being understood that Purchaser
or PGE, as the case may be, shall retain control of the conduct of the
Proceeding.
(m) Section 351 Treatment. Seller acknowledges (but in no way represents,
---------------------
warrants, covenants or guarantees) that the transfer of the PGE Shares to
Purchaser pursuant to this Agreement is occurring pursuant to a transaction
qualifying for nonrecognition treatment under Code Section 351, and agrees to
comply with all reporting requirements relating thereto and further agrees that
it shall not take any position inconsistent with such intent.
43
Section 7.13 Evidence of Financing Availability. If the Closing has not
-----------------------------------------------
occurred on or before December 8, 2002, NW Natural and Purchaser will use their
best efforts to obtain, and will provide Seller with a copy of, either an
extension of the Financing Commitment or a new financing commitment that, in
either case, provides for at least the same amount of financing as the Financing
Commitment as originally issued, funding conditions no less favorable than those
included in the Financing Commitment as originally issued and other terms and
conditions the aggregate effect of which is not materially adverse to the
Purchaser in comparison with those contained in the Financing Commitment as
originally issued, which extension or new commitment shall include a termination
date not earlier than the Extended Termination Date. Any new financing
commitment shall be made by either or both of the lenders that are parties to
the Financing Commitment as originally issued or another bona fide lender or
lenders acceptable to Seller, which consent shall not be unreasonably withheld.
Purchaser shall accept any such extended Financing Commitment or new Financing
Commitment if the funding conditions and other terms and conditions contained
therein are is not materially adverse to Purchaser in comparison with those
contained in the Financing Commitment as originally issued. Once obtained, such
extended or new Financing Commitment shall become the Financing Commitment
hereunder.
Section 7.14 Information Supplied. Seller, NW Natural and Purchaser each
---------------------------------
agrees, as to itself and its subsidiaries (as applicable), that none of the
information supplied or to be supplied by it or its subsidiaries for inclusion
or incorporation by reference in the Registration Statement on Form S-4 to be
filed with the SEC by Purchaser in connection with the issuance of shares of
Common Stock in the NW Natural Merger (including the proxy statement and
prospectus (the "Prospectus/Proxy Statement") constituting a part thereof) (the
"Registration Statement") will, at the time the Registration Statement becomes
effective under the Securities Act, at the date of mailing of the
Prospectus/Proxy Statement to shareholders of NW Natural and at the time of the
meeting of shareholders of NW Natural at which the NW Natural Shareholder
Approval is sought, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading, in the case of the latter two dates,
in light of the circumstances under which they were made. Seller, NW Natural and
Purchaser each agrees, as to itself and its subsidiaries (as applicable), that
all information supplied or to be supplied by it or its subsidiaries (as
applicable), for inclusion or incorporation by reference in the Registration
Statement will comply as to form with the requirements of the Securities Act and
the Exchange Act.
Section 7.15 NW Natural Shareholders Meeting. NW Natural will take, in
--------------------------------------------
accordance with applicable law and its articles of incorporation, and by-laws,
all action necessary to convene a meeting of holders of NW Natural Common Stock
as promptly as reasonably practicable after the date hereof to consider and vote
upon the approval of the NW Natural Merger Agreement and the issuance of
Securities pursuant to this Agreement. The Board of Directors of NW Natural
shall recommend such approval and shall take all lawful action to solicit such
approval.
Section 7.16 Registration Statement.
------------------------------------
(a) Registered Offering. NW Natural and Purchaser shall as soon as
-------------------
practicable, following the date hereof (and in no event later than 60 days from
the date hereof) prepare and file with the SEC the Prospectus/Proxy Statement
44
and the Registration Statement. Neither NW Natural nor Purchaser shall be deemed
to have breached the immediately preceding sentence if any delay beyond 60 days
is caused by any Person other than NW Natural, Purchaser or their legal counsel,
but, notwithstanding any such delay, NW Natural and Purchaser shall use their
best efforts to effect such filing promptly thereafter. NW Natural and Purchaser
shall use their best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and as soon as practicable thereafter mail the Prospectus/Proxy Statement to the
shareholders of NW Natural, and, if necessary after the Prospectus/Proxy
Statement is mailed, promptly circulate amended supplemental proxy material,
and, if required, resolicit proxies. NW Natural and Purchaser shall also use
their best efforts to obtain prior to the effective date of the Registration
Statement all necessary state securities law or "blue sky" permits and approvals
required in connection with the NW Natural Merger and to consummate the other
transactions contemplated hereby and will pay all expenses incident thereto.
(b) Comfort Letter. Seller will use its best efforts to cause to be
--------------
delivered to Purchaser and its directors a letter of the independent auditors
for PGE and its subsidiaries and PGH II, dated the date on which the
Registration Statement shall become effective, in form and substance customary
for "comfort" letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
(c) Information Furnished. Subject to applicable laws and the preservation
---------------------
of any applicable attorney-client privilege, Seller and NW Natural each shall,
upon request by the other, furnish the other with all information concerning
itself, its subsidiaries, directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with the
Prospectus/Proxy Statement and the Registration Statement.
(d) Other Disclosure Documents. Seller agrees as to itself and its
--------------------------
subsidiaries to provide such information and to cooperate with Purchaser and NW
Natural with respect to other disclosure documents, including registration
statements (and the prospectuses included in such registration statements) filed
with the SEC with respect to securities of Purchaser (including shares of Common
Stock and debt securities of Purchaser) to be issued and sold after the Closing
on the terms set forth in Section 7.14 and this Section 7.16 as if such
provisions expressly referred to such additional disclosure documents and
securities.
Section 7.17 Rights Plan. NW Natural has amended its Stockholder Rights
------------------------
Plan to make it inapplicable to the transactions contemplated hereby and to
provide that none of Seller, Enron NW Assets and any Designated Transferee will
be deemed to be an Acquiring Person (as such term is defined therein)
thereunder. NW Natural will keep such amendment in effect prior to Closing and
will make the same provision in any rights plan adopted by Purchaser prior to
Closing.
Section 7.18 California Receivables. If any California Receivables are not
-----------------------------------
collected in full on or prior to the first anniversary of the Closing Date and
if Purchaser thereafter notifies Seller that such receivables have not been
collected in full, then Seller shall cause to be paid to Purchaser, within 20
Business Days after such notification, an amount equal to the excess, if any, of
(a) the sum of (i) the unpaid amount of such California Receivables for sales in
the year ended December 31, 2000 (the "2000 Receivables") less the aggregate
45
reserve for the 2000 Receivables, if any, set forth on PGE' s consolidated
balance sheet as of the Closing Date (the "PGE Closing Balance Sheet") used to
determine "net income" pursuant to Section 5.2 but which shall not be less than
the amount of such reserves specifically identified to the 2000 Receivables on
the date hereof, less any reduction in Purchaser's Taxes as a result of the
failure of such receivables to be paid, plus (ii) 10% of the unpaid amount of
such California Receivables for sales from January 1, 2001 through February 6,
2001 (the "2001 Receivables") less 10% of the aggregate reserve for the 2001
Receivables, if any, set forth on the PGE Closing Balance Sheet but which shall
not be less than the amount of such reserves specifically identified to the 2001
Receivables on the date hereof, less any reduction in Purchaser's Taxes as a
result of the failure of such receivables to be paid, except that if less than
90% of the 2001 Receivables are recovered through the power cost adjustment in
PGE's rates, then the "10%" percentage in this clause (ii) shall be deemed to be
increased to a percentage equal to 100 minus the percentage of such 2001
Receivables that are so actually recovered, plus (iii) Carrying Costs and
Litigation Costs over (b) $10,000,000. Promptly after receiving the payment
required under this Section 7.18 with respect to any California Receivable or
portion thereof, Purchaser shall assign its or any of its subsidiaries rights in
such receivable to Seller and Purchaser shall thereafter cooperate with Seller
in attempting to collect such receivable. For all periods prior to the first
anniversary date of the Closing Date, Purchaser shall, and shall cause it
subsidiaries to, use its best efforts to collect the 2000 Receivables and the
2001 Receivables in full.
ARTICLE VIII
CONDITIONS
Section 8.1 Joint Conditions to Obligations of the Parties. The obligations
----------------------------------------------------------
of NW Natural and Purchaser, on the one hand, to purchase the Shares and to
consummate the other transactions contemplated hereby, and the obligations of
the Seller and Enron NW Assets, on the other, to sell the Shares and to
consummate the other transactions contemplated hereby shall both be subject to
the fulfillment on or prior to the Closing Date (or the mutually agreed waiver
by all such Parties) of the following conditions:
(a) No Injunction. No preliminary or permanent injunction or other order,
-------------
judgment or decree by any federal or state court of competent jurisdiction that
prevents the consummation of the sale of the Shares contemplated herein shall
have been issued and remain in effect (each Party agreeing to use its best
efforts to have any such injunction, order, judgment or decree lifted) and the
sale of the Shares shall not have been prohibited under any applicable federal
or state law or regulation.
(b) NW Natural Shareholder Approval. The NW Natural Shareholder Approval
-------------------------------
shall have been obtained.
(c) Debt Financing. Those Persons providing the Debt Financing shall have
--------------
advised Purchaser that they are unconditionally (save and except those
conditions contemplated by the Financing Commitment and the documentation
required thereby, all of which have been fulfilled or waived) ready, willing and
able to deliver to Purchaser the Debt Financing; provided, however, the
provisions of this subsection (c) of this Section 8.1 shall not constitute a
condition to the obligations of the Parties hereto if a NW Natural Change of
Control shall have occurred on or prior to the Closing.
46
(d) No-Action Letter. Seller shall have received the No-Action Letter.
----------------
(e) FELINE PRIDES Documents. Purchaser and Seller or any other Person to
-----------------------
which Purchaser issues FELINE PRIDES at the Closing shall have executed and
delivered definitive agreements relating to such FELINE PRIDES on the terms set
forth in the Term Sheet attached to this Agreement as Exhibit E and otherwise on
terms and conditions mutually satisfactory to such parties.
Section 8.2 Conditions to Obligations of NW Natural and Purchaser. The
-----------------------------------------------------------------
obligations of NW Natural and Purchaser to purchase the Shares and to consummate
the other transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date (or the waiver by NW Natural and
Purchaser) of the following conditions:
(a) Statutory Approvals. All Seller Required Statutory Approvals and all NW
-------------------
Natural Required Statutory Approvals shall have been made or obtained and become
Final Orders, and such Final Orders shall not, in the aggregate, impose terms
and conditions that would have a PGE Material Adverse Effect or a Combined
Material Adverse Effect, except that in no event shall Purchaser be required to
register as a "holding company" under PUHCA .
(b) Performance of Obligations of Seller and Enron NW Assets. Each of
--------------------------------------------------------
Seller and Enron NW Assets shall have performed and complied with, in all
material respects, the covenants and agreements contained in this Agreement that
are required to be performed and complied with by Seller and Enron NW Assets, as
applicable, on or prior to the Closing Date.
(c) Representations and Warranties. The representations and warranties of
------------------------------
each of Seller and Enron NW Assets set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date (except for representations and warranties that
expressly speak only as of a specific date or time other than the date hereof or
the Closing Date, which need only be true and correct as of such date or time)
except in each of clauses (i) and (ii) above for such failures of
representations and warranties to be true and correct (without regard to any
materiality qualifications contained therein) that, individually or in the
aggregate, would not result in a PGE Material Adverse Effect.
(d) Closing Certificate. Purchaser shall have received a certificate from
-------------------
an authorized officer of the Seller, dated the Closing Date, to the effect that,
to such officer's knowledge, the conditions set forth in subsections (b) and (c)
of this Section 8.2 have been satisfied.
(e) No PGE Material Adverse Effect. Since the date of this Agreement, no
------------------------------
PGE Material Adverse Effect shall have occurred and be continuing.
(f) PUHCA Registration. Purchaser shall not be required to register as a
-------------------
"holding company" under the registration provisions of PUHCA and the Regulations
of the SEC promulgated thereunder.
(g) PGE Short-Term Debt. The aggregate amount of short-term indebtedness of
-------------------
PGE and its Subsidiaries outstanding at the Closing shall not exceed $300
million.
47
Section 8.3 Conditions to Obligations of Seller and Enron NW Assets. The
-------------------------------------------------------------------
obligations of Seller and Enron NW Assets to sell the Shares and to consummate
the other transactions contemplated by this Agreement shall be subject to the
fulfillment on or prior to the Closing Date (or the waiver by Seller and Enron
NW Assets, as appropriate) of the following conditions:
(a) Statutory Approvals. All NW Natural Required Statutory Approvals and
-------------------
all Seller Required Statutory Approvals shall have been made or obtained and
become Final Orders, and such Final Orders shall not impose any liability, loss,
cost, expense, restriction, encumbrance or obligation on Seller or any of its
subsidiaries or affiliates or impose terms or conditions that would have a
Combined Material Adverse Effect.
(b) Performance of Obligations of NW Natural and Purchaser. NW Natural and
------------------------------------------------------
Purchaser shall have performed and complied with, in all material respects, the
covenants and agreements contained in this Agreement that are required to be
performed and complied with by NW Natural and Purchaser on or prior to the
Closing Date.
(c) Representations and Warranties. The representations and warranties of
------------------------------
each of Purchaser and NW Natural set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date (except for representations and warranties that
expressly speak only as of a specific date or time other than the date hereof or
the Closing Date, which need only be true and correct as of such date or time)
except in each of clauses (i) and (ii) above for such failures of
representations and warranties to be true and correct (without regard to any
materiality qualifications contained therein) that, individually or in the
aggregate, would not result in a NW Natural Material Adverse Effect.
(d) Closing Certificate. Seller shall have received a certificate from an
-------------------
authorized officer of NW Natural and Purchaser, dated the Closing Date, to the
effect that, to the officer's Knowledge, the conditions set forth in subsections
(b) and (c) of this Section 8.3 have been satisfied.
(e) No Material Adverse Effect. Since the date of this Agreement, no event
--------------------------
shall have occurred and be continuing that constitutes a Combined Material
Adverse Effect that is not substantially the result of any concurrent PGE
Material Adverse Effect.
ARTICLE IX
TERMINATION
Section 9.1 Termination.
------------------------
(a) Mutual Consent. This Agreement may be terminated at any time prior to
--------------
the Closing Date by the mutual consent of Seller and NW Natural.
(b) Permanent Injunction. This Agreement may be terminated by Seller or NW
--------------------
Natural, if any federal or state Court of competent jurisdiction shall have
issued an Order permanently restraining, enjoining or otherwise prohibiting the
Closing, and such Order shall have become final and nonappealable.
48
(c) Termination Date. This Agreement may be terminated by Seller or NW
----------------
Natural if the Closing contemplated hereby shall have not occurred on or before
December 8, 2002 (the "Initial Termination Date"); provided, however, that the
right to terminate this Agreement under this subsection (c) shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted directly or indirectly in, the
failure of the Closing to occur on or before such date; and provided, further,
that, if on the Initial Termination Date the conditions to the Closing set forth
in subsection (a) of Sections 8.2 and 8.3 shall not have been fulfilled, but all
other conditions to the Closing have been fulfilled or waived or are capable of
being fulfilled, then the right of a Party to terminate this Agreement pursuant
to this subsection (c) shall not arise unless the Closing has not occurred on or
before the first Business Day that is at least 18 months after the date of this
Agreement (the "Extended Termination Date").
(d) Required Statutory Approvals. This Agreement may be terminated by NW
----------------------------
Natural or Seller if any of the NW Natural Required Statutory Approvals or
Seller Required Statutory Approvals, the receipt of which are conditions to the
obligations of NW Natural and Seller to consummate the Closing as set forth in
subsection (a) of Sections 8.2 and 8.3, shall have been denied by a final and
nonappealable Order.
(e) Breach by Seller. This Agreement may be terminated by NW Natural if
----------------
there has been a violation or breach by Seller of any covenant, representation
or warranty contained in this Agreement that has resulted in a PGE Material
Adverse Effect and such violation or breach is not cured by the earlier of the
Closing Date or the date thirty (30) days after receipt by Seller of written
notice specifying particularly such violation or breach, and such violation or
breach has not been waived by Purchaser.
(f) Breach by NW Natural or Purchaser. This Agreement may be terminated by
---------------------------------
Seller if there has been a material violation or breach by NW Natural or
Purchaser of any covenant, representation or warranty contained in this
Agreement and such violation or breach is not cured by the earlier of the
Closing Date or the date thirty (30) days after receipt by NW Natural of written
notice specifying particularly such violation or breach, and such violation or
breach has not been waived by Seller.
(g) NW Natural Shareholder Approval. This agreement may be terminated by
-------------------------------
Seller or NW Natural if the NW Natural Shareholder Approval shall not have been
obtained by reason of failure to obtain the required vote at a duly held meeting
of shareholders, or of any adjournment thereof called for the purpose of
obtaining the NW Natural Shareholder Approval; provided, however, that NW
Natural shall not have the right to terminate this Agreement pursuant to this
subsection (g) if NW Natural or Purchaser is not in material compliance with its
covenants and agreements set forth herein.
Section 9.2 Procedure and Effect of Termination. Any Party entitled to
-----------------------------------------------
terminate this Agreement in accordance with Section 9.1 and desiring to do so
shall give written notice thereof to each other Party hereto. In such event,
this Agreement shall terminate and be of no further force or effect other than
the provisions of this Section 9.2 and Article X. No such termination of this
Agreement shall have the effect of relieving any Party hereto of liability for
any misrepresentation, breach of warranty or violation of any covenant
hereunder.
49
ARTICLE X
MISCELLANEOUS
Section 10.1 Non-Survival of Representations, Warranties, Covenants and
-----------------------------------------------------------------------
Agreements. No representation, warranty, covenant or agreement in this Agreement
----------
shall survive the Closing, except the covenants and agreements contained in
Section 1.4 (Enron Merger Obligation), Section 5.2(c) (Stub Period), Section
5.17 (Non-Solicitation), Section 7.5 (Employee Benefit Plans), Section 7.6
(Expenses), Section 7.8 (Directors' and Officers' Indemnification), Section 7.9
(Insurance), Section 7.10 (Corporate Name), Section 7.12 (Tax Matters) and
Section 7.18 (California Receivables) shall survive the Closing. This Article X
shall survive the Closing.
Section 10.2 Brokers. Seller represents and warrants that, except for
--------------------
Credit Suisse First Boston Corporation, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller, PGE or PGH II. NW Natural and Purchaser
represent and warrant that, except for Merrill Lynch & Co., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of NW Natural or Purchaser. The
Parties acknowledge that Credit Suisse First Boston Corporation is acting as
financial advisor to Seller in connection with the contemplated transactions and
as joint lead arranger and book runner under the Financing Commitment to
Purchaser and consent to such roles.
Section 10.3 Notices. All notices and other communications hereunder to a
--------------------
Party hereto shall be in writing and shall be deemed given upon receipt thereof
(a) if delivered personally, (b) if sent by overnight courier service (receipt
confirmed in writing), upon receipt thereof or (c) if delivered by facsimile
transmission (with receipt confirmed) between the hours of 9:00 a.m. and 5:00
p.m. in the recipient Party's time zone, in each case to such Party at the
following address (or at such other address for a Party as shall be specified by
like notice):
(i) If to NW Natural or Purchaser, to:
Northwest Natural Gas Company
220 N.W. Second Avenue
Portland, Oregon 97209
Attention: Mark S. Dodson
President and Chief Operating Officer
Fax: (503) 220-2584
with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019-4097
Attention: Richard S. Green, Esq.
Fax: (212) 603-2001
50
(ii) If to Seller or Enron NW Assets, to:
James V. Derrick
Executive Vice President and General Counsel
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Fax: (713) 853-3920
with copies to:
Corporate Secretary William E. Joor III
Enron Corp. Vinson & Elkins L.L.P.
1400 Smith Street 2300 First City Tower
Houston, Texas 77002 1001 Fannin
Fax: (713) 853-3920 Houston, Texas 77002
Fax: (713) 758-2346
Section 10.4 Miscellaneous. This Agreement (including the documents and
--------------------------
instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the Parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; (b) shall not be assigned by operation
of Law or otherwise by any Party without the prior written consent of the other
Party; and (c) may be modified, amended or supplemented in any manner and at any
time only by a written instrument executed by each of the Parties. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect. The Parties hereto shall negotiate
in good faith to replace any provision of this Agreement so held invalid or
unenforceable with a valid provision that is as similar as possible in purpose,
substance and economic effect to the invalid or unenforceable provision.
Section 10.5 Interpretation. When reference is made in this Agreement to
---------------------------
Articles or Sections, such reference shall be to an Article or Section of this
Agreement, as the case may be, unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes," or "including" are used in this Agreement, they
------- -------- ---------
shall be deemed to be followed by the words "without limitation."
------------------
Section 10.6 Counterparts; Effect. This Agreement may be executed in one or
---------------------------------
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon and
--------------------------------
inure solely to the benefit of each Party hereto and, except for rights of
Indemnified Parties as set forth in Section 7.8 (Directors' and Officers'
Indemnification), nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Notwithstanding anything contained herein
51
to the contrary, Seller and Enron NW Assets may assign their respective rights
to receive the PGE Purchase Price or any portion thereof to any Person
designated by Seller or Enron NW Assets.
Section 10.8 Specific Performance. The Parties hereto agree that
---------------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
Section 10.9 Governing Law. This Agreement shall be governed by, and
--------------------------
construed in accordance with, the laws of the State of New York, other than any
conflict of laws rules thereof that would direct the application of the laws of
another jurisdiction to this Agreement.
Section 10.10 Disclosure Schedules. The Seller Disclosure Schedule and the
----------------------------------
NW Natural Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules constitute an integral part of
this Agreement and modify the respective representations, warranties, covenants
or agreements of the Parties contained herein to the extent that such
representations, warranties, covenants or agreements expressly refer
specifically to the applicable section of the Disclosure Schedules. Any and all
statements, representations, warranties or disclosures set forth in the
Disclosure Schedules shall be deemed to have been made on and as of the date of
this Agreement.
52
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the date first above written.
ENRON CORP.
By:
-------------------------------------
J. Mark Metts
Executive Vice President,
Corporate Development
ENRON NORTHWEST ASSETS, LLC
By:
Enron Finance Management, LLC,
its Class A and Managing Member
By: Enron Corp.,
its sole member
By:
----------------------------
Richard A. Causey
Executive Vice President and
Chief Accounting Officer
NORTHWEST NATURAL GAS COMPANY
By:
-------------------------------------
Richard G. Reiten
Chairman and Chief Executive Officer
NORTHWEST ENERGY CORPORATION
By:
-------------------------------------
Richard G. Reiten
Chairman and Chief Executive Officer
53
ANNEX A
DEFINITIONS
-----------
As used herein, the following terms have the following meanings:
Agreement: shall have the meaning ascribed to such term in the introductory
---------
paragraph of this Agreement.
Amended and Restated Charter: The Amended and Restated Articles of
----------------------------
Incorporation of Purchaser in the form attached hereto as Exhibit D.
Ancillary Agreements: The PGE Option Agreement and the Securityholders'
--------------------
Agreement.
Articles of Amendment: The Articles of Amendment designating the rights and
---------------------
preferences of the Preferred Shares, which rights and preferences shall reflect
the terms of the Preferred Shares set forth in the Term Sheet attached to this
Agreement as Exhibit E.
Atomic Energy Act: The Atomic Energy Act of 1954, as amended, or any
-----------------
successor thereto.
Average Market Price: The average of the closing sales prices of one share
--------------------
of NW Natural Common Stock as reported on The New York Stock Exchange, Inc. (the
"NYSE") composite transactions reporting system (as reported in the New York
City edition of the Wall Street Journal, or, if not reported thereby, another
mutually acceptable authoritative source) for each of the twenty consecutive
trading days ending on the third trading day immediately prior to the date of
determination.
BBI: The Brewery Blocks I, LLC, an Oregon limited liability company.
---
BB Investors: Brewery Blocks Investors, LLC, an Oregon limited liability
------------
company.
Beginning Tax Date: shall have the meaning ascribed to such term in
------------------
subsection (a) of Section 7.12.
Benefit Plan: Any employee pension benefit plan (whether or not insured),
------------
as defined in Section 3(2) of ERISA, any employee welfare benefit plan (whether
or not insured) as defined in Section 3(1) of ERISA, any plan that would be
employee pension benefit plans or employee welfare benefit plans if they were
subject to ERISA, such as foreign plans and plans for directors, any stock
bonus, stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock, or other stock plan (whether qualified or nonqualified), and any
bonus or incentive compensation plan sponsored, maintained, contributed to or
required to be contributed to by the applicable Party or any of its subsidiaries
for the benefit of any of the present or former directors, officers, employees,
agents, consultants, or other similar representatives; provided, however, that
such term shall not include (a) routine employment policies and procedures
developed and applied in the ordinary course of business and consistent with
past practice, including wage, vacation, holiday, and sick or other leave
policies, (b) workers compensation insurance, and (c) directors and officers
liability insurance.
Business Day: Any day that is not a Saturday, a Sunday or other day on
------------
which banks are required or authorized by law to be closed in the City of New
York or Portland, Oregon.
California Receivables: Any account receivable of PGE or any of its
----------------------
subsidiaries owed by either the California Independent System Operator or the
California Power Exchange that accrued prior to the date hereof.
Capital Stock: of any Person means any and all shares, interests, rights to
-------------
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any preferred stock or
preference stock, but excluding any debt securities convertible into such
equity.
Carrying Costs: Interest, calculated at PGE's weighted average rate of
--------------
interest on short-term indebtedness, with respect to the amount described in
clauses (i) and (ii) of clause (a) of Section 7.18 for the period from the
Closing Date to the date of the payment contemplated by Section 7.18.
Class B Common Stock: Class B Common Stock of Purchaser, having the rights
--------------------
and designations as set forth in the Amended and Restated Charter.
Closing: shall have the meaning ascribed to such term in Section 2.1.
-------
Closing Date: shall have the meaning ascribed to such term in Section 2.1.
------------
Code: The Internal Revenue Code of 1986, as amended, or any successor
----
thereto.
Combined Material Adverse Effect: Any change or effect that is materially
--------------------------------
adverse to the business, condition (financial or otherwise) or results of
operations of NW Natural, the Purchaser, PGE and their respective subsidiaries
taken as a whole provided, however, that a Combined Material Adverse Effect
shall not be deemed to have occurred as a result of changes or effects resulting
from (i) general economic, financial or gas or electric utility conditions in
the Pacific Northwest or nationally, (ii) the announcement or consummation of
the transactions contemplated by this Agreement, (iii) adverse hydro conditions
in the Pacific Northwest or (iv) the Oregon Restructuring Legislation.
Common Stock: Common Stock of Purchaser, having the rights and designations
------------
set forth in the Amended and Restated Charter.
Commonly Controlled Entity: Any corporation, trade, business or entity
--------------------------
under common control with Seller, within the meaning of Section 414(b), (c) or
(m) of the Code or Section 4001 of ERISA.
Confidentiality Agreements: The Confidentiality Agreement, dated as of
--------------------------
March 27, 2001, between Seller and NW Natural and the Confidentiality Agreement
dated as of August 6, 2001 between Seller and NW Natural.
A-2
Consolidated Net Income: The consolidated net income of PGE and its
-----------------------
Subsidiaries after income taxes (for this purpose income taxes shall mean any
financial statement provision for income taxes consistent with the manner
reported in the PGE SEC Reports) available to the common stock of PGE less
accrued but unpaid interest on the Enron Merger Obligation.
Court: Any court or arbitration tribunal established and functioning under
-----
the Laws of the United States of America, any state thereof, the District of
Columbia or any political subdivision thereof.
Decommissioning Plan: The PGE Decommissioning Plan relating to PGE Nuclear
--------------------
Facility as approved by the NRC on April 15, 1996, and revisions thereto, all of
which have been delivered by Seller to Purchaser.
Debt Financing: The financing contemplated by the Financing Commitment.
--------------
Designated Transferee: Any one or more Persons created in connection with a
---------------------
monetization, securitization or other structured finance transaction by or on
behalf of Enron or any of its Affiliates and designated in any Purchase and Sale
Notice.
Ending Tax Date: shall have the meaning ascribed to such term in subsection
---------------
(a) of Section 7.12.
Enron Merger Obligation: Seller's obligations set forth in Condition 20 to
-----------------------
the Stipulation dated April 29, 1997 adopted by the OPUC and incorporated by
reference into the Enron/PGE Order.
Enron NW Assets: shall have the meaning ascribed to such term in the
---------------
introductory paragraph of this Agreement.
Enron/PGE Order: OPUC's Order dated June 4, 1997 approving Seller's
---------------
application to acquire the power to exercise influence over PGE.
Environmental Claim: Any and all administrative, regulatory or judicial
-------------------
actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation by any
Person (including, without limitation, any Governmental Authority) alleging
potential liability (including, without limitation, potential liability for
enforcement costs, investigatory costs, cleanup costs, response costs, removal
costs, remedial costs, natural resources damages, property damages, personal
injuries, fines or penalties) arising out of, based on or resulting from (A) the
presence, or Release or threatened Release of any Hazardous Materials at any
location, whether or not owned, operated, leased or managed by PGE, PGH II or
any of their respective subsidiaries or joint ventures on the one hand or NW
Natural or any of its subsidiaries on the other hand, (B) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law or
(C) any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or Release of any Hazardous Materials.
Environmental Laws: All foreign, federal, state and local laws, rules,
------------------
regulations, ordinances, orders, judgments, decrees and common law rules
A-3
relating to Hazardous Materials, or relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) as in effect on the date
hereof including laws and regulations relating to Releases or threatened
Releases of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
Environmental Permits: Permits required under or pursuant to Environmental
---------------------
Laws.
ERISA: The Employee Retirement Income Security Act of 1974, as amended, or
-----
any successor thereto.
Exchange Act: The Securities Exchange Act of 1934, as amended, or any
------------
successor thereto.
Executive and Director Plans: shall have the meaning ascribed to such term
----------------------------
in subparagraph (i) of Section 7.5.
Extended Termination Date: shall have the meaning ascribed to such term in
-------------------------
subparagraph (c) of Section 9.1.
Feline Prides: Units of securities to be issued by Purchaser to Enron NW
-------------
Assets pursuant to this Agreement. Each Feline Pride consists of a Purchase
Contract and a Cumulative Preferred Share.
FERC: The Federal Energy Regulatory Commission, or any successor thereto.
----
Final Orders: A judgment, order or decree of the relevant regulatory
------------
authority that has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired (but without the
requirement for expiration of any applicable rehearing or approval period), and
as to which all conditions to the consummation of such transactions prescribed
by law, regulation or order have been satisfied.
Financing Commitment: shall have the meaning ascribed to such term in
--------------------
Section 4.3; provided, however, that the term Financing Commitment shall mean
the extended or new Financing Commitment to which reference is made in Section
7.13 once obtained and accepted by Purchaser.
GAAP: Generally accepted accounting principles applied on a consistent
----
basis.
Governmental Authority: Any federal, regional, state, local or other
----------------------
governmental agency, authority, administrative agency, regulatory body,
commission or instrumentality (other than a Court).
Guaranty Agreements: The Guaranty executed as of January 30, 2001 by Seller
-------------------
in favor of BB Investors and BBI and the Guaranty Agreement executed as of
January 30, 2001 by Seller in favor of BB Investors and BBI.
A-4
Hazardous Materials: Any (A) petroleum or petroleum products or petroleum
-------------------
wastes (including crude oil or any fraction thereof), radioactive materials,
friable asbestos or friable asbestos-containing material, urea formaldehyde foam
insulation, and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls, (B) chemicals, materials or substances
which are now defined as or included in the definition of "hazardous
---------
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
---------- ---------------- ------------------- -------------------
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
------ --------------------------- ---------------- ----------------
or words of similar import, under any Environmental Law and (C) other chemicals,
materials, substances or wastes, exposure to which is now prohibited, limited or
regulated under any applicable Environmental Law.
HSR Act: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
-------
amended, or any successor thereto.
Initial Termination Date: shall have the meaning ascribed to such term in
------------------------
subparagraph (c) of Section 9.1.
IRS: The United States Internal Revenue Service, or any successor thereto.
---
joint venture: Other than with respect to Sections 3.2 or 4.2, references
-------------
to a "joint venture" of a Person means any corporation or other entity
-------------
(including partnerships and other business associations and joint ventures) in
which such Person or one or more of its subsidiaries owns an equity interest
that is less than a majority of any class of the outstanding voting securities
but at least 10% of such voting securities.
Knowledge: With respect to a particular fact or other matter, in the case
---------
of NW Natural or Purchaser, the actual knowledge or awareness of such fact or
other matter by the Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer or the Director, Corporate Development of NW Natural and, in
the case of Seller, the actual knowledge or awareness of such fact or matter by
the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or
the Executive Vice President, Corporate Development of Seller, Charles Delacey
or the Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer of PGE.
Last Balance Sheet Date: shall have the meanings ascribed to such terms in
-----------------------
subsection (c) of Section 5.2.
Laws: Laws, statutes and ordinances of the United States of America or any
----
state thereof or the District of Columbia, and any political subdivision
thereof, including all decisions of Courts having the effect of law in any such
jurisdiction.
