20131204Exhibits D1-D7.pdf

Exhibit D-l
Corporate Structure of Avista Corporation
Prior to and Following the Proposed Transaction
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ExhibitD-2
Agreement and Plan of Merger of AERC,
Avista Corporation and Alaska Merger Sub, Inc.
AGREEMENT AND PLAI\I OF MERGER
among:
AVISTA CORPORATION,
a Washington corporation;
ALASKA MERGER SUB, INC.,
an Alaska corporation;
ALASKA ENERGY AND RESOURCES COMPAI\Y,
an Alaska corporation;
and
William A. Corbus,
as the Shareholders' Representative
Dated as ofNovember 4,2013
Page 1 of85
AGREEMENT A}[D PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreemenf') is made and entered
into as of November 4,2013, by and among: Avista Corporation, a Washington corporation
("Parent"); Alaska Merger Sub, Inc., an Alaska corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"); Alaska Energy and Resources Company, an Alaska corporation
(the "Company"); and, solely with respect to Article 8 and Section 9.1, William A. Corbus as
the Shareholders' Representative.
WHEREAS, upon the terms of and subject to the conditions set forth in this Agreement
and in accordance with the ACC, Parent and the Company have agreed to enter into a business
combination transaction pursuant to which Merger Sub will merge with and into the Company
(the "Merger"), and the Company will survive the Merger as a wholly owned subsidiary of
Parent;
WHEREAS, the Board of Directors of the Company (i) has determined that the Merger is
fair to, and in the best interests of, the Company and its shareholders and has approved this
Agreement and the transactions contemplated by this Agreement, and (ii) has unanimously
recommended the approval of the principal terms of the Merger by the Company Shareholders in
accordance with the ACC;
WHEREAS, (i) the Boards of Directors of Parent and Merger Sub have determined that
the Merger is fair to, and in the best interests ol Parent and Merger Sub and their respective
shareholders and have approved this Agreement and the transactions contemplated by this
Agreement, and (ii) Paren! as the sole shareholder of Merger Sub, has approved the principal
terms of the Merger in accordance with the ACC;
WHEREAS, at the Closing, Parent, the Shareholders' Representative and an escrow agent
mutually agreed upon by the parties (the "Escrow Agent"), shall execute an Escrow Agreement
in a form mutually agreed upon by Parent and the Company, subject to any changes proposed by
the Escrow Agent that are reasonably acceptable to Parent and the Company (the "Escrow
Agreement");
WHEREAS, the parties intend, for U.S. federal income Tax purposes, that the Merger
qualify as a "reorganization" described in Section 368(a) of the Code, and thatthe execution of
this Agreement constitute the adoption of a "plan of reorganization" within the meaning of
Section 35a(a)(l) of the Code and Treasury Regulations Section 1.368-2(g); and
WHEREAS, pursuant to the Merger, among other things,
outstanding shares of Company Common Stock shall be converted
consideration as set forth in Article 2.
issued and
to receive
of the
the right
NOW, THEREFORE, in consideration of the foregoing and the
warranties, covenants and agreements contained herein, the parties hereto
follows:
representations,
hereby agree as
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Exhibit D-2 Page 2 of 85
Section 1.1
meanings:
ARTICLE 1.
DEFINITIONS
Definitions. (a) The following terms, as used herein, have the following
"ACC" means the Alaska Corporations Code - AS 10.06.005 - AS 10.06.995.
"Action" means any action, suit or proceeding, arbitral action, goverrrmental inquiry,
criminal prosecution or other investigation.
"Affiliate" means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such Person. For purposes of the
immediately preceding sentence, the term "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
"Antitrust Lawso' means the HSR Act and the rules and regulations promulgated
thereunder, and any other laws that are designed to prohibit, restrict or regulate actions having
the purpose or effect of monopolization or restraint of trade.
'oBurdensome Condition" shall mean a condition and requirement that is (i) not normal
and customary for regulatory approvals requested in connection with similar transactions or
(ii) materially and adversely affects either (l) the business of Parent, the Company, Alaska
Electric Light and Power Company or Snettisham Electric Company, each considered separately,
or the Surviving Corporation and Merger Sub taken as a whole (including, but not limited to, the
reasonable opportunity to recover prudently incurred costs and earn the authorized rate of return,
as applicable) or (2) the ability of Parent to continue to operate the business of the Company and
the Company Subsidiaries, taken as a whole, consistent with past practices.
"Business Day" means any day (other than a Saturday or Sunday) on which banks are
not required or authorized to close in Juneau, Alaska or in New York, New York.
"Cash and Cash Equivalents" means cash, cash equivalents, short-term
marketable securities, deposits, checks received that have not been posted, and
transit.
"Closing Indebtedness" means indebtedness for borrowed money of the Company and
any Company Subsidiary outstanding as of immediately prior to the Closing solely with respect
to (i) CoBank, ACB pursuant to that certain Master Loan Agreement, dated as of August 6,2009,
by and between Alaska Electric Light and Power Company and CoBank, ACB, (ii) the Alaska
Industrial Development and Export Authority pursuant to that certain Unsecured Loan
Agreement, dated as of May 18, 2006, by and between Alaska Electric Light and Power
Company and the Alaska Indushial Development and Export Authority and (iii) Wells Fargo
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Exhibit D-2
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Bank, National Association pursuant to that certain Business Loan Agreement, dated as of
January l, 2012, by and between Alaska Electric Light and Power Company and Wells Fargo
Bank, National Association. For purposes of clarity, Closing Indebtedness shall not include any(l) inter-company indebtedness among the Company and any Company Subsidiary or
(2) amounts owing by the Company or any Company Subsidiary pursuant to the Snettisham
Agreements (as defined in the Disclosure Schedules).
"Closing Net Working Capital" means (i) the aggregate dollar amount of all current
assets of the Company set forth on Schedule2.9 as of immediately prior to the Closing, minus
(ii) the aggregate dollar amount of all current liabilities of the Company set forth on Schedule 2.9
as of immediately prior to the Closing, in each case prepared in accordance with the Company's
historical accounting practices and consistent with GAAP and calculated in the same manner as
set forth on Schedule 2.9.
"Closing Stock Consideration" means the aggregate Stock Consideration (valued at the
Parent Closing Price) payable to Company Shareholders at Closing.
"Code" means the [nternal Revenue Code of 1986, as amended.
"Company Common Stock" means the common stock, no par value, of the Company.
"Company Material Adverse Effect" means any material adverse effect on the business
of the Company and the Company Subsidiaries taken as a whole; provided, however, that none
of the following shall be deemed, either alone or in combination, to constitute, and no change or
effect arising from, affributable to or relating to any of the following shall be taken into account
in determining whether there has been a Company Material Adverse Effect: (i) the negotiation,
execution, delivery, public announcement or pendency of this Agreement or any of the
transactions contemplated herein; (ii) conditions affecting the industry in which the Company
operates or participates, the U.S. economy or financial markets or any foreign markets or any
foreign economy or financial markets in any location where the Company has material
operations or sales, except to the extent any such condition has a substantially disproportionate
effect on the Company relative to other Persons principally engaged in the same industry as the
Company; (iii) compliance with the terms of, or the taking of any action required by, this
Agreement, or otherwise taken with the consent of Parent; (iv) any breach by Parent or Merger
Sub of this Agreement or the Confidentiality Agreement; (v) the taking of any action by Parent
or any of Parent's Affiliates; (vi) any change in GAAP; (vii) any change in applicable laws,
except to the extent any such condition has a substantially disproportionate effect on the
Company relative to other Persons principally engaged in the same industry as the Company,
(viii) any acts of God, calamities, acts of war or terrorism, or national or international political or
social conditions, except to the extent any such condition has a substantially disproportionate
effect on the Company relative to other Persons principally engaged in the same industry as the
Company; (ix) any action required to be taken under applicable laws; or (x) any failure in and of
itself (as distinguished from any change or effect giving rise to or contributing to such failure) by
the Company to meet any projections or forecasts for any period.
"Company Shareholders" means the holders of Company Common Stock.
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Exhibit D-2
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"Company Subsidiary" means a Subsidiary of the Company.
"Disclosure Schedule" means the Disclosure Schedule that has been delivered by the
Company to Parent on the date of this Agreement and as may be updated and amended pursuant
to Section 9.1I through the Closing Date.
"Dissenting Shares" means shares of Company Common Stock outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor of approval of the
principal terms of the Merger and who is entitled to demand and properly demands dissenters'
rights for such Company Shares in accordance with the ACC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Fund" means the escrow fund established pursuant to the Escrow Agreement.
"Escrow Participants" means those Persons who hold shares of Company Common
Stock (other than Dissenting Shares) immediately prior to the Effective Time.
"Escrow Participation Percentage" means, with respect to an Escrow Participant, the
percentage corresponding to the fraction: (i) having a numerator equal to the sum of the
aggregate amount of Stock Consideration (valued at the Parent Closing Price) distributable to
such Escrow Participant pursuant to Section 2.3 (prior to deducting any sums contributed to the
Escrow Fund therefrom on behalf of such Escrow Participant); and (ii) having a denominator
equal to the sum of the aggregate amount of Stock Consideration (valued at the Parent Closing
Price) described in clause (i) above with respect to all Escrow Participants.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" means the ratio obtained by dividing the Per Share Amount by
(i) $21.48 if the Parent Closing Price is less than or equal to $21.48, (ii) the Parent Closing Price,
if the Parent Closing Price is greater than $21.48 and less than $34.30 or (iii) $34.30 if the Parent
Closing Price is greater than or equal to $34.30.
"Fully Diluted Share Number" means the aggregate number of shares of Company
Common Stock outstanding immediately prior to the Effective Time.