Lien: Any mortgage, pledge, security interest, adverse claim, encumbrance,
----
option, right of pre-emption, lien, publicly filed financing statement, charge
or similar adverse interest of any kind, restrictions on use, any conditional
sale or other title retention agreement, any lease in the nature thereof or any
agreement to give any of the foregoing.
Litigation Costs: The reasonable expenses of Purchaser and PGE incurred
----------------
with respect to litigation relating to the collection of the California
Receivables, whether or not such litigation results in the collection of all or
any portion of the California Receivables.
A-5
Merger Sub: shall have the meaning ascribed to such term in the first
----------
recital to this Agreement.
NRC: The Nuclear Regulatory Commission, or any successor thereto.
---
NW Natural: shall have the meaning ascribed to such term in the
----------
introductory paragraph of this Agreement.
NW Natural Benefit Plans: shall have the meaning ascribed to such term in
------------------------
subsection (a) of Section 4.9.
NW Natural Change of Control: The occurrence of any of the following
----------------------------
events: (i) any person (as such term is used in Section 13(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rules 13 d-3 and 13 d-5
----------------
under the Exchange Act, except that for purposes of this clause (i) such person
shall be deemed to have "beneficial ownership" of all shares that any such
--------------------
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total voting power of the Voting Stock of NW Natural, (ii) individuals who
as of the date of this Agreement constituted the Board of Directors of NW
Natural together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of NW Natural, as
the case may be, was approved by a vote of a majority of the directors of NW
Natural then still in office who were either directors on the date of this
Agreement or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of NW Natural then in office; (iii) the adoption of a plan relating to
the liquidation or dissolution of NW Natural; or (iv) the merger or
consolidation of NW Natural, with or into another Person or the merger of
another Person with or into NW Natural, or the sale of all or substantially all
the assets of NW Natural (determined on a consolidated basis) to another Person
(other than a wholly-owned subsidiary in the case of a merger or consolidation
involving NW Natural), in each case, other than pursuant to the NW Natural
Merger Agreement or this Agreement.
NW Natural Common Stock: shall have the meaning ascribed to such term in
-----------------------
the first recital to this Agreement.
NW Natural Material Adverse Effect: Any change or effect that is materially
----------------------------------
adverse to the business, condition (financial or otherwise) or results of
operations of NW Natural and its subsidiaries (including Purchaser) taken as a
whole; provided, however, that a NW Natural Material Adverse Effect shall not be
deemed to have occurred as a result of changes or effects resulting from (i)
general economic, financial or gas utility conditions in the Pacific Northwest
or nationally and (ii) the announcement or consummation of the transactions
contemplated by this Agreement.
NW Natural Merger: shall have the meaning ascribed to such term in the
-----------------
first recital to this Agreement.
NW Natural Merger Agreement: shall have the meaning ascribed to such term
---------------------------
in the first recital to this Agreement.
A-6
NW Natural Preference Stock: Shares of authorized preference stock of NW
---------------------------
Natural, as provided in its Articles of Incorporation.
NW Natural Preferred Stock: Shares of the authorized preferred stock of NW
--------------------------
Natural as provided in its articles of incorporation.
NW Natural Redeemable Preferred Stock: Shares of the authorized redeemable
-------------------------------------
preferred stock of NW Natural as provided in its articles of incorporation.
NW Natural Representatives: The officers, directors, employees,
--------------------------
accountants, counsel, investment bankers, financial advisers and other
representatives of Purchaser chosen by Purchaser to represent Purchaser with
respect to the transactions contemplated by this Agreement.
NW Natural Required Consents: shall have the meaning ascribed to such term
----------------------------
in subsection (b) of Section 4.4.
NW Natural Required Statutory Approvals: shall have the meaning ascribed to
---------------------------------------
such term in subsection (c) of Section 4.4.
NW Natural SEC Reports: Each report, schedule, registration statement and
----------------------
definitive proxy statement, if any, filed by NW Natural with the SEC since
January 1, 1999, and through the date hereof (as such documents have been
amended since the time of the original filing thereof).
NW Natural Shareholder Approval: shall have the meaning ascribed to such
-------------------------------
term in subsection (a) of Section 4.4.
NW Natural Violation: shall have the meaning ascribed to such term in
--------------------
subsection (b) of Section 4.4.
NW Natural Voting Debt: shall have the meaning ascribed to such term in
----------------------
subsection (c) of Section 4.2.
OPUC: The Oregon Public Utility Commission, and any successor thereto.
----
Order: Any judgment, order or decree of any Court or Governmental Authority
-----
of competent jurisdiction.
Oregon Restructuring Legislation: Senate Bill 1149 that was signed into law
--------------------------------
by the Governor of Oregon on July 23, 1999 and regulations or orders promulgated
thereunder.
Party or Parties: shall have the meanings ascribed to such terms in the
----------------
introductory paragraph of this Agreement.
PBGC: Pension Benefit Guaranty Corporation, or any successor thereto.
----
A-7
Permits: Any permits, licenses, franchises and other governmental
-------
authorizations, consents and approvals.
Person: An individual, corporation, limited liability company, partnership,
------
company, joint venture, or other entity bank, trust, unincorporated organization
and/or a government or any department or agency thereof.
PGE: shall have the meaning ascribed to such term in the second recital to
---
this Agreement.
PGE Benefit Plans: shall have the meaning ascribed to such term in
-----------------
subsection (a) of Section 3.9.
PGE Cash Purchase Price: shall have the meaning ascribed to such term in
-----------------------
subsection (b) of Section 1.1.
PGE Common Stock: Common stock, par value $3.75 per share, of PGE.
----------------
PGE Employee: Any individual who is actively employed by any of PGE, PGH II
------------
or any of their subsidiaries as of and after Closing.
PGE Financial Statements: The audited consolidated financial statements and
------------------------
unaudited interim consolidated financial statements of PGE that are included in
the PGE SEC Reports.
PGE Former Employee: Any individual who is not actively employed by any of
-------------------
PGE, PGH II, Seller or any of their subsidiaries as of Closing but who was at
some time prior to Closing employed by PGH or PGE or any subsidiary of PGH or
PGE or of any predecessor of any of them and who is as a result of such prior
employment eligible for coverage under one or more Benefit Plans disclosed on
Seller's Disclosure Schedule 3.9(a) and/or one or more of the Replacement Plans.
PGE Material Adverse Effect: Any change or effect that is materially
---------------------------
adverse to the business, condition (financial or otherwise) or results of
operations of PGE, PGH II and their respective subsidiaries, taken as a whole;
provided, however, that a PGE Material Adverse Effect shall not be deemed to
have occurred as a result of changes or effects resulting from (i) general
economic, financial or electric utility conditions in the Pacific Northwest or
nationally, (ii) the announcement or consummation of the transactions
contemplated by this Agreement, (iii) adverse hydro conditions in the Pacific
Northwest or (iv) the Oregon Restructuring Legislation.
PGE Nuclear Facility: shall have the meaning ascribed to such term in
--------------------
Section 3.13.
PGE Option: shall have the meaning ascribed to such term in the third
----------
recital to this Agreement.
PGE Option Agreement: shall have the meaning ascribed to such term in the
--------------------
third recital to this Agreement.
A-8
PGE Preferred Stock: Cumulative preferred stock, no par value, of PGE.
-------------------
PGE Purchase Price: shall have the meaning ascribed to such term in
------------------
subsection (b) of Section 1.1 or subsection (d) of Section 1.2, as applicable.
PGE Required Consents: shall have the meaning ascribed to such term in
---------------------
subsection (b) of Section 3.4.
PGE SEC Reports: Each report, schedule, registration statement and
---------------
definitive proxy statement, if any, filed by PGE with the SEC since January 1,
1999 and through the date hereof (as such documents have since the time of the
filing been amended).
PGE Shares: shall have the meaning ascribed to such term in the second
----------
recital to this Agreement provided, that for purposes of Articles I and II, the
term "PGE Shares" shall exclude any shares of PGE Common Stock that are
repurchased by PGE on or prior to the Closing Date in accordance with Section
5.2.
PGE Violation: shall have the meaning ascribed to such term in subsection
-------------
(b) of Section 3.4.
PGE Voting Debt: shall have the meaning ascribed to such term in subsection
---------------
(b) of Section 3.3.
PGH: shall have the meaning ascribed to such term in the fourth recital to
---
this Agreement.
PGH II: shall have the meaning ascribed to such term in the fourth recital
------
to this Agreement.
PGH II Common Stock: Common stock, par value $1.00 per share, of PGH II.
-------------------
PGH II Financials: shall have the meaning ascribed to such term in
-----------------
subsection (b) of Section 3.5.
PGH II Shares: shall have the meaning ascribed to such term in the fourth
-------------
recital to this Agreement.
PGH II Purchase Price: shall have the meaning ascribed to such term in
---------------------
subsection (c) of Section 1.1.
Power Act: The Federal Power Act, as amended, or any successor thereto.
---------
Pre-Closing Straddle Period: shall have the meaning ascribed to such term
---------------------------
in subparagraph (c) of Section 7.12.
Preferred Share: A share of Cumulative Preferred Stock of Purchaser having
---------------
a stated liquidation amount equal to $50.00 and having the rights and
designations as set forth in the form of Amended and Restated Charter and the
Articles of Amendment.
A-9
Proceeding: shall have the meaning ascribed to such term in subsection (i)
----------
of Section 7.12.
Prospectus/Proxy Statement: has the meaning ascribed to such term in
--------------------------
Section 7.14.
PUHCA: The Public Utility Holding Company Act of 1935, as amended, or any
-----
successor thereto.
Purchase and Sale Notice: shall have meaning ascribed to such term in
------------------------
Section 1.2.
Purchase Contract: A Purchase Contact to be dated as of the Closing Date
-----------------
between the Purchaser and an agent for the holders of the Feline Prides.
Purchase Price Per Share: With respect to both the Common Stock and the
------------------------
Class B Common Stock, an amount per share equal to the result obtained by
dividing $50 million by the aggregate of the number of shares of Common Stock
and Class B Common Stock to be issued pursuant to Section 1.5.
Purchaser: shall have the meaning ascribed to such term in the introductory
---------
paragraph of this Agreement.
Purchaser Preferred Stock: Shares of the authorized preferred stock of
-------------------------
Purchaser as provided in the Amended and Restated Charter.
Registration Statement: shall have the meaning ascribed to such term in
----------------------
Section 7.14.
Regulation: Any regulations, policies, protocols, proclamations, executive
----------
orders and ordinances issued or otherwise applicable under applicable Laws or
issued or promulgated by any Governmental Authority having the effect of Law,
including any rule or regulation of any self-regulatory organization, such as a
national securities exchange.
Related Party Contracts: shall have the meaning ascribed to such term in
-----------------------
Section 3.17.
Release: Any release, spill, emission, leaking, injection, deposit,
-------
disposal, discharge, dispersal, leaching or migration into the atmosphere, soil,
surface water, groundwater or property (indoors or outdoors).
Replacement Plans: The plans maintained by Purchaser and/or PGE or PGH II
-----------------
and their subsidiaries in accordance with subsection (f) of Section 6.5 of this
Agreement.
Rights Plan: Rights Agreement, dated as of February 27, 1996, between NW
-----------
Natural and ChaseMellon Shareholder Services, L.L.C.
SEC: The Securities and Exchange Commission, or any successor thereto.
---
Securities Act: The Securities Act of 1933, as amended, or any successor
--------------
thereto.
Securities: The Feline Prides, Class A Common Stock and Class B Common
----------
Stock described in clauses (ii), (iii) and (iv) of subsection (b) of Section
1.1.
A-10
Securityholders' Agreement: An agreement in form and substance
--------------------------
substantially similar to the form of Securityholders' and Registration Rights
Agreement attached hereto as Exhibit B, executed and delivered at the Closing by
those Parties required to execute and deliver it pursuant to subsection (l) of
Section 2.2.
Seller: shall have the meaning ascribed to such term in the introductory
------
paragraph of this Agreement.
Seller Group: shall have the meaning ascribed to such term in subsection
------------
(a) of Section 7.12.
Seller Representatives: The officers, directors, employees, accountants,
----------------------
counsel, investment bankers, financial advisers and other representatives of
Seller chosen by Seller to represent Seller with respect to the transactions
contemplated by this Agreement.
Seller Required Statutory Approvals: shall have the meaning ascribed to
-----------------------------------
such term in subsection (c) of Section 3.4.
Shares: The PGE Shares and the PGH II Shares, taken together.
------
Specified Enron Merger Obligation Payments: The payments of principal made
------------------------------------------
by Seller to PGE with respect to the Enron Merger Obligation for the months of
April 2001 to September 2001, inclusive, which payments aggregate $4,536,790.
Straddle Period Return: all have the meaning ascribed to such term in
----------------------
subparagraph (c) of Section 7.12.
Subsidiary: Other than with respect to Section 3.2, references to a
----------
"subsidiary" of a Person means any corporation or other entity (including
limited liability companies, partnerships and other business associations) in
which such Person, directly or indirectly owns outstanding capital stock or
other voting securities having the power, under ordinary circumstances, to elect
a majority of the directors or similar members of the governing body of such
corporation or other entity, or otherwise to direct the management and policies
of such corporation or other entity.
Tax Items: shall have the meaning ascribed to such term in subsection (a)
---------
of Section 7.12.
Tax Return: A report, return or other information required to be supplied
----------
to a governmental entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes PGE, PGH II or any of their respective subsidiaries.
Taxes: Any federal, state, county, local or foreign taxes, levies, or other
-----
similar assessments, including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any governmental entity,
and includes any interest and penalties (civil or criminal) on or additions to
any such taxes.
A-11
Tax Sharing Payment: shall have the meaning ascribed to such term in
-------------------
subsection (b) of Section 5.2.
Trusts: shall have the meaning ascribed to such term in subsection (i) of
------
Section 7.5.
Voting Stock: of a Person means all classes of Capital Stock or other
------------
interest (including partnership interests) of such person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
A-12
EX-10
4
exhibit102.txt
EXHIBIT 10.2
EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of October
___, 2001 (the "Agreement"), by and among NORTHWEST NATURAL GAS COMPANY, an
Oregon corporation ("NW Natural"), NORTHWEST ENERGY CORPORATION, an Oregon
corporation and a wholly-owned subsidiary of NW Natural ("Holdco") and NORTHWEST
ENERGY SUB CORP., an Oregon corporation and a wholly-owned subsidiary of Holdco
("Merger Sub"),
WITNESSETH:
WHEREAS, the Board of Directors of each of NW Natural, Holdco and Merger Sub
deems it advisable to merge Merger Sub with and into NW Natural in accordance
with the Oregon Business Corporation Act (the "Oregon Business Corporation Act")
and to approve this Agreement for the purpose of establishing Holdco as the
parent corporation of NW Natural, as a result of which the holders of common
stock, $3 1/6 par value per share, of NW Natural (the "NW Natural Common Stock")
would hold, in lieu thereof, common stock of Holdco (the "Holdco Common Stock");
WHEREAS, the Board of Directors of each of NW Natural, Holdco and
Merger Sub has determined to recommend that their respective shareholders
approve this Agreement, the merger of Merger Sub with and into NW Natural (the
"Merger") and the other matters set forth herein;
NOW, THEREFORE, in consideration of the premises and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 MERGER. Merger Sub shall be merged with and into NW Natural, with NW
Natural being the corporation surviving the Merger.
1.2 ARTICLES OF MERGER. Subject to and in accordance with the provisions of
this Agreement, Articles of Merger of NW Natural shall be delivered for filing
with the Office of the Secretary of State of Oregon, all as provided by
applicable law.
1.3 EFFECTIVE TIME. The Merger shall become effective at the time of filing
on the date on which the Articles of Merger are filed with the Office of the
Secretary of State of Oregon, as contemplated by Section 1.2 above, unless
otherwise specified in such Articles of Merger (the "Effective Time"). At the
Effective Time, the separate existence of Merger Sub shall cease and Merger Sub
shall be merged with and into NW Natural, which shall continue its corporate
existence as the surviving corporation (NW Natural and Merger Sub being
sometimes referred to herein as the "Constituent Corporations" and NW Natural,
as the surviving corporation, being sometimes referred to herein as the
"Surviving Corporation"). NW Natural shall succeed, without other transfer, to
all the rights and property of Merger Sub, shall be subject to all the debts and
liabilities of Merger Sub in the same manner as if NW Natural had itself
incurred them and all rights of creditors and all liens upon the property of
each of NW Natural and Merger Sub shall be preserved unimpaired, all as provided
in Section 60.497 of the Oregon Business Corporation Act.
1.4 APPROPRIATE ACTIONS. Prior to and after the Effective Time, Holdco, NW
Natural and Merger Sub shall take all such actions as may be necessary or
appropriate in order to effectuate the Merger. In this connection, Holdco shall
issue and deliver the shares of Holdco Common Stock into which outstanding
shares of NW Natural Common Stock will be converted on the basis and to the
extent provided in Article 2 of this Agreement, and shall take such other
actions as are necessary to fulfill Holdco's obligations hereunder, including,
without limitation, those specified in Article 6 of this Agreement. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full title to all properties, assets, privileges, rights,
immunities and franchises of either of the Constituent Corporations, NW Natural
and the individuals who were the officers and directors of Merger Sub as of the
Effective Time shall take all such further action.
ARTICLE 2
TERMS OF CONVERSION AND EXCHANGE OF SHARES
2.1 NW NATURAL COMMON STOCK. At the Effective Time, shares of NW Natural
Common Stock issued and outstanding immediately prior to the Effective Time
shall be automatically changed and converted into shares of Holdco Common Stock,
in the ratio of one share of Holdco Common Stock for each one share of NW
Natural Common Stock, and such Holdco Common Stock shall thereupon be issued and
outstanding and shall be fully-paid and non-assessable.
2.2 NW NATURAL PREFERRED STOCK. At the Effective Time, shares of NW Natural
Preferred Stock issued and outstanding immediately prior to the Merger shall
remain unchanged.
2.3 NW NATURAL PREFERENCE STOCK. At the Effective Time, shares of NW Natural
Preference Stock issued and outstanding immediately prior to the Merger shall
remain unchanged.
2.4 MERGER SUB COMMON STOCK. The shares of Merger Sub Common Stock issued
and outstanding immediately prior to the Effective Time shall be automatically
changed and converted into all of the issued and outstanding shares of Common
Stock of the Surviving Corporation, which shall thereupon be issued and
outstanding and fully-paid and non-assessable, with the effect that the number
of issued and outstanding shares of Common Stock of the Surviving Corporation
shall be the same as the number of issued and outstanding shares of Merger Sub
Common Stock immediately prior to the Effective Time.
2.5 HOLDCO COMMON STOCK. Each share of Holdco Common Stock issued and
outstanding immediately prior to the Effective Time shall be canceled.
2.6 COMMON STOCK PURCHASE RIGHTS. At the Effective Time, the common share
purchase rights issued pursuant to the Rights Agreement dated as of February 27,
1996, as amended to date (the "Rights Agreement"), between NW Natural and
ChaseMellon Shareholder Services, as Rights Agent (the "Rights Agent"), shall be
deemed to represent for all purposes rights to purchase shares of Holdco Common
Stock on the terms set forth in the Rights Agreement, and Holdco, NW Natural and
the Rights Agent shall execute and deliver an amendment to the Rights Agreement
to effectuate the assumption by Holdco of the obligations of the Company under
the Rights Agreement, so that, for purposes of the Rights Agreement, the term
"Company" shall be deemed to refer to Holdco. Holdco shall take such other
corporate action (including, without limitation, the declaration of a dividend
on its common stock) that is required in order for Holdco to assume the
obligations of the Company under the Rights Agreement pursuant to this Section
2.6.
2
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
3.1 NW NATURAL ARTICLES AND BYLAWS. Promptly after the Effective Time and
until thereafter amended in accordance with applicable law, the Articles of
Incorporation of NW Natural shall be amended and restated as provided in Exhibit
A, attached hereto, and the Board of Directors of NW Natural shall take such
further steps as necessary to amend and restate the Bylaws of NW Natural,
pursuant to the Oregon Business Corporation Act, as provided in Exhibit B,
attached hereto.
3.2 HOLDCO ARTICLES AND BYLAWS. Immediately prior to the Effective Time and
until thereafter amended in accordance with applicable law, the Board of
Directors of Holdco shall take such further steps as necessary to amend and
restate the Articles of Incorporation and Bylaws of Holdco, pursuant to the
Oregon Business Corporation Act, as provided in Exhibits C and D, respectively,
attached hereto.
ARTICLE 4
DIRECTORS AND OFFICERS
4.1 NW NATURAL DIRECTORS AND OFFICERS. The persons who are officers of NW
Natural immediately prior to the Effective Time shall continue as officers of NW
Natural and shall continue to hold office as provided in the Articles of
Incorporation and Bylaws of NW Natural. The persons listed on Exhibit E hereto
shall, as of the Effective Time, become directors of NW Natural and shall hold
office as provided in the Articles of Incorporation and Bylaws of NW Natural.
4.2 HOLDCO DIRECTORS AND OFFICERS. NW Natural, as sole shareholder of Holdco
prior to the Effective Time, shall take such steps as necessary to cause,
pursuant to the Oregon Business Corporation Act, the persons who are directors
of NW Natural prior to the Effective Time to become, immediately prior to the
Effective Time, directors of Holdco and shall hold office as provided in the
Articles of Incorporation and Bylaws of Holdco, as amended and restated pursuant
to Section 3.2 above. The directors shall be divided into three classes as
follows:
(a) persons whose terms as directors of NW Natural would have expired
at the first annual meeting of shareholders following the
Effective Time shall be Class I directors;
(b) persons whose terms as directors of NW Natural would have expired
at the second annual meeting of shareholders following the
Effective Time shall be Class II directors; and
(c) persons whose terms as directors of NW Natural would have expired
at the third annual meeting of shareholders following the
Effective Time shall be Class III directors.
The persons who are officers of Holdco immediately prior to the Merger shall
continue as officers of Holdco and shall hold office as provided in the Bylaws
of Holdco.
ARTICLE 5
STOCK CERTIFICATES
5.1 RIGHTS OF HOLDERS OF CERTIFICATES. Following the Effective Time,
certificates representing shares of NW Natural Common Stock outstanding at the
Effective Time (herein sometimes referred to as "NW Natural Certificates") shall
represent the same number of shares of Holdco Common
3
Stock and shall evidence the right of the registered holder thereof to receive,
and may be exchanged for, certificates for the shares of Holdco Common Stock
into which such shares of NW Natural Common Stock were converted in accordance
with Section 2.1. At the Effective Time, Holdco shall issue and deliver, or
cause to be issued and delivered, to the transfer agent for Holdco Common Stock
(the "Transfer Agent") certificates representing whole shares of Holdco Common
Stock into which outstanding shares of NW Natural Common Stock have been
converted as provided above. As promptly as practicable following the Effective
Time, Holdco shall send or cause to be sent to each former shareholder of record
of NW Natural immediately prior to the Effective Time written instructions and
transmittal materials (a "Transmittal Letter") for use in surrendering NW
Natural Certificates to the Transfer Agent. Upon the proper surrender and
delivery to the Transfer Agent (in accordance with Holdco's instructions, and
accompanied by a properly completed Transmittal Letter) by a former shareholder
of NW Natural of such shareholder's NW Natural Certificate(s), and in exchange
therefor, the Transfer Agent shall, as soon as practicable, issue, register and
deliver to such shareholder a certificate evidencing the shares of Holdco Common
Stock as contemplated in Section 2.1 above.
5.2 OUTSTANDING CERTIFICATES. Each outstanding certificate which, prior to
the Effective Time, represented NW Natural Common Stock shall be deemed for all
corporate purposes to represent the same number of shares of Holdco Common Stock
and the right to receive certificates therefor.
5.3 STOCK TRANSFER BOOKS. The stock transfer books for NW Natural Common
Stock shall be deemed to be closed at the Effective Time and no transfer of
shares of NW Natural Common Stock outstanding prior to the Effective Time shall
thereafter be made on such books. As of the Effective Time, Holdco shall
establish a stock register reflecting ownership of Holdco Common Stock by former
holders of record of NW Natural Common Stock.
5.4 POST-MERGER RIGHTS OF HOLDERS. Following the Effective Time, the holders
of certificates for NW Natural Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to the stock of NW
Natural and their sole rights shall be with respect to the Holdco Common Stock
into which their shares of NW Natural Common Stock shall have been converted by
the Merger.
5.5 UNSURRENDERED CERTIFICATES. Subject to Section 5.6 below, no Holdco
Common Stock certificate shall be delivered to any former holder of NW Natural
Common Stock unless and until such shareholder shall have properly surrendered
to the Transfer Agent the NW Natural Certificate(s) formerly representing his or
her shares of NW Natural Common Stock, together with a properly completed
Transmittal Letter in such form as shall be provided to the shareholder by
Holdco for that purpose. Further, until such NW Natural Certificate(s) are so
surrendered, no dividend or other distribution payable to holders of record of
Holdco Common Stock as of any date subsequent to the Effective Time shall be
delivered to the holder of such NW Natural Certificate(s). However, subject to
prior escheatment under applicable law, upon the proper surrender of such NW
Natural Certificate(s), the Transfer Agent shall pay to the registered holder of
the shares of Holdco Stock represented by such NW Natural Certificate(s) the
amount without interest of any such cash, dividends or distributions which have
accrued but remain unpaid with respect to such shares. Neither Holdco, NW
Natural nor the Transfer Agent shall have any obligation to pay any interest on
any such cash, dividends or distributions for any period prior to such payment.
5.6 LOST, ETC., CERTIFICATES. Any former holder of NW Natural Common Stock
whose certificate for shares of NW Natural Common Stock has been lost,
destroyed, stolen or otherwise is missing shall be entitled to receive a
certificate representing the shares of Holdco Common Stock to which he or she is
entitled in accordance with and upon compliance with conditions imposed by the
Transfer Agent or Holdco (including, without limitation, a requirement that the
shareholder provide a lost
4
instruments indemnity or surety bond in form, in substance and amount
satisfactory to the Transfer Agent and Holdco).
ARTICLE 6
NORTHWEST NATURAL GAS STOCK PLANS
NW Natural and Holdco shall take all actions required to provide that, from
and after the Effective Time, all director, officer, employee, customer,
shareholder and other plans of NW Natural or its affiliates, to the extent they
directly or indirectly utilize NW Natural Common Stock, shall utilize Holdco
Common Stock instead of NW Natural Common Stock.
ARTICLE 7
NORTHWEST NATURAL CONVERTIBLE DEBENTURES
7.1 Pursuant to Sections 6.01 and 11.15 of the Indenture (the "Indenture")
dated January 15, 1987, between NW Natural and The Bank of New York, a New York
corporation, (the "Trustee"), providing for NW Natural's 7 1/4% Convertible
Debentures due March 1, 2012, NW Natural and Holdco shall enter into a
supplemental indenture (the "Supplemental Indenture") immediately prior to the
Effective Time which shall provide that the Holder of a Debenture may convert
such Debenture, as provided for in Article 11 of the Indenture, into the amount
of shares of Holdco Common Stock which such Holder would have owned immediately
after the Merger if such Holder had converted the Debenture immediately before
the Effective Time. The Supplemental Indenture shall provide for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in Article 11 of the Indenture. Holdco shall mail to the
Debentureholders a notice briefly describing the Supplemental Indenture.
7.2 Pursuant to Section 11.15 of the Indenture, NW Natural shall deliver to
the Trustee an Officers' Certificate and Opinion of Counsel, each stating that
the Merger and Supplemental Indenture comply with Article 6 and Section 11.15 of
the Indenture.
7.3 With respect to this Article 7, capitalized terms not defined in this
Agreement shall have the meaning ascribed to them in the Indenture.
ARTICLE 8
CONDITIONS OF THE MERGER
Completion of the Merger is subject to the satisfaction of the following
conditions:
8.1 SHAREHOLDER APPROVAL. The principal terms of this Agreement shall have
been approved by such holders of capital stock of the parties hereto as is
required by the Oregon Business Corporation Act.
8.2 STOCK EXCHANGE LISTING. All conditions for the listing on the New York
Stock Exchange as of the Effective Time of the Holdco Common Stock to be issued
and to be reserved for issuance pursuant to the Merger shall have been
satisfied.
8.3 REGULATORY APPROVALS. All necessary orders, consents, authorizations,
approvals or waivers from the Secretary of State of Oregon and all other
regulatory bodies, boards or agencies, or from other third parties, shall have
been received, remain in full force and effect, and shall not include, in the
sole judgment of the Board of Directors of NW Natural, unacceptable conditions.
5
8.4 FILINGS. All documents that are required to be filed pursuant to the
Oregon Business Corporation Act shall have been duly executed and filed with the
appropriate agency.
8.5 TAX OPINION. NW Natural shall have received an opinion of Thelen Reid &
Priest LLP confirming the United States federal income tax consequences of the
Merger and reorganization contemplated by this Agreement.
ARTICLE 9
AMENDMENT AND TERMINATION
9.1 AMENDMENT. The parties to this Agreement, by consent of their respective
boards of directors, may amend, modify or supplement this Agreement in such
manner as may be agreed upon by them in writing at any time before or after
approval of this Agreement by the pre-Merger shareholders of NW Natural (as
provided in Section 8.1 above); provided, however, that no such amendment,
modification or supplement shall, if agreed to after such approval by the
pre-Merger shareholders of NW Natural, change any of the principal terms of this
Agreement in a manner that would materially and adversely affect the rights of
the shareholders of NW Natural.
9.2 TERMINATION. This Agreement may be terminated and the transactions
provided for by this Agreement may be abandoned at any time, whether before or
after approval of this Agreement by the pre-Merger shareholders of NW Natural,
by action of the Board of Directors of NW Natural if such Board of Directors
determines for any reason that the completion of the transactions provided for
herein would for any reason be inadvisable or not in the best interests of NW
Natural or its shareholders.
ARTICLE 10
MISCELLANEOUS
10.1 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original hereof.
10.2 OREGON LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Oregon, without giving effect to the
conflict of laws principles thereof.
IN WITNESS WHEREOF, NW Natural, Holdco and Merger Sub have each caused this
Agreement to be executed by an authorized officer.
NORTHWEST NATURAL GAS COMPANY
By:__________________________
Its:_________________________
NORTHWEST ENERGY CORPORATION
By:__________________________
Its:_________________________
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NORTHWEST ENERGY SUB CORP.
By:__________________________
Its:_________________________
EXHIBIT A
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
of
NORTHWEST NATURAL GAS COMPANY
as Filed and Effective __________, 200_
STATE OF OREGON
CORPORATION DIVISION
Registry Number:
014302-14
AMENDED AND RESTATED ARTICLES OF INCORPORATION
Business Corporation
1. The name of the corporation is Northwest Natural Gas Company.
2. A copy of the Amended and Restated Articles of Incorporation is
attached.
3. The Amended and Restated Articles of Incorporation do not contain
amendments which require shareholder approval. These Amended and
Restated Articles were duly adopted by the Board of Directors.
Execution: _____________ _____________ _________________
Signature Printed Name Title
Person to contact
about this filing: C. J. Rue (503) 220-2411
Name Daytime Phone
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
NORTHWEST NATURAL GAS COMPANY
(These Amended and Restated Articles of Incorporation of Northwest Natural Gas
Company supersede its theretofore existing Restated Articles of Incorporation
and all amendments thereto.)
2
ARTICLE I
A. The name of this corporation is NORTHWEST NATURAL GAS COMPANY, and its
duration shall be perpetual.
ARTICLE II
A. The purposes of the corporation are to engage in any lawful activity for
which corporations may be organized under the Oregon Business Corporation Act.
ARTICLE III
A. The aggregate number of shares of capital stock which the corporation
shall have authority to issue is 63,500,000 shares, divided into 1,500,000
shares of Preferred Stock without par value, issuable in series as hereinafter
provided, 2,000,000 shares of Preference Stock without par value, issuable in
series as hereinafter provided, and 60,000,000 shares of Common Stock without
par value.
B. A statement of the preferences, limitations and relative rights of each
class of capital stock of the corporation, namely, the Preferred Stock, the
Preference Stock and the Common Stock, of the variations in the relative rights
and preferences as between series of the Preferred Stock and as between series
of the Preference Stock, insofar as the same are fixed by these Amended and
Restated Articles of Incorporation, and of the authority vested in the board of
directors of the corporation to establish series of Preferred Stock and series
of Preference Stock and to fix and determine the variations in the relative
rights and preferences as between series insofar as the same are not fixed by
these Amended and Restated Articles of Incorporation, is as follows:
Preferred Stock
1. The shares of the Preferred Stock may be divided into and issued in
series. Each series shall be so designated as to distinguish the shares thereof
from the shares of all other series of the Preferred Stock and all other classes
of capital stock of the corporation. To the extent that these Amended and
Restated Articles of Incorporation shall not have established series of the
Preferred Stock and fixed and determined the variations in the relative rights
and preferences as between series, the board of directors shall have authority,
and is hereby expressly vested with authority, to divide the Preferred Stock
into series and, within the limitations set forth in these Amended and Restated
Articles of Incorporation and such limitations as may be provided by law, to fix
and determine the relative rights and preferences of any series of the Preferred
Stock so established. Such action by the board of directors shall be expressed
in a resolution or resolutions adopted by it prior to the issuance of shares of
each series, which resolution or resolutions shall also set forth the
distinguishing designation of the particular series of the Preferred Stock
established thereby. Without limiting the generality of the foregoing,
3
authority is hereby expressly vested in the board of directors so to fix and
determine with respect to any series of the Preferred Stock:
(a) The rate of dividend;
(b) The price at which and the terms and conditions on which
shares may be redeemed;
(c) The amount payable upon shares in the event of voluntary
and involuntary liquidation;
(d) Sinking fund provisions, if any, for the redemption or
purchase of shares; and
(e) The terms and conditions, if any, on which shares may be
converted if the shares of any series are issued with the privilege of
conversion.