"GAAP" means generally accepted accounting principles in the United States.
"Indemnified Taxes" means all liabilities for Taxes (or the nonpayment thereof) of the
Company or any Company Subsidiary for any Pre-Closing Tax Period (determined, with respect
to any Straddle Period, in the manner provided by Section s.ll(c)) to the extent such Taxes
exceed the amount, if any, reserved for such Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) on the face of the
Closing Date Statement (rather than in any notes thereto) and taken into account in the
determination of Final Closing Net Working Capital; provided, however, Indemnified Taxes
shall not include (i) Transfer Taxes and (ii) any Taxes attributable to any transaction engaged in
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Exhibit D-2
sd-625790
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by Parent or any Affiliate thereof on the Closing Date after the Closing that is not specifically
contemplated by this Agreement or that is not in the ordinary course of business.
"IPUC" means the Idaho Public Utilities Commission.
"IRS'means the United States lnternal Revenue Service.
"Knowledge" means, (i) with respect to the Company and its Subsidiaries, the actual
knowledge after due inquiry of any executive officer of the Company and (ii) with respect to
Parent and its Subsidiaries, including the Merger Sub or the Surviving Corporation, the actual
knowledge after due inquiry of any executive officer of Parent
"Merger Consideration" means $170,000,000, (i) increased by the amount of Cash and
Cash Equivalents of the Company and any Company Subsidiary as of immediately prior to the
Closing (prior to the payment of any Transaction Expenses), (ii) deueased by the amount of
Closing Indebtedness, (iii) decreased by the amount of Transaction Expenses, (iv) decreasedby
the Representative Reimbursement Amount, (v) if the Estimated Closing Net Working Capital
exceeds the Target Net Working Capital, increased by the amount of such excess, and (vi) if the
Target Net Working Capital exceeds the Estimated Closing Net Working Capital, deueased by
the amount of such excess.
"MPSC" means the Public Service Commission of the State of Montana.
"OPUC" means the Public Utility Commission of Oregon.
"Parent Closing Price" means the arithmetic average of the 4:00 p.m. Eastem Time
closing sale prices of Parent Common Stock reported on the New York Stock Exchange
composite tape for the ten (10) consecutive trading days immediately preceding but not including
the trading day prior to the Closing Date, as adjusted for any Parent Adjustment Event.
"Parent Common Stock" means Parent's common stock, no par value.
"Paying Agent" mean the Person authorized to receive Letters of Transmittal and to act
as paying agent under this Agreement, which Person shall be designated by the Parent and
reasonably acceptable to the Company pursuant to an agreement entered into at least twenty five
(25) Business Days prior to Closing between the Paying Agent and Parent in a form reasonably
acceptable to the Company (the "Paying Agent Agreement").
"Per Share Amount" means the amount determined by dividing (a) the Merger
Consideration by (b) the Fully Diluted Share Number.
"Person" means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"Pre-Closing Tax Period" means any taxable period ending at the end of or before the
Closing Date and the portion through the end of the Closing Date for any Straddle Period.
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"Principal Documents" means (i) this Agreement, (ii) the Escrow Agreement, (iii) each
agreement, instrument or document attached as an exhibit to this Agreement and (iv) each other
agreement, certificate, document and instrument to be executed by any of the parties at or prior
to the Closing pursuant to this Agreement.
"Regulatory Laws" means any law or any binding agreement issued or entered by or
with any govemmental entity relating to the regulation of Parent, the Company, their respective
Subsidiaries, or the transactions contemplated by this Agreement.
"Requisite Shareholders" means Company Shareholders holding at least two-thirds of
all shares of outstanding Company Common Stock.
(6SEC" means the Securities and Exchange Commission.
"Straddle Period" means any taxable period that includes (but does not end on) the
Closing Date.
"Subsidiary" means any corporation, partnership, Iimited liability company, joint
venture or other legal entity of which an entity (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, fiffy percent (50%) or more of the stock or other equity
interests the holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation, partnership, limited liability company,
joint venture or other legal entity.
"Target Net Working Capital" means $1,500,000.
"Tax" or "Taxes" means any and all federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated
or other tax or similar levy, fee, impost duty or charge of whatever kind (including any interest,
penalty or addition to the tax imposed in connection therewith or with respect thereto).
"Tax Return" means any return, report, information statement or other documentation,
including any schedule or attachment thereto and any amendment thereof, filed or maintained, or
required to be filed or maintained, in connection with the calculation, determination, assessment,
claim for refund, payment or collection of any Tax and shall include any amended returns
required as a result of examination adjustments made by any governmental Tax authority.
"Total Consideration" means the sum of the Merger
Representative Reimbursement Amount.
plus the
"Transaction Expenses" means all out-of-pocket fees and expenses payable by the
Company as of the Closing to brokers, financial advisors, accountants or legal advisors for
services performed in connection with the negotiation, execution and delivery of this Agreement
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Exhibit D-2
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and the consummation of the transactions contemplated hereby, but only to the extent that any
such fees and expenses remain unpaid as of immediately prior to the Closing.
"Transfer Taxes" means any statutory, governmental, federal, state, local, municipal,
foreign and other transfer, documentary, real estate transfer, mortgage recording, sales, use,
stamp, registration, value-added and other similar Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest) incurred in connection
with the consummation of the transactions contemplated by this Agreement.
*WIJTC" means the Washington Utilities and Transportation Commission.
(b) Each of the following terms is defined in the Section set forth opposite
such term:
Term
Aggregate D istribution Amount
Aggregate Escrow Balance
Aggregate Pending Claim Amount
Agreement
Articles of Merger
Audit Firm
Benefit Plans
Claimed Amount
Closing
Closing Date
Closing Date Statement
Company
Company Balance Sheet
Company Employees
Company Financial Statements
Company IP Rights
Company Plans and Arrangements
Company Required Govemmental Approvals
Company Retums
Company Stock Certifi cates
Confi dentiality Agreement
Contested Amount
Continuation Period
Damages
Deferred Compensation Plan
Dispute Notice
Dissenting Holders
DOJ
Effective Time
Environment
Environmental Law
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Exhibit D-2
Section
Section 8.8(e)
Section 8.8(e)
Section 8.8(e)
Preamble
Section 2.2(a)
Section 2.8(d)
Section 3.19(0
Section 8.8(a)
Section 2.2
Section 2.2
Section 2.8(b)
Preamble
Section 3.5
Section 3.19(c)
Section 3.5
Section 3.8(a)
Section 5.9(a)
Section 3.24
Section 3.18(a)
Section 2.a@)
Section 5.2
Section 8.8O)
Section 5.9(a)
Section 8.2
Section 3.19(i)
Section 2.8(d)
Section 2.8(e)
Section 5.5(a)
Section 2.2
Section 3.20(b)
Section 3.20(b)
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Page 8 of 85
Term
Escrow Agreement
Escrow Amount
Estimated Closing Net Working Capital
Exchange Fund
Expiration Date
FERC
Final Closing Net Working Capital
FTC
Hazardous Materials
HSR Act
Indemnification Claim
Indemnified Parties
Information Statement
Letter of Transmittal
Merger
Merger Sub
Notice of Indemnification Claim
Parent
Parent Adjustment Event
Parent Required Governmental Approvals
Parent SEC Documents
Parent Stock Certificate
Paying Agent Agreement
Pre-Closing Distributions
Pre-Closing Period
Pre-Closing Tax Contest
Pre-Closing Tax Return
RCA
Registration Statement
Representative Reimbursement Amount
Representative Reimbursement Fund
Response Notice
Securities Act
Shareholder Dishibutions
Shareholder Meeting
Shareholders' Representative
Significant Contract
Stock Consideration
Surviving Corporation
Tax Contest
Tax Sharing Agreement
Third-Party Claim
Trademarks
Union
Unresolved Escrow Claim
Section
Recitals
Section 2.5
Section 2.8(a)
Section 2.4(d)
Section 8.1
Section 5.5(a)
Section 2.8(b)
Section 5.5(a)
Section 3.20(b)
Section 3.24
Section 8.8(a)
Section 5.8(a)
Section 5.7(a)
Section 2.a@)
Recitals
Preamble
Section 8.8(a)
Preamble
Section 2.6
Section 4.3
Section 4.7
Section 2.4(e)
Section I .l (a)
Section 5.12
Section 5.1
Section 5.1 l(b)
Section 5.1l(a)
Section 3.24
Section 5.7(a)
Section 9.1(b)
Section 9.1(b)
Section 8.8(b)
Section 4.7
Section 2.4(e)
Section 5.2
Section 9.1(a)
Section 3.15(a)
Section 2.3
Section 2.1(a)
Section 5.1l(b)
Section 3.18(e)
Section 8.5
Section 3.8(a)
Section 3.19(c)
Section 8.8(e)
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Exhibit D-2
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Page I of 85
Term Section
Section 3.19(d)WARN
ARTICLE 2.
THE MERGER
Section 2.1 Merger of Merger Sub into the Company.
(a) Upon the terms and subject to the provisions set forth in this Agreement,
at the Effective Time, Merger Sub shall be merged with and into the Company. By virtue of the
Merger, at the Effective Time, the separate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation in the Merger (the "Surviving
Corporation").
(b) The Merger shall have the effects set forth in this Agreement and in the
applicable provisions of the ACC. The Articles of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to ExhibitA and the bylaws
of the Surviving Corporation shall be amended and restated as of the Effective Time to conform
to the bylaws of Merger Sub as in effect immediately prior to the Effective Time. The directors
and officers of the Surviving Corporation immediately after the Effective Time shall be the
respective individuals who were directors and officers of Merger Sub immediately prior to the
Effective Time.