All shares of the Preferred Stock of the same series shall be identical
except that shares of the same series issued at different times may vary as to
the dates from which dividends thereon shall be cumulative; and all shares of
the Preferred Stock, irrespective of series, shall constitute one and the same
class of stock, shall be of equal rank, and shall be identical except as to the
designation thereof, the date or dates from which dividends on shares thereof
shall be cumulative, and the relative rights and preferences set forth above in
clauses (a) through (e) of this subdivision, as to which there may be variations
between different series. Except as otherwise may be provided by law, by
subdivision III.B.7., or by the resolutions establishing any series of Preferred
Stock in accordance with the foregoing provisions of this subdivision, whenever
the written consent, affirmative vote, or other action on the part of the
holders of the Preferred Stock may be required for any purpose, such consent,
vote or other action shall be taken by the holders of the Preferred Stock as a
single class irrespective of series and not by different series.
2. The holders of shares of the Preferred Stock of each series
shall be entitled to receive dividends, when and as declared by the board of
directors, out of any funds legally available for the payment of dividends, at
the annual rate fixed and determined with respect to each series either by these
Amended and Restated Articles of Incorporation or in accordance with subdivision
III.B.1., and no more, payable quarterly on the 15th day of February, May,
August and November in each year or on such other date or dates as the board of
directors shall determine in the resolutions establishing such series. Such
dividends shall be cumulative in the case of shares of each series either from
the date of issuance of shares of such series or from the first day of the
current dividend period within which shares of such series shall be issued, as
the board of directors shall determine, so that if dividends on all outstanding
shares of each particular series of the Preferred Stock, at the annual dividend
rates fixed and determined by the board of directors for the respective series,
shall not have been paid or declared and set apart for payment for all past
dividend periods and for the then current dividend periods, the deficiency shall
be fully paid or dividends equal thereto declared and set apart for payment at
said rates before any dividends on the Preference Stock or the Common Stock
shall be paid or declared and set apart for payment. In the event more than one
series of the Preferred Stock shall be
4
outstanding, the corporation, in making any dividend payment on the Preferred
Stock, shall make payments ratably upon all outstanding shares of the Preferred
Stock in proportion to the amount of dividends accumulated thereon to the date
of such dividend payment. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments which may be in
arrears.
3. In the event of any dissolution, liquidation or winding up of
the corporation, before any distribution or payment shall be made to the holders
of the Preference Stock or the Common Stock, the holders of the Preferred Stock
of each series then outstanding shall be entitled to be paid out of the net
assets of the corporation available for distribution to its shareholders the
respective amounts per share fixed and determined with respect to each series
either by these Amended and Restated Articles of Incorporation or in accordance
with subdivision III.B.1., and no more. If upon dissolution, liquidation or
winding up of the corporation, whether voluntary or involuntary, the net assets
of the corporation available for distribution to its shareholders shall be
insufficient to pay the holders of all outstanding shares of Preferred Stock of
all series the full amounts to which they shall be respectively entitled as
aforesaid, the entire net assets of the corporation available for distribution
shall be distributed ratably to the holders of all outstanding shares of
Preferred Stock of all series in proportion to the amounts to which they shall
be respectively so entitled. For the purposes of this subdivision, any dissolu-
tion, liquidation or winding up which may arise out of or result from the con-
demnation or purchase of all or a major portion of the properties of the
corporation by (i) the United States Government or any authority, agency or
instrumentality thereof, (ii) a State of the United States or any political sub-
division, authority, agency or instrumentality thereof, or (iii) a district,
cooperative or other association or entity not organized for profit, shall be
deemed to be an involuntary dissolution, liquidation or winding up; and a
consolidation, merger or amalgamation of the corporation with or into any other
corporation or corporations shall not be deemed to be a dissolution, liquidation
or winding up of the corporation, whether voluntary or involuntary.
4. (a) Subject to the limitations set forth in subdivision
III.B.9. or fixed and determined in accordance with subdivision III.B.1., the
Preferred Stock of all series, or of any series thereof, or any part of any
series thereof, at any time outstanding, may be redeemed by the corporation, at
its election expressed by resolution of the board of directors, at any time or
from time to time, at the then applicable redemption price fixed and determined
with respect to each series either by these Amended and Restated Articles of
Incorporation or in accordance with subdivision III.B.1. If less than all of the
shares of any series are to be redeemed, the redemption shall be made either pro
rata or by lot in such manner as the board of directors shall determine.
(b) In the event the corporation shall so elect to redeem
shares of the Preferred Stock, notice of the intention of the corporation to do
so and of the date and place fixed for redemption shall be mailed not less than
thirty days before the date fixed for redemption to each holder of shares of the
Preferred Stock to be redeemed at his address as it shall appear on the books of
the corporation, and on and after the date fixed for redemption and specified in
such notice (unless the corporation shall default in making payment of the
redemption price), such holders shall cease to be shareholders of the
corporation with respect to such shares and shall have no interest in or claim
against the corporation with respect to such shares, excepting only the right to
receive the redemption price therefor from the corporation on the date fixed for
5
redemption, without interest, upon endorsement, if required, and surrender of
their certificates for such shares.
(c) Contemporaneously with the mailing of notice of redemp-
tion of any shares of the Preferred Stock as aforesaid or at any time thereafter
on or before the date fixed for redemption, the corporation may, if it so
elects, deposit the aggregate redemption price of the shares to be redeemed with
any bank or trust company doing business in The City of New York, New York, or
Portland, Oregon, having a capital and surplus of at least $25,000,000, named in
such notice, payable on the date fixed for redemption in the proper amounts to
the respective holders of the shares to be redeemed, upon endorsement, if
required, and surrender of their certificates for such shares, and on and after
the making of such deposit such holders shall cease to be shareholders of the
corporation with respect to such shares and shall have no interest in or claim
against the corporation with respect to such shares, excepting only the right to
exercise such redemption, conversion or exchange rights, if any, on or before
the date fixed for redemption as may have been provided with respect to such
shares or the right to receive the redemption price of their shares from such
bank or trust company on the date fixed for redemption, without interest, upon
endorsement, if required, and surrender of their certificates for such shares.
(d) If the corporation shall have elected to deposit the
redemption moneys with a bank or trust company as permitted by subdivision (c)
above, any moneys so deposited which shall remain unclaimed at the end of six
years after the redemption date shall be repaid to the corporation, and upon
such repayment holders of Preferred Stock who shall not have made claim against
such moneys prior to such repayment shall be deemed to be unsecured creditors of
the corporation for an amount, without interest, equal to the amount they would
theretofore have been entitled to receive from such bank or trust company. Any
redemption moneys so deposited which shall not be required for such redemption
because of the exercise, after the date of such deposit, of any right of
redemption, conversion or exchange or otherwise, shall be returned to the
corporation forthwith. The corporation shall be entitled to receive any interest
allowed by any bank or trust company on any moneys deposited with such bank or
trust company as herein provided, and the holders of any shares called for
redemption shall have no claim against any such interest.
(e) Nothing herein contained shall limit any legal right of
the corporation to purchase or otherwise acquire any shares of the Preferred
Stock.
5. The holders of shares of the Preferred Stock shall have no right
to vote in the election of directors or for any other purpose, except as may be
otherwise provided by law or by subdivisions III.B.6, 7 and 8. Holders of
Preferred Stock shall be entitled to notice of each meeting of shareholders at
which they shall have any right to vote, but shall not be entitled to notice of
any other meeting of shareholders.
6. (a) If at any time dividends payable on any share or shares of
Preferred Stock shall be in arrears in an amount equal to four full quarterly
dividends or more per share, a default in preferred dividends for the purpose of
this subdivision shall be deemed to have occurred, and having so occurred, such
default shall be deemed to exist thereafter until, but only until, all unpaid
accumulated dividends on all shares of Preferred Stock shall have been paid to
6
the last preceding dividend period. If and whenever a default in preferred
dividends shall occur, a special meeting of shareholders of the corporation
shall be held for the purpose of electing directors upon the written request of
the holders of at least 10% of the total number of shares of Preferred Stock
then outstanding. Such meeting shall be called by the secretary of the
corporation upon such written request and shall be held at the earliest
practicable date upon like notice as that required for the annual meeting of
shareholders of the corporation and at the place for the holding of such annual
meeting. If notice of such special meeting shall not be mailed by the secretary
within thirty days after personal service of such written request upon the
secretary of the corporation or within thirty days of mailing the same in the
United States of America by registered mail addressed to the secretary at the
principal office of the corporation, then the holders of at least 10% of the
total number of shares of Preferred Stock then outstanding may designate in
writing one of their number to call such meeting and the person so designated
may call such meeting upon like notice as that required for the annual meeting
of shareholders and to be held at the place for the holding of such annual
meeting. Any holder of Preferred Stock so designated shall have access to the
stock books of the corporation for the purpose of causing a meeting of
shareholders to be called pursuant to the foregoing provisions of this
subdivision.
(b) At any such special meeting, or at the next annual meet-
ing of shareholders of the corporation for the election of directors and at each
other meeting, annual or special, for the election of directors held thereafter
(unless at the time of any such meeting such default in preferred dividends
shall no longer exist), the holders of the outstanding shares of Preferred
Stock, voting separately as a class irrespective of series, shall have the right
to elect the smallest number of directors which shall constitute at least
one-fourth of the total number of directors of the corporation, or two
directors, whichever shall be the greater, and the holders of the outstanding
shares of Common Stock, voting as a class, shall have the right to elect all
other members of the board of directors, anything herein or in the bylaws of the
corporation to the contrary notwithstanding. The terms of office, as directors,
of all persons who may be directors of the corporation at any time when such
special right to elect directors shall become vested in the holders of the
Preferred Stock shall terminate upon the election of any new directors to
succeed them as aforesaid.
(c) At any meeting, annual or special, of the corporation,
at which the holders of Preferred Stock shall have the special right to elect
directors as aforesaid, the presence in person or by proxy of the holders of a
majority of the total number of shares of Preferred Stock then outstanding shall
be required to constitute a quorum of such class for the election of directors,
and the presence in person or by proxy of the holders of a majority of the total
number of shares of Common Stock then outstanding shall be required to
constitute a quorum of such class for the election of directors; provided,
however, that the absence of a quorum of the holders of shares of any such class
shall not prevent the election at any such meeting or adjournment thereof of
directors by the other class, if the necessary quorum of the holders of such
other class shall be present at such meeting or any adjournment thereof; and
provided further, that in the absence of a quorum of holders of shares of any
class, a majority of the holders of the shares of such class who are present in
person or by proxy shall have power to adjourn the election of the directors to
be elected by such class from time to time, without notice other than
announcement at the meeting, until the requisite quorum of holders of such class
shall be present in person or by proxy, but no such adjournment shall be made to
a date beyond the date for the mailing of
7
the notice of the next annual meeting of shareholders of the corporation or
special meeting in lieu thereof.
(d) So long as a default in preferred dividends shall exist,
any vacancy in the office of a director elected by the holders of the Preferred
Stock may be filled at any meeting of shareholders, annual or special, for the
election of directors held thereafter, and a special meeting of shareholders, or
of the holders of shares of the Preferred Stock, may be called for the purpose
of filling any such vacancy. So long as a default in preferred dividends shall
exist, any vacancy in the office of a director elected by the holders of the
Common Stock may be filled by a majority vote of the remaining directors elected
by the holders of Common Stock.
(e) If and when the default in preferred dividends which
permitted the election of directors by the holders of the Preferred Stock shall
cease to exist, the holders of the Preferred Stock shall be divested of any
special right with respect to the election of directors, and the voting power of
the holders of the Preferred Stock and of the holders of the Common Stock shall
revert to the status existing before the first dividend payment date on which
dividends on the Preferred Stock were not paid in full, subject to revesting in
the event of each and every subsequent like default in preferred dividends. Upon
the termination of any such special right, the terms of office of all persons
who may have been elected directors by vote of the holders of the Preferred
Stock pursuant to such special right shall forthwith terminate, and the
resulting vacancies shall be filled by the majority vote of the remaining
directors.
7. So long as any shares of the Preferred Stock shall be outstand-
ing, the corporation shall not, without the written consent or affirmative vote
of the holders of at least two-thirds of the total number of shares of the
Preferred Stock then outstanding, (i) create or authorize any new class of stock
ranking prior to the Preferred Stock as to dividends or upon dissolution,
liquidation or winding up, or (ii) amend, alter or repeal any of the express
terms of the Preferred Stock then outstanding in a manner substantially
prejudicial to the holders thereof. Notwithstanding the foregoing provisions of
this subdivision, if any proposed amendment, alteration or repeal of any of the
express terms of any outstanding shares of the Preferred Stock would be
substantially prejudicial to the holders of shares of one or more, but not all,
of the series of the Preferred Stock, only the written consent or affirmative
vote of the holders of at least two-thirds of the total number of outstanding
shares of all series so affected shall be required. Any affirmative vote of the
holders of the Preferred Stock, or of any one or more series thereof, which may
be required in accordance with the foregoing provisions of this subdivision,
upon a proposal to create or authorize any class of stock ranking prior to the
Preferred Stock or to amend, alter or repeal the express terms of outstanding
shares of the Preferred Stock or of any one or more series thereof in a manner
substantially prejudicial to the holders thereof may be taken at a special
meeting of the holders of the Preferred Stock or of the holders of one or more
series thereof called for the purpose, notice of the time, place and purposes of
which shall have been given to the holders of the shares of the Preferred Stock
entitled to vote upon any such proposal, or at any meeting, annual or special,
of the shareholders of the corporation, notice of the time, place and purposes
of which shall have been given to holders of shares of the Preferred Stock
entitled to vote on such a proposal.
8
8. So long as any shares of the Preferred Stock shall be outstand-
ing, the corporation shall not, without the written consent or affirmative vote
of the holders of at least a majority of the total number of shares of Preferred
Stock then outstanding:
(a) issue any shares of the Preferred Stock, or of any other
class of stock ranking prior to or on a parity with the Preferred Stock as to
dividends or upon dissolution, liquidation or winding up, unless (i) the net
income of the corporation available for the payment of dividends for a period of
twelve consecutive calendar months within the fifteen calendar months
immediately preceding the issuance of such shares (including, in any case in
which such shares are to be issued in connection with the acquisition of new
property, the net income of the property so to be acquired, computed on the same
basis as the net income of the corporation) is at least equal to two times the
annual dividend requirements on all shares of the Preferred Stock, and on all
shares of all other classes of stock ranking prior to or on a parity with the
Preferred Stock as to dividends or upon dissolution, liquidation or winding up,
which will be outstanding immediately after the issuance of such shares,
including the shares proposed to be issued, and (ii) the gross income of the
corporation available for the payment of interest for a period of twelve
consecutive calendar months within the fifteen calendar months immediately
preceding the issuance of such shares (including, in any case in which such
shares are to be issued in connection with the acquisition of new property, the
gross income of the property so to be acquired, computed on the same basis as
the gross income of the corporation) is at least equal to one and one-half times
the aggregate of the annual interest requirements on all securities evidencing
indebtedness of the corporation, and the annual dividend requirements on all
shares of the Preferred Stock and on all shares of all other classes of stock
ranking prior to or on a parity with the Preferred Stock as to dividends or upon
dissolution, liquidation or winding up, which will be outstanding immediately
after the issuance of such shares, including the shares proposed to be issued;
or
(b) issue any shares of the Preferred Stock, or of any other
class of stock ranking prior to or on a parity with the Preferred Stock as to
dividends or upon dissolution, liquidation or winding up, unless the aggregate
of the capital of the corporation applicable to the Common Stock and the surplus
of the corporation (paid-in, earned or other, if any) shall be not less than the
aggregate amount payable on the involuntary dissolution, liquidation or winding
up of the corporation on all shares of the Preferred Stock, and on all shares of
all other classes of stock ranking prior to or on a parity with the Preferred
Stock as to dividends or upon dissolution, liquidation or winding up, which will
be outstanding immediately after the issuance of such shares, including the
shares proposed to be issued; provided, however, that if, for the purposes of
meeting the requirements of this subdivision, it shall become necessary to take
into consideration any surplus of the corporation the corporation shall not
thereafter pay any dividends on shares of the Preference Stock or the Common
Stock which would result in reducing the aggregate of the capital of the
corporation applicable to the Common Stock and the surplus of the corporation to
an amount less than the aggregate amount payable, on involuntary dissolution,
liquidation or winding up of the corporation, on all shares of the Preferred
Stock and of any stock ranking prior to or on a parity with the Preferred Stock,
as to dividends or upon dissolution, liquidation or winding up, at the time
outstanding.
In any case where it would be appropriate, under generally accepted
accounting principles, to combine or consolidate the financial statements of any
predecessor or subsidiary of
9
the corporation with those of the corporation, the foregoing computations may be
made on the basis of such combined or consolidated financial statements. Any
affirmative vote of the holders of the Preferred Stock, which may be required in
accordance with the foregoing provisions of this subdivision, may be taken at a
special meeting of the holders of the Preferred Stock called for the purpose,
notice of the time, place and purposes of which shall have been given to the
holders of the outstanding shares of the Preferred Stock, or at any meeting,
regular or special, of the shareholders of the corporation, notice of the time,
place and purposes of which shall have been given to the holders of the
outstanding shares of the Preferred Stock.
9. The series of Preferred Stock heretofore established and
outstanding on the date of the adoption of these Amended and Restated Articles
of Incorporation, together with a statement of the rights and preferences of
each series, are as follows:
$7.125 Series
(a) The Preferred Stock $7.125 Series, of which 90,000
shares were outstanding at the time of the adoption of these Amended and
Restated Articles of Incorporation, shall have the following rights and
preferences:
(i) (1) the rate of dividend of shares of said Series
shall be $7.125 per annum plus that amount, if any, which will maintain each
holder's after Federal income tax dividend yield on each dividend with respect
to which any legislative enactment, administrative action, judicial decision or
other change in law shall reduce or eliminate the dividends received deduction
of 70% provided by Section 243(a)(1) of the Internal Revenue Code of 1986, as
amended, as in effect on April 1, 1988 (the "Dividends Received Deduction"), at
the level at which such yield would have been if such dividend had been paid to
such holder on April 1, 1988 (each holder's after Federal income tax dividend
yield on April 1, 1988 being calculated on the bases of (i) a cost per share of
$100, (ii) the Dividends Received Deduction, and (iii) an assumed Federal income
tax rate of 34%; and, thereafter, such holder's after Federal income tax
dividend yield being calculated on the bases of (i) and (iii) and any reduced
dividends received deduction at the time then in effect); provided, however,
that any such increased dividend shall be payable only (A) on shares of said
Series in respect of which the holder shall have delivered to the corporation no
later than 360 days after the effective date of any such reduction or
elimination of the Dividends Received Deduction a written notice (I) stating
that such holder is entitled to an increased dividend as a result of such
reduction or elimination, (II) specifying the amount per share of such increase,
and (III) specifying the total number of shares of said Series held by such
holder, and (B) in respect of dividends payable after the date of receipt of
such notice by the corporation; (2) the dividend payment dates shall be the 15th
days of February, May, August and November in each year, commencing on February
15, 1994; and (3) dividends shall be cumulative from December 1, 1993;
(ii) (1) other than as provided in subdivision (2)
below, shares of said Series shall not be redeemable at the election of the
corporation prior to May 1, 1998. On and after May 1, 1998, the shares of said
Series may be redeemed, at the election of the corporation, at the following
redemption prices:
10
If Redeemed If Redeemed
During 12-Months Redemption During 12-Months Redemption
Period Ending Price Period Ending Price
April 30 Per Share April 30 Per Share
-------- --------- -------- ---------
1999.................. $104.750 2004.................. $102.375
2000.................. $104.275 2005.................. $101.900
2001.................. $103.800 2006.................. $101.425
2002.................. $103.325 2007.................. $100.950
2003.................. $102.850 2008.................. $100.475
and thereafter $100 per share, plus an amount in each case equal to accrued
unpaid dividends, if any, to the date of redemption; and (2) all but not less
than all of the shares of said Series held by any holder which shall have given
notice that such holder will be entitled to an increased dividend in accordance
with subdivision (i)(1) above may be redeemed, at the election of the
corporation, at the redemption price of $100 per share, plus an amount equal to
accrued unpaid dividends to the date of redemption, within the period of 360
days commencing on the date of receipt by the corporation of such notice.
(iii) the amount payable upon shares of said Series
in the event of involuntary liquidation shall be $100 per share and in the event
of voluntary liquidation (1) occurring prior to May 1, 1994, shall be $107.125
per share, (2) occurring during the 12 months periods ending April 30, 1995,
1996, 1997 and 1998, shall be, respectively, $106.650, $106.175, $105.700 and
$105.225 per share and (3) occurring on or after May 1, 1998, shall be an amount
equal to the then applicable redemption price of shares of said Series, plus in
each case, an amount equal to accrued unpaid dividends, if any, to the date of
payment;
(iv) shares of said Series shall not be, by their
terms, convertible;
(v) shares of said Series shall be entitled to the
benefits of a sinking fund as follows:
(1) The corporation (unless such action, in the
opinion of counsel for the corporation, would be contrary to any applicable law
or to any rule or regulation of any governmental authority having jurisdiction
in the premises) as a sinking fund for the retirement of shares of said Series,
shall redeem, in the manner herein provided, 7,500 shares of said Series on June
15, 1994 and 7,500 shares of said Series on the 15th day of June of each year
thereafter so long as any shares of said Series shall remain outstanding, at
$100.00 per share plus accrued unpaid dividends to the date fixed for
redemption. The total number of shares to be redeemed and the number of shares
to be redeemed from any holder shall be adjusted to the nearest full share so
that fractional shares need not be redeemed. The corporation may, on any
redemption date as above provided and at its option, credit against its sinking
fund obligation such number of shares of said Series theretofore redeemed by the
corporation, otherwise than for the account of its sinking fund obligation, or
such number of shares of said Series theretofore purchased by the corporation at
a price per share not in excess of $100.00 plus accrued unpaid dividends, and in
either case not theretofore applied as a credit on its sinking fund obligation.
11
The sinking fund for said Series shall not be cumulative. Notice of redemption
for each sinking fund shall be given, and deposit of the aggregate redemption
price may be made, subject to the general terms and provisions for redemption of
the Preferred Stock set forth in subdivision III.B.4 of the Amended and Restated
Articles of Incorporation;
(2) Shares of said Series redeemed pursuant to
the provisions of the sinking fund or credited thereto shall be cancelled, shall
not be reissued as shares of said Series, and shall be restored to the status of
authorized but unissued shares of the Preferred Stock of the corporation;
(3) Unless otherwise provided by law, nothing
herein contained shall prevent or in any manner restrict the Board of Directors
of the corporation from authorizing and issuing any other series of Preferred
Stock entitled to a purchase fund, sinking fund or other analogous device for
the benefit of the holders of such other series of Preferred Stock of the
corporation, whether or not the provisions therefor shall correspond with the
provisions for said Series; provided that the dates on which such other fund or
device shall operate in any particular year shall correspond with the date
applicable to said Series and in the event there is a deficiency in the funds
available in any particular year for the fulfillment of the maximum requirements
of the purchase funds, sinking funds or other analogous devices of all
outstanding series of Preferred Stock of the corporation in accordance with the
terms thereof, such funds as are available in accordance with such terms for
such purpose shall be prorated among all such series so that the percentage
allocated to any particular series of Preferred Stock shall correspond with its
portion of the total amount due; and
(4) After June 15, 1994, so long as any shares
of said Series shall be outstanding, no dividends on the Common Stock or the
Preference Stock of the corporation shall, without the written consent or
affirmative vote of the holders of at least a majority of the total number of
shares of said Series then outstanding, be declared and set apart for payment,
unless the corporation, on the June 15th immediately preceding the declaration
of such dividend, shall have redeemed 7,500 shares of said Series at $100.00 per
share plus accrued unpaid dividends to such June 15th or in accordance with the
terms hereof shall have taken credits against the shares of said Series sinking
fund which, with shares redeemed pursuant to such fund obligation, aggregate
7,500 shares of said Series; and
(vi) Whenever any of the dates mentioned with respect
to said Series shall not be a full business day in the City of Portland, Oregon,
then any action to be taken on said date may be taken on the next succeeding
full business day.
Preference Stock
10. The shares of the Preference Stock may be divided into and
issued in series. Each series shall be so designated as to distinguish the
shares thereof from the shares of all other series of the Preference Stock and
all other classes of capital stock of the corporation. To the extent that these
Amended and Restated Articles of Incorporation shall not have established series
of the Preference Stock and fixed and determined the variations in the relative
rights and preferences as between series, the board of directors shall have
authority, and is hereby expressly vested with authority, to divide the
Preference Stock into series and, within the
12
limitations set forth in these Amended and Restated Articles of Incorporation
and such limitations as may be provided by law, to fix and determine the
relative rights and preferences of any series of the Preference Stock so
established. Such action by the board of directors shall be expressed in a
resolution or resolutions adopted by it prior to the issuance of shares of each
series, which resolution or resolutions shall also set forth the distinguishing
designation of the particular series of the Preference Stock established
thereby. Without limiting the generality of the foregoing, authority is hereby
expressly vested in the board of directors so to fix and determine with respect
to any series of the Preference Stock:
(a) The rate of dividend;
(b) The price at which and the terms and conditions on which
shares may be redeemed;
(c) The amount payable upon shares in the event of voluntary
and involuntary liquidation;
(d) Sinking fund provisions, if any, for the redemption or
purchase of shares;
(e) The terms and conditions, if any, on which shares may be
converted if the shares of any series are issued with the privilege of
conversion; and
(f) Any other relative right or preference as permitted by
law.
All shares of the Preference Stock of the same series shall be
identical except that shares of the same series issued at different times may
vary as to the dates from which dividends thereon shall be cumulative; and all
shares of the Preference Stock, irrespective of series, shall constitute one and
the same class of stock, shall be of equal rank, and shall be identical except
as to the designation thereof, the date or dates from which dividends on shares
thereof shall be cumulative, and the relative rights and preferences set forth
above in clauses (a) through (f) of this subdivision, as to which there may be
variations between different series. Except as otherwise may be provided by law
or by the resolutions establishing any series of Preference Stock in accordance
with the foregoing provisions of this subdivision, whenever the written consent,
affirmative vote, or other action on the part of the holders of the Preference
Stock may be required for any purpose, such consent, vote or other action shall
be taken by the holders of the Preference Stock as a single class irrespective
of series and not by different series.
11. The payment of dividends on the shares of the Preference Stock
shall be subordinate to the dividend and other distributive rights of the
holders of the Preferred Stock. No dividend shall be paid on the Preference
Stock, unless (i) dividends on all outstanding shares of each particular series
of the Preferred Stock, at the annual dividend rates fixed and determined either
by these Amended and Restated Articles of Incorporation or in accordance with
subdivision III.B.1., shall have been paid or declared and set apart for payment
for all past dividend periods and for the then current dividend periods, and
(ii) all amounts due and payable to the holders of the Preferred Stock, by
virtue of purchase funds, sinking funds, or other analogous devices for the
retirement of the Preferred Stock, or by virtue of dissolution, liquidation or
winding up of the corporation, shall have been paid or funds for the payment
13
thereof shall have been set apart for payment. Subject to the foregoing, the
holders of shares of the Preference Stock of each series shall be entitled to
receive dividends, when and as declared by the board of directors, out of any
funds legally available for the payment of dividends, at the annual rate fixed
and determined with respect to each series either by these Amended and Restated
Articles of Incorporation or in accordance with subdivision III.B.10., and no
more, payable quarterly on the 15th day of February, May, August and November in
each year or on such other date or dates as the board of directors shall
determine in the resolutions establishing such series. Such dividends shall be
cumulative in the case of shares of each series either from the date of issuance
of shares of such series or from the first day of the current dividend period
within which shares of such series shall be issued, as the board of directors
shall determine, so that if dividends on all outstanding shares of each
particular series of the Preference Stock, at the annual dividend rates fixed
and determined either by these Amended and Restated Articles of Incorporation or
in accordance with subdivision III.B.10., shall not have been paid or declared
and set apart for payment for all past dividend periods and for the then current
dividend periods, the deficiency shall be fully paid or dividends equal thereto
declared and set apart for payment at said rates before any dividends on the
Common Stock shall be paid or declared and set apart for payment. In the event
more than one series of the Preference Stock shall be outstanding, the
corporation, in making any dividend payment on the Preference Stock, shall make
payments ratably upon all outstanding shares of the Preference Stock in
proportion to the amount of dividends accumulated thereon to the date of such
dividend payment. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments which may be in arrears.
12. Distribution or payment upon dissolution, liquidation or winding
up of the corporation to the holders of the Preference Stock shall be
subordinate to the dividend and other distributive rights of the holders of the
Preferred Stock. No such distribution or payment shall be made on the Preference
Stock, unless all amounts due by virtue of the dissolution, liquidation or
winding up of the corporation to the holders of all outstanding shares of the
Preferred Stock of all series shall have been paid or funds for the payment
thereof set apart for payment. Subject to the foregoing, in the event of any
dissolution, liquidation or winding up of the corporation, before any
distribution or payment shall be made to the holders of the Common Stock, the
holders of the Preference Stock of each series then outstanding shall be
entitled to be paid out of the net assets of the corporation available for
distribution to its shareholders the respective amounts per share fixed and
determined with respect to each series either by these Amended and Restated
Articles of Incorporation or in accordance with subdivision III.B.10., and no
more. If upon dissolution, liquidation or winding up of the corporation, whether
voluntary or involuntary, the net assets of the corporation available for
distribution to its shareholders (after all amounts due by virtue of the
dissolution, liquidation or winding up of the corporation to the holders of all
outstanding shares of the Preferred Stock of all series shall have been paid or
funds for the payment thereof set apart for payment) shall be insufficient to
pay the holders of all outstanding shares of Preference Stock of all series the
full amounts to which they shall be respectively entitled as aforesaid, the net
assets of the corporation so available for distribution shall be distributed
ratably to the holders of all outstanding shares of Preference Stock of all
series in proportion to the amounts to which they shall be respectively so
entitled. For the purposes of this subdivision, any dissolution, liquidation or
winding up which may arise out of or result from the condemnation or purchase of
all or a major portion of the properties of the corporation by (i) the United
States Government or any authority, agency or instrumentality thereof (ii) a
14
State of the United States or any political subdivision, authority, agency or
instrumentality thereof, or (iii) a district, cooperative or other association
or entity not organized for profit, shall be deemed to be an involuntary
dissolution, liquidation or winding up; and a consolidation, merger or
amalgamation of the corporation with or into any other corporation or
corporations shall not be deemed to be a dissolution, liquidation or winding up
of the corporation, whether voluntary or involuntary.
13. (a) Subject to the limitations set forth in subdivision
III.B.15., or fixed and determined in accordance with subdivision III.B.10.,
the Preference Stock of all series, or of any series thereof, or any part of
any series thereof, at any time outstanding, may be redeemed by the corporation,
at its election expressed by resolution of the board of directors, at any time
or from time to time, at the then applicable redemption price fixed and
determined with respect to each series either by these Amended and Restated
Articles of Incorporation or in accordance with subdivision III.B.10. If less
than all of the shares of any series are to be redeemed, the redemption shall be
made either pro rata or by lot in such manner as the board of directors shall
determine.
(b) In the event the corporation shall so elect to redeem
shares of the Preference Stock, notice of the intention of the corporation to do
so and of the date and place fixed for redemption shall be mailed not less than
thirty days before the date fixed for redemption to each holder of shares of the
Preference Stock to be redeemed at his address as it shall appear on the books
of the corporation, and on and after the date fixed for redemption and specified
in such notice (unless the corporation shall default in making payment of the
redemption price), such holders shall cease to be shareholders of the
corporation with respect to such shares and shall have no interest in or claim
against the corporation with respect to such shares, excepting only the right to
receive the redemption price therefor from the corporation on the date fixed for
redemption, without interest, upon endorsement, if required, and surrender of
their certificates for such shares.
(c) Contemporaneously with the mailing of notice of redemp-
tion of any shares of the Preference Stock as aforesaid or at any time there-
after on or before the date fixed for redemption, the corporation may, if it so
elects, deposit the aggregate redemption price of the shares to be redeemed with
any bank or trust company doing business in The City of New York, New York, or
Portland, Oregon, having a capital and surplus of at least $25,000,000, named in
such notice, payable on the date fixed for redemption in the proper amounts to
the respective holders of the shares to be redeemed, upon endorsement, if
required, and surrender of their certificates for such shares, and on and after
the making of such deposit such holders shall cease to be shareholders of the
corporation with respect to such shares and shall have no interest in or claim
against the corporation with respect to such shares, excepting only the right to
exercise such redemption, conversion or exchange rights, if any, on or before
the date fixed for redemption as may have been provided with respect to such
shares or the right to receive the redemption price of their shares from such
bank or trust company on the date fixed for redemption, without interest, upon
endorsement, if required, and surrender of their certificates for such shares.