Section 2.2 Closing; Effective Time.
(a) The consummation of the transactions contemplated by this Agreement
(the "Closing") shall take place as soon as practicable, but no later than two Business Days after
the satisfaction or waiver of the last of the conditions set forth in Article 6 to be satisfied or
waived (other than those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of such conditions), unless the parties hereto otherwise agree
in writing. The Closing shall be held atthe offices of Morrison & FoersterLLP, 12531 High
BluffDrive, Suite 100, San Diego, Califomia 92130, unless the parties hereto otherwise agree in
writing. The date on which the Closing actually takes place is referred to as the "Closing Date."
Articles of Merger substantially in the form attached hereto as Exhibit B (the "Articles of
Merger") will be duly prepared and executed by the parties, and thereafter delivered to the State
of Alaska, Department of Commerce, Community and Economic Development, Division of
Corporations for filing, as provided in the ACC, as soon as practicable on the Closing Date. The
Merger will become effective upon the later of the acceptance for filing of the Articles of Merger
by the State of Alaska, Department of Commerce, Community and Economic Development,
Division of Corporations or at such later time as is provided in the Articles of Merger (the
"Effective Time"). The Merger will, from and after the Effective Time, have all the effects
provided by the ACC and other applicable law.
(b) At the Closing, subject to the satisfaction or waiver by the Company of the
conditions set forth in Section 6.2, the Company shall deliver or cause to be delivered to Parent
the following documents:
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sd-625790
Exhibit D-2 Page 10 of85
(i) executed copies of any Principal Documents to which it is a party
or signatory (to the extent not previously delivered);
(ii) a certificate of an officer of the Company certiffing that the
conditions set forth in Section 6.1(a), Section 6.1(b) and Section 6.1(c) have been satisfied;
(iiD a true and complete copy, certified by the Secretary or an Assistant
Secretary of the Company, of the resolutions duly and validly adopted by the Board of Directors
of the Company evidencing its authorization of the execution and delivery of this Agreement and
the other Principal Documents to which the Company is a party or signatory and the
consummation of the transactions contemplated by this Agreement;
(iv) a good standing certificate for the Company from the State of
Alaska, Department of Commerce, Community and Economic Development, Division of
Corporations dated as of a date not earlier than five Business Days prior to the Closing Date; and
(v) a schedule of Escrow Participants that sets forth their respective
Escrow Participation Percentages.
(c) At the Closing, subject to the satisfaction or waiver by Parent of the
conditions set forth in Section 6.1:
(D each of Parent and Merger Sub shall cause to be delivered to the
Company executed copies of any Principal Documents to which it is a party or signatory (to the
extent not previously delivered);
(ii) Parent shall cause to be delivered to the Company a certificate of
an officer of Parent certiffing that the conditions set forth in Section 6.2(a) and Section 6.2(b)
have been satisfied; and
(iii) each of Parent and Merger Sub shall cause to be delivered to the
Company true and complete copies, certified by the Secretary or an Assistant Secretary of each
of Parent and Merger Sub, respectively, of the resolutions duly and validly adopted by the Boards
of Directors of Parent and Merger Sub, respectively, evidencing their respective authorizations of
the execution and delivery of this Agreement and the other Principal Documents to which Parent
and Merger Sub are parties or signatories and the consummation of the transactions
contemplated by this Agreement.
Section 2.3 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any further action on the part of Parent, Merger Sub, the Company, the
Shareholders' Representative, the Paying Agent or any Company Shareholder:
(a) each share of Company Common Stock (other than Dissenting Shares)
shall be canceled and converted into the right to receive (i) the number of shares of Parent
Common Stock equal to one share of Company Common Stock multiplied by the Exchange
Ratio ("Stock Consideration") and (ii) a portion of the Representative Reimbursement Amount
in accordance with Section 9.1(b); and
t0
Exhibit D-2
sd-625790
Page 11 of85
(b) each share of the common stock, no par value, of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share of common stock of
the Surviving Corporation.
Notwithstanding the foregoing, (i) a portion of the Merger Consideration payable to each
Company Shareholder pursuant to this Section 2.3 shall be withheld and placed in the Escrow
Fund pursuant to the provisions of Section 2.5 in an amount equal to the product of (l) such
Company Shareholder's Escrow Participation Percentage multiplied bV Q) the Escrow Amount,
and in the form of Stock Consideration valued in the same fashion as Stock Consideration paid
by Parent to such Company Shareholder at the Closing and (ii) such Company Shareholder's
portion of the Representative Reimbursement Amount shall be withheld and placed in the
Representative Reimbursement Fund in accordance with Section 9.1(b) in an amount equal to the
product of (l) such Company Shareholder's Escrow Participation Percentage multiplied by
(2) the Representative Reimbursement Amount. For Tax pu{poses, each Company Shareholder's
portion of the Representative Reimbursement Amount shall be treated as having been received
and voluntarily set aside by such Company Shareholder.
Section 2.4 Exchange Procedures.
(a) At least twenty (20) Business Days prior to the Closing Date, Parent shall
cause the Paying Agent to mail to each Company Shareholder: (i) a letter of transmittal, the form
of which shall be finalized prior to the Closing and shall be substantially in such form and have
such other provisions as shall reasonably be determined by Parent and reasonably acceptable to
Company (the "Letter of Transmittal") and (ii) instructions for surrendering the certificates of
the shares of Company Common Stock (the "Company Stock Certificates") in exchange for the
payments in accordance herewith. The Letter of Transmittal shall include, without limitation, a
form of certificate, to be completed and signed under penalties of perjury by the Company
Shareholder, if applicable, stating that the Company Shareholder is not a "foreign person," dated
as of the Closing Date and in form and substance as required under Treasury Regulations Section
1.1445-2(b)(2) and as set out in Exhibit C.
(b) Upon surrender to the Paying Agent of its Company Stock Certificate(s),
accompanied by a properly completed Letter of Transmittal, a Company Shareholder will be
entitled to receive promptly after the Effective Time the payments in respect of the shares of
Company Common Stock represented by its Company Stock Certificate(s) in accordance with,
and subject to the terms and conditions ol this Article 2. Until so surrendered, each such
Company Stock Certificate shall represent after the Effective Time, for all purposes, only the
right to receive the Merger Consideration, the Representative Reimbursement Amount, any cash
in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.4(h), and any dividends or
distributions to which such holder is entitled pursuant to Section 2.4(9.
(c) If any portion of the Merger Consideration is to be paid to a Person other
than the Person in whose name a Company Stock Certificate so surrendered is registered, it shall
be a condition to such payment that such Company Stock Certificate shall be properly endorsed
or otherwise be in proper form for transfer and the Person requesting such payment shall inform
the Paying Agent whether any transfer or other similar Taxes are required as a result of such
ll
sd-625790
Exhibit D-2 Page 12 of 85
payment to a Person other than the registered holder of such Company Stock Certificate, or
establish to the reasonable satisfaction of the Paying Agent that such Taxes are not payable. If
such transfer or other similar Taxes are payable pursuant to the preceding sentence, then the
Paying Agent shall withhold and deduct from the Merger Consideration (including Stock
Consideration and cash in lieu of fractional shares of Parent Common Stock) otherwise payable
pursuant to this Agreement to the designated Person other than the registered holder such
amounts as the Paying Agent determines is necessary based on the information supplied by the
registered holder.
(d) After the Effective Time there shall be no further registration or transfers
of shares of Company Common Stock. If, after the Effective Time, Company Stock Certificates
are presented to the Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration and a portion of the Representative Reimbursement Amount in accordance with
the procedures set forth in this Article 2.
(e) At any time following the twelve-month anniversary of the Effective
Time, Parent shall be entitled to require the Paying Agent to deliver to it any remaining portion
of the Merger Consideration, cash in lieu of fractional shares of Parent Common Stock and any
dividends or other distributions with respect to Parent Common Stock payable upon due
surrender of applicable Company Stock Certificates, not distributed to Company Shareholders
that was deposited with the Paying Agent at or after the Effective Time in accordance with
Section 2.4(g), Section 2.4(h) or Section 2.10(d) (the "Exchange Fund") (including any interest
received with respect thereto and other income resulting from investments by the Paying Agent,
as directed by Parent), and Company Shareholders shall be entitled to look only to Parent
(subject to abandoned property, escheat or other similar laws) with respect to the Exchange
Fund, without any interest thereon. Notwithstanding the foregoing, neither Parent nor the Paying
Agent shall be liable to any Company Shareholder for any portion of the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property, escheat or similar
laws.
(0 In the event any Company Stock Certificates shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person claiming such Company
Stock Certificate(s) to be lost, stolen or destroyed and, if required by Parent or the Paying Agent,
the execution of an indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such Company Stock Certificate(s), Parent shall cause the Paying
Agent to issue the Merger Consideration deliverable in respect of the shares of Company
Common Stock represented by such lost, stolen or destroyed Company Stock Certificates.
- (g) No dividends or other distributions with respect to Parent Common Stock
with a record date after the Effective Time shall be paid to the holder of any surrendered
Company Stock Certificate with respect to the shares of Parent Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.4(h) below, and all such dividends, other dishibutions and cash in lieu of
fractional shares of Parent Common Stock payable in connection with Closing Stock
Consideration shall be paid by Parent to the Paying Agent and shall be included in the Exchange
Fund, in each case until the surrender of such Company Stock Certificate in accordance with
t2
Exhibit D-2
sd-625790
Page 13 of85
Section 2.4Q1) below. Subject to the effect of applicable abandoned property, escheat or similar
laws, following surrender of any such Company Stock Certificate there shall be paid to any such
Company Shareholder receiving a certificate for Parent Common Stock (a "Parent Stock
Certificate") representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and the amount of any cash payable in lieu of a fractional share of Parent
Common Stock to which such Company Shareholder is entitled pursuant to Section 2.4(h) below
at Closing, ffid (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock. Parent shall make available to the Paying Agent cash for these purposes, if
necessary. Dividends or other distributions with respect to Parent Common Stock held in the
Escrow Fund with a record date after the Effective Time ("Shareholder Distributions") shall be
(x) deposited by Parent into the Escrow Fund when paid and (y) released to the applicable party
to which the corresponding shares of Parent Common Stock are released from the Escrow
Account in accordance with Section 8.8(e) simultaneously with the release of such shares.