(d) If the corporation shall have elected to deposit the
redemption moneys with a bank or trust company as permitted by subdivision (c)
above, any moneys so
15
deposited which shall remain unclaimed at the end of six years after the
redemption date shall be repaid to the corporation, and upon such repayment
holders of Preference Stock who shall not have made claim against such moneys
prior to such repayment shall be deemed to be unsecured creditors of the
corporation for an amount, without interest, equal to the amount they would
theretofore have been entitled to receive from such bank or trust company. Any
redemption moneys so deposited which shall not be required for such redemption
because of the exercise, after the date of such deposit, of any right of
redemption, conversion or exchange or otherwise, shall be returned to the
corporation forthwith. The corporation shall be entitled to receive any interest
allowed by any bank or trust company on any moneys deposited with such bank or
trust company as herein provided, and the holders of any shares called for
redemption shall have no claim against any such interest.
(e) Nothing herein contained shall limit any legal right of
the corporation to purchase or otherwise acquire any shares of the Preference
Stock.
14. The holders of shares of the Preference Stock shall have no
right to vote in the election of directors or for any other purpose, except as
may be otherwise provided by law or by resolutions establishing any series of
Preference Stock in accordance with subdivision III.B.10. Holders of Preference
Stock shall be entitled to notice of each meeting of shareholders at which they
shall have any right to vote, but shall not be entitled to notice of any other
meeting of shareholders.
15. The series of Preference Stock heretofore established and
outstanding on the date of the adoption of these Amended and Restated Articles
of Incorporation, together with a statement of the rights and preferences of
each series, are as follows:
$6.95 Series
(a) The Preference Stock $6.95 Series, of which 250,000
shares were outstanding at the time of the adoption of these Amended and
Restated Articles of Incorporation, shall have the following rights and
preferences:
(i) The rate of dividend of shares of said Series
shall be $6.95 per annum; the dividend payment dates shall be the 15th days of
February, May, August and November in each year, commencing on February 15,
1993; and dividends shall be cumulative from the date of original issue;
(ii) The shares of said Series shall not be redeem-
able prior to December 31, 2002; and on such date, all of the outstanding shares
of said Series shall be subject to mandatory redemption (unless such action, in
the opinion of counsel for the corporation, would be contrary to any applicable
law or to any rule or regulation of any governmental authority having jurisdic-
tion in the premises) at the mandatory redemption price of $100 per share, plus
unpaid accumulated dividends; provided, however, that the payment of such
mandatory redemption price shall be subordinate to the dividend and other
distributive rights of the Preferred Stock, so that such redemption price shall
not be paid and the shares of said Series shall not be redeemed unless (i)
dividends on all outstanding shares of each particular series of the Preferred
Stock, at the annual dividend rates fixed and determined either by these Amended
16
and Restated Articles of Incorporation or in accordance with subdivision III.B.1
thereof, shall have been paid or declared and set apart for payment for all past
dividend periods and for the then current dividend periods, and (ii) all amounts
due and payable to the holders of Preferred Stock, by virtue of purchase funds,
sinking funds, or other analogous devices for the retirement of the Preferred
Stock, or by virtue of dissolution, liquidation or winding up of the
corporation, shall have been paid or funds for the payment thereof shall have
been set apart for payment;
(iii) The amount payable upon shares of said Series in
the event of either involuntary or voluntary liquidation shall be $100 per
share, plus unpaid accumulated dividends, if any, to the date of payment;
(iv) All shares of said Series redeemed by the
corporation shall be cancelled and thereupon restored to the status of
authorized but unissued Preference Stock of the corporation, undesignated as to
series; and
(v) Whenever any of the dates mentioned with respect
to said Series shall not be a full business day in the City of Portland, Oregon,
then any action to be taken on said date may be taken on the next succeeding
full business day.
Common Stock
16. Subject to the limitations set forth in subdivisions III.B.2.
and 11. (and subject to the rights of any class of stock hereafter authorized),
dividends may be paid upon the Common Stock when and as declared by the board of
directors of the corporation out of any funds legally available for the payment
of dividends.
17. Subject to the limitations set forth in subdivisions III.B.3.
and 12. (and subject to the rights of any other class of stock hereafter
authorized), upon any dissolution, liquidation or winding up of the corporation,
whether voluntary or involuntary, the net assets of the corporation shall be
distributed ratably to the holders of the Common Stock.
18. Subject to the limitations set forth in subdivisions III.B.6, 7,
8, 9 and 15. (and subject to the rights of any class of stock hereafter
created), and except as may be otherwise provided by law or by the resolutions
establishing any series of Preference Stock in accordance with subdivision
III.B.10., the holders of the Common Stock shall have the exclusive right to
vote for the election of directors and for all other purposes. In the election
of directors of the corporation, every holder of record of any share or shares
of the Common Stock of the corporation shall have the right to cast as many
votes for in the election as shall equal the number of shares that the holder
owns.
19. Upon the issuance for money or other consideration of any shares
of capital stock of the corporation, or of any security convertible into capital
stock of the corporation, no holder of shares of the capital stock, irrespective
of the class or kind thereof, shall have any preemptive or other right to
subscribe for, purchase or receive any proportionate or other amount of such
shares of capital stock, or such security convertible into capital stock,
proposed to be issued; and the board of directors may cause the corporation to
dispose of all or any of such shares of capital stock, or of any such security
convertible into capital stock, as and when said board may determine, free of
any such right, either by offering the same to the
17
corporation's then shareholders or by otherwise selling or disposing of such
shares or other securities, as the board of directors may deem advisable.
ARTICLE IV
A. The business and affairs of the corporation shall be managed by a board
of directors. Except as provided in subdivision B. below, the number of
members of the board, their terms of office, and the manner of their election
and removal shall be as follows:
1. The number of directors shall be that number, not less than
three or more than six, determined from time to time by resolution adopted by
affirmative vote of a majority of the entire board of directors.
2. A director shall hold office until the annual meeting for the
year in which his or her term shall expire and until his or her successor shall
have been elected and qualified, subject, however, to prior death, resignation,
retirement or removal from office. Any newly created directorship resulting from
an increase in the number of directors and any other vacancy on the board of
directors, however caused, may be filled by the affirmative vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. The term of a director elected to fill a newly created
directorship or any other vacancy shall expire at the next shareholders' meeting
at which directors are elected.
3. One or more of the directors may be removed with or without
cause by the affirmative vote of the holders of not less than two-thirds of the
shares entitled to vote thereon at a meeting of the shareholders called
expressly for that purpose.
4. No person, except those persons nominated by the board, shall be
eligible for election as a director at any annual or special meeting of
shareholders unless a written request that his or her name be placed in
nomination shall be received from a shareholder of record entitled to vote at
such election by the secretary of the corporation not later than the latter of
(a) the thirtieth day prior to the date fixed for the meeting, or (b) the tenth
day after the mailing of notice of that meeting, together with the written
consent of the nominee to serve as a director.
B. Notwithstanding the provisions of subdivision A. above, whenever the
holders of any one or more classes of the capital stock of the corporation shall
have the right, voting separately as a class or classes, to elect directors at
an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the provisions of these Amended and Restated Articles of Incorporation
applicable thereto. The board of directors shall consist of such directors in
addition to the directors determined as provided in subdivision A. above.
C. This Article IV may not be repealed or amended in any respect unless
such action shall be approved by the affirmative vote of the holders of not less
than two-thirds of the shares entitled to vote at an election of directors
determined as provided in subdivision A. above, at a meeting of the shareholders
called expressly for that purpose.
18
ARTICLE V
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director;
provided that this Article V shall not eliminate the liability of a director for
any act or omission for which such elimination of liability is not permitted
under the Oregon Business Corporation Act. No amendment to the Oregon Business
Corporation Act that further limits the acts or omissions for which elimination
of liability is permitted shall affect the liability of a director for any act
or omission which occurs prior to the effective date of such amendment.
ARTICLE VI
The corporation shall indemnify to the fullest extent then permitted by
law any person who is made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including an action, suit or
proceeding by or in the right of the corporation) by reason of the fact that the
person is or was a director or officer of the corporation or is or was serving
at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise against all
judgments, amounts paid in settlement, fines and such expenses (including
attorneys' fees), actually and reasonably incurred in connection therewith. This
Article shall not be deemed exclusive of any other provisions for
indemnification of directors and officers that may be included in any statute,
bylaw, agreement, vote of shareholders or directors or otherwise, both as to
action in any official capacity and as to action in another capacity while
holding an office.
19
EXHIBIT B
---------
BYLAWS
OF
NORTHWEST
NATURAL
GAS
COMPANY
AS ADOPTED BY THE BOARD OF DIRECTORS
JULY 17, 1975
AS AMENDED AND RESTATED ON _______________
CONTENTS
ARTICLE I. OFFICES........................................................... 1
Section 1. Office......................................................1
Section 2. Registered Office...........................................1
ARTICLE II. MEETINGS OF SHAREHOLDERS..........................................1
Section 1. Annual Meeting..............................................1
Section 2. Special Meetings............................................1
Section 3. Notice......................................................2
Section 4. Fixing Record Date..........................................2
Section 5. Record of Shareholders......................................2
Section 6. Quorum......................................................3
Section 7. Voting......................................................3
Section 8. Conduct of Meetings.........................................3
ARTICLE III. BOARD OF DIRECTORS...............................................4
Section 1. Directors...................................................4
Section 2. Chairman of the Board.......................................4
Section 3. Lead Director...............................................4
Section 4. Retired Directors...........................................4
Section 5. Compensation................................................5
ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS................................5
Section 1. Regular Meetings............................................5
Section 2. Special Meetings............................................5
Section 3. Waiver of Notice............................................5
Section 4. Quorum......................................................6
Section 5. Manner of Acting............................................6
Section 6. Action Without a Meeting....................................6
ARTICLE V. COMMITTEES OF THE BOARD............................................6
Section 1. Executive Committee.........................................6
Section 2. Audit Committee.............................................6
Section 3. Retirement Committee........................................7
Section 4. Pension Committee...........................................7
Section 5. Organization and Executive Compensation Committee...........7
Section 6. Environmental Policy Committee..............................8
Section 7. Finance Committee...........................................8
Section 8. Other Committees............................................8
Section 9. Changes of Size and Function................................8
Section 10. Conduct of Meetings.........................................8
Section 11. Compensation............................................... 9
ARTICLE VI. NOTICES..........................................................10
Section 1. Form and Manner............................................10
Section 2. Waiver.....................................................10
ARTICLE VII. OFFICERS........................................................10
Section 1. Election...................................................10
Section 2. Compensation...............................................10
Section 3. Term.......................................................10
Section 4. Removal....................................................11
Section 5. President..................................................11
Section 6. Vice Presidents............................................11
Section 7. Secretary..................................................11
Section 8. Treasurer..................................................11
ARTICLE VIII. CONTRACTS, LOANS, CHECKS AND DEPOSITS..........................12
Section 1. Contracts..................................................12
Section 2. Loans......................................................12
Section 3. Checks and Drafts..........................................12
Section 4. Deposits...................................................12
ARTICLE IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER.......................12
Section 1. Certificates for Shares....................................12
Section 2. Transfer...................................................13
Section 3. Owner of Record............................................13
ARTICLE X. INDEMNIFICATION AND INSURANCE.....................................13
Section 1. Indemnification............................................13
Section 2. Insurance..................................................14
ARTICLE XI. SEAL.............................................................14
ARTICLE XII. AMENDMENTS......................................................14
The following Bylaws were adopted by Northwest Natural Gas Company on
____________, amending and restating Bylaws adopted on July 17, 1975 pursuant to
an Agreement and Plan of Merger dated ______________, which superseded amended
Bylaws originally adopted in conformity with an order of the District Court of
the United States for the District of Oregon enforcing a plan for rearrangement
of the Company's capital structure effective December 31, 1951, and subsequently
amended by the stockholders on May 17, 1954, May 20, 1957, May 21, 1973, and May
20, 1974.
BYLAWS
OF
NORTHWEST NATURAL GAS COMPANY
ARTICLE I.
OFFICES
SECTION 1. OFFICE. The principal office of the company shall be located in
the City of Portland, Oregon. The company also may have offices at such other
places both within and without the State of Oregon as the board of directors
from time to time may determine.
SECTION 2. REGISTERED OFFICE. The registered office of the company required
by law to be maintained in the state shall be at the same location as the
principal office unless otherwise designated by resolution of the board of
directors.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders of the company
for the election of directors and for the transaction of other business shall be
held at the company's office in the City of Portland, Oregon, or such other
place in that City as shall be determined by the board of directors, on the
fourth Thursday of May in each year, unless such day shall be a legal holiday,
in which event such meeting shall be held on the next business day. If such
meeting shall not be held on such day in any year, it shall be held within 60
days thereafter on such day as shall be fixed by the board of directors and be
specified in the notice of the meeting. Every such meeting shall be held at the
hour of two o'clock p.m., or at such other hour as shall be fixed by the board
and specified in such notice.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders of the
company may be called by the board of directors or the holders of not less than
one-tenth of all shares entitled to vote at the meeting. Each special meeting
shall be held for such purposes, at such place in the City of Portland, Oregon,
and at such time as shall be specified in the notice thereof.
SECTION 3. NOTICE. Written or printed notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
50 days before the date of the meeting, either personally or by mail, by or at
the direction of the board of directors or the persons calling the meeting, to
each shareholder of record entitled to vote at such meeting.
SECTION 4. FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than 50 days
and, in the case of a meeting of shareholders, not less than 10 days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the board
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
SECTION 5. RECORD OF SHAREHOLDERS. The officer or agent having charge of the
transfer books for shares of the company shall make, at least 10 days before
each meeting of shareholders, a complete record of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order
with the address of and the number of shares held by each, which record, for a
period of 10 days prior to such meeting, shall be kept on file at the registered
office of the company and shall be subject to inspection by any shareholder at
any time during usual business hours. Such record also shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
transfer books for shares shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of the shareholders.
2
SECTION 6. QUORUM. A majority of the shares of the company entitled to vote,
represented in person or by proxy, shall constitute a quorum at all meetings of
shareholders. If a quorum is present, in person or by proxy, the affirmative
vote of a majority of the shares represented at the meeting and entitled to vote
on the subject matter shall be the act of the shareholders, unless the vote of a
greater number, or voting by classes, is required by law or the Amended and
Restated Articles of Incorporation.
If a quorum shall not be represented at any meeting of shareholders, the
shareholders represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders represented at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
SECTION 7. VOTING. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by law or the Amended and Restated
Articles of Incorporation. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his or her duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the company
before or at the time of the meeting.
SECTION 8. CONDUCT OF MEETINGS. Every meeting of shareholders shall be
presided over by the chairman of the board, in his or her absence by the
president, in their absence by a vice president or, if none be present, by a
chairman appointed by the shareholders present at the meeting. The minutes of
such meeting shall be recorded by the secretary or an assistant secretary but,
if neither be present, by a secretary appointed for that purpose by the chairman
of the meeting.
3
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. DIRECTORS. The business and affairs of the company shall be
managed by its board of directors. The number of members of the board, their
classification and terms of office, and the manner of their election and removal
shall be determined as provided by the Amended and Restated Articles of
Incorporation. Directors need not be residents of the State of Oregon or
shareholders of the company. No person who has reached the age of 72 years shall
be eligible to be elected a director, but a director may serve until the next
annual meeting of shareholders after reaching that age.
SECTION 2. CHAIRMAN OF THE BOARD. The board of directors may elect one of
its members as chairman of the board. The chairman of the board, if that
position be filled, shall preside at all meetings of the shareholders and the
board of directors and shall have such other duties and responsibilities as may
be prescribed by the board of directors. If there shall be no chairman of the
board, or in his or her absence or disability, the president also shall exercise
the duties and responsibilities of that position.
SECTION 3. LEAD DIRECTOR. The board of directors shall elect one of its
members as lead director. The lead director shall, in the absence of the
chairman of the board and the president, preside at meetings of the board of
directors and shall preside at all meetings of the executive committee. The lead
director shall have such other duties and responsibilities as may be prescribed
by the board of directors.
SECTION 4. RETIRED DIRECTORS. Any person who, upon retirement as a director
after reaching age 72, shall have served as a director of the company for ten or
more years shall be appointed a retired director of the company for life. Any
other person who shall have served as a director of the company may be elected
by the board as a retired director of the company for one or more terms of one
year or less. A retired director may attend meetings of the board but shall not
have the right to vote at such meetings.
4
SECTION 5. COMPENSATION. Directors shall receive such reasonable
compensation for their services as may be fixed from time to time by resolution
of the board of directors, and shall be reimbursed for their expenses properly
incurred in the performance of their duties as directors. No such payment shall
preclude any director from serving the company in any other capacity and
receiving such reasonable compensation for such services as may be fixed by
resolution of the board.
Retired directors who retired prior to January 1, 1998 shall receive such
compensation as from time to time may be fixed by resolution of the board of
directors as the annual retainer for members of the board of directors.
Directors who retire subsequent to December 31, 1997 shall not be entitled to
receive such compensation.
ARTICLE IV.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held in the company's offices at two o'clock p.m., Pacific Time, on the
fourth Thursday of February, April, May, July and September, and on the third
Thursday of December, or on such other date or at such other hour and place as
shall be specified in the notice of meeting. The date, time and place for
holding regular meetings of the board of directors may be changed upon the
giving of notice to all directors by or at the request of the chairman of the
board or the president. The board may provide by resolution the time and place
either within or without the State of Oregon for holding of meetings or may omit
the holding of any meeting without other notice than such resolution. SECTION 2.
SPECIAL MEETINGS. Special meetings of the board of directors may be called by or
at the request of the chairman of the board, the lead director, the president or
any two directors. The person or persons authorized to call special meetings of
the board may fix any place, either within or without the State of Oregon, as
the place for holding any special meeting of the board called by them. Notice of
the time and place of special meetings shall be given to each director at least
one day in advance by the secretary or other officer performing his or her
duties.
SECTION 3. WAIVER OF NOTICE. Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. Except as otherwise provided by law or the
Amended and Restated Articles of Incorporation, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
5
SECTION 4. QUORUM. A majority of the number of directors at any time fixed
by resolution adopted by the affirmative vote of a majority of the entire board
of directors shall constitute a quorum for the transaction of business. If a
quorum shall not be present at any meeting of directors, the directors present
may adjourn the meeting from time to time without further notice until a quorum
shall be present.
SECTION 5. MANNER OF ACTING. Except as otherwise provided by law or the
Amended and Restated Articles of Incorporation, the act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors. SECTION 6. ACTION WITHOUT A MEETING. Any action required
or permitted to be taken at a meeting of the board of directors may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors entitled to vote with respect to the
subject matter thereof.
ARTICLE V.
COMMITTEES OF THE BOARD
SECTION 1. EXECUTIVE COMMITTEE. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint an
executive committee composed of the chairman of the board, the lead director,
and such other number of directors as the board may from time to time determine.
The lead director, or in his or her absence, the chairman of the board, shall
act as chairman. The committee shall have and may exercise all of the authority
of the board of directors in the management of the company, except with respect
to matters upon which by law only the board of directors may act. The duties of
the committee shall include recommending to the board nominees for election as
directors, the conduct of periodic reviews of board effectiveness and the
performance of such other functions as the board by resolution from time to time
may direct.
SECTION 2. AUDIT COMMITTEE. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint an audit
committee composed of [three] or more directors, none of whom shall be an
officer of the company. The board shall designate one member of the committee as
chairman. The duties of the committee shall be to discuss and review with the
company's independent auditors the annual audit of the company, including the
scope of the audit, and report the results of this review to the board; to meet
with the independent auditors at such other times as the committee shall deem to
be advisable; and to perform such other functions as the board by resolution
from time to time may direct.
6
SECTION 3. RETIREMENT COMMITTEE. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint a
retirement committee composed of [three] or more directors, a majority of whom
shall not be members under the company's Non-Bargaining Unit Employees
Retirement Plan established by the board. Any action required or permitted to be
taken by the committee must be approved by both (a) a majority of the committee
members present at a meeting at which a quorum is present, and (b) a majority of
the total number of committee members who are not members under said Plan. The
chairman of the committee shall not be a member under said Plan. The duties of
the committee shall be to monitor the general administration of the company's
Non-Bargaining Unit Employees Retirement Plan and the committee shall be
responsible for monitoring the carrying out of its provisions as more fully set
forth under the terms of the Plan.
SECTION 4. PENSION COMMITTEE. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint [three]
or more directors to serve on the pension committee provided for in the
company's Bargaining Unit Employees Retirement Plan established by the board.
The duties of the committee shall be to monitor the general administration of
the Bargaining Unit Employees Retirement Plan and the committee shall be
responsible for monitoring the carrying out of its provisions as more fully set
forth under the terms of the Plan.
SECTION 5. ORGANIZATION AND EXECUTIVE COMPENSATION COMMITTEE. The board of
directors at any time, by resolution adopted by a majority of the board of
directors, may appoint an organization and executive compensation committee
composed of [three] or more directors, none of whom shall be an officer of the
company. The board shall designate one member of the committee as chairman. The
duties of the committee shall be to discuss and review the management of the
affairs of the company relating to its organization and to executive personnel
and their compensation, and to perform such other functions as the board by
resolution from time to time may direct.
7
SECTION 6. ENVIRONMENTAL POLICY COMMITTEE. The board of directors at any
time, by resolution adopted by a majority of the board of directors, may appoint
an environmental policy committee composed of three or more directors, a
majority of whom shall not be officers or retired officers of the company. Any
action required or permitted to be taken by the committee must be approved by
both (a) a majority of the committee members present at a meeting at which a
quorum is present, and (b) a majority of the total number of committee members
who are not officers or retired officers of the company. The board shall
designate one member of the committee who is not an officer or retired officer
of the company as chairman. The duties of the committee shall be to develop and
recommend to the board appropriate environmental policies and to perform such
other functions as the board by resolution from time to time may direct.
SECTION 7. FINANCE COMMITTEE. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint a
finance committee composed of three or more directors, a majority of whom shall
not be officers or retired officers of the company. Any action required or
permitted to be taken by the committee must be approved by both (a) a majority
of the committee members present at a meeting at which a quorum is present, and
(b) a majority of the total number of committee members who are not officers or
retired officers of the company. The board shall designate one member of the
committee who is not an officer or retired officer of the company as chairman.
The duties of the committee shall be to discuss and review the management of the
affairs of the company relating to financing, including the development of
long-range financial planning goals and financial policy, and to perform such
other functions as the board by resolution from time to time may direct.
SECTION 8. OTHER COMMITTEES. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint from
among its members such other committees and the chairmen thereof as it may deem
to be advisable. Each such committee shall have such powers and authority as are
set forth in the resolutions pertaining thereto from time to time adopted by the
board.
SECTION 9. CHANGES OF SIZE AND FUNCTION. Subject to the provisions of law,
the board of directors shall have the power at any time to increase or decrease
the number of members of any committee, to fill vacancies thereon, to change any
members thereof and to change the functions and terminate the existence thereof.
SECTION 10. CONDUCT OF MEETINGS. Each committee shall conduct its meetings
in accordance with the applicable provisions of these bylaws relating to the
conduct of meetings of the board of directors. Each committee shall adopt such
further rules and regulations regarding its conduct, keep such minutes and other
records and appoint such subcommittees and assistants as it shall deem to be
appropriate.
8
SECTION 11. COMPENSATION. Persons serving on any committee shall receive
such reasonable compensation for their services on such committee as may be
fixed by resolution of the board of directors, provided that no person shall
receive compensation for his or her services on any committee while serving as
an officer of the company.
9
ARTICLE VI.
NOTICES
SECTION 1. FORM AND MANNER. Whenever, under the provisions of law or the
Amended and Restated Articles of Incorporation, notice is required to be given
to any director or shareholder, unless otherwise specified, it shall be given in
writing by mail addressed to such director or shareholder at his or her address
as it appears on the stock transfer books or other records of the company, with
postage thereon prepaid, and such notice shall be deemed to be delivered when
deposited in the United States Mail. Notice to directors also shall be given by
telephone or in any other manner which is reasonably calculated to give adequate
notice.
SECTION 2. WAIVER. Whenever any notice whatever is required to be given
under the provisions of law, the Amended and Restated Articles of Incorporation
or these bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE VII.
OFFICERS
SECTION 1. ELECTION. The board of directors, at its first meeting following
the annual meeting of shareholders each year, shall elect one of its members as
president and shall elect a secretary. At such meeting, or at any other time it
shall deem appropriate, the board may elect one or more vice presidents and a
treasurer. The board also may elect or appoint such other officers and agents as
it may deem necessary. Any two or more offices may be held by the same person,
except the offices of president and secretary.
SECTION 2. COMPENSATION. The officers of the company shall receive such
reasonable compensation for their services as from time to time may be fixed by
resolution of the board of directors. SECTION 3. TERM. The term of office of all
officers shall commence upon their election or appointment and shall continue
until the first meeting of the board of directors following the annual meeting
of shareholders and thereafter until their successors shall be elected or until
their resignation or removal. A vacancy occurring in any office of the company
for whatever reason may be filled by the board.
10
SECTION 4. REMOVAL. Any officer or agent elected or appointed by the board
of directors may be removed by the board whenever in its judgment the best
interests of the company will be served thereby but such removal shall be
without prejudice to the contract rights, if any, of the officer or agent so
removed.
SECTION 5. PRESIDENT. Unless otherwise determined by the board of directors,
the president shall be the chief executive officer of the company and, subject
to the control of the board of directors, shall be responsible for the general
administration and operation of the company. He shall have such other duties and
responsibilities as may pertain to such office or be prescribed by the board of
directors. In the absence or disability of the president, an officer designated
by the board shall exercise the duties and responsibilities of the president.
SECTION 6. VICE PRESIDENTS. Each vice president shall have such duties and
responsibilities as may be prescribed by the board of directors and the
president. The board or the president may confer a special title upon a vice
president.
SECTION 7. SECRETARY. The secretary shall record and keep the minutes of the
shareholders in one or more books provided for that purpose; see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; and perform such other duties as may be prescribed by the board
or the president. The secretary shall have custody of the corporate seal of the
company and shall affix the seal to any instrument requiring it and attest the
same by his or her signature.
The assistant secretaries shall have such duties as may be prescribed from
time to time by the board, the president or the secretary. In the absence or
disability of the secretary, his or her duties shall be performed by an
assistant secretary.
SECTION 8. TREASURER. The treasurer shall have charge and custody and be
responsible for all funds and securities of the company; deposit all moneys and
other valuable effects in the name and to the credit of the company in such
depositories as may be designated by the board of directors; and disburse the
funds of the company as may be authorized by the board and take proper vouchers
for such disbursements. The treasurer shall have such other duties as may be
prescribed from time to time by the board or the president. In the absence or
disability of the treasurer, his or her duties shall be performed by an
assistant treasurer.
11
ARTICLE VIII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors by resolution may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the company, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the company and
no evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the board of directors. Such authority may be general or confined
to specific instances. SECTION 3. CHECKS AND DRAFTS. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the company shall be signed by such officer or officers, agent or
agents of the company and in such manner as shall from time to time be
determined by resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the company not otherwise employed shall
be deposited from time to time to the credit of the company in such banks, trust
companies or other depositories as the board of directors or officers of the
company designated by the board may select, or be invested as authorized by the
board.
ARTICLE IX.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
company shall be issued only for whole numbers of shares and shall be in such
form as the board of directors may, from time to time, prescribe in accordance
with the laws of the State of Oregon. Such certificates shall be signed by the
president or a vice president and by the secretary or an assistant secretary and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles thereof. In case of a lost,
destroyed or mutilated certificate a new one may be issued therefor upon such
terms and indemnity to the company as the board may authorize.
12
SECTION 2. TRANSFER. Shares of stock of the company shall be transferable on
the books of the company by the holder of record thereof, or by his or her legal
representative who shall furnish proper evidence of authority to transfer, or by
his or her attorney thereunto authorized by duly executed power of attorney, and
on surrender for cancellation of the certificates for such shares. The board of
directors may appoint one or more transfer agents and registrars of stock of the
company.
SECTION 3. OWNER OF RECORD. The company shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends and to vote as such owner and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE X.
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION. The company shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was director, officer,
employee or agent of the company, or is or was serving at the request of the
company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise or any
employee benefit plan, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the defense or settlement of such action, suit or
proceeding to the fullest extent permissible under the Oregon Business
Corporation Act or the indemnification provisions of any successor Act. The
foregoing rights of indemnification shall not be exclusive of any other rights
to which any such person so indemnified may be entitled, under any agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office; shall continue as to a person who has ceased to be a
director, officer, employee or agent; and shall inure to the benefit of the
heirs, executors and administrators of such a person.
13
SECTION 2. INSURANCE. The company may purchase and maintain insurance (and
pay the entire premium therefor) on behalf of any person who is or was a
director, officer, employee or agent of the company, or is or was serving at the
request of the company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity or arising out of his or her status as such, whether or not the company
would have the power to indemnify him or her against such liability under the
provisions of the Oregon Business Corporation Act or any successor Act; and on
behalf of any person who is or was a fiduciary under the Employee Retirement
Income Security Act of 1974 with regard to an employee benefit plan of the
company against any liability asserted against him or her and incurred by him or
her in his or her fiduciary capacity.
ARTICLE XI.
SEAL
The corporate seal of the company shall be circular in form and shall
bear an inscription containing the name of the company, the year of its
organization, the state of its incorporation and the words "Corporate Seal."
ARTICLE XII.
AMENDMENTS
These bylaws, or any of them, may be altered, amended or repealed, or
new bylaws adopted, by resolution of a majority of the board of directors,
subject to repeal or change by action of the shareholders.
14
CERTIFICATE
I, C. J. Rue, Secretary of Northwest Natural Gas Company, a corporation
organized and existing under the laws of the State of Oregon, HEREBY CERTIFY
that the foregoing eight printed pages entitled "Bylaws of Northwest Natural Gas
Company" constitute a full and true copy of the Bylaws of said corporation as of
the date hereof.
WITNESS my hand and the seal of said corporation this ______ day of
________________________________.
C. J. Rue
Secretary
15
EXHIBIT C
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
NORTHWEST ENERGY CORPORATION
(These Amended and Restated Articles of Incorporation of NORTHWEST ENERGY
CORPORATION supersede its theretofore existing Articles of Incorporation and all
amendments thereto.)
ARTICLE I
A. The name of this corporation is NORTHWEST ENERGY CORPORATION, and its
duration shall be perpetual.
ARTICLE II
A. The purposes of the corporation are to engage in any lawful activity for
which corporations may be organized under the Oregon Business Corporation
Act.
ARTICLE III
A. The aggregate number of shares of capital stock which the corporation shall
have the authority to issue is 90,000,000 shares, divided into 10,000,000
shares of Preferred Stock without par value, 65,000,000 shares of Common
Stock without par value, and 15,000,000 shares of Class B Common Stock
without par value.
B. A statement of the preferences, limitations and relative rights of each
class of capital stock of the corporation, namely, the Preferred Stock, the
Common Stock and the Class B Common Stock, and of the authority vested in
the Board of Directors of the corporation to establish series of Preferred
Stock and to fix and determine the variations in the relative rights and
preferences as between series insofar as the same are not fixed by these
Amended and Restated Articles of Incorporation, is as follows:
PREFERRED STOCK
1. The Board of Directors of the corporation shall have the authority to
divide the Preferred Stock into series and to determine the
designation, preferences, limitations and relative rights of the
shares of each series so established, all to the extent and in the
manner provided by law.
COMMON STOCK AND CLASS B COMMON STOCK
2. Subject to the limitations, if any, specified with respect to the
Preferred Stock, or any series thereof, dividends may be paid on the
Common Stock and the Class B Common Stock when and as declared by the
Board of Directors of the corporation out of any funds legally
available for the payment of dividends, and dividends shall be
distributed ratably in accordance with their holdings to the holders
of the Common Stock and the Class B Common Stock. The rights of the
holders of shares of Common Stock and of the Class B Common Stock to
receive dividends, when and as declared by the Board of Directors of
the corporation, shall be identical, and no dividend shall be declared
or paid with respect to the Common Stock or the Class B Common Stock
unless a dividend of the same nature and equal in amount per share
shall also be declared and paid with respect to the other class of
common stock.
3. Subject to the limitations, if any, specified with respect to the
Preferred Stock, or any series thereof, upon any dissolution,
liquidation or winding up of the corporation, whether voluntary or
involuntary, the net assets of the corporation shall be distributed
ratably in accordance with their holdings to the holders of the Common
Stock and of the Class B Common Stock. The rights of the holders of
shares of Common Stock and of the Class B Common Stock upon any
dissolution, liquidation, or winding up of the corporation, whether
voluntary or involuntary, shall be identical, and no such distribution
shall be declared or made with respect to the Common Stock or the
Class B Common Stock unless a distribution of the same nature and
equal in amount per share shall also be declared and made with respect
to the other class of common stock.