(h) No Parent Stock Certificates representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Company Stock Certificates;
no dividend or distribution by Parent shall relate to such fractional share interests; and such
fractional share interests will not entitle the owner thereof to vote or to any rights as a
shareholder of Parent. In lieu of any such fractional shares, each Company Shareholder of a
Company Stock Certificate who would otherwise have been entitled to receive a fractional share
interest (after aggregating all fractional shares of Parent Stock to be received by such Company
Shareholder) in exchange for such Company Stock Certificate shall receive from the Paying
Agent, Parent or Escrow Agent as applicable, an amount in cash (rounded to the nearest whole
cent) equal to the product obtained by multiplying (i) the fractional share interest to which such
Company Shareholder (after taking into account all shares of Company Common Stock held by
such holder at the Effective Time) would otherwise be entitled bV (ii) the Parent Closing Price.
Parent shall make available to the applicable party cash for these pulposes, if necessary. For
U.S. federal income tax purposes, the amount of any cash consideration paid pursuant to this
Section 2.4(h) in lieu of issuing fractional shares of Parent Common Stock shall be treated as
though such fractional share interests were first delivered to affected Company Shareholders and
then redeemed.
(i) At or prior to the Effective Time, Parent will deposit with the Paying
Agent, and instruct the Paying Agent to timely pay and distribute, sufficient (i) shares of Parent
Common Stock to permit prompt payment of the Closing Stock Consideration and (ii) cash to
permit prompt payment of the cash in lieu of fractional shares of Parent Common Stock payable
in connection with the Closing Stock Consideration.
Section 2.5 Escrow. An amount equal to lUYo of the Total Consideration (the
"Escrow Amount"), all of which shall be in the form of Parent Common Stock valued at the
Parent Closing Price, shall be deposited by Parent with the Escrow Agent into the Escrow Fund
l3
Exhibit D-2
sd-625790
Page 14 of85
on or prior to the Effective Time, and shall be subject to the terms of the Escrow Agreement and
this Agreement.
Section 2.6 Certain Adjustments. If the outstanding shares of Parent Common Stock
as of the date of this Agreement changes into a different number of shares by reason of any
reclassification, recapitalization or combination, stock split, reverse stock split, stock dividend or
rights issued in respect of such stock, or any similar event (any such action, a "Parent
Adjustment Event"), the Exchange Ratio for any payment or issuance occurring simultaneously
with or after such Parent Adjustment Event and the floor and ceiling prices utilized in
determining the Exchange Ratio shall be proportionately adjusted to provide to the Company
Shareholders the same economic effect as contemplated by this Agreement prior to such Parent
Adjustment Event.
Section 2.7 Rights of Dissenting Shareholders.
(a) Notwithstanding anything in this Agreement to the contrary and to the
extent available under the ACC, all Dissenting Shares shall not be converted into, or represent
the right to receive, the Merger Consideration or any portion of the Representative
Reimbursement Amount. Such shareholders shall be entitled to receive payment of the fair value
of Dissenting Shares held by them in accordance with the provisions of AS 10.06.580 of the
ACC, except that all Dissenting Shares held by Company Shareholders who have failed to
perfect or who effectively have withdrawn or lost their rights under AS 10.06.574 of the ACC
shall thereupon be deemed to have been converted into, and to have become exchangeable for, as
of the Effective Time, the right to receive the Merger Consideration and the applicable portion of
the Representative Reimbursement Amount, without any interest thereon, upon surrender, in the
manner provided in Section 2.3, Section 2.4 and Section 9.1(b).
(b) Company shall give Parent (i) prompt notice of any demands for fair value
received by Company, withdrawals of such demands and any other similar instruments served
pursuant to the ACC and received by Company and (ii) the opportunity, in consultation with
Company, to direct all negotiations and proceedings with respect to demands for fair value under
the ACC. Company shall not, except with the prior written consent of Parent, make any payment
with respect to any demands for fair value or offer to settle or seffle any such demands or waive
any failure to timely deliver a demand, subject to Company's legal duties and obligations under
the ACC.
Section 2.8 Closing Balance Sheet.
(a) At least two (2) Business Days prior to the Closing, the Company shall
deliver to Parent an estimated unaudited balance sheet of the Company as of immediately prior to
the Closing, which shall be prepared in accordance with the Company's historical accounting
practices and consistent with GAAP, together with a statement setting forth in reasonable detail
the Company's calculation of the Closing Net Working Capital (the "Estimated Closing Net
Working Capital").
(b) As soon as reasonably practicable after the Closing, but in any event no
later than sixty (60) days thereafter, Parent shall cause to be prepared and delivered to the
t4
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Exhibit D-2 Page 15 of 85
Shareholders' Representative its unaudited balance sheet of the Company as of immediately
prior to the Closing, which shall be prepared in accordance with the Company's historical
accounting practices and consistent with GAAP, together with a statement (the "Closing Date
Statement") setting forth in reasonable detail its calculation of the Closing Net Working Capital
(the "Final Closing Net Working Capital").
(c) Parent shall, and shall cause Parent's Affiliates and its and their
accountants to, make such information, books, records, properties, schedules, analyses, work
papers, personnel and resources available to the Shareholders' Representative as may be
reasonably necessary to enable the Shareholders' Representative to review the Closing Date
Statement and related underlying calculations.
(d) In the event that the Shareholders' Representative disputes the calculation
of the Final Closing Net Working Capital set forth in the Closing Date Statement, the
Shareholders' Representative shall notiff Parent in writing (the "Dispute Notice") of the
amount, nature and basis of such dispute, within forty-five (45) days after delivery of the Closing
Date Statement. In the event of such a dispute, Parent and the Shareholders' Representative shall
first use good faith efforts to resolve such dispute among themselves. If Parent and the
Shareholders' Representative are unable to resolve the dispute within thirty (30) days after
delivery of the Dispute Notice, then any remaining items in dispute shall be submitted to a "Big
Four" accounting firm jointly chosen by Parent and the Shareholders' Representative (the "Audit
Firm"). If such disagreement and the determination of the Final Closing Net Working Capital is
submitted to the Audit Firm for resolution, then (i) the Shareholders' Representative and Parent
shall execute any agreement(s) required by the Audit Firm to accept their engagement pursuant
to this Section 2.8(d), (ii) Parent shall promptly furnish or cause to be furnished to the Audit
Firm such work papers and other documents and information relating to the computation of the
Final Closing Net Working Capital as the Audit Firm may reasonably request and are available
to Parent or any of its Affiliates, (iii) each Party shall be afforded the opportunity to present to
such Audit Firm, with a copy to the other Party, any other written material relating to the
computation of the Final Closing Net Working Capital, (iv) the Audit Firm shall review only
those items that are in dispute, (v) the Audit Firm shall not attribute a value to any single
disputed amount greater than the greatest amount proposed by either party nor an amount less
than the least amount proposed by either party, and (vi) the Shareholders' Representative, on the
one hand, and Parent, on the other hand, shall each bear fifty percent (50%) ofthe fees and costs
of the Audit Firm for such determination. The written decision of the Audit Firm shall be
rendered within no more than sixty (60) days from the date that the matter is referred to such
firm and shall be final and binding on the parties hereto and, in the absence of fraud or manifest
error, shall not be subject to dispute or review. Following any such dispute resolution (whether
by mutual agreement of the parties or by written decision of the Audit Firm), the Final Closing
Net Working Capital (as determined in such dispute resolution) shall be determined final.
(e) Immediately upon the expiration of the forry-five (45) day period for
giving the Dispute Notice, if no such notice is given, or upon notification by the Shareholders'
Representative to Parent that no such notice will be given, or immediately upon the resolution of
disputes, if any, pursuant to this Section 2.8, Parent's calculations set forth in the Closing Date
Statement or Audit Firm's calculations, as applicable, shall be final and binding on the parties
15
Exhibit D-2
sd-625790
Page 16of85
hereto and shall not be subject to dispute or review. In the event that the Final Closing Net
Working Capital is less than the Estimated Closing Net Working Capital, such amount shall be
repaid on a dollar-for-dollar basis by the Shareholders' Representative to Parent out of the
Escrow Fund by the release of shares of Parent Common Stock (valued at the Parent Closing
Price) held in the Escrow Fund to Parent. In the event that the Final Closing Net Working
Capital is greater than the Estimated Closing Net Working Capital, such amount shall be paid on
a dollar-for-dollar basis by Parent to the Company Shareholders (other than Dissenting
Shareholders) in the form of Stock Consideration valued in the same fashion as Stock
Consideration paid by Parent to each Company Shareholder at the Closing.