4. All voting power shall be vested exclusively in the holders of shares
of the Common Stock, except to the extent any statute of the State of
Oregon shall expressly otherwise provide, and except as and to the
extent otherwise specified with respect to the Preferred Stock, or any
series thereof, and each holder of the Common Stock shall, in the
election of directors and upon each other matter coming before any
meeting of shareholders, be entitled to one vote for each share of
such stock standing in the name of such holder on the books of the
corporation.
5. If the corporation shall at any time (i) declare a stock dividend upon
the Common Stock payable in shares of its Common Stock, or (ii) make
any distribution upon the Common Stock payable in shares of Common
Stock, or (iii) subdivide the outstanding shares of Common Stock into
a greater number of shares or (iv) combine the outstanding shares of
Common Stock into a smaller number of shares, then and in any such
event the corporation shall also, declare, make or effect a ratable
stock dividend or distribution or subdivision on the Class B Common
Stock payable in shares of Class B Common Stock that is, on a per
share basis, equal in effect to that declared, made or effected on the
Common Stock.
6. Each share of Class B Common Stock shall be convertible, at the option
of the holder thereof, into one share of Common Stock; provided,
however, that if, after giving effect to any proposed act of
conversion, the holder of Class B Common Stock would thereby then own
shares of Common Stock entitled to cast five percent (5%) or more of
the total number of votes entitled to be cast by all issued and
outstanding shares of Common Stock, the act of conversion shall be
effective only as to those shares of Class B Common Stock that, when
converted, would result in the holder owning shares of Common Stock
entitled to cast less than five percent (5%) of the total number of
2
votes entitled to be cast by all then issued and outstanding shares of
Common Stock and shall be ineffective and of no force or effect with
respect to the balance of the shares of Class B Common Stock. The
holder of Class B Common Stock shall convert shares of Class B Common
Stock by surrendering to the corporation at any office of the
corporation, or at the office of the transfer agent or registrar
thereof, for cancellation, the certificate representing the shares of
Class B Common Stock to be converted, and such other documentation
that the corporation may reasonably request in connection with such
conversion, and, upon such surrender, shall be entitled to receive one
or more certificates representing the number of shares of Common Stock
that the corporation is required to issue upon conversion of shares of
Class B Common Stock as provided herein. As used in this subdivision
III.B.6, the term holder shall include any beneficial owner of Class B
Common Stock and beneficial owner shall have the meaning given such
term in Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934 as in effect on the Effective Date (as
defined in subdivision IV.A.1 below), and any person's beneficial
ownership of Common Stock and Class B Common Stock shall be calculated
in accordance with the provisions of such Rule; provided, however,
that for purposes of calculating beneficial ownership of Common Stock
entitled to cast votes, beneficial ownership of shares of Class B
Common Stock shall be excluded.
7. Upon the conversion of shares of Class B Common Stock, or upon any
other acquisition by the corporation of shares of Class B Common
Stock, by purchase or otherwise, such shares of Class B Common Stock
shall be cancelled and retired, and may not be reissued.
8. Upon the issuance for money or other consideration of any shares of
capital stock of the corporation or of any security convertible into
or exchangeable for shares of capital stock of the corporation, no
holder of shares of the capital stock of the corporation, irrespective
of the class or kind thereof, shall have any preemptive or other right
to subscribe for, purchase or receive any proportionate or other
amount of such shares of capital stock, or such security convertible
into shares of capital stock, proposed to be issued; and the Board of
Directors of the corporation may cause the corporation to dispose of
all or any of such shares of capital stock, or any such security
convertible into or exchangeable for shares of capital stock, as such
Board of Directors of the corporation may determine, free of any such
right, either by offering the same to the corporation's then
shareholders or by otherwise selling or disposing of such shares or
other securities, as the Board of Directors may deem advisable.
ARTICLE IV
A. The business and affairs of the corporation shall be managed by a board of
directors. Except as provided in subdivision B below, the number of members
of the board, their classifications and terms of office, and the manner of
their election and removal shall be as follows:
3
1. The number of directors shall be that number, not less than nine or
more than fourteen, determined from time to time by resolution adopted
by affirmative vote of a majority of the entire board of directors.
The directors shall be divided into three classes, designated Class I,
Class II, and Class III. Each class shall consist, as nearly as
possible, of one-third of the total number of directors. The terms of
office of directors shall be classified as follows: (a) the term of
Class I shall expire at the first annual meeting of shareholders
following the effective date of these Amended and Restated Articles of
Incorporation (the "Effective Date"), (b) the term of Class II shall
expire at the second annual meeting of shareholders following the
Effective Date and (c) the term of Class III shall expire at the third
annual meeting of shareholders following the Effective Date. At each
succeeding annual meeting of shareholders, successors to directors
whose terms expire at that annual meeting shall be of the same class
as the directors they succeed, and shall be elected for three-year
terms. If the number of directors should be changed by resolution of
the board of directors, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each
class as nearly equal as possible, but in no case shall a decrease in
the number of directors shorten the term of any incumbent director.
2. A director shall hold office until the annual meeting for the year in
which his or her term shall expire and until his or her successor
shall have been elected and qualified, subject, however, to prior
death, resignation, retirement or removal from office. Any newly
created directorship resulting from an increase in the number of
directors and any other vacancy on the board of directors, however
caused, may be filled by the affirmative vote of a majority of the
directors then in office, although less than a quorum, or by a sole
remaining director. The term of a director elected to fill a newly
created directorship or any other vacancy shall expire at the next
shareholders' meeting at which directors are elected.
3. One or more of the directors may be removed with or without cause by
the affirmative vote of the holders of not less than two-thirds of the
shares entitled to vote thereon at a meeting of the shareholders
called expressly for that purpose, except that no Enron Director, as
such term is define in the Securityholders and Registration Rights
Agreement dated as of _____________, among Enron Corp., the Company,
and other entities named as parties thereto (the "Enron
Securityholders' Agreement"), a copy of which is on file with the
Secretary of the Company, may be removed without cause by the
shareholders without the express written consent of Enron, as provided
in Section 2.3 of the Enron Securityholders' Agreement.
4. No person, except those persons nominated by the board, shall be
eligible for election as a director at any annual or special meeting
of shareholders unless a written request that his or her name be
placed in nomination shall be received from a shareholder of record
entitled to vote at such election by the secretary of the corporation
not later than the later of (a) the thirtieth day prior to the date
fixed for the meeting or (b) the tenth day after the mailing of notice
of that meeting, together with the written consent of the nominee to
serve as a director.
4
B. This Article IV may not be repealed or amended in any respect unless such
action shall be approved by the affirmative vote of the holders of not less
than two-thirds of the shares entitled to vote at an election of directors
determined as provided in subdivision A. above, at a meeting of the
shareholders called expressly for that purpose.
ARTICLE V
A. For purposes of this Article V:
1. The term "Affiliate", as used to indicate a relationship with a
specified "Person" (as hereinafter defined), shall mean a Person that
directly or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, the Person
specified.
2. The term "Associate", as used to indicate a relationship with a
specified Person, shall mean (a) any Person (other than the
corporation) of which such specified Person is a director, officer,
partner, trustee, guardian, fiduciary or official or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of
equity securities or any beneficial interest, (b) any Person who is a
director, officer, partner, trustee, guardian, fiduciary or official
or is, directly or indirectly, the beneficial owner of 10 percent or
more of any class of equity securities or any beneficial interest of
or in such specified Person (other than the corporation), and (c) any
relative or spouse of such specified Person, or any relative of such
spouse who has the same home as such specified Person.
3. The term "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect on the Effective Date; provided,
however, that, notwithstanding the provisions of such Rule, a Person
shall be deemed to be the Beneficial Owner of any share of the capital
stock of the corporation that such Person shall have the right to
acquire at any time pursuant to any agreement, contract, arrangement
or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise, and any such share of capital stock shall be
deemed to be outstanding for purposes of subdivision V.A.9.
4. The term "Business Transaction" shall include, without limitation, (a)
any merger, consolidation or plan of exchange of the corporation, or
any Person controlled by or under common control with the corporation,
with or into any "Related Person" (as hereinafter defined), (b) any
merger, consolidation or plan of exchange of a Related Person with or
into the corporation or any Person controlled by or under common
control with the corporation, (c) any sale, lease, exchange, transfer
or other disposition (in one transaction or a series of transactions)
including without limitation a mortgage or any other security device,
of all or any "Substantial Part" (as hereinafter defined) of the
property and assets of the corporation, or any Person controlled by or
under common control with the corporation, to or with a Related
Person, (d) any purchase, lease, exchange, transfer or other
acquisition (in one transaction or a series of transactions),
5
including without limitation a mortgage or any other security device,
of all or any Substantial Part of the property and assets of a Related
Person, by or with the corporation or any Person controlled by or
under common control with the corporation, (e) any ecapitalization of
the corporation that would have the effect of increasing the voting
power of a Related Person, (f) the issuance, sale, exchange or other
disposition of any securities of the corporation, or of any Person
controlled by or under common control with the corporation, by the
corporation or by any Person controlled by or under common control
with the corporation, (g) any liquidation, spinoff, splitoff, splitup
or dissolution of the corporation, and (h) any agreement, contract or
other arrangement providing for any of the transactions described in
this subdivision.
5. The term "Continuing Director" shall mean a director who was a
director of the corporation on the Effective Date and a director who
shall become a director subsequent thereto whose election, or whose
nomination for election by the shareholders, shall have been approved
by a vote of a majority of the then Continuing Directors.
6. The term "Highest Purchase Price" shall mean, with respect to the
shares of any class or series of the capital stock of the corporation,
the highest amount of consideration paid by a Related Person for a
share of the same class and series at any time regardless of whether
the share was acquired before or after such Related Person became a
Related Person; provided, however, that the Highest Purchase Price
shall be appropriately adjusted to reflect the occurrence of any
reclassification, recapitalization, stock split, reverse stock split
or other readjustment in the number of outstanding shares of that
class or series, or the declaration of a stock dividend thereon. The
Highest Purchase Price shall include any brokerage commissions,
transfer taxes and soliciting dealers' fees paid by such Related
Person with respect to any shares of the capital stock acquired by
such Related Person.
7. The term "Other Consideration" shall include, without limitation,
capital stock to be retained by the shareholders of the corporation in
a Business Transaction in which the corporation shall be the survivor.
8. The term "Person" shall mean any natural person, corporation,
partnership, trust, firm, association, government, governmental agency
or any other entity whether acting in an individual, fiduciary or
other capacity.
9. The term "Related Person" shall mean (a) any Person which, together
with its Affiliates and Associates, shall be the Beneficial Owner in
the aggregate of 10 percent or more of the capital stock of the
corporation, and (b) any Affiliate or Associate (other than the
corporation or a wholly owned subsidiary of the corporation) of any
such Person. Notwithstanding anything to the contrary in this Article
V, during the period beginning on the Effective Date and ending on the
Termination Date (as such term is defined in the Enron
Securityholders' Agreement) neither Enron Corp., an Oregon
6
corporation, any of its Affiliates or Associates nor any of their
successors or assigns shall be deemed to be a Related Person under
this Article V. Two or more Persons acting in concert for the purpose
of acquiring, holding or disposing of the capital stock of the
corporation shall be deemed to be a "Related Person". A Related Person
shall be deemed to have acquired a share of capital stock at the time
when such Related Person became the Beneficial Owner thereof. With
respect to the shares of the capital stock of the corporation owned by
any Related Person, if the price paid for such shares cannot be
determined by a majority of the Continuing Directors, the price so
paid shall be deemed to be the market price of the shares in question
at the time when such Related Person became the Beneficial Owner
thereof.
10. The term "Substantial Part" shall mean 10 percent or more of the fair
market value of the total assets of a Person, as reflected on the most
recent balance sheet of such Person available to the Continuing
Directors on the date of mailing of the notice of the meeting of
shareholders called for the purpose of voting with respect to a
Business Transaction involving the assets constituting any such
Substantial Part.
B. The corporation shall not enter into any Business Transaction with a
Related Person or in which a Related Person shall have an interest (except
proportionately as a shareholder of the corporation) without first
obtaining both (1) the affirmative vote of the holders of not less than
two-thirds of the outstanding shares of the capital stock of the
corporation not held by such Related Person, and (2) the determination of a
majority of the Continuing Directors that the cash or fair market value of
the property, securities or Other Consideration to be received per share by
the holders, other than such Related Person, of the shares of each class or
series of the capital stock of the corporation in such Business Transaction
shall not be less than the Highest Purchase Price paid by such Related
Person in acquiring any of its holdings of shares of the same class or
series, unless the Continuing Directors by a majority vote shall either (a)
have expressly approved the acquisition of the shares of the capital stock
of the corporation that caused such Related Person to become a Related
Person, or (b) have expressly approved such Business Transaction.
C. For the purposes of this Article V, a majority of the Continuing Directors
shall have the power to make a good faith determination, on the basis of
information known to them, of: (1) the number of shares of capital stock of
the corporation of which any Person shall be the Beneficial Owner, (2)
whether a Person is an Affiliate or Associate of another Person, (3)
whether a Person has an agreement, contract, arrangement or understanding
with another Person as to the matters referred to in subdivision V.A.3. or
clause (h) of subdivision V.A.4., (4) the Highest Purchase Price paid by a
Related Person for shares of any class or series of the capital stock, (5)
whether the assets subject to any Business Transaction constitute a
Substantial Part, (6) whether any Business Transaction is one in which a
Related Person has an interest (except proportionately as a shareholder of
the corporation), and (7) such other matters with respect to which a
determination may be required under this Article V.
7
D. In determining whether to give their approval as provided in subdivision
V.B., the Continuing Directors shall give due consideration to all relevant
factors involved, including, without limitation, (1) the value of the
corporation in a freely negotiated transaction and its future value as an
independent entity, (2) the recognition of gain or loss to the corporation
for tax purposes or the postponement of such recognition in a tax-free
transaction, (3) the anticipated developments of the business of the
corporation not yet reflected in the price of its shares, and (4) the
impact on employees, customers, suppliers and the public generally within
the geographical area it serves.
E. This Article V may not be repealed or amended in any respect unless such
action shall be approved by the affirmative vote of the holders of not less
than two-thirds of the capital stock of the corporation not held by a
Related Person at a meeting of the shareholders called expressly for that
purpose.
ARTICLE VI
No director of the corporation shall be personally liable to the corporation or
its shareholders for monetary damages for conduct as a director; provided that
this Article VI shall not eliminate the liability of a director for any act or
omission for which such elimination of liability is not permitted under the
Oregon Business Corporation Act. No amendment to the Oregon Business Corporation
Act that further limits the acts or omissions for which elimination of liability
is permitted shall affect the liability of a director for any act or omission
which occurs prior to the effective date of such amendment.
ARTICLE VII
The corporation shall indemnify to the fullest extent then permitted by law any
person who is made, or threatened to be made, a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including an action, suit or
proceeding by or in the right of the corporation) by reason of the fact that the
person is or was a director or officer of the corporation or is or was serving
at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise against all
judgments, amounts paid in settlement, fines and such expenses (including
attorneys' fees), actually and reasonably incurred in connection therewith. This
Article shall not be deemed exclusive of any other provisions for
indemnification of directors and officers that may be included in any statute,
bylaw, agreement, vote of shareholders or directors or otherwise, both as to
action in any official capacity and as to action in another capacity while
holding an office.
8
EXHIBIT D
---------
BYLAWS
of
NORTHWEST
ENERGY
CORPORATION
As Adopted by the Board of Directors
_________, 200_
As Amended Through _________, 200_
CONTENTS
ARTICLE I. OFFICES............................................................1
Section 1. Office......................................................1
Section 2. Registered Office...........................................1
ARTICLE II. MEETINGS OF SHAREHOLDERS..........................................1
Section 1. Annual Meeting..............................................1
Section 2. Special Meetings............................................1
Section 3. Notice......................................................2
Section 4. Fixing Record Date..........................................2
Section 5. Record of Shareholders......................................2
Section 6. Quorum......................................................3
Section 7. Voting......................................................3
Section 8. Conduct of Meetings.........................................3
ARTICLE III. BOARD OF DIRECTORS...............................................4
Section 1. Directors...................................................4
Section 2. Chairman of the Board.......................................4
Section 3. Lead Director...............................................4
Section 4. Retired Directors...........................................4
Section 5. Compensation................................................4
ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS................................5
Section 1. Regular Meetings............................................5
Section 2. Special Meetings............................................5
Section 3. Waiver of Notice............................................5
Section 4. Quorum......................................................5
Section 5. Manner of Acting............................................5
Section 6. Action Without a Meeting....................................6
ARTICLE V. COMMITTEES OF THE BOARD............................................6
Section 1. Executive Committee.........................................6
Section 2. Audit Committee.............................................6
Section 3. Retirement Committee........................................6
Section 4. Pension Committee...........................................7
Section 5. Organization and Executive Compensation Committee...........7
Section 6. Environmental Policy Committee..............................7
Section 7. Finance Committee...........................................8
Section 8. Other Committees............................................8
Section 9. Changes of Size and Function................................8
Section 10. Conduct of Meetings.........................................8
Section 11. Compensation................................................8
ARTICLE VI. NOTICES...........................................................9
Section 1. Form and Manner.............................................9
Section 2. Waiver......................................................9
ARTICLE VII. OFFICERS.........................................................9
Section 1. Election....................................................9
Section 2. Compensation................................................9
Section 3. Term........................................................9
Section 4. Removal....................................................10
Section 5. President..................................................10
Section 6. Vice Presidents............................................10
Section 7. Secretary..................................................10
Section 8. Treasurer..................................................10
ARTICLE VIII. CONTRACTS, LOANS, CHECKS AND DEPOSITS..........................11
Section 1. Contracts..................................................11
Section 2. Loans......................................................11
Section 3. Checks and Drafts..........................................11
Section 4. Deposits...................................................11
ARTICLE IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER.......................11
Section 1. Certificates for Shares....................................11
Section 2. Transfer...................................................12
Section 3. Owner of Record............................................12
ARTICLE X. INDEMNIFICATION AND INSURANCE.....................................12
Section 1. Indemnification............................................12
Section 2. Insurance..................................................13
ARTICLE XI. SEAL.............................................................13
ARTICLE XII. AMENDMENTS......................................................13
BYLAWS
OF
NORTHWEST ENERGY CORPORATION
ARTICLE I.
OFFICES
Section 1. Office. The principal office of the company shall be located in
the City of Portland, Oregon. The company also may have offices at such other
places both within and without the State of Oregon as the board of directors
from time to time may determine.
Section 2. Registered Office. The registered office of the company required
by law to be maintained in the state shall be at the same location as the
principal office unless otherwise designated by resolution of the board of
directors.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of shareholders of the
company for the election of directors and for the transaction of other business
shall be held at the company's office in the City of Portland, Oregon, or such
other place in that City as shall be determined by the board of directors, on
the fourth Thursday of May in each year, unless such day shall be a legal
holiday, in which event such meeting shall be held on the next business day. If
such meeting shall not be held on such day in any year, it shall be held within
60 days thereafter on such day as shall be fixed by the board of directors and
be specified in the notice of the meeting. Every such meeting shall be held at
the hour of two o'clock p.m., or at such other hour as shall be fixed by the
board and specified in such notice.
Section 2. Special Meetings. Special meetings of the shareholders of the
company may be called by the board of directors or the holders of not less than
one-tenth of all shares entitled to vote at the meeting. Each special meeting
shall be held for such purposes, at such place in the City of Portland, Oregon,
and at such time as shall be specified in the notice thereof.
Section 3. Notice. Written or printed notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than 10 nor more
than 50 days before the date of the meeting, either personally or by mail, by or
at the direction of the board of directors or the persons calling the meeting,
to each shareholder of record entitled to vote at such meeting.
Section 4. Fixing Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than 50 days
and, in the case of a meeting of shareholders, not less than 10 days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the board
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
Section 5. Record of Shareholders. The officer or agent having charge of
the transfer books for shares of the company shall make, at least 10 days before
each meeting of shareholders, a complete record of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order
with the address of and the number of shares held by each, which record, for a
period of 10 days prior to such meeting, shall be kept on file at the registered
office of the company and shall be subject to inspection by any shareholder at
any time during usual business hours. Such record also shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
transfer books for shares shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of the shareholders.
2
Section 6. Quorum. A majority of the shares of the company entitled to
vote, represented in person or by proxy, shall constitute a quorum at all
meetings of shareholders. If a quorum is present, in person or by proxy, the
affirmative vote of a majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number, or voting by classes, is required by law or
the Amended and Restated Articles of Incorporation.
If a quorum shall not be represented at any meeting of shareholders,
the shareholders represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders represented at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 7. Voting. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by law or the Amended and Restated
Articles of Incorporation. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his or her duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the company
before or at the time of the meeting.
Section 8. Conduct of Meetings. Every meeting of shareholders shall be
presided over by the chairman of the board, in his or her absence by the
president, in their absence by a vice president or, if none be present, by a
chairman appointed by the shareholders present at the meeting. The minutes of
such meeting shall be recorded by the secretary or an assistant secretary but,
if neither be present, by a secretary appointed for that purpose by the chairman
of the meeting.
3
ARTICLE III.
BOARD OF DIRECTORS
Section 1. Directors. The business and affairs of the company shall be
managed by its board of directors. The number of members of the board, their
classification and terms of office, and the manner of their election and removal
shall be determined as provided by the Amended and Restated Articles of
Incorporation. Directors need not be residents of the State of Oregon or
shareholders of the company. No person who has reached the age of 72 years shall
be eligible to be elected a director, but a director may serve until the next
annual meeting of shareholders after reaching that age.
Section 2. Chairman of the Board. The board of directors may elect one of
its members as chairman of the board. The chairman of the board, if that
position be filled, shall preside at all meetings of the shareholders and the
board of directors and shall have such other duties and responsibilities as may
be prescribed by the board of directors. If there shall be no chairman of the
board, or in his or her absence or disability, the president also shall exercise
the duties and responsibilities of that position.
Section 3. Lead Director. The board of directors shall elect one of its
members as lead director. The lead director shall, in the absence of the
chairman of the board and the president, preside at meetings of the board of
directors and shall preside at all meetings of the executive committee. The lead
director shall have such other duties and responsibilities as may be prescribed
by the board of directors.
Section 4. Retired Directors. Any person who, upon retirement as a director
after reaching age 72, shall have served as a director of the company for ten or
more years shall be appointed a retired director of the company for life. Any
other person who shall have served as a director of the company may be elected
by the board as a retired director of the company for one or more terms of one
year or less. A retired director may attend meetings of the board but shall not
have the right to vote at such meetings.
Section 5. Compensation. Directors shall receive such reasonable
compensation for their services as may be fixed from time to time by resolution
of the board of directors, and shall be reimbursed for their expenses properly
incurred in the performance of their duties as directors. No such payment shall
preclude any director from serving the company in any other capacity and
receiving such reasonable compensation for such services as may be fixed by
resolution of the board.
4
ARTICLE IV.
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Regular Meetings. Regular meetings of the board of directors
shall be held in the company's offices at two o'clock p.m., Pacific Time, on the
fourth Thursday of February, April, May, July and September, and on the third
Thursday of December, or on such other date or at such other hour and place as
shall be specified in the notice of meeting. The date, time and place for
holding regular meetings of the board of directors may be changed upon the
giving of notice to all directors by or at the request of the chairman of the
board or the president. The board may provide by resolution the time and place
either within or without the State of Oregon for holding of meetings or may omit
the holding of any meeting without other notice than such resolution.
Section 2. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the chairman of the board, the lead director,
the president or any two directors. The person or persons authorized to call
special meetings of the board may fix any place, either within or without the
State of Oregon, as the place for holding any special meeting of the board
called by them. Notice of the time and place of special meetings shall be given
to each director at least one day in advance by the secretary or other officer
performing his or her duties.
Section 3. Waiver of Notice. Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. Except as otherwise provided by law or the
Amended and Restated Articles of Incorporation, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 4. Quorum. A majority of the number of directors at any time fixed
by resolution adopted by the affirmative vote of a majority of the entire board
of directors shall constitute a quorum for the transaction of business. If a
quorum shall not be present at any meeting of directors, the directors present
may adjourn the meeting from time to time without further notice until a quorum
shall be present.
Section 5. Manner of Acting. Except as otherwise provided by law or the
Amended and Restated Articles of Incorporation, the act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors.
5
Section 6. Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the board of directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors entitled to vote with respect to the subject matter thereof.
ARTICLE V.
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint an
executive committee composed of the chairman of the board, the lead director,
and such other number of directors as the board may from time to time determine.
The lead director, or in his or her absence, the chairman of the board, shall
act as chairman. The committee shall have and may exercise all of the authority
of the board of directors in the management of the company, except with respect
to matters upon which by law only the board of directors may act. The duties of
the committee shall include recommending to the board nominees for election as
directors, the conduct of periodic reviews of board effectiveness and the
performance of such other functions as the board by resolution from time to time
may direct.
Section 2. Audit Committee. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint an audit
committee composed of three or more directors, none of whom shall be an officer
of the company. The board shall designate one member of the committee as
chairman. The duties of the committee shall be to discuss and review with the
company's independent auditors the annual audit of the company, including the
scope of the audit, and report the results of this review to the board; to meet
with the independent auditors at such other times as the committee shall deem to
be advisable; and to perform such other functions as the board by resolution
from time to time may direct.
Section 3. Retirement Committee. The board of directors at any time, by
resolution adopted by a majority of the board of directors, shall appoint a
retirement committee composed of three or more directors, a majority of whom
shall not be members under the company's Non-Bargaining Unit Employees
Retirement Plan established by the board. Any action required or permitted to be
taken by the committee must be approved by both (a) a majority of the committee
members present at a meeting at which a quorum is present, and (b) a majority of
the total number of committee members who are not members under said Plan. The
chairman of the committee shall not be a member under said Plan. The duties of
the committee shall be to monitor the general administration of the company's
Non-Bargaining Unit Employees Retirement Plan and the committee shall be
responsible for monitoring the carrying out of its provisions as more fully set
forth under the terms of the Plan.
6
Section 4. Pension Committee. The board of directors at any time, by
resolution adopted by a majority of the board of directors, shall appoint three
or more directors to serve on the pension committee provided for in the
company's Bargaining Unit Employees Retirement Plan established by the board.
The duties of the committee shall be to monitor the general administration of
the Bargaining Unit Employees Retirement Plan and the committee shall be
responsible for monitoring the carrying out of its provisions as more fully set
forth under the terms of the Plan.
Section 5. Organization and Executive Compensation Committee. The board of
directors at any time, by resolution adopted by a majority of the board of
directors, may appoint an organization and executive compensation committee
composed of three or more directors, none of whom shall be an officer of the
company. The board shall designate one member of the committee as chairman. The
duties of the committee shall be to discuss and review the management of the
affairs of the company relating to its organization and to executive personnel
and their compensation, and to perform such other functions as the board by
resolution from time to time may direct.
Section 6. Environmental Policy Committee. The board of directors at any
time, by resolution adopted by a majority of the board of directors, may appoint
an environmental policy committee composed of three or more directors, a
majority of whom shall not be officers or retired officers of the company. Any
action required or permitted to be taken by the committee must be approved by
both (a) a majority of the committee members present at a meeting at which a
quorum is present, and (b) a majority of the total number of committee members
who are not officers or retired officers of the company. The board shall
designate one member of the committee who is not an officer or retired officer
of the company as chairman. The duties of the committee shall be to develop and
recommend to the board appropriate environmental policies and to perform such
other functions as the board by resolution from time to time may direct.
7
Section 7. Finance Committee. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint a
finance committee composed of three or more directors, a majority of whom shall
not be officers or retired officers of the company. Any action required or
permitted to be taken by the committee must be approved by both (a) a majority
of the committee members present at a meeting at which a quorum is present, and
(b) a majority of the total number of committee members who are not officers or
retired officers of the company. The board shall designate one member of the
committee who is not an officer or retired officer of the company as chairman.
The duties of the committee shall be to discuss and review the management of the
affairs of the company relating to financing, including the development of
long-range financial planning goals and financial policy, and to perform such
other functions as the board by resolution from time to time may direct.
Section 8. Other Committees. The board of directors at any time, by
resolution adopted by a majority of the board of directors, may appoint from
among its members such other committees and the chairmen thereof as it may deem
to be advisable. Each such committee shall have such powers and authority as are
set forth in the resolutions pertaining thereto from time to time adopted by the
board.
Section 9. Changes of Size and Function. Subject to the provisions of law,
the board of directors shall have the power at any time to increase or decrease
the number of members of any committee, to fill vacancies thereon, to change any
members thereof and to change the functions and terminate the existence thereof.
Section 10. Conduct of Meetings. Each committee shall conduct its meetings
in accordance with the applicable provisions of these bylaws relating to the
conduct of meetings of the board of directors. Each committee shall adopt such
further rules and regulations regarding its conduct, keep such minutes and other
records and appoint such subcommittees and assistants as it shall deem to be
appropriate.
Section 11. Compensation. Persons serving on any committee shall receive
such reasonable compensation for their services on such committee as may be
fixed by resolution of the board of directors, provided that no person shall
receive compensation for his or her services on any committee while serving as
an officer of the company.
8
ARTICLE VI.
NOTICES
Section 1. Form and Manner. Whenever, under the provisions of law or the
Amended and Restated Articles of Incorporation, notice is required to be given
to any director or shareholder, unless otherwise specified, it shall be given in
writing by mail addressed to such director or shareholder at his or her address
as it appears on the stock transfer books or other records of the company, with
postage thereon prepaid, and such notice shall be deemed to be delivered when
deposited in the United States Mail. Notice to directors also shall be given by
telephone or in any other manner which is reasonably calculated to give adequate
notice.
Section 2. Waiver. Whenever any notice whatever is required to be given
under the provisions of law, the Amended and Restated Articles of Incorporation
or these bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE VII.
OFFICERS
Section 1. Election. The board of directors, at its first meeting following
the annual meeting of shareholders each year, shall elect one of its members as
president and shall elect a secretary. At such meeting, or at any other time it
shall deem appropriate, the board may elect one or more vice presidents and a
treasurer. The board also may elect or appoint such other officers and agents as
it may deem necessary. Any two or more offices may be held by the same person,
except the offices of president and secretary.
Section 2. Compensation. The officers of the company shall receive such
reasonable compensation for their services as from time to time may be fixed by
resolution of the board of directors.
Section 3. Term. The term of office of all officers shall commence upon
their election or appointment and shall continue until the first meeting of the
board of directors following the annual meeting of shareholders and thereafter
until their successors shall be elected or until their resignation or removal. A
vacancy occurring in any office of the company for whatever reason may be filled
by the board.
9
Section 4. Removal. Any officer or agent elected or appointed by the board
of directors may be removed by the board whenever in its judgment the best
interests of the company will be served thereby but such removal shall be
without prejudice to the contract rights, if any, of the officer or agent so
removed.
Section 5. President. Unless otherwise determined by the board of
directors, the president shall be the chief executive officer of the company
and, subject to the control of the board of directors, shall be responsible for
the general administration and operation of the company. He shall have such
other duties and responsibilities as may pertain to such office or be prescribed
by the board of directors. In the absence or disability of the president, an
officer designated by the board shall exercise the duties and responsibilities
of the president.
Section 6. Vice Presidents. Each vice president shall have such duties and
responsibilities as may be prescribed by the board of directors and the
president. The board or the president may confer a special title upon a vice
president.
Section 7. Secretary. The secretary shall record and keep the minutes of
the shareholders in one or more books provided for that purpose; see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; and perform such other duties as may be prescribed by the board
or the president. The secretary shall have custody of the corporate seal of the
company and shall affix the seal to any instrument requiring it and attest the
same by his or her signature.
The assistant secretaries shall have such duties as may be prescribed
from time to time by the board, the president or the secretary. In the absence
or disability of the secretary, his or her duties shall be performed by an
assistant secretary.
Section 8. Treasurer. The treasurer shall have charge and custody and be
responsible for all funds and securities of the company; deposit all moneys and
other valuable effects in the name and to the credit of the company in such
depositories as may be designated by the board of directors; and disburse the
funds of the company as may be authorized by the board and take proper vouchers
for such disbursements. The treasurer shall have such other duties as may be
prescribed from time to time by the board or the president. In the absence or
disability of the treasurer, his or her duties shall be performed by an
assistant treasurer.
10
ARTICLE VIII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors by resolution may authorize
any officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the company, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the company and
no evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the board of directors. Such authority may be general or confined
to specific instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the company shall be signed by such officer or officers, agent or agents of the
company and in such manner as shall from time to time be determined by
resolution of the board of directors.
Section 4. Deposits. All funds of the company not otherwise employed shall
be deposited from time to time to the credit of the company in such banks, trust
companies or other depositories as the board of directors or officers of the
company designated by the board may select, or be invested as authorized by the
board.
ARTICLE IX.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of the
company shall be issued only for whole numbers of shares and shall be in such
form as the board of directors may, from time to time, prescribe in accordance
with the laws of the State of Oregon. Such certificates shall be signed by the
president or a vice president and by the secretary or an assistant secretary and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles thereof. In case of a lost,
destroyed or mutilated certificate a new one may be issued therefor upon such
terms and indemnity to the company as the board may authorize.
11
Section 2. Transfer. Shares of stock of the company shall be transferable
on the books of the company by the holder of record thereof, or by his or her
legal representative who shall furnish proper evidence of authority to transfer,
or by his or her attorney thereunto authorized by duly executed power of
attorney, and on surrender for cancellation of the certificates for such shares.
The board of directors may appoint one or more transfer agents and registrars of
stock of the company.
Section 3. Owner of Record. The company shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends and to vote as such owner and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE X.
INDEMNIFICATION AND INSURANCE
Section 1. Indemnification. The company shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was director, officer,
employee or agent of the company, or is or was serving at the request of the
company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise or any
employee benefit plan, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the defense or settlement of such action, suit or
proceeding to the fullest extent permissible under the Oregon Business
Corporation Act or the indemnification provisions of any successor Act. The
foregoing rights of indemnification shall not be exclusive of any other rights
to which any such person so indemnified may be entitled, under any agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office; shall continue as to a person who has ceased to be a
director, officer, employee or agent; and shall inure to the benefit of the
heirs, executors and administrators of such a person.
12
Section 2. Insurance. The company may purchase and maintain insurance (and
pay the entire premium therefor) on behalf of any person who is or was a
director, officer, employee or agent of the company, or is or was serving at the
request of the company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity or arising out of his or her status as such, whether or not the company
would have the power to indemnify him or her against such liability under the
provisions of the Oregon Business Corporation Act or any successor Act; and on
behalf of any person who is or was a fiduciary under the Employee Retirement
Income Security Act of 1974 with regard to an employee benefit plan of the
company against any liability asserted against him or her and incurred by him or
her in his or her fiduciary capacity.
ARTICLE XI.
SEAL
The corporate seal of the company shall be circular in form and shall bear
an inscription containing the name of the company, the year of its organization,
the state of its incorporation and the words "Corporate Seal."
ARTICLE XII.
AMENDMENTS
These bylaws, or any of them, may be altered, amended or repealed, or new
bylaws adopted, by resolution of a majority of the board of directors, subject
to repeal or change by action of the shareholders.
13
CERTIFICATE
I, C. J. Rue, Secretary of Northwest Energy Corporation, a corporation
organized and existing under the laws of the State of Oregon, HEREBY CERTIFY
that the foregoing eight printed pages entitled "Bylaws of Northwest Energy
Corporation" constitute a full and true copy of the Bylaws of said corporation
as of the date hereof.
WITNESS my hand and the seal of said corporation this ______ day of
___________________________________.
---------------------------------------
C. J. Rue
Secretary
14
EXHIBIT E
---------
DIRECTORS OF NORTHWEST NATURAL GAS COMPANY
Richard G. Reiten
Mark S. Dodson
Bruce R. DeBolt
EX-10
5
exhibit103.txt
EXHIBIT 10.3
EXHIBIT 10.3
SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
NORTHWEST ENERGY CORPORATION
ENRON CORP.,
[COMMON STOCK PURCHASER],
[CLASS B PURCHASER]
AND
[FELINE PRIDES PURCHASER]
DATED AS OF ___________, 200_
TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms..........................................1
Section 1.2 Other Definitional Provisions..................................9
ARTICLE II
CORPORATE GOVERNANCE OF THE COMPANY
Section 2.1 Board Representation..........................................10
Section 2.2 Initial Enron Representation..................................11
Section 2.3 Removal of Enron Designees....................................11
Section 2.4 Vacancies.....................................................11
Section 2.5 Resignation of Enron Directors................................12
Section 2.6 Available Financial Information...............................12
Section 2.7 Access........................................................12
Section 2.8 Consent Rights................................................14
Section 2.9 Actions Affecting Certain Distributions.......................15
Section 2.10 Shareholder Actions...........................................15
ARTICLE III
TRANSFERS
Section 3.1 Transfer Restrictions.........................................16
Section 3.2 Assignment of Rights Hereunder................................16
Section 3.3 Condition.....................................................17
Section 3.4 Transferee....................................................17
Section 3.5 Tax Transfer Restrictions.....................................17
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1 Shelf Registration Statement..................................17
Section 4.2 Incidental Registrations......................................19
ARTICLE V
REGISTRATION PROCEDURES
Section 5.1 Registration Procedures.......................................20
Section 5.2 Information Supplied..........................................23
Section 5.3 Restrictions on Disposition...................................23
Section 5.4 Indemnification...............................................24
Section 5.5 Required Reports..............................................26
Section 5.6 Selection of Counsel..........................................26
Section 5.7 Holdback Agreement............................................27
Section 5.8 No Inconsistent Agreement.....................................27
ARTICLE VI
STANDSTILL
Section 6.1 Acquisition of Additional Voting Securities...................27
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices.......................................................29
Section 7.2 Amendments and Waivers........................................29
Section 7.3 Successors, Assigns, Transferees..............................29
Section 7.4 Further Assurances............................................30
Section 7.5 Entire Agreement..............................................30
Section 7.6 Delays or Omissions...........................................30
Section 7.7 Governing Law, Jurisdiction...................................30
Section 7.8 Severability..................................................30
Section 7.9 Effective Date................................................30
Section 7.10 Enforcement; Limitations on Certain Damages...................30
Section 7.11 Titles and Subtitles..........................................31
Section 7.12 Counterparts; Facsimile Signatures............................31
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SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT
THIS SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"),
dated ___________, 200_, is by and among Northwest Energy Corporation (being the
Company herein), Enron Corp. (being Enron herein), ______________ (being the
Common Stock Purchaser herein), ____________ (being the Class B Purchaser
herein) and ____________ (being the FELINE PRIDES Purchaser herein).
RECITALS
Pursuant to the Stock Purchase Agreement by and among Enron, Enron
Northwest Assets, LLC, a Delaware limited liability company, the Company and
Northwest Natural Gas Company, an Oregon corporation, dated as of October __,
2001 (the "Stock Purchase Agreement"), at the Closing, the Company shall issue
and deliver (i) to the Common Stock Purchaser a number of shares of Common Stock
to be determined pursuant to the provisions of Section 1.5 of the Stock Purchase
Agreement, (ii) to the Class B Purchaser a number of shares of Class B Common
Stock to be determined pursuant to the provisions of Section 1.5 of the Stock
Purchase Agreement and (iii) to the FELINE PRIDES Purchaser 4,000,000 units of
the Company's FELINE PRIDES;
The parties hereto desire to enter into certain arrangements relating to
the Company, the Common Stock, the Class B Common Stock and the FELINE PRIDES to
be effective as of the Closing.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used herein, the following terms
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shall, unless the context shall otherwise require, have the following meanings:
"ACQUISITION" has the meaning assigned to such term in subsection (a) of
Section 6.1.
"ACQUISITION FINANCING" means the Debt Financing as such term is defined in
the Stock Purchase Agreement.
"ACQUISITION RESTRICTIONS" has the meaning assigned to such term in
subsection (a) of Section 6.1.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person.
"AGREEMENT" has the meaning assigned to such term in the first paragraph
hereof.
"APPLICABLE BOARDS" has the meaning assigned to such term in subsection (c)
of Section 2.1.
"ARTICLES" means the Amended and Restated Articles of Incorporation of the
Company, including the Certificate of Designation of the Preferred Shares, as in
effect on the date hereof and as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
the terms of this Agreement.
"AUDIT COMMITTEE" means a committee of the Company Board that performs the
functions generally required to be performed by an audit committee in accordance
with the rules and regulations of the NYSE.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" has the meaning given such term in
Rule 13d-3 under the Exchange Act, as of the date hereof, and a Person's
beneficial ownership of Common Stock, Class B Common Stock, FELINE PRIDES or
Preferred Shares shall be calculated in accordance with the provisions of such
Rule; provided, however, that for purposes of determining beneficial ownership,
a Person shall be deemed to be the beneficial owner of any security that may be
acquired by such Person whether within sixty (60) days or thereafter, through
the conversion, exchange or exercise of any warrants, options, rights or other
securities.
"BUSINESS COMBINATION" shall mean, with respect to the Company, Northwest
or PGE, any merger, consolidation, share exchange, sale of all or substantially
all of their respective assets or any other comparable transaction.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the City of New
York or Portland, Oregon.
"CAPITAL STOCK" means, with respect to any Person at any time, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock, partnership interests (whether
general or limited), member interests or equivalent ownership interests in or
issued by such Person, including, in the case of the Company, any and all shares
of Common Stock, Class B Common Stock and Preferred Shares.
"CHANGE OF CONTROL" means, with respect to the Company, any event (a)
constituting a Business Combination, except where (i) shareholders of the
Company immediately prior to such Business Combination own (in substantially the
same proportion relative to each other as such shareholders owned the Capital
Stock of the Company immediately prior to such consummation) (x) 50% or more of
the voting stock of the surviving or resulting entity immediately after such
Business Combination, and (y) 50% or more of the outstanding common stock of the
surviving or resulting entity immediately after such Business Combination, (ii)
the members of the Company Board immediately prior to the entering into the
agreement relating to such Business Combination constitute at least a majority
of the board of directors of the surviving or resulting entity immediately after
such Business Combination under circumstances in which there are no agreements
or arrangements in place immediately after such consummation that would result
in the members of such board of directors immediately prior to the entering into
the agreement relating to such Business Combination ceasing to constitute at
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least a majority of the board of directors of the surviving or resulting entity
and (iii) no Person or Group is the beneficial owner of 15% or more of the total
outstanding voting stock or common stock of the surviving or resulting entity or
(b) pursuant to which any Person or Group acquires beneficial ownership of 50%
or more of the total outstanding Voting Securities of the Company.
"CLAIMS" has the meaning assigned to such term in subsection (a) of Section
5.4.
"CLASS B COMMON STOCK" means the Class B Common Stock of the Company,
having the rights and designations set forth in the Articles (and any securities
into which the shares of Class B Common Stock are converted or reclassified or
that are issued in respect of the Class B Common Stock, pursuant to any Business
Combination, recapitalization, stock dividend or other similar transaction).
"CLASS B PURCHASER" has the meaning assigned to such term in the first
paragraph hereof.
"CLOSING" has the meaning assigned to such term in the Stock Purchase
Agreement.
"CLOSING DATE" has the meaning assigned to such term in the Stock Purchase
Agreement.
"COMMON STOCK" means the Common Stock of the Company, having the rights and
designations set forth in the Articles (and any securities into which the shares
of Common Stock are converted or reclassified or that are issued in respect of
the Common Stock pursuant to any Business Combination, recapitalization, stock
dividend or other similar transaction).
"COMMON STOCK PURCHASER" has the meaning assigned to such term in the first
paragraph hereof.
"COMPANY" means Northwest Energy Corporation, an Oregon corporation,
together with its successors and assigns.
"COMPANY BOARD" means the Board of Directors of the Company.
"COMPANY INDEBTEDNESS RATING" means (i) with respect to senior secured
Indebtedness of the Company, a rating of Baa3 by Moody's and BB+ by Standard &
Poor's, (ii) with respect to senior unsecured Indebtedness of the Company, a
rating of Baa3 by Moody's and BB+ by Standard & Poor's and (iii) with respect to
Feline Prides or Preferred Shares, a rating of Ba2 by Moody's and BB- by
Standard & Poor's.
"COMPANY OFFERING" has the meaning assigned to such term in the definition
of Company Offering Event.
"COMPANY OFFERING EVENT" means the provision of a written opinion to the
Company by a nationally recognized investment banking firm selected by the
Company to the effect that resales of Registrable Securities pursuant to the
Shelf Registration Statement would materially jeopardize the success of a
proposed public offering by the Company of its securities with respect to which
the Company has commenced preparations prior to receiving notice from a Holder
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of a current intention to sell Registrable Securities pursuant to the Shelf
Registration Statement (a "Company Offering").
"COMPENSATION COMMITTEE" means a committee of the Company Board that
performs the functions customarily performed by compensation committees of
boards of directors of corporations subject to the reporting provisions of the
Exchange Act.
"CONSENT PERIOD" means the period commencing on the date of this Agreement
and ending on the earlier of the date on which Enron, its Affiliates and any
Designated Transferees, as a group, own less than twenty-five percent (25%) of
the Securities or the fifth anniversary of the Closing Date.
"CONTROL" with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, as trustee or executor, by contract or
otherwise and "CONTROLS," "CONTROLLING," and "CONTROLLED" have the meanings
correlative to the foregoing.
"DESIGNATED TRANSFEREE" means any one or more Persons created in connection
with a monetization, securitization or other structured finance transaction by,
or on behalf of, Enron or any of its Affiliates.
"DIRECTOR" means any member of any of the Applicable Boards.
"EFFECTIVE PERIOD" means the period commencing with the effective date of
the Shelf Registration Statement and ending on the Second Disposition Date.
"ENRON" means Enron Corp., an Oregon corporation, and its successors and
assigns.
"ENRON DESIGNEES" means any Director of PGE or Northwest and any member of
the Audit Committee, in each case designated by Enron pursuant to subsection (c)
of Section 2.1 of this Agreement.
"ENRON DIRECTOR" means any Director of the Company designated by Enron
pursuant to subsection (a) of Section 2.1 of this Agreement.
"EQUITY OFFERING" means the issuance and sale of Equity Securities by the
Company to a Third Party after the Closing, other than (i) upon conversion of
Class B Common Stock to Common Stock, (ii) pursuant to a Purchase Contract,
(iii) pursuant to the Company's employee, officer or director stock incentive or
benefit plans, (iv) as consideration for any Business Combination or (v)
pursuant to a stock split, stock dividend, recapitalization or other similar
transaction.
"EQUITY SECURITIES" means any and all shares of Capital Stock of the
Company, securities of the Company convertible into, or exchangeable or
exercisable for, such shares, and options, warrants or other rights to acquire
such shares.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXECUTIVE COMMITTEE" means a committee of the Company Board that performs
the functions customarily performed by executive committees of boards of
directors of public corporations organized under the laws of states of the
United States.
"FELINE PRIDES" means units of securities to be issued by the Company to
the FELINE PRIDES Purchaser pursuant to the Stock Purchase Agreement, with each
unit consisting of (i) a Purchase Contract and (ii) either a Preferred Share
having a stated liquidation value of $50 or U.S. treasury securities or certain
demand promissory notes with a principal amount at maturity equal to $50.
"FIRST DISPOSITION DATE" means the date on which Enron, its Affiliates and
any Designated Transferees, as a group, own less than fifty percent (50%) of the
Securities.
"GAAP" means generally accepted accounting principles, as in effect in the
United States of America from time to time applied on a consistent basis.
"GROUP" has the meaning assigned to such term in Section 13(d)(3) of the
Exchange Act.
"HOLDER" means any holder of Registrable Securities.
"INCUR" or "INCURRENCE" means to incur, create, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness.
"INDEBTEDNESS" of any Person means, with respect to any Person, (a) all
indebtedness and other obligations of such Person for the repayment of money
borrowed (including without limitation reimbursement obligations with respect to
drawn letters of credit), whether or not represented by acceptances, bonds,
debentures, notes, or other instruments or securities, (b) all indebtedness and
other obligations of such Person for the deferred payment of the purchase price
of any property or assets (other than accounts payable on terms customary in the
trade), (c) all capitalized lease obligations of such Person, (d) all
indebtedness and other obligations, whether or not assumed by such Person,
secured by any lien on any property of such Person and (e) all guaranties of
payment or collection of any indebtedness of any other Person described in
clauses (a) to (d), inclusive, of this definition.
"INDEMNIFIED PARTIES" has the meaning assigned to such term in subsection
(a) of Section 5.4.
"INSIDER BOARD" means a Subsidiary Board that is, but for any Enron
Designees, composed solely of officers or employees of the Company or any
Subsidiary of the Company.
"MOODY'S" means Moody's Investors Service and any successor thereto.
"NASD" means the National Association of Securities Dealers, Inc.
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"NORTHWEST" means Northwest Natural Gas Company, an Oregon corporation, and
its successors and assigns.
"NYSE" means The New York Stock Exchange, Inc.
"PERSON" means any individual, company, corporation, limited liability
company, limited or general partnership, joint venture, association, joint stock
company, union, trust, unincorporated organization, government or any agency or
political subdivisions thereof or any Group comprised of two or more of the
foregoing.
"PGE" means Portland General Electric Company, an Oregon corporation, and
its successors and assigns.
"PREFERRED SHARES" means the cumulative preferred shares of the Company
issued initially as part of the FELINE PRIDES, each having a stated liquidation
amount equal to $50.00 and having the rights and designations as set forth in
the Articles (and any securities into which the Preferred Shares are converted
or reclassified or that are issued in respect of the Preferred Shares, pursuant
to a Business Combination, recapitalizatiton, stock dividend or other similar
transaction).
"PROPORTIONAL" means, when used to determine the number of individuals that
Enron is entitled to nominate to any board of directors at any particular time,
the number (rounded to the nearest whole number) determined by multiplying the
aggregate number of members of such board by a fraction, the numerator of which
shall be the number of Enron Directors that Enron is entitled to designate to
the Company Board pursuant to subsection (a) of Section 2.1 at such time and the
denominator of which shall be the total number of directors constituting the
entire Company Board at such time; provided, however, that, notwithstanding the
foregoing, in no event shall such number be less than one (1).
"PUBLIC OFFERING" means a distribution of securities of the Company that is
required to be registered pursuant to the provisions of Section 5 of the
Securities Act.
"PUHCA" means the Public Utility Holding Company Act of 1935, as amended,
or any successor thereto.
"PURCHASE CONTRACT" means, with respect to each FELINE PRIDE, a purchase
contract pursuant to which the holder of such contract shall be obligated to
purchase from the Company on the fourth anniversary of the Closing Date, for an
amount of cash equal to $50, the number of shares of Class B Common Stock set
forth in such purchase contract.
"QUALIFIED EQUITY OFFERING" means an Equity Offering that, together with
any gross proceeds received by the Company from any other Equity Offering that
has been consummated, generates aggregate gross proceeds to the Company of at
least $300 million.
"REGISTRABLE SECURITIES" means any Common Stock, FELINE PRIDES and
Preferred Shares issued or to be issued by the Company (i) pursuant to the Stock
Purchase Agreement, (ii) upon conversion of the Class B Common Stock issued
pursuant to the Stock Purchase Agreement to Common Stock, (iii) upon conversion
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of the Class B Common Stock to be issued pursuant to a Purchase Contract to
Common Stock or (iv) in satisfaction of unpaid dividends on any Preferred
Shares. As to any particular Registrable Securities, once issued, such
Registrable Securities shall only cease to be Registrable Securities when (a) a
registration statement with respect to the sale by the Holder of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with the method of distribution described in
such registration statement, (b) such securities shall have been distributed to
the public pursuant to Rule 144 or (c) such securities shall have ceased to be
outstanding.
"REGISTRATION EXPENSES" means any and all expenses incident to performance
of or compliance with Articles IV and V of this Agreement, including without
limitation (i) all SEC and NYSE or other securities exchange or NASD
registration and filing fees, (ii) all fees and expenses of complying with
securities or blue sky laws (including the reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery expenses,
(iv) all fees and expenses incurred in connection with the listing of the
Registrable Securities on the NYSE or any other securities exchange or the NASD
pursuant to this Agreement and all rating agency fees, (v) the fees and
disbursements of counsel for the Company and its independent public accountants,
including the expenses of any special audits and/or "cold comfort" letters
required by or incident to such performance and compliance, (vi) the reasonable
fees and disbursements of counsel selected pursuant to Section 5.6, (vii) any
reasonable fees and disbursements of underwriters and their counsel customarily
paid by the issuers or sellers of securities, transfer taxes, fees and expenses
of any transfer agent or registrar, costs of insurance, and the reasonable fees
and expenses of special experts retained in connection with the requested
registration, but excluding underwriting discounts and selling commissions and
(viii) all expenses incurred in connection with any road shows (including the
reasonable out-of-pocket expenses of the Holder of the applicable Registrable
Securities).
"REPRESENTATIVES" of a Person means the officers, employees, independent
accountants, independent legal counsel and other representatives of such Person.
"RIGHTS AGREEMENT" has the meaning assigned to such term in subsection (a)
of Section 2.8.
"RULE 144" means Rule 144 (or any successor provision) under the Securities
Act.
"SEC" means the U.S. Securities and Exchange Commission or any other
federal agency then administering the Securities Act or the Exchange Act and
other federal securities laws.
"SECOND DISPOSITION DATE" means the date on which Enron, its Affiliates and
any Designated Transferees, as a group, own less than ten percent (10%) of the
Securities.
"SECURITIES" means the shares of the Common Stock, the Class B Common
Stock, the FELINE PRIDES and the Preferred Shares issued by the Company pursuant
to the Stock Purchase Agreement, including any Class B Common Stock issued
pursuant to a Purchase Contract and any Common Stock issued upon conversion of
any Class B Common Stock so issued. For purposes of calculating a percentage of
the Securities owned by any particular Person or a percentage of the Securities
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issued in connection with the Stock Purchase Agreement, in each case pursuant to
any of the provisions of this Agreement, the shares of Class B Common Stock
shall be deemed to be equivalent to the shares of Common Stock and each unit of
FELINE PRIDES shall be deemed to be equivalent to the minimum number of shares
of Class B Common Stock issuable on the Purchase Contract Settlement Date (as
such term is defined therein) in respect of such unit of FELINE PRIDES. For the
purpose of making any such determination, the Preferred Shares shall be deemed
to be synonymous with the FELINE PRIDES and shall not be deemed to represent
separate securities or to be included in the calculation.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SECURITY HOLDERS" means Enron, the Common Stock Purchaser, the Class B
Purchaser and the FELINE PRIDES Purchaser and any Transferee to whom any of the
Securities have been transferred pursuant to the provisions of subsection (a) of
Section 3.1.
"SECURITY PURCHASERS" means the Common Stock Purchaser, the Class B
Purchaser and the FELINE PRIDES Purchaser.
"SHELF REGISTRATION STATEMENT" has the meaning assigned to such term in
subsection (a) of Section 4.1.
"SIGNIFICANT ADVERSE EFFECT" has the meaning assigned to such term in
subsection (f) of Section 4.2.
"STANDARD & POOR'S" means Standard & Poor's Rating Services and any
successor thereto.
"STOCK PURCHASE AGREEMENT" has the meaning assigned to such term in the
first recital to this Agreement.
"SUBSIDIARY" of a Person means any corporation or other entity (including a
limited liability company, partnership or other business entity) in which such
Person, directly or indirectly, owns outstanding Capital Stock or other Voting
Securities having the power, under ordinary circumstances, to elect a majority
of the directors or members of the governing body of such corporation or other
entity or with respect to which such Person otherwise has the power to direct
the management and policies of such corporation or other entity.
"SUBSIDIARY BOARDS" has the meaning assigned to such term in subsection (c)
of Section 2.1.
"SUBSIDIARY INDEBTEDNESS RATING" means a rating for the senior secured
Indebtedness of PGE or Northwest of A3 by Moody's and BBB by Standard & Poor's.
"SUSPENSION EVENT" means the engagement by the Company in a material
transaction and that the disclosure thereof required by the filing of a
registration statement or any amendment or supplement thereto under the
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Securities Act would, in the good faith reasonable judgment of the Company
Board, after consultation with its outside securities counsel, materially and
adversely affect the Company.
"SUSPENSION NOTICE" has the meaning assigned to such term in subsection (e)
of Section 4.1.
"TERMINATION DATE" means the earlier of the Second Disposition Date and the
fifth anniversary of the Closing Date.
"THIRD PARTY" has the meaning assigned to such term in subsection (b) of
Section 6.1.
"TRANSFER" means to sell, transfer, assign or otherwise dispose of, either
voluntarily or involuntarily, or to enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, assignment or
other disposition of, Equity Securities beneficially owned by a Person.
"TRANSFER RESTRICTIONS TERMINATION DATE" means the earliest of (i) the last
day of the 30th calendar month following the Closing Date, (ii) six months
following the consummation of a Qualified Equity Offering and (iii) the
occurrence of a Change of Control.
"TRANSFEREE" means any Person to whom the Common Stock Purchaser, the Class
B Purchaser, the FELINE PRIDES Purchaser or any Transferee thereof Transfers any
Common Stock, Class B Common Stock, Preferred Shares or FELINE PRIDES pursuant
to the provisions of subsection (a) of Section 3.1.
"VOTING SECURITIES" means, at any time, shares of any class of Equity
Securities that are ordinarily entitled to vote (without regard to the
occurrence of any additional event or contingency) generally in the election of
Directors.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless the context otherwise
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requires, as used in this Agreement: (i) a term defined herein has the meaning
ascribed to it herein; (ii) an accounting term not otherwise defined herein has
the meaning ascribed to it in accordance with U.S. GAAP; (iii) "or" is not
exclusive; (iv) "including" means "including, without limitation;" (v) words in
the singular include the plural and vice versa; (vi) words applicable to one
gender apply to each gender; (vii) the terms "hereof," "herein," "hereby,"
"hereto" and derivative or similar words refer to this entire Agreement,
including the Annexes hereto; and (viii) the terms "Article", "Section" and
"Annex" refer to the specified Article, Section or Annex of or to this
Agreement.
(b) A reference to any Person includes such Person's successors and
permitted assigns.
(c) Any reference to "days" shall mean calendar days unless "Business
Days" (as defined herein) are expressly specified.
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ARTICLE II
CORPORATE GOVERNANCE OF THE COMPANY
SECTION 2.1 BOARD REPRESENTATION. During the period commencing on the date
--------------------------------
hereof and ending on the Termination Date, subject to the provisions of
applicable laws and regulations:
(a) Enron shall, subject to subsection (e) of this Section 2.1, be
entitled to nominate two individuals for election to the Company Board, and each
party hereto that holds Voting Securities agrees to vote such Voting Securities
in favor of the election of such individuals (the "Enron Directors") to the
Company Board; provided, however, that from and after the First Disposition
Date, Enron's entitlement under this subsection shall be reduced to the right to
nominate one individual for election to the Company Board;
(b) the Company agrees, by action of the Company Board, (i) to
establish, by appointment from among the members of the Company Board, and
maintain an Audit Committee and (ii) to appoint to the Audit Committee one of
the Enron Directors, as designated by Enron;
(c) the Company agrees to elect or to cause to be elected, through
action of the Company Board, to the board of directors of PGE and Northwest (the
"Subsidiary Boards" and, together with the Company Board, the "Applicable
Boards") a number of individuals designated by Enron, who need not be directors,
officers or employees of the Company or any of its Subsidiaries, that is, in the
case of each Subsidiary Board, as nearly as is practicable, Proportional to the
number of members of each such Subsidiary Board (together with Enron's
designated member of the Audit Committee, the "Enron Designees"); provided,
however, that if at any time during the duration of the Entitlement Period a
Subsidiary Board consists solely of officers or employees of the Company or any
of its Subsidiaries (an "Insider Board") and only for so long as such Subsidiary
Board remains an Insider Board, the Company shall not be obligated pursuant to
this subsection (c) to elect or cause to be elected the individuals so
designated by Enron to such Subsidiary Board;
(d) the Company agrees to permit one of the Enron Directors or, if
there are no Enron Directors, one individual designated by Enron, who need not
be a director, officer or employee of the Company or any of its Subsidiaries, to
attend as a non-voting observer all meetings of the Executive Committee and the
Compensation Committee and to transmit to such individual, at the time and in
the manner sent to other members of such committees, all information and
materials provided by the Company to such committee members;
(e) the Company agrees, to the extent that the Company reasonably
determines that applicable laws and regulations prohibit Enron from designating
members of any Applicable Board or of the Audit Committee but permit an
individual designated by Enron to attend such meetings, to permit one individual
designated by Enron, who need not be a director, officer or employee of the
Company or any of its Subsidiaries, to attend as a non-voting observer all
meetings of each such Applicable Board and the Audit Committee; and
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(f) the Company agrees to provide advance notice in accordance with
Section 60.034 of the Oregon Business Corporation Act and the Company's bylaws
to each Enron Director with respect to each regular and special meeting of the
Company Board and the Audit Committee which notice shall, in the case of each
special meeting, include a reasonable summary of the subject matter of the
meeting.
SECTION 2.2 INITIAL ENRON REPRESENTATION. To the extent permitted by
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applicable laws and regulations, each party hereto agrees to take such actions,
including actions as necessary or desirable to nominate and elect individuals to
the intended offices and, in the case of the Company, actions by the Company
Board, as shall be necessary or desirable in order that, effective as of the
opening of business on the Business Day immediately following the Closing Date:
(a) The Company Board shall include the Enron Directors;
(b) one of the Enron Directors shall have been elected to the class of
directors having the then longest remaining term and the other shall have been
elected to the class of directors having the then second longest remaining term;
(c) the Audit Committee shall include the Enron Director required by
Section 2.1; and
(d) each other Applicable Board shall include the Enron Designees to
the extent required by subsection (c) of Section 2.1.
SECTION 2.3 REMOVAL OF ENRON DESIGNEES. No Enron Director or Enron Designee
--------------------------------------
shall be subject to removal, without cause, from any Applicable Board or the
Audit Committee other than with the express written consent of Enron. If Enron
shall determine to remove any Enron Director or Enron Designee from any
Applicable Board or the Audit Committee, each party hereto agrees, upon written
notice to such effect from Enron, to take all actions reasonably necessary or
desirable , including the voting of outstanding Voting Securities held by such
party, in order to effect such action. Following such removal of an Enron
Director or Enron Designee, the parties shall comply with the other provisions
of this Article II to ensure that the removed individual is replaced by another
Enron Director or Enron Designee, as appropriate. Notwithstanding the foregoing,
if a Subsidiary Board becomes an Insider Board, Enron shall, to the extent that
there shall then be one or more Enron Designees on the Subsidiary Board, cause
each of the Enron Designees to resign promptly from the Subsidiary Board, and,
for so long as such Subsidiary Board remains an Insider Board, the Company shall
not be obligated to replace the removed individuals with other Enron Designees.
SECTION 2.4 VACANCIES. If a vacancy is created on any Applicable Board or
---------------------
the Audit Committee by virtue of the death, disability, retirement, resignation
or removal of any Enron Director or Enron Designee from any Applicable Board or
the Audit Committee, each party hereto shall, to the extent permitted by
applicable laws and regulations, take promptly any and all actions, including
the voting of outstanding Voting Securities held by such party and, in the case
of the Company, actions by the Company Board, necessary or desirable to fill
such vacancy with an individual designated in writing by Enron so as to give
effect to the provisions of Section 2.1. Any Designated Transferee to which
11
Voting Securities have been Transferred also agrees, pursuant to the assumption
contemplated by Section 3.2, to vote such Voting Securities in favor of any such
action.
SECTION 2.5 RESIGNATION OF ENRON DIRECTORS. Immediately following the First
------------------------------------------
Disposition Date, Enron shall, to the extent that there shall then be more than
one Enron Director or Enron Designee on any Applicable Board, cause one of the
Enron Directors or Enron Designees to resign from all of the Applicable Boards,
effective as of the First Disposition Date. Immediately following the
Termination Date, Enron shall cause the remaining Enron Director or Enron
Designee to resign from all of the Applicable Boards. Enron agrees to take all
actions reasonably necessary or desirable, including the voting of outstanding
Voting Securities held by it, in order to effect such action. Any Designated
Transferee to which Voting Securities have been Transferred also agrees,
pursuant to the assumption contemplated by Section 3.2, to vote such Voting
Securities in favor of any such action.
SECTION 2.6 AVAILABLE FINANCIAL INFORMATION. For so long as the Company is
-------------------------------------------
not a reporting issuer under the Exchange Act or, if having become such a
reporting issuer, it shall cease to be such a reporting issuer or for so long as
the Company shall fail to comply with its reporting obligations under the
Exchange Act, the Company shall, to the extent that Enron or any Holder
beneficially owns any of the Securities, deliver, or cause to be delivered, to
Enron and each Holder:
(a) as soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a consolidated and
consolidating balance sheets of the Company as of the end of such fiscal year,
and consolidated and consolidating statements of income, changes in
shareholders' equity and cash flows of the Company for such year, prepared in
accordance with GAAP and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and followed
promptly thereafter (to the extent not then available) by such financial
statements accompanied by the audit report with respect thereto of independent
public accountants of recognized national standing selected by the Company; and
(b) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five (45) days after the end of each such period, a
consolidated balance sheets of the Company as of the end of each such quarterly
period, and consolidated statements of income, changes in shareholders' equity
and cash flows of the Company for such period and for the current fiscal year to
date, prepared in accordance with GAAP and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject to
changes resulting from normal year-end audit adjustments, all in reasonable
detail and certified by the principal financial or accounting officer of the
Company.
SECTION 2.7 ACCESS.
------------------
(a) During the period commencing on the date hereof and ending on the
Termination Date, the Company shall afford, provide and furnish, and shall cause
its Subsidiaries and the Representatives of the Company and its Subsidiaries to
12
afford, provide and furnish to Enron and each Designated Transferee, if any, and
their Representatives:
(i) during normal business hours and upon reasonable advance
notice, reasonable access to the Representatives, properties, plants and other
facilities and to all books and records of the Company and each of its
Subsidiaries;
(ii) all financial, operating and other data and information
regarding the Company and its Subsidiaries as the Security Holders and their
Representatives may reasonably request; and
(iii) the opportunity to discuss the affairs, finances,
operations and accounts of the Company and its Subsidiaries with the Company's
officers on a periodic basis;
provided, however, that the Company shall not be required to furnish or to cause
to be furnished any data or information or access to any data or information (i)
regarding the gas or electric power trading or marketing operations of the
Company and its Subsidiaries or (ii) to the extent that the furnishing of any
other data or information or the provision of access to such data or information
would violate applicable laws and regulations. Notwithstanding the foregoing,
the Company shall have the right to require that Enron and the Designated
Transferees coordinate their access to the Company pursuant to this Section 2.7
(including by way of example and not limitation, requiring that Representatives
of Enron and all of the Designated Transferees conduct visits to the Company's
premises as a group or requiring that Enron and the Designated Transferees
collectively submit requests for information) to keep the burdens on the Company
to a minimum.