Section 2.9 Withholding. Each of Parent, the Surviving Corporation and the Paying
Agent shall be entitled to deduct and withhold from any consideration otherwise payable under
this Agreement to any holder or former holder of Company Common Stock or any other
recipient of any payment under this Agreement, such amounts as Parent, the Surviving
Corporation or the Paying Agent reasonably determines are required to be deducted and withheld
from such payment under the Code or other applicable Tax law. Notwithstanding the foregoing,
Parent, the Surviving Corporation and the Paying Agent, as the case may be, shall notify the
Shareholders' Representative of any intent to withhold any amount from any payment hereunder
prior to withholding any such amounts therefrom and the parties shall work together in good
faith to take such commercially reasonable actions as may be necessary or advisable to avoid or
otherwise mitigate any such withholding. If Parent, the Surviving Corporation or the Paying
Agent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes
of this Agreement as having been paid to the Company Shareholder or other recipient of
payments in respect of which Parent, the Surviving Corporation or the Paying Agent, as the case
may be, made such deduction and withholding. Parent, the Surviving Corporation and the Paying
Agent shall take all action that may be necessary to ensure that any such amounts so withheld are
promptly and properly remitted to the appropriate governmental Tax authority.
Section 2.10 Payment of Merger Consideration. At the Effective Time, Parent shall:
(a) Deposit the Escrow Amount with the Escrow Agent in accordance with
Section 2.5, to be disbursed in accordance with the terms of this Agreement and the Escrow
Agreement.
(b) Deposit the Representative Reimbursement Amount by wire transfer of
immediately available funds with the Shareholders' Representative, in accordance with Section
9.1(b), to be disbursed in accordance with the terms of this Agreement.
(c) Pay, on behalf of the Company, all Transaction Expenses by wire transfer
of immediately available funds, which amounts shall be set forth on a schedule that the Company
shall deliver to Parent and the Shareholders' Representative not less than two (2) Business Days
prior to the Closing Date.
(d) Deposit shares of Parent Common Stock and cash (by wire transfer of
immediately available funds) with the Paying Agent in accordance with Section 2.4(i) sufficient
to pay (i) the Merger Consideration (less the Escrow Amount) and (ii) cash in lieu of fractional
t6
Exhibit D-2
sd-625790
Page 17 of85
shares of Parent Common Stock payable in connection with the Closing Stock Consideration, to
be disbursed in accordance with the terms of this Agreement and the Paying Agent Agreement.
Section 2.11 Further Action. If, at any time after the Effective Time, any further
action is necessary to vest the Surviving Corporation with full right, title and possession of and
to all rights and property of Merger Sub and the Company, the officers and directors of the
Surviving Corporation and Parent shall take, and shall be fully authorized (in the name of Merger
Sub, in the name of the Company and otherwise) to take, such action.
ARTICLE 3.
REPRESENTATIONS AI\iD WARRANTIES OF TIIE COMPAIIY
The Company represents and warrants to Parent and Merger Sub that, except as disclosed
in the Disclosure Schedule:
Section 3.1 Due Organization; Organizational Documents. The Company is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Alaska and has all necessary corporate power and authority to conduct its business in the manner
in which its business is currently being conducted. The Company is qualified to do business as a
foreign corporation under the laws of all jurisdictions where the nature of its business requires
such qualification, except where the failure to be so qualified would not have a Company
Material Adverse Effect. The Company has made available to Parent copies of the current
organizational documents of the Company, including all amendments thereto.
Section 3.2 Authority; Binding Nature of Agreement; Non-Contravention. The
Company has the requisite corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated by this Agreement. The execution and delivery of this
Agreement have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement, assuming it constitutes the valid and binding obligation of the other
parties hereto, constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to: (a) laws of general application relating to
bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies. Neither the execution and delivery
of this Agreement by the Company nor the consummation by the Company of the Merger will:
(i) result in a violation by the Company of any provision of the Articles of Incorporation and
bylaws of the Company, each as amended; (ii) other than the consents or approvals set forth on
Section 3.2 of the Disclosure Schedule (the "Company Consents") result in a material violation
by the Company or any Company Subsidiary of any material provision of any Significant
Contract or the termination of any Significant Contract; or (iii) result in a violation by the
Company or any Company Subsidiary of any law or governmental regulation applicable to the
Company, except in each case where such violation or termination would not have a Company
Material Adverse Effect.
Section 3.3 Subsidiaries. Except as set forth on Section 3.3 of the Disclosure
Schedule, the Company does not directly or indirectly own, or hold any rights to acquire, any
shares of capital stock or any other securities or interests in any other Person. Each Company
t7
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Exhibit D-2 Page 18 of85
Subsidiary has been duly organized, is validly existing in good standing under the laws of the
jurisdiction of its organization or formation, has the corporate power and authority to own its
assets and to conduct its business as presently being conducted. Each Company Subsidiary is
qualified to do business as a foreign corporation under the laws of all jurisdictions where the
nature of its business requires such qualification, except where the failure to be so qualified
would not have a Company Material Adverse Effect.
Section 3.4 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of 600,000 shares of
Company Common Stock, 200,000 shares of Voting Preferred Stock, no par value, and 200,000
shares of Preferred Stock, no par value. As of the date of this Agreement, 114,504 shares of
Company Common Stock, no shares of the Company's Voting Preferred Stock and no shares of
the Company's Preferred Stock are issued and outstanding. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. The shareholder register provided to Parent by the Company accurately reflects
the registered holders of the Company Common Stock and the number of shares of Company
Common Stock registered in the name of each such holder as of October 25,2013.
(b) As of the date of this Agreement, there are no (i) outstanding options,
warrants, stock options or rights to acquire from the Company any shares of the capital stock or
other equity securities of the Company; or (ii) outstanding securities of the Company that are
convertible into any shares of capital stock or other equity securities of the Company.
(c) All of the issued and outstanding capital stock of each Company
Subsidiary has been duly authorized and validly issued, are fully paid and non-assessable. The
Company owns directly all of the issued and outstanding capital stock of each Company
Subsidiary. As of the date of this Agreement, there are no (i) outstanding options, warrants,
stock options or rights to acquire from any Company Subsidiary any shares of the capital stock
or other equity securities of such Company Subsidiary; or (ii) outstanding securities of any
Company Subsidiary that are convertible into any shares of capital stock or other equity
securities of such Company Subsidiary.
Section 3.5 Financial Statements. The Company has made available to Parent or
Parent's legal or financial advisor: (i) the consolidated audited balance sheet of the Company as
of December 31, 2012 and the related audited consolidated statements of operations,
shareholders' equity and cash flows of the Company for the year then ended; and (ii) the
consolidated unaudited balance sheet of the Company as of September 30, 201 3 (the "Company
Balance Sheet") and the related consolidated unaudited statements of operations of the
Company for the nine months then ended (the financial statements referred to in clauses (i) and
(ii) of this sentence, the "Company Financial Statements"). Except as set forth on Section 3.5
of the Disclosure Schedule, the Company Financial Statements fairly present, in all material
respects and in accordance with GAAP, the financial condition of the Company as of the dates
indicated therein and the results of operations of the Company for the periods indicated therein,
except that the Company Financial Statements referenced in clause (ii) of the preceding sentence
are subject to normal year-end audit adjustments and do not contain footnotes.
l8
Exhibit O-2
sd-625790
Page 19of85
Section 3.6 Undisclosed Liabilities. Except as set forth on Section 3.6 of the
Disclosure Schedule, as of the date of this Agreement, neither the Company nor any Company
Subsidiary has any liabilities of a nature required to be disclosed on a balance sheet or in the
related notes to the financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the Company, except for (i) liabilities shown on the
Company Balance Sheet; (ii) liabilities that have arisen in the ordinary course of business
consistent with past practice since the date of the Company Balance Sheet; or (iii) fees and
expenses to brokers, financial advisors, accountants or legal advisors for services performed in
connection with the negotiation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (and constituting either Transaction
Expenses or Pre-Closing Distributions).
Section 3.7 Legal Proceedings; Orders. As of the date of this Agreement, (i) there is
no lawsuit or other legal proceeding pending (or, to the Knowledge of the Company, being
overtly threatened in writing) against the Company or any Company Subsidiary before any court
of competent jurisdiction or arbitrator, and (ii) there are no orders, judgments or decrees of, or
before, any govemmental entity with respect to the Company or any Company Subsidiary.
Section3.8 IntellectualProperty.
(a) Section 3.8(a) of the Disclosure Schedule sets forth all of the following
that are owned by the Company or any Company Subsidiary as of the date of this Agreement
(collectively, the "Company IP Rights"): (i) trademarks, service marks, trade names, brand
names, logos, trade dress, design rights and other similar designations of source, sponsorship,
association or origin, together with the goodwill connected with the use of and symbolizedby,
and all registrations, applications and renewals for, any of the foregoing ("Trademark ");
(ii) internet domain names, whether or not Trademarks, registered by any authorized private
registrar or governmental authority, web addresses, web pages, websites and URLs; (iii) works
of authorship, expressions, designs and design registrations, whether or not copyrightable,
including copyrights, author, performer, moral and neighboring rights, and all registrations,
applications for registration, and renewals for any of the foregoing; (iv) patents (including all
reissues, divisionals, provisionals, continuations and continuations-in-part, re-examinations,
renewals, substitutions and extensions thereof), patent applications, and other patent rights and
any other governmental authority-issued indicia of invention ownership (including inventor's
certificates, petty patents and patent utility models) and (v) software and firmware that has been
intemally developed by the Company or any Company Subsidiary, including source code, object
code, application programming interfaces, architecture, and other related specifications and
documentation. Each of the Company IP Rights is owned solely by the Company or a Company
Subsidiary. As of the date of this Agreement, neither the Company nor any Company Subsidiary
has received any written communications challenging, or, to the Company's Knowledge,
threatening to challenge the right, title or interest of the Company or any Company Subsidiary in
or to the Company IP Rights. Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated by this
Agreement will result in any material limitation on the Company's or any Company Subsidiary's
right, title or interest in or to any Company IP Rights.
t9
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Page 20 of 85
(b) To the Knowledge of the Company, as of the date of this Agreement, no
Company IP Rights are being materially infringed or misappropriated by any third party.
(c) To the Knowledge of the Company, as of the date of this Agreement, no
employee of the Company or any Company Subsidiary has misappropriated the trade secrets of
any other Person in the course of the employment of such employee with the Company or any
Company Subsidiary.
Section 3.9 Indebtedness with Affiliates. As of the date of this Agreement, except as
set forth on Section 3.9 of the Disclosure Schedule, neither the Company nor any Company
Subsidiary is indebted to any director, oflicer or employee of the Company or of any Company
Subsidiary (except for amounts due as salaries and bonuses under employment agreements or
employee benefit plans and amounts payable in reimbursement of expenses), and no such
director, officer or employee is indebted to the Company or any Company Subsidiary.
Section 3.10 Absence of Changes. Between the date of the Company Balance Sheet
and the date of this Agreement: (a) no event has occurred that has had a Company Material
Adverse Effect; (b) the Company has not declared or paid any dividend in respect of any shares
of its capital stock; (c) the Company has not issued any shares of its capital stock or any
warrants, rights or options to acquire any shares of its capital stock; (d) neither the Company nor
any Company Subsidiary has incurred, outside the ordinary course of business, any material
liability of the type required to be reflected in the liabilities column of a balance sheet prepared
in accordance with GAAP, except for fees and expenses to brokers, financial advisors,
accountants or legal advisors for services performed in connection with the negotiation,
execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby (and constituting either Transaction Expenses or Pre-Closing
Distributions); (e) neither the Company nor any Company Subsidiary has acquired or sold any
material assets, except in the ordinary course of business; (f) there has been no material increase
in or material modification of the compensation or benefits payable by the Company or any
Company Subsidiary to any of their respective current employees; and (g) neither the Company
nor any Company Subsidiary has entered into any material transaction or series of related
transactions outside the ordinary course ofbusiness.
Section 3.11 Corporate Documents. The Articles of Incorporation and bylaws of the
Company and all amendments of each as of the date of this Agreement are in the form made
available to Parent or Parent's legal or financial advisor. Except as set forth on Section 3.1I of
the Disclosure Schedule, the copy of the minute books of the Company made available to Parent
or Parent's legal or financial advisor contains minutes of all meetings of the directors and
shareholders of the Company and all actions by written consent without a meeting of the
directors and the shareholders of the Company since January 1,2009.
Section 3.12 Tangible Personal Property. The Company or its applicable Company
Subsidiary has good title to all of the items of tangible personal property reflected on the
Company Balance Sheet as owned by the Company or such Company Subsidiary, except for
assets disposed of since the date of the Company Balance Sheet in the ordinary course of
business, and all tangible personal property owned by the Company or any Company Subsidiary
is owned free and clear of all liens, except for: (a) liens set forth on Section 3.12 of the
20
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Exhibit D-2 Page21 of85
Disclosure Schedule, (b) liens, other than any liens created pursuant to a security agreement or
similar agreement entered into by the Company, which do not individually or in the aggregate
materially detract from the value, or materially interfere with the present use, of the Company's
or any Company Subsidiary's tangible personal property considered as a whole; and (c) liens for
taxes not yet due and payable. The tangible personal properly of the Company and any
Company Subsidiary is in good repair and working order, except as would not, individually or in
the aggregate, have a Company Material Adverse Effect.
Section 3.13 Real Property; Lease Agreements. Except as set forth in Section 3.13 of
the Disclosure Schedule the Company or its applicable Company Subsidiary has (a) good and
insurable title or (b) good and valid leasehold interest in and to each material parcel of real
property owned or leased, as applicable, by the Company or any Company Subsidiary, subject to
any liens or exceptions (other than liens arising pursuant to any mortgages, deeds of trust or
similar instruments granted by the Company, which shall be set forth in Section 3.13 of the
Disclosure Schedule) that would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor the applicable Company
Subsidiary has received written notice of any material condemnation, rezoning or taking actions
pending, or to the Knowledge of the Company, threatened, with respect to any material parcel of
owned real property.
Section 3.14 Receivables. All accounts, notes receivable and other receivables arising
out of or relating to the business of the Company or any Company Subsidiary as of the Company
Balance Sheet Date have been included in the Company Balance Sheet and all reserves for
doubtful accounts reflected thereon were taken in accordance with GAAP.
Section3.l5 Contracts.
(a) Section 3.15(a) of the Disclosure Schedule identifies each Significant
Contract that is in effect as of the date of this Agreement. For purposes of this
Agreement, "significant Contract" means a legally binding, executory contract to which the
Company or a Company Subsidiary is a party: (i) for the future purchase, exchange,
transmission or sale of electric power in any form, including energy, capacity or any ancillary
services; (ii) dealing with interconnection matters; (iii) that are intended to benefit from or
reduce or eliminate the risk of fluctuations in interest rates or the price of commodities, including
electric power, including energy, capacity or any ancillary services; (iv) pursuant to which the
Company or any Company Subsidiary has an ownership interest in a partnership, joint venture or
limited liability company; (v) pursuant to which the Company leases any real property; (vi)
under which future expenditures required to be made by the Company or a Company Subsidiary
between the date of this Agreement and the first anniversary of such date (other than pursuant to
contracts with or for the benefit of Company Employees that can be terminated by the Company
or any Company Subsidiary on notice of 60 days or less without penalty or liability for severance
or notice pay) exceed $100,000; (vii) pursuant to which the Company or a Company Subsidiary
has licensed to or from any third party any patent, trademark registration, service mark
registration, trade name or copyright registration, other than pursuant to any nonexclusive license
that is available to the public generally; (viii) evidencing indebtedness of the Company or any
Company Subsidiary for, or a guarantee by the Company or a Company Subsidiary of
2l
sd-625790
Exhibit D-2 Page 22 of 85
indebtedness for, borrowed money in the amount of $100,000 or more; (ix) containing covenants
materially limiting the development, production or distribution of the Company's or any
Company Subsidiary's products or services; or (x) constituting a collective bargaining contract
or a written employment, management, severance or change in control contract with any director
or officer of the Company, other than offer letters in the Company's or any Company
Subsidiary's standard form. The Company has made available to Parent or Parent's legal or
financial advisor a copy of each Significant Contract identified in Section 3.15(a) of the
Disclosure Schedule,
(b) Each Significant Contract identified in Section 3.15(a) of the Disclosure
Schedule is valid and in full force and effect as of the date of this Agreement. To the Knowledge
of the Company, no party is in material breach or in material default under any such Significant
Contract as of the date of this Agreement.
Section 3.16 Compliance with Laws. The Company and each Company Subsidiary is
in compliance with all applicable laws and govemmental regulations with which compliance is
necessary for the operation of the business of the Company or such Company Subsidiary, as
applicable, as currently conducted, except where the failure to be in compliance would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.17 Permits. The Company and each Company Subsidiary holds all material
permits, approvals, licenses and registrations from U.S. federal, state and local governmental
authorities that are necessary for the conduct of its business as currently conducted, including,
without limitation, each of the foregoing from such governmental authorities exercising
regulatory jurisdiction over the Company and its subsidiary as a public utility. All such permits,
approvals, licenses and registrations are valid and in full force and effect, except as would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.18 Tax Matters.
(a) Each of the Company and the Company Subsidiaries has filed all Tax
Returns it was required to file with respect to any taxable period ending after January 1,2009
and such Tax Returns were true, correct and complete in all material respects and were prepared
in material compliance with applicable law (the "Company Returns"). All material Taxes due
and owing by the Company or any Company Subsidiary (whether or not shown on any
Company Return) have been paid. All Taxes that the Company or any Company Subsidiary has
been required to collect or withhold have been duly and timely collected or withheld and, if and
when required under applicable law, timely paid to the proper governmental Tax authority, and
the Company and the Company Subsidiaries have complied in all material respects with all
information reporting and other Tax laws relating to such withholding requirements.
(b) No audit or administrative or judicial Tax proceedings are pending or
being conducted with respect to the Company or any Company Subsidiary, and neither the
Company nor any Company Subsidiary has been notified in writing by any governmental Tax
authority that any such audit or proceeding is contemplated or pending, and since January l,
2009 no notice of deficiency or proposed adjustment for any amount of Tax has been received by
the Company or any Company Subsidiary. No waiver or agreement by or with respect to the
22
sd-625790
Exhibit D-2 Page 23 of 85
Company or any Company Subsidiary is in force as of the date of this Agreement for the waiver
of any stafute of limitations on, or extension of time for the collection or assessment of, any Tax.
Neither the Company nor any Company Subsidiary currently is the beneficiary of any extension
of time within which to file any Tax Return. No written claim has been received by the
Company or any Company Subsidiary from any governmental Tax authority in a jurisdiction
where the Company or any Company Subsidiary does not file Tax Returns that the Company or
any Company Subsidiary is or may be subject to taxation by that jurisdiction. There are no liens
for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company or
any Company Subsidiary. Section 3.18(b) of the Disclosure Schedule lists all income Tax
Returns filed with respect to the Company or the Company Subsidiaries for taxable periods
ending after January 1,2009 and indicates those Tax Returns that have been audited. The
Company has delivered to Parent correct and complete copies of all income Tax Returns of, and
examination reports and statements of deficiencies assessed against or agreed to by, the
Company or any Company Subsidiary filed or received since January 1,2009.