(b) Enron and each of the Designated Transferees, if any, agrees that:
(i) the non-public business information furnished to it or its
Representatives pursuant to subsection (a) of this Section is by its nature
confidential (the "Confidential Information") and that it shall not disclose,
and shall cause Representatives not to disclose, for the period commencing with
the furnishing of such information until the first anniversary of the
Termination Date, such Confidential Information to any Third Party without the
prior written consent of the Company, except that such Person may disclose such
Confidential Information (A) to Representatives and financial advisors and to
entities that are potential sources of debt financing or equity for such Person
(which Representatives and financial advisors shall keep such Confidential
Information confidential on the same terms and conditions as are applicable to
Enron or the Designated Transferee that disclosed such Confidential Information)
and (B) to the extent compelled by judicial process, required by applicable Laws
and Regulations or by any Governmental Authority ; and
(ii) the term "Confidential Information" shall not, for purposes
of this paragraph, include (i) information that is in the public domain, (ii)
information that generally is available to the public other than as a result of
a disclosure by Enron or such Designated Transferee or any of its
Representatives thereof in breach of this Section or (iii) information that
becomes available to such Security Holder or its Representatives on a
non-confidential basis from a source other than another Security Holder or its
Representatives, provided that such source is not known by any of the
13
aforementioned parties to be bound by a confidentiality agreement with, or other
obligation of secrecy to, the Company.
SECTION 2.8 CONSENT RIGHTS.
--------------------------
(a) During the Consent Period, the approval of Enron shall be
necessary, in addition to any vote or consent of the Company Board or the
shareholders of the Company required by law or the Articles, in order to
authorize, effect or validate the following actions by the Company (and no such
action shall be effectual or have any force or effect without such approval):
(i) the authorization, creation or issuance of, or the increase in the
authorized amount of, any shares of any class or series of Capital Stock or any
security convertible into shares of any class or series of any Capital Stock
ranking equal or prior to the Preferred Shares in the payment of dividends or in
the distribution of assets on any liquidation, dissolution, or winding up of the
Company;
(ii) any action by the Company that would result in Enron, together
with its Affiliates and any Designated Transferees, holding in excess of 4.9% of
the Voting Securities or Enron, any of its Affiliates or any Designated
Transferee becoming subject to regulation under PUHCA as a "holding company" or
a "subsidiary company" or an "affiliate" of a "holding company" or a "public
utility company" (as such terms are defined in PUHCA);
(iii) any of the following actions that would result in (A) a
downgrade of the rating of any then existing Indebtedness of the Company or the
rating assigned to the FELINE PRIDES or Preferred Shares below the applicable
Company Indebtedness Rating, (B) an assignment of an initial rating below the
Company Indebtedness Rating to any new Indebtedness of the Company to be
Incurred in connection with any such transaction, (C) a downgrade of the rating
of any then existing senior unsecured Indebtedness of PGE or Northwest below the
Subsidiary Indebtedness Rating or (D) an assignment of an initial rating below
the Subsidiary Indebtedness Rating to any new Indebtedness of PGE or Northwest
to be Incurred in connection with any such transaction:
A. any merger or consolidation of the Company, PGE or Northwest with
or into any other Person, any acquisition of another Person by the Company, PGE
or Northwest, any sale or transfer of all or a material portion of the assets of
the Company, PGE or Northwest or any other Business Combination involving the
Company, PGE or Northwest, whether in a single transaction or a series of
related transactions;
B. any issuance of any equity securities of any of the Company's
Subsidiaries to any Third Party (other than the Company or any of its wholly
owned Subsidiaries); or
C. any spin-off, split-off, dividend or distribution by the Company or
any of its Subsidiaries (other than cash dividends declared and paid with
respect to the Preferred Shares, the Common Stock and the Class B Common Stock
as permitted by the terms of the Company's senior Indebtedness and other than
dividends and distributions declared and paid solely to the Company or a wholly
owned Subsidiary of the Company);
14
(iv) amend or supplement the Company's Rights Agreement (the "Rights
Agreement") to delete, amend, eliminate or otherwise change, or otherwise have
the effect of amending, eliminating or otherwise changing, the provisions of the
Rights Agreement as in effect as of the date of this Agreement that exempt
Enron, the Security Purchasers or any of their respective Affiliates from the
definition of "Acquiring Person" pursuant to the terms and conditions set forth
in the Rights Agreement as in effect on the date hereof, or take any action to
approve, adopt or implement a rights agreement or any other agreement having a
similar effect, whether upon the expiration or termination of the Rights
Agreement or otherwise unless such rights agreement or other agreement exempts
Enron, the Security Purchasers and their respective Affiliates from the
restrictions thereof to the same extent provided in the Rights Agreement as in
effect on the date hereof; or
(v) the entering into any arrangement or contract to do any of the
foregoing.
(b) In connection with the exercise of the consent rights set forth in
clause (v) of subsection (a) of this Section 2.8, the Company shall, prior to
entering into or taking any of the transactions or actions specified in such
clause, obtain a confirmation of the rating of any of its then existing
Indebtedness and the FELINE PRIDES or the Preferred Shares or, as appropriate,
an initial rating of any new Indebtedness to be Incurred as contemplated thereby
from each of Moody's and Standard & Poor's.
(c) During the period commencing on the date hereof and ending on the
Termination Date, the approval of Enron shall be necessary, in addition to any
vote or consent of the Company Board or the shareholders of the Company required
by law or the Articles, in order to authorize, effect or validate any amendment,
repeal, alteration or change to subsection A.9. of Article V of the Company's
Articles in a manner that adversely affects Enron, any of its Affiliates or
Associates (as defined in the Company's Articles) or any of their successors or
assigns.
SECTION 2.9 ACTIONS AFFECTING CERTAIN DISTRIBUTIONS. The Company will not,
---------------------------------------------------
without the prior written consent of Enron, enter into any agreement that
contains provisions that restrict or limit the payment of dividends or the
making of distributions by the Company on the Preferred Shares and that are more
likely to prevent the Company from paying such dividends or making such
distributions than those included in the Debt Financing (as such term is defined
in the Stock Purchase Agreement); provided, however, that the Company may defer
the payment of dividends on the Preferred Shares in accordance with the terms of
the Preferred Shares as set forth in the Articles.
SECTION 2.10 SHAREHOLDER ACTIONS.
--------------------------------
(a) Enron agrees that its holdings of each class of Equity Securities
and those of its Affiliates will be represented at each meeting of the holders
of such class of Equity Securities and Enron and its Affiliates will, to the
extent that they hold Voting Securities, vote those Voting Securities in each
election of Directors of the Company in favor of the slate of nominees submitted
by the Company Board to the meeting of holders of Voting Securities. Any
Designated Transferee to which Voting Securities have been transferred also
15
agrees, pursuant to the assumption contemplated by Section 3.2, to take each of
the actions required of Enron by the immediately preceding sentence.
(b) Enron agrees that, subject to the provisions of Section 6.1,
neither Enron nor any of its Affiliates will take any action during the period
commencing on the Closing Date and ending on the Termination Date that will (i)
require the Company to register as a "holding company" under the PUHCA or (ii)
result in Enron or any of its Affiliates becoming a "holding company" or
"affiliate" of the Company, within the meaning of PUHCA. Each Designated
Transferee, if any, also agrees, in connection with the assumption contemplated
by Section 3.2, not to take any action that will (i) require the Company to
register as a "holding company" under the PUHCA or (ii) result in the Designated
Transferee becoming subject to regulation as a "holding company" or "affiliate"
of the Company, within the meaning of PUHCA.
ARTICLE III
TRANSFERS
SECTION 3.1 TRANSFER RESTRICTIONS. (a) Until the Transfer Restrictions
---------------------------------
Termination Date, no Security Purchaser or any Transferee permitted under this
subsection (a) of this Section 3.1 shall Transfer any of the Securities;
provided, however, that any Security Purchaser and any Designated Transferee
may:
(i) subject to the provisions of Section 3.3, Transfer all or any
portion of the Securities in any transaction not involving a Public Offering;
(ii) Transfer any of the Securities to any Designated Transferee; and
(iii) Transfer any of the Securities to Enron or any of its
Affiliates.
(b) At the time of any Transfer of any Securities by Enron or any of
its Affiliates to a Designated Transferee, Enron shall advise the Company in
writing as to the name of such Designated Transferee and, if a Person other than
Enron, each Person that controls such Designated Transferee and, generically, as
to the nature of the equity owners of such Designated Transferee or, if other
than Enron, of such other Person or Persons.
(c) The certificates representing the Securities shall bear an
appropriate legend referencing this Agreement and the restrictions on transfer
set forth in this Article III. The Company may also deliver "stop transfer"
instructions to its Transfer Agent and Registrar, if any, to assure compliance
with this Article III.
SECTION 3.2 ASSIGNMENT OF RIGHTS HEREUNDER. In connection with any Transfer
------------------------------------------
permitted by the provisions of subsection (a) of Section 3.1, a Security
Purchaser or any Transferee permitted thereunder may assign to a Transferee
permitted thereunder the Security Purchaser's rights, and shall provide for the
assumption by such Transferee of the Security Purchaser's obligations, under
Sections 2.1, 2.2 (it being understood that the rights accorded to Enron under
Sections 2.1 and 2.2 are personal to Enron and are not assignable), 2.4, 2.5,
2.6, 2.7, 2.10 and 3.1 and Articles IV, V, VI and VII. Any rights so assigned to
a Transferee and any obligations so assumed by a Transferee may be further
16
assigned to and assumed by a subsequent Transferee through compliance with this
Article III.
SECTION 3.3 CONDITION. Prior to the consummation of a Transfer permitted by
---------------------
Section 3.1 and as a condition thereto, the Security Purchaser (or a subsequent
Transferee) shall, if any rights are to be assigned to or obligations to be
assumed by the Transferee in accordance with Section 3.2, obtain the written
agreement of the Transferee to be bound by the terms and provisions of this
Agreement so assigned or assumed and obtain and provide to the Company complete
information for notices under this Agreement.
SECTION 3.4 TRANSFEREE. Except as provided in this Article III or in
----------------------
Section 7.3, no Transferee of any Security Purchaser (or of any subsequent
Transferee) shall be obligated by, or be entitled to any rights under, the
provisions of this Agreement.
SECTION 3.5 TAX TRANSFER RESTRICTIONS. As of the date hereof, each of the
-------------------------------------
Security Purchasers and Designated Transferees, if any, severally and not
jointly and as to itself only, represents and warrants to each other party
hereto that it is not as of the date of this Agreement subject to any binding
commitment to Transfer any portion of the Securities issued by the Company on
the date hereof, which Transfer would change the ownership of the Securities for
federal income tax purposes.
ARTICLE IV
REGISTRATION RIGHTS
SECTION 4.1 SHELF REGISTRATION STATEMENT.
----------------------------------------
(a) Subject to subsections (d) and (e) of this Section 4.1 and to
subsection (g) of Section 5.1, the Company shall:
(i) at least 30 days prior to the Transfer Restrictions Termination
Date, file an "evergreen" shelf registration statement on the form for which the
Company is eligible pursuant to Rule 415 under the Securities Act (or any
successor provisions) providing for an offering to be made on a continuous basis
of the Registrable Securities (the "Shelf Registration Statement"); provided,
however, that the inclusion of all or any part of the FELINE PRIDES or Preferred
Stock shall be at the election of the Holder or Holders thereof.
(ii) use its commercially reasonable efforts to cause the Shelf
Registration Statement to become effective as soon as practicable after the
Transfer Restrictions Termination Date (but in any event not later than 45 days
thereafter);
(iii) use its commercially reasonable efforts to maintain the Shelf
Registration Statement in effect for the Effective Period and, when necessary
for that purpose, to amend the Shelf Registration Statement or to supplement the
prospectus included therein, all as required by the Securities Act or as
reasonably requested by the Holders of (or any underwriter for) more than 10% of
the Common Stock (including any Common Stock issuable upon conversion of Class B
Common Stock) or 10% of the FELINE PRIDES and Preferred Shares covered by the
Shelf Registration Statement;
17
(iv) furnish to the Holders copies of any supplement or amendment to
the Shelf Registration Statement prior to the filing of such supplement or
amendment with the SEC or the use thereof; and
(v) pay all Registration Expenses in connection with the Shelf
Registration Statement.
(b) The Shelf Registration Statement shall not include any securities
other than the Registrable Securities.
(c) If at any time prior to the Registration Rights Termination Date
the Shelf Registration Statement ceases to be effective, then the Company shall
promptly file and use its commercially reasonable efforts to cause to become
effective a new "evergreen" shelf registration statement providing for an
offering to be made on a continuous basis of the Registrable Securities, which
registration statement shall also be referred to herein as the Shelf
Registration Statement.
(d) If the Company shall at any time furnish to the Holders a
certificate signed by its chairman of the board, chief executive officer or
president stating that a Suspension Event has occurred, the Company may postpone
the filing (but not the preparation) of the Shelf Registration Statement for up
to 60 days; provided, however, that the Company shall not be permitted to
postpone the filing of the Shelf Registration Statement pursuant to this
subsection (d) more than once. The Company shall promptly give the Holders
written notice of any postponement made in accordance with the preceding
sentence.
(e) If the Company shall at any time furnish to the Holders a
certificate signed by its chairman of the board, chief executive officer or
president (a "Suspension Notice") stating that a Suspension Event or a Company
Offering Event has occurred, the Holders may not effect any such resales until
(i) in the case of a Suspension Event, the earliest to occur of (A)
two Business Days following the public announcement by the Company of the
related transaction, (B) the abandonment by the Company of negotiations
regarding the related transaction (upon which the Company shall promptly notify
the Holders in writing) and (C) 90 days after the delivery of such Suspension
Notice; or
(ii) in the case of a Company Offering Event, the earliest to occur of
(A) 30 days after the completion of the related Company Offering, (B) after the
abandonment of the related Company Offering (upon which the Company shall
promptly notify the Holders in writing) and (C) 90 days after the delivery of
such Suspension Notice.
The Company shall be entitled to serve only one Suspension Notice
within any period of 365 consecutive days.
(f) The methods of distribution of the Registrable Securities
specified in the Shelf Registration Statement shall include an offering "at
market," a firm underwriting and a "best efforts" underwriting. Prior to the
Shelf Registration Statement becoming effective, the Holders of the Registrable
Securities included in the Shelf Registration Statement shall enter into an
18
agreement with the Company in form and substance substantially similar to the
form thereof attached hereto as Annex A (containing, among others, provisions
requiring advance notice by a Holder to the Company with respect to any sale of
Registrable Securities and provisions relating to the distribution of the
Registrable Securities in an "at market" offering).
(g) At the election of any Holder or group of Holders, in each case,
holding in excess of 10% of the aggregate amount of Securities (including any
Common Stock issuable upon conversion of the Class B Common Stock) included in
the Shelf Registration Statement, any resale pursuant to the Shelf Registration
Statement may involve an underwritten offering, and, in such case, the
underwriter(s) for such registration shall be selected by the Holders making
such election; provided, however, that such underwriter(s) shall be reasonably
satisfactory to the Company. The Company agrees to amend or supplement the Shelf
Registration Statement or any prospectus included therein as necessary to
disclose the method of distribution in accordance with the Securities Act.
SECTION 4.2 INCIDENTAL REGISTRATIONS.
-------------------------------------
(a) If, at any time after the Transfer Restrictions Termination Date,
the Company proposes to register Equity Securities for offering, sale and
delivery under the Securities Act (other than a registration on Form S-4 or S-8
for a purpose specified by either such Form as of the date hereof and a
registration on any successor or other forms promulgated for such specified
purposes and other than a registration statement relating to any dividend
reinvestment or direct stock purchase plan), whether or not for sale for its own
account, in a manner that would permit registration of Common Stock for sale to
the public under the Securities Act, it will, at each such time, give prompt
written notice to all Holders of Common Stock, Class B Common Stock and FELINE
PRIDES of its intention to do so and of such Holders' rights under this
Agreement.
(b) Upon the written request of any such Holder made within thirty
(30) days after the receipt of any such notice, the Company will use
commercially reasonable efforts to effect the registration under the Securities
Act under such registration statement of all shares of Common Stock that then
constitute Registrable Securities or are issuable on conversion of shares of
Class B Common Stock that then constitute Registrable Securities and that the
Company has been so requested to register by the Holders thereof. The foregoing
obligation in this subsection (b) is subject to the conditions that (i) if,
prior to the effective date of such registration statement, the Company shall
cease its efforts to register the initially proposed offering, sale and delivery
of Equity Securities, the Company may, at its election, give written notice of
such action to each Holder and, thereupon, shall be relieved of its obligation
hereunder to register any shares of Common Stock in connection with such
registration (but not from its obligation to pay the Registration Expenses
theretofore incurred) and (ii) if such registration involves an underwritten
offering, all Holders requesting inclusion of Common Stock in the registration
statement must offer, sell and deliver such Common Stock through the
underwriters selected for such offering on the same terms and conditions as
apply to the Company or the other sellers of the Equity Securities, with such
differences, including any with respect to indemnification and liability
insurance, as may be customary or appropriate in combined primary and secondary
offerings.
19
(c) If an offering to be registered pursuant to this Section 4.2
involves a firm underwriting, any Holder requesting inclusion of shares of
Common Stock in such offering and registration statement may elect in writing
prior to the effective date of the registration statement to delete all or any
part of such shares of Common Stock from such offering and such registration
statement.
(d) Nothing in this Section 4.2 shall operate to limit the right of
any Holder to request the registration of Common Stock issuable upon conversion,
exchange or exercise of securities, including Class B Common Stock, held by such
Holder notwithstanding the fact that at the time of request such Holder does not
hold the Common Stock underlying such securities. The registrations provided for
in this Section 4.2 are in addition to, and not in lieu of, registrations made
in accordance with Section 4.1.
(e) The Company will pay all Registration Expenses in connection with
each registration requested pursuant to this Section 4.2.
(f) If a registration pursuant to this Section 4.2 involves an
underwritten offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of shares of Common Stock requested to
be included in such registration would be likely to have a significant adverse
effect on the price, timing or distribution of the other securities to be
offered in such offering (a "Significant Adverse Effect") then the Company shall
include in such registration, (a) first, 100% of the securities the Company
proposes to sell and, (b) second, to the extent of the amount of Registrable
Securities requested to be included in such registration which, in the opinion
of such managing underwriter, can be sold without having a Significant Adverse
Effect, the amount of Registrable Securities which the Holders have requested to
be included in such registration, such amount to be allocated pro rata among all
requesting Holders on the basis of the relative amount of Registrable Securities
that constitute Common Stock requested to be included by such Holder in such
registration statement (provided, that any such amount thereby allocated to any
such Holder that exceeds such Holder's request shall be reallocated among the
remaining requesting Holders and any other requesting holders in like manner).
ARTICLE V
REGISTRATION PROCEDURES
SECTION 5.1 REGISTRATION PROCEDURES. In connection with the Company's
-----------------------------------
obligations hereunder to cause the registration of the Registrable Securities
under the Securities Act, the Company shall, when required under the provisions
of Article IV, as expeditiously as possible:
(a) prepare and file with the SEC the registration statement and the
prospectus to be used in connection therewith, including all financial
statements required thereby, all exhibits thereto and all other documents and
instruments required under the Securities Act with respect to the method of
distribution of the securities to be registered thereby;
(b) prepare and file with the SEC such amendments and supplements to
the registration statement and the prospectus used in connection therewith as
may be necessary to cause such registration to become effective under the
Securities Act, to maintain the effectiveness of such registration statement in
20
accordance with the provisions of this Agreement and to comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the Holders set
forth in such registration statement or any amendment or supplement thereto;
(c) before filing the registration statement or any amendments or
supplements thereto, furnish, on a timely basis so as to permit review thereof,
to any counsel selected pursuant to Section 5.6 hereof copies of all documents
proposed to be filed;
(d) furnish to each Holder such number of copies of the registration
statement and of each amendment and supplement thereto (in each case including
all exhibits filed therewith, including any documents incorporated by
reference), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities Act, and such
other related documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities by such Holder;
(e) use commercially reasonable efforts to register or qualify the
Registrable Securities in such jurisdictions as each Holder shall reasonably
request, and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Holder to consummate the distribution in
such jurisdictions of the Registrable Securities owned by such Holder, except
that the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction where, but for the
requirements of this subsection (e), it would not be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction or to consent
to general service of process in any such jurisdiction;
(f) use commercially reasonable efforts to cause the Registrable
Securities to be registered with or approved by such other governmental
authorities as may be necessary to enable the Holder or Holders thereof to
consummate the distribution of the Registrable Securities;
(g) immediately notify each Holder and each underwriter, if any, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the Company becoming aware that the prospectus included
in the registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and, at the request of any such Holder,
prepare and file with the SEC an amendment to the registration statement or a
supplement to the prospectus so that such prospectus shall not thereafter
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing and furnish as
promptly as practicable to such Holder a reasonable number of copies of the
prospectus as so amended or supplemented; provided, however, that, in the case
of the Shelf Registration Statement, the Company may defer the delivery of such
amended or supplemental prospectus in accordance with subsection (e) of Section
4.1 by delivery to each Holder of a Suspension Notice.
21
(h) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable (but not more than eighteen (18) months) after the
effective date of the registration statement and the date of each subsequent
final prospectus supplement to the prospectus contained in the registration
statement, if any, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act;
(i) use its commercially reasonable efforts to list all Registrable
Securities on the NYSE or any other national securities exchange on which
Registrable Securities of the same class are then listed and, if no such
Registrable Securities are so listed, on the NYSE or any national securities
exchange on which the Common Stock is then listed;
(j) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification provisions in
favor of underwriters and other Persons in addition to, or in substitution for
the provisions of Section 5.4 hereof, and take such other actions as the Holders
or the underwriters, if any, reasonably request in order to expedite or
facilitate the distribution of such Registrable Securities;
(k) obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form and covering matters of the
type customarily covered by "cold comfort" letters as the Holders of such
Registrable Securities shall reasonably request;
(l) make available for inspection by any Holder, by any underwriter
participating in any distribution to be effected pursuant to the registration
statement and by any attorney, accountant or other agent retained by any such
Holder or any such underwriter all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant or
agent in connection with such registration statement;
(m) notify counsel (selected pursuant to Section 5.6 hereof) for the
Holders and the managing underwriter or agent, as applicable, immediately, and
confirm the notice in writing, (i) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment to the
prospectus shall have been filed, (ii) of the receipt of any comments from the
SEC, (iii) of any request of the SEC to amend the registration statement or
amend or supplement the prospectus or for additional information, (iv) of the
issuance by the SEC or any other governmental agency or authority of any stop
order suspending the effectiveness of the registration statement, any order
preventing or suspending the use of any preliminary prospectus or any order
suspending the qualification of the securities for offering or sale in any
jurisdiction, or (v) of the institution or threat by the SEC or any other
governmental agency or authority of any proceedings for any of such purposes;
(n) use its best efforts to prevent the issuance of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any prospectus and, if any such order is
22
issued, to obtain the withdrawal of any such order at the earliest possible
moment;
(o) in the case of an underwritten offering and if requested by the
managing underwriter or agent or any Holder, promptly incorporate in a
prospectus supplement or post-effective amendment to the registration statement
such information as the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent and with
respect to any other terms of any underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
being notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(p) cooperate with the Holders and the managing underwriter or agent,
if any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under the
registration statement, such certificates to be in such denominations and
registered in such names as the managing underwriter or agent, if any, or such
Holders may request;
(q) use its best efforts to obtain for delivery to the Holders and to
the managing underwriter or agent, if any, any opinion or opinions from counsel
for the Company reasonably requested by any Holder and in customary form and in
form, substance and scope reasonably satisfactory to such Holders, the managing
underwriter or agent and their counsel;
(r) cooperate with each Holder and each underwriter or agent, if any,
participating in the distribution of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
NYSE or any other securities exchange or the NASD; and
(s) use its best efforts to make available the executive officers of
the Company to participate with the Holders of Registrable Securities and any
underwriters in any "road shows" or other selling efforts that may be reasonably
requested by the Holders in connection with the methods of distribution for the
Registrable Securities.
SECTION 5.2 INFORMATION SUPPLIED. The Company may require each Holder, the
--------------------------------
Registrable Securities of which are being included in a registration statement
as required hereby, to furnish the Company with such information regarding such
Holder and pertinent to the disclosure requirements relating to the registration
and the distribution of such securities and reasonably necessary in order to
ensure compliance with applicable securities laws as the Company may from time
to time reasonably request in writing.
SECTION 5.3 RESTRICTIONS ON DISPOSITION. Each Holder agrees that, upon
---------------------------------------
receipt of any notice from the Company of the happening of any event of the kind
described in subsection (g) of Section 5.1, such Holder will forthwith
discontinue distribution of Registrable Securities pursuant to the Shelf
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subsection (g) of Section
23
5.1, and, if so directed by the Company, such Holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
such Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
SECTION 5.4 INDEMNIFICATION. (a) In the event of any registration of any
---------------------------
securities of the Company under the Securities Act pursuant to Article IV, the
Company shall, and it hereby does, indemnify and hold harmless, to the extent
permitted by law, the Holder of any Registrable Securities covered by such
registration statement, each Affiliate of such Holder and their respective
directors, officers, employees and stockholders or members or general and
limited partners (and any director, officer, Affiliate, employee, stockholder
and controlling Person of any of the foregoing), each Person who participates as
an underwriter in the offering or sale of such securities and each other Person,
if any, who controls such Holder or any such underwriter within the meaning of
the Securities Act (collectively, the "Indemnified Parties"), against any and
all losses, claims, damages or liabilities, joint or several, actions or
proceedings (whether commenced or threatened) in respect thereof ("Claims") and
expenses (including reasonable attorney's fees and reasonable expenses of
investigation) ("Expenses")to which such Indemnified Party may become subject
under the Securities Act, common law or otherwise, insofar as such Claims or
Expenses arise out of, relate to or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in or incorporated by
reference in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto or (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading; provided, however, that the Company shall not be liable to any
Indemnified Party in any such case to the extent that any such Claim or Expense
arises out of, relates to or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement or amendment or supplement thereto or in any such preliminary, final
or summary prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder specifically
for use in the preparation thereof; and provided, further, that, with respect to
any such Claim and Expenses that arise out of or are based on an untrue
statement or alleged untrue statement in or omission or alleged omission from
any preliminary prospectus, the indemnity agreement contained in this
subparagraph shall not inure to the benefit of any Indemnified Party from whom
the person asserting such Claim and Expenses purchased the Securities concerned
to the extent that any such Claim and Expenses result from the fact that a copy
of the final prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities as required by the
Securities Act if the untrue statement or alleged untrue statement in or
omission or alleged omission has been corrected in the final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Party and shall survive the transfer of
securities by any Holder.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 4.1 or Section 4.2 herein, that it shall have received an undertaking
reasonably satisfactory to it from the Holder of such Registrable Securities or
any underwriter acting for such Holder to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subsection (a) of this
24
Section 5.4) the Company and all other prospective sellers or underwriters, as
the case may be, with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Holder or
underwriter specifically for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or supplement,
or a document incorporated by reference into any of the foregoing. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of the prospective sellers, or any of
their respective Affiliates, directors, officers or controlling Persons and
shall survive the transfer of securities by any seller. In no event shall the
liability of any Holder of Registrable Securities hereunder be greater in amount
than the dollar amount of the proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an Indemnified Party hereunder of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Section 5.4, such
Indemnified Party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action or proceeding; provided, however, that the failure of the
Indemnified Party to give notice as provided herein shall not relieve the
Company of its obligations under Section 5.4, except to the extent that the
Company is materially prejudiced by such failure to give notice. In case any
such action or proceeding is brought against an Indemnified Party, unless in
such Indemnified Party's reasonable judgment (after consultation with legal
counsel) a conflict of interest between such Indemnified Party and the Company
may exist in respect of such action or proceeding, the Company shall be entitled
to participate in and to assume the defense thereof (at its expense), jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel selected by the Company and reasonably satisfactory to such
Indemnified Party, and after notice from the Company to such Indemnified Party
of its election so to assume the defense thereof, the Company shall not be
liable to such Indemnified Party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that, if the Company
declines or fails to assume the defense of the action or proceeding or to employ
counsel reasonably satisfactory to the Indemnified Party, in either case within
a 30-day period, or if a court of competent jurisdiction determines that the
Company is not vigorously defending such action or proceeding, then such
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Company shall pay the reasonable fees and
disbursements of such counsel or other representative as incurred. The Company
shall not settle any such action or proceeding or consent to the entry of any
judgment without the prior written consent of the Indemnified Party, unless such
settlement or judgment (i) includes as an unconditional term thereof the giving
by the claimant or plaintiff of a release to such Indemnified Party from all
liability in respect of such action or proceeding and (ii) does not involve the
imposition of equitable remedies or the imposition of any obligations on such
Indemnified Party and does not otherwise adversely affect such Indemnified
Party. No Indemnified Party shall settle any such action or proceeding or
25
consent to the entry of any judgment without the prior written consent of the
Company (such consent not to be unreasonably withheld).
(d) If the indemnification provided for in this Section 5.4 from the
Company is unavailable to an Indemnified Party hereunder in respect of any Claim
or Expenses referred to herein, then the Company, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Claim or Expenses in such proportion as is
appropriate to reflect the relative fault of the Company and Indemnified Party
in connection with the actions that resulted in such Claim or Expenses, as well
as any other relevant equitable considerations, including relevant benefits. The
relative fault of the Company and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, the Company or the Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party under this subsection (d) as
a result of the Claim and Expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any action or proceeding.
(e) The parties hereto agree that it would not be just and equitable
if contribution pursuant to subsection (d) of this Section 5.4 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in subsection (d) of this
Section 5.4. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) Indemnification similar to that specified in this Section 5.4
(with appropriate modifications) shall be given by the Company and each Holder
of Registrable Securities with respect to any required registration or other
qualification of securities under any law or with any governmental authority
other than as required by the Securities Act.
(g) The obligations of the parties under this Section 5.4 shall be in
addition to any liability which any party may otherwise have to any other party.
SECTION 5.5 REQUIRED REPORTS. The Company covenants that it will file the
----------------------------
reports required to be filed by it under the Securities Act and the Exchange Act
(or, if the Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available such information), and it will
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell shares of Registrable
Securities without registration under the Securities Act but within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
SECTION 5.6 SELECTION OF COUNSEL. In connection with any registration of
--------------------------------
Registrable Securities pursuant to Article IV hereof, the Holders of a majority
26
of the Registrable Securities covered by any such registration may select one
counsel to represent all Holders of Registrable Securities.
SECTION 5.7 HOLDBACK AGREEMENT. If any registration under Section 4.2
------------------------------
hereof or any sale of securities in connection with a registration under Section
4.1 hereof shall be in connection with an underwritten public offering, each
Holder that beneficially owns Common Stock or Class B Common Stock representing
at least 2% of the outstanding shares of Common Stock and Class B Common Stock,
taken as a whole, agrees not to effect any public offering, sale or delivery,
including any sale pursuant to Rule 144 under the Securities Act, of any Equity
Securities of the Company (in each case, other than as part of such underwritten
public offering), within seven (7) days before, or ninety (90) days (or such
lesser period as the managing underwriters may permit) after, the effective date
of any such registration pursuant to Section 4.2 or the closing of any sale of
securities in connection with a registration under Section 4.1 (except as part
of any such registration or sale), and the Company hereby also so agrees and
agrees to cause each other holder of any equity security of the Company
purchased from the Company (at any time other than in a public offering) to so
agree.
SECTION 5.8 NO INCONSISTENT AGREEMENT. The Company represents and warrants
-------------------------------------
that it will not enter into, or cause or permit any of its Subsidiaries to enter
into, any agreement which conflicts with or limits or prohibits the exercise of
the rights granted to the Holders in this Agreement.
ARTICLE VI
STANDSTILL
SECTION 6.1 ACQUISITION OF ADDITIONAL VOTING SECURITIES.