(c) Neither the Company nor any Company Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or could reasonably be expected to
result, separately or in the aggregate, in the payment of any "excess parachute payment" within
the meaning of Section 280G of the Code (or any corresponding provision of state, local or
foreign Tax law) without regard to Subsection (b)(a) thereof. There is no written or unwritten
agreement, arrangement or other contract by which the Company or any Company Subsidiary is
bound to compensate any individual for excise Taxes paid pursuant to Section 4999 of the Code.
(d) There is no application pending as of the date of this Agreement with any
governmental Tax authority requesting permission for any change in any accounting method of
the Company or any Company Subsidiary, and the IRS has not issued in writing any proposal
pending as of the date of this Agreement regarding any such adjustment or change in accounting
method. Neither the Company nor any Company Subsidiary will be required to include any item
of income or gain in, or exclude any item of deduction or loss from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in
method of accounting made by the Company or any Company Subsidiary; (ii) closing agreement
as described in Section 7l2l of the Code (or any corresponding provision of state, local or
foreign Tax law) entered into by the Company or any Company Subsidiary; (iii) excess loss
account with respect to any Company Subsidiary described in Treasury Regulations promulgated
under Section 1502 of the Code (or any corresponding provision of state, local or foreign Tax
law); (iv) installment sale or open transaction disposition entered into by the Company or any
Company Subsidiary; (v) prepaid amounts received by the Company or any Company
Subsidiary, other than prepaid amounts received in the ordinary course of business; or (vi)
election under Section 108(i) of the Code made by the Company or any Company Subsidiary.
(e) As of the date of this Agreement, neither the Company nor any Company
Subsidiary is a party to any contract with any third party relating to allocating or sharing the
payment of, or liability for, Taxes other than (i) commercially reasonable contracts providing for
the allocation or payment of real property Taxes attributable to real property leased or occupied
by the Company or a Company Subsidiary and (ii) commercially reasonable contracts for the
allocation or payment of personal property Taxes, sales or use Taxes or value added Taxes with
23
Exhibit D-2
sd-625790
Page 24 of 85
respect to personal property leased, used, owned or sold in the ordinary course of business (such
Tax sharing or allocation agreement, a "Tax Sharing Agreement").
(0 Except with respect to the group of which the Company is the common
parent, neither the Company nor any Company Subsidiary has been a member of an affiliated,
consolidated, combined or unitary group for Tax purposes (including within the meaning of
Section 1504 of the Code or similar provisions of state, Iocal or foreign Tax law) or has any
liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar
provision ofstate, Iocal or foreign Tax law), as a transferee or successor, by contract or pursuant
to any law, rule or regulation. Since January l, 2009, neither the Company nor any Company
Subsidiary has been or is a member of an entity treated as a partnership for income Tax purposes.
(g) Since the date of the most recent balance sheet, neither the Company nor
any Company Subsidiary has incurred any liability for Taxes arising from extraordinary gains or
losses as that term is used in GAAP, outside the ordinary course of business consistent with past
custom and practice.
(h) Neither the Company nor any Company Subsidiary has "participated" in
any transaction described in Treasury Regulations Section 1.601 l-4(b)(2), (3), (4), (5) or (6).
(i) Within the last two (2) years, neither the Company nor any Company
Subsidiary has distributed stock of another Person or has had its stock distributed by another
Person in a transaction that was purported or intended to be governed in whole or in part by
Section 355 or 361 of the Code.
O To the Knowledge of the Company, none of the Company or any Affiliate
thereof has taken, proposed to take, or agreed to take any action, not contemplated by this
Agreement, that would prevent the Merger from qualiffing as a "reorganization" within the
meaning of Section 368(a) of the Code.
(k) Neither the Company nor any Company Subsidiary is an investment
company as defined in Sections 368(aX2)(F)(iii) and (iv) of the Code.
(l) The Company has not engaged in any one or more transactions that would
cause the Surviving Corporation to fail to hold "substantially all" of the Company's properties
after the Merger within the meaning of Section 368(a)(2)@) of the Code.
Section 3.19 Employee and Labor Matters; Benefit Plans.
(a) The Company has made available to Parent or Parent's legal or financial
advisor copies of all material employee manuals, handbooks and policy statements in effect as of
the date of this Agreement and relating to the employment of the Company Employees.
(b) Except for such matters that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect: (i) as of the date of this
Agreement, neither the Company nor any Company Subsidiary is delinquent in any material
payments to any of its employees for any wages, salaries, commissions, bonuses or other direct
24
Exhibit D-2
sd-625790
Page 25 of 85
cash compensation for any services performed for the Company or such Company Subsidiary
and (ii) as of the date of this Agreement, there are no material employee grievances, complaints
or charges pending against the Company or any Company Subsidiary under any employee
dispute resolution procedure.
(c) As of the date of this Agreement and except as set forth in Section 3.19(c)
of the Disclosure Schedule: (i) neither the Company nor any Company Subsidiary is a party to
or bound by any collective bargaining agreement, work rules or other agreement with any labor
union, labor organization, employee association, or works council (each, a "Union") applicable
to employees of the Company or any Company Subsidiary ("Company Employees"), (ii) none
of the Company Employees is represented by a Union with respect to his or her employment
with the Company or any Company Subsidiary, (iii) to the Company's Knowledge, within the
past three years, no Union has attempted to organize employees at the Company or any Company
Subsidiary or filed a petition with the National Labor Relations Board seeking to be certified as
the bargaining representative of any Company Employees, (iv) within the past three years, there
have been no actual or, to the Company's Knowledge, threatened (A) work stoppages, lock-outs
or strikes, (B) slowdowns, boycotts, handbilling, picketing, walkouts, demonstrations, leafleting,
sit-ins or sick-outs by Company Employees, causing significant disruption to the operations of a
facility of the Company or any Company Subsidiary, or (C) other form of Union disruption at the
Company or any Company Subsidiary, and (v) except as would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, there is no unfair
labor practice, labor dispute, or other arbitration proceeding pending or, to the Knowledge of the
Company, threatened with respect to Company Employees.
(d) Excep for such matters that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect: (i) the Company and the
Company Subsidiaries are, and within the past three years have been, in compliance with all
applicable state, federal, and local laws respecting labor and employment, including all laws
relating to discrimination, disability, labor relations, unfair labor practices, hours of work,
payment of wages, employee benefits, retirement benefits, compensation, immigration, workers'
compensation, working conditions, occupational safety and health, family and medical leave,
reductions in force, plant closings, notifications of employees, and employee termination and
(ii) neither the Company nor any Company Subsidiary has any liabilities under the Worker
Adjustment and Retraining Notification Act ("WARN") or any state or local laws requiring
notice with respect to such layoffs or terminations.
(e) In the past three years and except for such matters that would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) no governmental entity has threatened (to the Knowledge of the Company) or initiated
any material complaints, charges, lawsuits, grievances, claims, arbitrations, administrative
proceedings, or other proceeding(s) or investigation(s) with respect to the Company or any
Company Subsidiary arising out of, in connection with, or otherwise relating to any Company
Employees or any laws governing labor or employment, and (ii) no governmental entity has
issued or, to the Company's Knowledge, threatened to issue any significant citation, order,
judgment, fine or decree against the Company or any Company Subsidiary with respect to any
Company Employees or any laws governing labor or employment.
25
Exhibit D-2
sd-625790
Page 26 of 85
(0 All material employee benefit plans maintained by the Company or any
Company Subsidiary for their employees as of the date of this Agreement are listed in Section
3.19(f) of the Disclosure Schedule (the "Benefit Plans"). Copies of all Benefit Plans, or if no
plan document is available, a written description of each Benefit Plan, and with respect to each
Benefit Plan the three most recent annual reports on Form 5500 filed with the IRS (if any such
report was required), the most recent summary plan description, if required, and each trust
agreement and group annuity contract relating to any such Benefit Plan, have been made
available to Parent or Parent's legal or financial advisor. Except as set forth in Section 3.19(f) of
the Disclosure Schedule and except for such matters that would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect:
(i) No Benefit Plan, no trustee or administrator thereof, and no other
fiduciary with respect thereto has engaged in any material breach of fiduciary responsibility or
any material "prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) to which Section 406 of ERISA or Section 4975 of the Code applies
and which would reasonably be expected to subject any such Benefit Plan or trustee or
administrator thereof to a material Tax or penalty on prohibited transactions imposed by
Section 4975 of the Code;
(iD neither the Company nor any ERISA Affiliate sponsors or has
within the last six years sponsored a Benefit Plan that has been subject to the minimum funding
requirements of Section 412 of the Code or Title IV of ERISA. "ERISA Affiliate" means any
person as defined in Section 3(9) of ERISA that is or has been a member of any group of persons
described in Section 414(b), (c), (m) or (o) of the Code with the Company within the last six
years;
with respect to the Benefit Plans, each Benefit Plan (and each
related trust, insurance contract or fund) has been maintained, funded and administered in all
respects in accordance with its goveming instruments and all applicable laws including ERISA
and the Code and all required contributions have been made timely and properly accrued on the
Company' s financial statements;
(iv) neither the Company nor any Company Subsidiary has any liability
under any Benefit Plan to provide medical, dental or vision benefits with respect to Company
Employees beyond their termination of employment (other than coverage mandated by law or
governmental regulation);
(v) other than routine claims for benefits, there are no actions, audits,
investigations, suits, or claims pending, or threatened against any of the Benefit Plans or any
fiduciary of any of the Employee Benefit Plans or against the assets of any of the Benefit Plans.;
(vi) except as may be required by applicable law, the consummation of
the transactions contemplated hereby will not accelerate or increase any liability under any
Employee Benefit Plan because of an acceleration or increase of any of the rights or benefits to
which employees may be entitled thereunder; and
sd-625790
Exhibit D-2 Page 27 of 85
(vii) all required reports and descriptions of each Benefit Plan
(including IRS Form 5500 annual reports, summary annual reports, summary plan descriptions
and summaries of material modifications) have been timely filed with the [RS, the Department of
Labor or other governmental body and have been distributed as required.