-------------------------------------------------------
(a) Subject to subsection (b) of this Section 6.1, during the period
commencing on the date hereof and ending on the Termination Date, Enron hereby
agrees that it shall not, and that it shall cause each of its Affiliates not to
(and each Designated Transferee also agrees, pursuant to the assumption
contemplated by Section 3.2, not to), without the prior approval of the Company
Board (excluding, for purposes of such approval, the Enron Directors), (i)
acquire, offer or propose to acquire or agree to acquire (whether by purchase,
tender or exchange offer, through an acquisition of control of another Person
(including by way of merger or consolidation), by joining a partnership,
syndicate or other Group, or otherwise), the beneficial ownership of any Voting
Securities of the Company in excess of Voting Securities delivered at Closing
(or any warrants, options or other rights to purchase or acquire, or any
securities convertible into, or exchangeable for, any Voting Securities of the
Company); (ii) make any public announcement with respect to, or submit any
proposal for, any merger, consolidation, sale of substantial assets (other than
sales made in the ordinary course of business of Enron or its Subsidiaries) or
other business combination or extraordinary transaction involving the Company;
(iii) except in connection with the election of the Enron Directors and Enron
Designees, make, or in any way participate in, any "solicitation" of "proxies"
(as such terms are defined or used in Regulation 14A under the Exchange Act) to
vote any Voting Securities of the Company or seek to advise or influence any
Person (other than any Enron Affiliate or Designated Transferee) with respect to
the voting of any Voting Securities of the Company; (iv) otherwise act, either
27
alone or in concert with others, to seek control of the Company Board or (v)
publicly disclose any intention, proposal, plan or arrangement with respect to
any of the foregoing (collectively, the "Acquisition Restrictions"). The
Acquisition Restrictions contained in clause (i) above shall not apply to any
acquisition (each, an "Acquisition") of beneficial ownership of any additional
Voting Securities of the Company: (x) which is by way of stock dividends, stock
reclassifications or other distributions or offerings made available on a pro
rata basis to holders of Equity Securities of the Company generally, (y) that
involves Equity Securities acquired from the Company in accordance with the
provisions of the Stock Purchase Agreement or upon conversion of any Class B
Common Stock (including any Class B Common Stock issued pursuant to a Purchase
Contract) issued pursuant to the Stock Purchase Agreement, except that in no
event shall Enron, its Affiliates and any Designated Transferee, together,
acquire or hold direct ownership of more than 4.9% of the outstanding Voting
Securities of the Company or (z) from an Affiliate of Enron. Nothing contained
in this Section 6.1 shall be construed to limit or restrict any action taken in
good faith by the Enron Directors or Designees in their capacities as directors
of the Company Board or any other Applicable Board or by Enron or its Affiliates
pursuant to Article II.
(b) The foregoing Acquisition Restrictions will not apply if:
(i) a third party that is not an Affiliate of Enron or a Designated
Transferee (a "Third Party", which term shall include any Group, other than a
Group that includes Enron, any of its Affiliates or any Designated Transferee as
a member) commences or publicly announces its intention to commence a bona fide
tender or exchange offer for more than 15% of the outstanding Voting Securities
of the Company and the Company Board does not recommend against the tender or
exchange offer within 10 Business Days after the commencement thereof (which, in
the case of an exchange offer, shall be deemed to be the effective date of the
registration statement relating to the securities offered in such exchange offer
or, if permitted under the Exchange Act, such earlier date selected by the
offeror for commencement of the exchange offer) or such longer period as shall
then be permitted under SEC rules;
(ii) a Third Party acquires beneficial ownership of 15% or more of the
Company's outstanding Voting Securities;
(iii) a Third Party makes a bona fide proposal to acquire assets of
the Company that the Company Board is actively negotiating and the consummation
of which would require approval of the shareholders of the Company pursuant to
the Oregon Business Corporation Act;
(iv) a Third Party makes a bona fide proposal to enter into any
acquisition or other business combination transaction with the Company that the
Company Board is actively negotiating;
(v) the Company enters into (or publicly announces its intention to do
so) a definitive agreement, or an agreement contemplating a definitive
agreement, for any of the foregoing transactions described in clauses (i) to
(iv) above;
28
(vi) to any Transfer of Equity Securities between or among Enron, its
Affiliates and any Designated Transferee or Transferees; or
(vii) the Company is in material breach of its obligations under this
Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 NOTICES. All notices required or permitted hereunder shall be
-------------------
in writing and shall be deemed effectively given (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient or, if not, then on the next
Business Day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid or (iv) one (1)
Business Day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent as follows:
(a) to the Company at its address specified in Section 10.3 of the
Stock Purchase Agreement;
(b) to Enron at the address specified in Section 10.3 of the Stock
Purchase Agreement;
(c) to the Common Stock Purchaser, the Class B Purchaser or the FELINE
PRIDES Purchaser at the address set forth under the name of each such party on
the signature page hereto;
(d) to any Transferee at the address provided pursuant to subsection
Section 3.3;
(e) to any other Holder (if other than pursuant to clause (b), (c) or
(d) above), to the address of such Holder as shown in the stock record books of
the Company; or
(f) to such other address for any party as it may specify by like
notice.
SECTION 7.2 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
----------------------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against any party hereto unless such modification, amendment or waiver
is approved in writing by each party hereto; provided that, notwithstanding the
foregoing, no such approval shall be required of any Transferee that is made a
party hereto pursuant to Section 3.3 unless such modification, amendment or
waiver affects such Transferee. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
SECTION 7.3 SUCCESSORS, ASSIGNS, TRANSFEREES. This Agreement shall bind the
--------------------------------------------
parties hereto and their respective successors and permitted assigns. Except as
expressly provided in this Agreement, this Agreement may not be assigned without
29
the prior written consent of each other party, except that Enron may assign its
rights and obligations hereunder to any Affiliate or Affiliates.
SECTION 7.4 FURTHER ASSURANCES. At any time or from time to time after the
------------------------------
date hereof, the parties agree to cooperate with each other and, at the request
of any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
SECTION 7.5 ENTIRE AGREEMENT. Except as otherwise expressly set forth
----------------------------
herein, the Stock Purchase Agreement and any other agreement executed in
connection with the transactions contemplated under the Stock Purchase Agreement
embody the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, that may have related to the subject matter hereof in any way.
SECTION 7.6 DELAYS OR OMISSIONS. No delay or omission to exercise any
-------------------------------
right, power or remedy accruing to any party upon any breach, default or
noncompliance by another party under this Agreement shall impair any such right,
power or remedy nor shall it be construed to be a waiver of any such breach,
default or noncompliance or of any subsequent breach, default or noncompliance.
Any waiver, permit, consent or approval of any kind or character on the part of
any party hereto of any breach, default or noncompliance under this Agreement or
any waiver on such party's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
SECTION 7.7 GOVERNING LAW, JURISDICTION. This Agreement shall be governed
---------------------------------------
in all respects by the laws of the State of New York, except, in the case of the
Company and with respect to Section 2.1, to the extent that the Oregon Business
Corporation Act is applicable.
SECTION 7.8 SEVERABILITY. In case any provision of this Agreement shall be
------------------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 7.9 EFFECTIVE DATE. This Agreement shall become effective
--------------------------
immediately upon the Closing.
SECTION 7.10 ENFORCEMENT; LIMITATIONS ON CERTAIN DAMAGES. Each party hereto
--------------------------------------------------------
acknowledges that money damages would not be an adequate remedy in the event
that any of the covenants or agreements in this Agreement are not performed in
accordance with its terms, and it is therefore agreed that in addition to and
without limiting any other remedy or right it may have, the non-breaching party
will have the right to an injunction, temporary restraining order or other
equitable relief in any court of competent jurisdiction enjoining any such
breach and enforcing specifically the terms and provisions hereof.
Notwithstanding anything herein to the contrary, in connection with any claim by
30
a party hereto against another party hereto, the claiming party shall not be
entitled to recover any punitive, consequential, special, incidental or indirect
damages (including any exemplary damages, treble damages, penalties, or loss of
profits or income), whether based on statute, in tort, contract or otherwise,
regardless of whether such damages may be available under applicable law or
otherwise, and whether or not arising from a party's sole, joint or concurrent
negligence, strict liability or other fault, the parties hereto hereby waiving
their right, if any, to recover such damages in connection with any claims
hereunder.
SECTION 7.11 TITLES AND SUBTITLES. The titles of the sections and
---------------------------------
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
SECTION 7.12 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
-----------------------------------------------
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument. This Agreement may be
executed by facsimile signature(s).
31
IN WITNESS WHEREOF, the parties hereto have executed this Securityholders
and Registration Rights Agreement as of the date set forth in the first
paragraph hereof.
ENRON CORP.
By:____________________________________
Name:
Title:
[COMMON STOCK PURCHASER]
By:____________________________________
Name:
Title:
Address: ___________________________
___________________________
[CLASS B PURCHASER]
By:____________________________________
Name:
Title:
Address: ____________________________
___________________________
[FELINE PRIDES PURCHASER]
By:____________________________________
Name:
Title:
Address: ___________________________
___________________________
32
NORTHWEST ENERGY CORPORATION
By:____________________________________
Name:
Title:
33
EX-10
6
exhibit104.txt
EXHIBIT 10.4
EXHIBIT 10.4
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
SUMMARY TERM SHEET
____________________________________
SECURITIES OFFERED 4.0 million Income PRIDES
____________________________________
ISSUER Holdco
____________________________________
STATED AMOUNT $50.00 per Income PRIDES
____________________________________
AGGREGATE STATED AMOUNT $200.0 million
____________________________________
COMPONENTS OF FELINE PRIDES Each FELINE PRIDES offered hereby will
initially consist of a unit with a
Stated Amount of $50.00 (referred to as
an "Income PRIDES") comprised of (a) a
Purchase Contract under which the holder
will purchase from Holdco on the date
(the "Purchase Contract Settlement
Date") that is four years from the
closing of the acquisition by Holdco of
PGE (the "Closing Date"), for an amount
of cash equal to the Stated Amount, a
number of shares of Class B Common Stock
of Holdco equal to the Settlement Rate,
and (b) a Cumulative Preferred Share
(referred to as a Preferred Share)
having a stated liquidation amount equal
to $50.00.
With respect to the Income PRIDES, the
related Preferred Shares will be pledged
pursuant to a pledge agreement, to be
dated as of the Closing Date (the
"Pledge Agreement"), among the Purchase
Contract Agent, Holdco and __________,
as collateral agent for Holdco (together
with any successor thereto in such
capacity, the "Collateral Agent"), to
secure the holder's obligation to
purchase Class B Common Stock under the
related Purchase Contract.
The FELINE PRIDES will be issued under a
Purchase Contract Agreement, to be dated
as of the Closing Date (the "Purchase
Contract Agreement"), among Holdco, and
________________, as agent for the
holders of the FELINE PRIDES (together
with any successor thereto in such
capacity, the "Purchase Contract
Agent").
____________________________________
SUBSTITUTIONS OF PLEDGED SECURITIES:
GROWTH PRIDES On or prior to the fifth Business Day
immediately preceding the Purchase
Contract Settlement Date, a holder of
the Income PRIDES may substitute for the
related Preferred Shares zero-coupon
U.S. Treasury Securities (referred to as
the Treasury Securities) or, prior to
the filing of a registration statement
under the Securities Act of 1933 in
respect of the FELINE PRIDES (the
"Non-Registration Period") and so long
as an
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
Enron Credit Condition shall not have
occurred and be continuing, zero-coupon
demand notes of, or fully and
unconditionally guaranteed as to
principal payments and other obligations
by, Enron ("Enron Notes") in an amount
per Income PRIDES equal to the Stated
Amount per Preferred Share. Each Growth
PRIDES will consist of a unit with a
Stated Amount of $50.00 comprised of (a)
a Purchase Contract under which the
holder will purchase from the Company
not later than the Purchase Contract
Settlement Date for an amount of cash
equal to the Stated Amount a number of
shares of Class B Common Stock of Holdco
equal to the Settlement Rate, and (b)
either (i) a 1/20 undivided beneficial
ownership interest in a Treasury
Security having a principal amount at
maturity equal to $1,000 or (ii) an
Enron Note having a principal amount
equal to $50.00 and in each case
maturing or being repayable on the
Business Day immediately preceding the
Purchase Contract Settlement Date.
If, at any time that Growth PRIDES are
secured by Enron Notes, an Enron Credit
Condition has occurred and is continuing
or the Non-Registration Period has
ended, Enron Corp. will be obligated to
substitute either Preferred Shares or
Treasury Securities, in each case, with
a liquidation amount or principal amount
at maturity equal to the aggregate
principal amount of the Enron Notes.
Enron Credit Condition means (i) Enron
Corp.'s senior unsecured debt shall be
rated below the rating listed below by
at least two of the three following
rating agencies:
a) S&P - BBB-;
b) Moody's - Baa3;
c) DCR (Fitch) - BBB-; or
(ii) a default has occurred and is
continuing under the Indenture, dated
as of November 1, 1985, as amended,
modified or supplemented, between
Environ Corp. and The Bank of New
York, as trustee.
____________________________________
RECREATING INCOME PRIDES On or prior to the fifth Business Day
immediately preceding the Purchase
Contract Settlement Date, a holder of
Growth PRIDES will have the right to
recreate Income PRIDES by resubstituting
Preferred Shares for the related
Treasury Securities or Enron Notes held
by the Collateral Agent. At such time,
the Collateral Agent would release the
related Treasury Securities or Enron
Notes to such holder. Such Preferred
Shares will be pledged with the
Collateral Agent to secure the holder's
obligation to purchase Class B Common
Stock under the related Purchase
Contracts.
2
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
____________________________________
CURRENT PAYMENTS A holder of Income PRIDES or separate
Preferred Shares will be entitled to
receive aggregate cash dividends payable
quarterly in arrears, consisting of
dividends on the Preferred Shares
payable by Holdco on February 15, May
15, August 15, and November 15, based on
an amount per Income PRIDES equal to
6.0% per annum of the aggregate stated
liquidation amount of the Preferred
Shares held by such holder, either
separately or as a component of Income
PRIDES, (equal to $3.00 per Income
PRIDES) for the eight consecutive
quarters following the Closing Date and
9.0% per annum of the aggregate stated
liquidation amount of such Preferred
Shares (equal to $4.50 per Income
PRIDES) for the next eight consecutive
quarters until the Purchase Contract
Settlement Date, if, when and as
authorized and declared by the Board of
Directors. Thereafter, the dividend rate
on the Preferred Shares shall be reset
on the Purchase Contract Settlement Date
in connection with the remarketing
thereof. A holder of Growth PRIDES will
not be entitled to receive any cash
distributions.
Dividends on the Preferred Shares shall
be cumulative whether or not Holdco has
earnings, whether or not there are funds
legally available for the payment of
such dividends and whether or not such
dividends are declared. Any dividends
that have been deferred will accrue
yield at the rates set forth in the
preceding paragraph.
In the event that dividends on the
Preferred Shares are not declared,
Holdco will not declare or pay any
dividend on any capital stock of Holdco
nor purchase, acquire, redeem or make a
liquidation payment with respect to any
such capital stock until all accumulated
and unpaid dividends on the Preferred
Shares have been paid. To the extent
that there are any accumulated and
unpaid dividends on the Preferred Shares
on the liquidation date for such shares,
Holdco will on such liquidation date pay
to the holder of the Preferred Shares,
in lieu of a cash payment, a number of
shares of Class B Common Stock equal to
the accumulated amount of such payment
payable to the holder divided by an
average trading price of Holdco common
shares at that time.
____________________________________
REMARKETING OF PLEDGED PREFERRED
SHARES Pursuant to a remarketing agreement
dated as of the Closing Date, among
Holdco, the Purchase Contract Agent and
a nationally recognized investment
banking firm chosen by Holdco (the
"Remarketing Agent"), and subject to the
terms of a Supplemental Remarketing
Agreement to be dated as of the third
Business Day immediately preceding the
Purchase
3
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
Contract Settlement Date among such
parties, the pledged Preferred Shares of
such Income PRIDES holders who have
failed to notify the related Purchase
Contract Agent on or prior to the fifth
Business Day immediately preceding the
Purchase Contract Settlement Date of
their intention to settle the related
Purchase Contracts with cash will be
remarketed on the third Business Day
immediately preceding the Purchase
Contract Settlement Date. The
Remarketing Agent will use its
reasonable efforts to remarket such
Preferred Shares on such date for
settlement on the Purchase Contract
Settlement Date at a price of
approximately 100.25% (the dividend
reset rate being the rate intended to
result in sales at such price) of the
aggregate stated liquidation amount of
such Preferred Shares, plus accumulated
and unpaid dividends, if any, thereon.
The portion of the proceeds from such
remarketing equal to the aggregate
stated liquidation amount of such
pledged Preferred Shares will be
automatically applied to satisfy in full
such Income PRIDES holders' obligations
to purchase Class B Common Stock under
the related Purchase Contracts. In
addition, after deducting as the
Remarketing Fee an amount not exceeding
25 basis points (.25%) of the aggregate
stated liquidation amount of the
remarketed Preferred Shares from any
amount of such proceeds in excess of the
aggregate stated liquidation amount of
the remarketed Preferred Shares plus any
accumulated and unpaid dividends, the
Remarketing Agent will remit the
remaining portion of the proceeds, if
any, for the benefit of such holder.
Income PRIDES holders whose pledged
Preferred Shares are so remarketed will
not otherwise be responsible for any
Remarketing Fee in connection therewith.
If, despite using its reasonable
efforts, the Remarketing Agent cannot
remarket the related pledged Preferred
Shares of such holders of Income PRIDES
at a price not less than 100% of the
aggregate stated liquidation amount of
such Preferred Shares plus accumulated
and unpaid dividends, if any (resulting
in a "Failed Remarketing"), then Holdco
will exercise its rights as a secured
party to dispose of the Preferred Shares
in accordance with applicable law to
satisfy in full such holder's obligation
to purchase Class B Common Stock under
the related Purchase Contracts;
provided, that if Holdco exercises such
rights as a secured party with respect
to such Preferred Shares, any
accumulated and unpaid dividends on such
Preferred Shares will be paid on the
Purchase Contract Settlement Date in
cash or shares of Holdco Class B Common
Stock by Holdco to the holder of record
of such Preferred Shares. Holdco will
cause a notice of such Failed
Remarketing to be published on the
second Business Day immediately
preceding the Purchase Contract
Settlement Date. It is currently
anticipated that Merrill Lynch, Pierce,
Fenner & Smith Incorporated will be the
Remarketing Agent.
___________________________________
OPTIONAL REMARKETING OF SEPARATE
PREFERRED SHARES On or prior to the fifth Business Day
preceding the Purchase Contract
Settlement Date, holders of separate
Preferred Shares which are not
components of Income PRIDES may elect to
have their Preferred Shares
4
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
remarketed by delivering their Preferred
Shares to the Collateral Agent along
with a notice of such election. Holders
will have a right to withdraw such
election on or prior to the fifth
Business Day prior to the Purchase
Contract Settlement Date. The holders
will receive proceeds from the
remarketing equal to (i) the liquidation
amount of their Preferred Shares, plus
(ii) any accrued and unpaid dividends
through the Purchase Contract Settlement
Date, plus (iii) any proceeds in excess
of the remarketing fee (determined as
described above under "Remarketing of
Pledged Preferred Shares"). If the
remarketing results in a Failed
Remarketing, the remarketing agent will
promptly return such Preferred Shares to
the Collateral Agent to release to such
holders.
___________________________________
PUT OPTION Holders of separate Preferred Shares
will have the right in the event the
remarketing has been determined to be a
Failed Remarketing to put their
Preferred Shares to Holdco on the date
that is one month after the Purchase
Contract Settlement Date in exchange for
cash, or Enron Notes with a principal
amount, equal to the Stated Amount plus
any accumulated but unpaid dividends.
___________________________________
SETTLEMENT OF PURCHASE CONTRACTS The Purchase Contract Settlement Date
will be the fourth year anniversary of
the Closing Date. On the Business Day
immediately preceding the Purchase
Contract Settlement Date, unless a
holder of Income PRIDES or Growth PRIDES
(i) has settled the related Purchase
Contracts through the early delivery of
cash to the Purchase Contract Agent,
(ii) in the case of Income PRIDES, has
settled the related Purchase Contracts
with cash on the Business Day prior to
the Purchase Contract Settlement Date
pursuant to prior notification to the
Purchase Contract Agent, or (iii) in the
case of Income PRIDES, has had the
Preferred Shares related to such
holder's Purchase Contracts remarketed
in the manner described herein in
connection with settling such Purchase
Contracts (and there has not been a
Failed Remarketing), (A) in the case of
Income PRIDES, Holdco will exercise its
rights as a secured party to dispose of
the related Preferred Shares, in
accordance with applicable law, and (A)
in the case of Growth PRIDES (1) the
amount of the related Treasury
Securities, when paid at maturity, will
automatically be applied pursuant to the
exercise of such rights by Holdco, or
(2) Holdco will exercise such rights to
obtain possession of the Enron Notes, in
each case, to satisfy in full such
Holder's obligation to purchase Class B
Common Stock under the related Purchase
Contracts.
In the event that a holder of either
Income PRIDES or Growth PRIDES effects
the early settlement of the related
Purchase Contracts through the delivery
of cash or, in the case of an Income
PRIDES, settles such Purchase Contracts
with cash on the Business Day
immediately
5
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
preceding the Purchase Contract
Settlement Date, the related Preferred
Shares, Treasury Securities or Enron
Notes, as the case may be, will be
released to such holder as described
herein.
The settlement rate for early settlement
(other than early settlement resulting
from a change of control) shall be
[x.xxxx] shares of Class B Common Stock
computed by dividing the Stated Amount
by the Threshold Appreciation Price.
____________________________________
SETTLEMENT RATE The number of shares of Class B Common
Stock issuable upon settlement of each
Purchase Contract on the Purchase
Contract Settlement Date (the
"Settlement Rate") will equal:
(i) If the Settlement Price is equal to
or less than the Reference Price, then
each holder of a Purchase Contract will
receive [x.xxxx] shares of Class B
Common Stock, which is equal to the
Stated Amount divided by the Reference
Price.
(ii) If the Settlement Price is greater
than the Reference Price but less than
the Threshold Appreciation Price, then
each holder of a Purchase Contract will
receive a number of shares of Class B
Common Stock equal to the Stated Amount
divided by the Settlement Price.
(iii) If the Settlement Price is equal
to or greater than the Threshold
Appreciation Price, then each holder of
a Purchase Contract will receive
[x.xxxx] shares of Class B Common Stock,
which is equal to the Stated Amount
divided by the Threshold Appreciation
Price.
Definitions:
------------
"Announcement Date" means the date on
-----------------
which NW Natural, Enron and PGE enter
into a definitive purchase and sale
agreement
"Announcement Price" means the average
------------------
closing price of NW Natural stock during
the twenty trading day period ending on
the third trading day immediately
preceding the Announcement Date
"Ceiling Price" means 110% of the
-------------
Announcement Price
6
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
"Closing Date" means the date of closing
------------
of Holdco's acquisition of PGE as
contemplated under the definitive
purchase and sale agreement
"Closing Price" means the average
-------------
closing price of NW Natural stock during
the twenty trading day period
immediately preceding the Closing Date
"Floor Price" means 90% of the
-----------
Announcement Price
"Purchase Contract Settlement Date"
---------------------------------
means the date that is four years from
the Closing Date
"Reference Price" means:
---------------
(i) if the Closing Price is
equal to or greater than the Ceiling
Price, the Ceiling Price;
(ii) if the Closing Price is
greater than the Floor Price but less
than the Ceiling Price, the Closing
Price; or
(iii) if the Closing Price is n
less than or equal to the Floor Price,
the Floor Price.
"Settlement Price" means the average
----------------
closing price for Common Stock of Holdco
during the twenty trading day period
ending three days prior to the Purchase
Contract Settlement Date.
"Threshold Appreciation Price" means the
----------------------------
Reference Price multiplied by 1.15.
____________________________________
REDEMPTION OF PREFERRED SHARES The Preferred Shares are subject to
mandatory redemption on a date that is
twelve months following the Purchase
Contract Settlement Date (the
"Redemption Date") at a price of $50.00
per Preferred Share, plus accumulated
and unpaid dividends to the Redemption
Date. The redemption price for the
Preferred Shares may be paid, at
Holdco's option, in cash or, if Holdco
has obtained possession of any pledged
Enron Notes, by delivery of such Enron
Notes to the holders of the Preferred
Shares. Except as set forth in this
section and as set forth under Change of
Control, the Preferred Shares are not
redeemable by Holdco.
____________________________________
CHANGE OF CONTROL If during the Non-Registration Period
(a) a Change of Control shall have
occurred, (b) Enron, its affiliates or
Designated Transferees (as defined in
the Securityholder's Agreement) shall be
the sole beneficial owners of the Income
Prides and (c) no Growth Prides shall be
outstanding (or all Growth Prides shall
have recreated into Income Prides),
Enron may, by notice to Holdco, cause
(i) the Purchase Contract Settlement
Date and the
7
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
remarketing of the Preferred Shares to
be accelerated and (ii) the Preferred
Shares to be mandatorily redeemed on a
date that is three months following the
accelerated Purchase Contract Settlement
Date. The Settlement Rate on such
accelerated Purchase Contract Settlement
Date shall be determined as set forth
above under "Settlement Rate" except
that all references to the Purchase
Contract Settlement Rate shall be deemed
to be references to such accelerated
Purchase Contract Settlement Date.
____________________________________
DILUTION PROVISIONS Standard anti-dilution provisions on
Settlement Rate, including without
limitation, adjustments for
extraordinary dividends or stock
dividends; subdivisions, combinations
and reclassifications; issuance to all
holders of Holdco common stock of
rights, options or warrants entitling
the owners of securities to subscribe
for shares of common stock at less than
the fair market value.
____________________________________
RANKING OF PREFERRED SHARES The Preferred Share shall rank pari
passu with all other preferred stock of
Holdco and senior to all other
outstanding capital stock of Holdco.
____________________________________
TAX CHARACTERIZATION The parties acknowledge (but in no way
represent, warrant, covenant or
guaranty) that the Preferred Stock
component of the Feline Prides will be
treated as equity for all state and
federal income tax purposes and further
agree that they shall not take any
position inconsistent with such intent.
8
EX-99
7
exhibit99.txt
EXHIBIT 99
EXHIBIT 99
FOR RELEASE AT 7:00 A.M. EDT MONDAY, OCTOBER 8, 2001
NW NATURAL TO PURCHASE PORTLAND GENERAL ELECTRIC FROM ENRON,
CREATING MAJOR OREGON-BASED ENERGY PROVIDER
PORTLAND, ORE. - Northwest Natural Gas Company (NYSE: NWN) ("NW Natural")
announced today that it has entered into a purchase and sale agreement under
which NW Natural will acquire Portland General Electric Company (PGE), a
wholly-owned subsidiary of Enron Corp. (NYSE: ENE), for $1.8 billion, comprised
of $1.55 billion in cash and $250 million of seller-financing securities to be
issued to Enron. In addition, a $75 million payment obligation from Enron to
PGE, remaining from Enron's purchase of PGE in 1996, will be cancelled. PGE will
retain its approximately $1.1 billion in existing debt and preferred stock. The
transaction is expected to close in the fourth quarter of 2002, following
customary regulatory approvals as well as the approval of NW Natural's
shareholders.
The acquisition is expected to be solidly accretive to NW Natural's
earnings in the first full year after closing of the transaction, whether
evaluated using the new accounting rule relating to the treatment of goodwill
(i.e., no amortization) or the former rule under which goodwill was amortized to
expense. The combined companies also are expected to generate strong cash flow.
The acquisition has been structured to ensure an investment grade credit rating
at the utility level.
The transaction brings together Oregon's largest natural gas utility with
the state's largest electric utility, creating an energy company headquartered
in Portland with $5 billion in assets and $3.9 billion in enterprise value. The
new company will have more than 1.25 million electric and gas customers and will
own over 2,000 megawatts of generation, 26,000 miles of electric transmission
and distribution lines and 12,000 miles of gas mains. The combined company will
be one of the largest corporations based in Oregon.
"The acquisition makes sense for our customers, our shareholders, our
employees and for Oregon," said Richard G. Reiten, Chairman and CEO of NW
Natural. "It will help ensure that assets critical to Oregon's economy and
environment will be locally-owned. We expect to be able to hold down electric
and gas prices over the long run and to deliver more convenient and more
comprehensive customer service. In addition to the many customer and community
benefits, the acquisition also provides NW Natural the size and strength to
flourish in the years ahead. We have great respect for the PGE team and we look
forward to working with them to realize all the benefits of the transaction."
With overlapping service territories and shared customers, the combined
companies will be able to capture significant operating efficiencies in their
energy delivery systems, especially in administrative areas, that neither
company could accomplish on its own. In addition, combining PGE's electric
generation and NW Natural's gas storage assets with both companies' gas
purchasing capability will produce synergies and economies of scale that are
expected to help hold energy prices for customers of NW Natural and PGE down
over the long run.
NW Natural and PGE have a successful track record of working together to
find savings through operational efficiencies. The companies have a joint meter
reading program in place already and conduct common trenching for new
construction projects. In addition, NW Natural's Chairman and CEO, Dick Reiten,
has seven years of executive experience at PGE, having served between 1989 and
1996 as president and COO of the company and as a member of its Board.
The combination ultimately will result in reductions in force at both
utilities in order to achieve cost savings. Reiten said NW Natural is committed
to a fair process that will maximize the use of attrition and may use selected
early retirement programs to achieve optimum staffing levels. The Company will
work with any displaced employees, providing an array of services to make the
transition as easy as possible. All union contracts will be honored.
The combination of NW Natural and PGE will lead to enhanced customer
service. Customers ultimately will be able to call one company for natural gas
or electric service needs, pay a single bill for both services and use a single
customer service number to get information on how best to manage their energy
needs.
NW Natural intends to form a holding company (to be named at a later date)
to carry out the acquisition. The holding company will acquire the common stock
of PGE from Enron, resulting in a holding company with two operating utility
subsidiaries, NW Natural and PGE. Existing shareholders of NW Natural will
receive one share of holding company common stock for each share of NW Natural
common stock. NW Natural will retain its existing preferred and preference
shares. Enron will designate up to two members of the holding company's board of
directors. NW Natural and PGE are expected to continue to operate under their
respective names.
The cash portion of the purchase price will be raised through loans to the
holding company from commercial banks and institutional lenders arranged by
Merrill Lynch and Credit Suisse First Boston. The holding company will issue to
Enron $50 million in common stock. In addition, the holding company will issue
$200 million in FELINE PRIDES(SM) securities to Enron. The FELINE PRIDES(SM)
will consist of 4 million shares of preferred stock of the holding company with
a liquidation value of $50 per share, together with a forward purchase agreement
of Enron to purchase additional common stock of the holding company at a price
defined in the agreement. Enron's voting rights on its common stock will be
limited to 4.9% of the total number of shares of holding company common stock
outstanding.
NW Natural expects the holding company to maintain NW Natural's current
dividend policy. For 2001 the Company expects to have paid dividends on its
common stock of $1.245 a share, making 2001 the 46th consecutive year in which
its dividend payments have increased.
The proposed transaction is subject to the receipt of required regulatory
approvals, the approval of NW Natural's shareholders and closing conditions
defined in the purchase and sale agreement. Required regulatory approvals
include the Oregon Public Utility Commission, the Washington Utilities and
Transportation Commission, the Federal Energy Regulatory Commission, the Nuclear
Regulatory Commission and the Securities and Exchange Commission.
NW Natural and PGE each has a long history of active corporate citizenship
and strong community support. The combined company will remain committed to
investing in the communities it serves. The $25 million PGE-Enron Foundation,
established in 1997, will continue to benefit communities throughout Oregon.
Merrill Lynch acted as financial advisor and Thelen Reid & Priest acted as
legal counsel to NW Natural.
NW Natural is Oregon's largest natural gas utility. It serves about 530,000
customers in northwest Oregon and southwest Washington. In addition to
purchasing gas supplies from suppliers in the western United States and Canada,
NW Natural owns and operates an underground gas storage facility within its
service territory. The 142-year-old company is headquartered in Portland, Oregon
and is one of the fastest growing natural gas local distribution companies in
the country.
PGE's service territory covers more than 3,000 square miles. PGE serves
about 733,000 customers, has 26,000 miles of transmission and distribution lines
and owns 2,015 megawatts of generation, split about evenly between
hydroelectric, coal and natural gas. PGE provides service to 45 percent of the
population of Oregon and 60 percent of the state's economic base.
FINANCIAL ANALYST TELECONFERENCE
NW Natural will host a financial analyst teleconference Monday at 10:00
a.m. EDT to discuss this transaction. A webcast of the teleconference will be
available on NW Natural's website at WWW.NWNATURAL.COM. A replay of the
-----------------
broadcast will be available on the website shortly after the call.
FINANCIAL ANALYST MEETING
NW Natural will host a financial analyst meeting in New York City Tuesday,
Oct. 9, at 10:00 a.m. EDT to discuss this transaction. A live audio webcast of
the meeting with slides from the presentation will be available on NW Natural's
website, and a replay will be available on the website shortly after the
meeting.
Note: This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Future operating
results will be affected by various uncertainties and risk factors, many of
which are
beyond the Company's control, including governmental policy and regulatory
action, the competitive environment and economic factors, as well as weather
conditions. For a more complete description of these uncertainties and risk
factors, see the Company's filings with the Securities and Exchange Commission
on Form 10-K, as amended, for the year ended Dec. 31, 2000, and on Form 10-Q for
the quarters ended March 31 and June 30, 2001.
-0-
PRESS CONTACT: Steve Sechrist
503/226-4211 Ext. 3517
INVESTOR CONTACT: James Boehlke
503/721-2451
503/226-4211 Ext. 2451