(g) Except as set forth on Section 3.19(9) of the Disclosure Schedule,
neither the Company nor any ERISA Affiliate has any obligation to contribute to any
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(h) Copies of the most recent IRS determination or opinion letter issued with
respect to each Benefit Plan maintained by the Company or any Company Subsidiary for
Company Employees as of the date of this Agreement have been made available to Parent or
Parent's legal or financial advisor, and, if suchplan is subjectto Sectiona0l(a) of the Code, to
the Knowledge of the Company, nothing has occurred since the issuance of such letter that
would reasonably be expected to cause the loss of the tax-qualified status of such Benefit Plan.
(i) No Benefit Plan is a nonqualified deferred compensation plan within the
meaning of Section 409A(dXl) of the Code (each such Benefit Plan, a "Deferred
Compensation Plan"). Each Deferred Compensation Plan satisfies the requirements of Section
409A(dXl) of the Code to avoid the consequences set forth in Section a09A(a)(l) of the Code.
At all times while subject to Section 409,4. of the Code, the written terms of each Deferred
Compensation Plan have been in compliance with, and each Deferred Compensation Plan has
been operated in compliance with, Section 409,4' of the Code and all applicable guidance
thereunder.
Section 3.20 Environmental Matters.
(a) Except as set forth in Section 3.20(a) of the Disclosure Schedule or as
would not reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect:
(i) there are no pending or, to the Knowledge of the Company,
threatened, claims, lawsuits, or administrative proceedings against the Company or any
Company Subsidiary, under or pursuant to any Environmental Law as of the date of this
Agreement, and neither the Company nor any Company Subsidiary has received written notice
as of the date of this Agreement from any person, including any governmental entity, alleging
that the Company or any Company Subsidiary has been or is in violation or potentially in
violation of any applicable Environmental Law or otherwise alleging that the Company or any
Company Subsidiary may be liable under any applicable Environmental Law, which violation or
liability remains pending or is unresolved or is the source of ongoing obligations or requirements
as of the date of this Agreement;
(ii) the Company and the Company Subsidiaries are and, since
January 1,2009, have been in compliance with all applicable Environmental Laws;
(iiD the Company and the Company Subsidiaries have and are in
compliance with all material permits, licenses and approvals (each of which is disclosed in
27
Exhibit D-2
sd-625790
Page 28 of 85
Section 3.20(a) of the Disclosure Schedule) required under any applicable Environmental Laws
for the operation of the businesses and the ownership, lease, operation, or use of their facilities or
assets, all such permits, licenses and approvals are in effect, and, to the Knowledge of the
Company, there is no actual or alleged proceeding as of the date of this Agreement to revoke,
modiff or terminate such permits, licenses and approvals;
(iv) to the Knowledge of the Company, there has been no release of
Hazardous Materials at any real property currently or formerly owned, leased, or operated by the
Company or any Company Subsidiary as of the date of this Agreement in concentrations or
under conditions or circumstances that (A) would reasonably be expected to result in liability to
the Company or any Company Subsidiary under any Environmental Laws; or (B) would require
reporting, investigation, remediation, or other corrective or response action by the Company or
any Company Subsidiary, under any Environmental Law and that has not otherwise been
addressed through such reporting, investigation, remediation, or other corrective or responsive
action by the Company or any Company Subsidiary;
(v) neither the Company nor any Company Subsidiary is party as of
the date of this Agreement to any order, judgment or decree that imposes any obligations under
any Environmental Law and, to the Knowledge of the Company, has not, either expressly or by
operation of law, undertaken any such obligations as of the date of this Agreement, including any
obligation for corrective or remedial action, of any other person; and
(vi) the Company has made available to Parent any and all material
environmental reports, studies, audits, records, sampling data, site assessments and other similar
documents, which are in the possession or control of the Company or any Company Subsidiary,
with respect to the business or assets of the Company or any Company Subsidiary or any
currently owned, operated or leased real property.
(b) As used in this Agreement:
(i) "Environment" means any ambient air, surface water, drinking
water, groundwater, land surface (whether below or above water), subsurface strata, sediment,
plant or animal life and natural resources.
(ii) "Environmental Law' means any law or any binding agreement
issued or entered by or with any governmental entity relating to: (A) the protection of the
Environment, including pollution, contamination, cleanup, preservation, protection and
reclamation of the Environment; (B) any release or threatened release of any Hazardous
Materials, including investigation, assessment, testing, monitoring, containment, removal,
remediation and cleanup of any such release or threatened release; (C) the management of any
Hazardous Materials, including the use, labeling, processing, disposal, storage, treatment,
transport or recycling or any Hazardous Materials; or (D) the presence of Hazardous Materials in
any building, physical structure , product or fixture.
(iii) "Hazardous Materials" means any regulated pollutant or
contaminant (including any constituent, raw material, product or byproduct thereof), petroleum,
asbestos or asbestos-containing material, polychlorinated biphenyls, lead paint, any hazardous,
28
sd-625790
Exhibit D-2 Page 29 of 85
industrial or solid waste, and any toxic, radioactive, infectious or hazardous substance, material
or agent.
(c) The representations and warranties set fonh herein are the Company's sole
representations and warranties relating to Environmental Law, the Environment and Hazardous
Materials.
Section 3.21 Insurance. Section 3.21 of the Disclosure Schedule is a list of all material
policies of insurance or fidelity bonds maintained by the Company or any Company Subsidiary
as of the date of this Agreement. Such policies are in full force and effect as of the date of this
Agreement and, to the Knowledge of the Company, neither the Company nor any Company
Subsidiary is in material default with respect to its obligations under any such policies.
Section 3.22 Regulatory Compliance.
(a) As of the date of this Agreement, there is no pending or, to the Knowledge
of the Company, threatened enforcement action against the Company or any Company
Subsidiary by any other governmental authority which has jurisdiction over the operations of the
Company or such Company Subsidiary, neither the Company nor any Company Subsidiary has
received written notice of any claim against the Company or any Company Subsidiary, and the
Company has no Knowledge that any governmental authority is threatening such action.
(b) There is no arrangement relating to the Company or any Company
Subsidiary as of the date of this Agreement providing for any rebates, kickbacks or other forms
of compensation that are unlawful to be paid to any Person in return for the referral of business
or for the arrangement for recommendation of such referrals.
(c) Neither the Company, any Company Subsidiary, nor any individual who is
an officer or director of the foregoing, nor, to the Knowledge of the Company, any other
employee or agent of the Company or any Company Subsidiary has as of the date of this
Agreement been convicted of, charged with or, to the Knowledge of the Company, investigated
for a violation of law related to fraud, theft, embezzlement, breach of fiduciary responsibility,
financial misconduct, obstruction of an investigation or controlled substances, or has been
subject to any order or stipulation of, or criminal or civil fine or penalty imposed by, any
governmental authority relating to the foregoing.
(d) Except as set forth on Section 3.22(d) of the Disclosure Schedule, neither
the Company nor any Company Subsidiaries, all or part of whose rates or services are regulated
by a govemmental authority (i) is a party to any rate proceeding before a governmental authority
with respect to rates charged by the Company or any Company Subsidiaries other than in the
ordinary course consistent with past practice, (ii) has rates that have been or are being collected
subjected to refund, pending final resolution of any rate proceeding pending before a
governmental authority or on appeal to a court, except in the case of clauses (i) and (ii) that
would not, individually or in the aggregate, reasonably be expected to have a Company Material
Adverse Effect.
29
Exhibit D-2
sd-625790
Page 30 of 85
Section 3.23 Financial Advisor. Except for Stifel, Nicolaus & Company,
Incorporated, no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements made by or on
behalf of the Company.
Section 3.24 No Consent; Required Fitings. Except as set forth on Section 3.24 of the
Disclosure Schedule or as may be required under or in relation to (a) the ACC, (b) the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (c) any other
Antitrust Laws and (d) the Regulatory Commission of Alaska (the "RCA") (the approvals
described in clauses (b), (c) and (d), referred to herein as the "Company Required
Governmental Approvals"), no consent, approval, authorization order, filing, registration or
qualification of or with any governmental authority or any other Person is necessary for the
consummation by the Company of the transactions contemplated by this Agreement, except for
such authorizations, consents, approvals or filings that, if not obtained or made, would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
ARTICLE 4.
REPRESENTATIONS ANID WARRANTIES OF PARENT AI\D MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
Section 4.1 Due Organization. Each of Parentand Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to conduct its business in the
manner in which its business is currently being conducted. Each of Parent and Merger Sub is
qualified to do business as a foreign corporation under the laws of all jurisdictions where the
nature of its business requires such qualification, except where the failure to be so qualified
would not have a material adverse effect. Each of Parent and Merger Sub has made available to
the Company or the Company's legal or financial advisor copies of the organizational documents
of such entity, including all amendments thereto.
Section 4.2 Authority; Binding Nature of Agreement; Non-Contravention. Each
of Parent and Merger Sub has the requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated by this Agreement. The execution and
delivery by Parent and Merger Sub of this Agreement have been duly authorizedby all necessary
corporate action on the part of Parent and Merger Sub. Parent, as the sole shareholder of Merger
Sub, has approved the principal terms of the Merger. This Agreement, assuming it constitutes
the valid and binding obligation of the Company and the Shareholders' Representative,
constitutes the valid and binding obligation of Parent and Merger Sub, enforceable against them
in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (b) rules of law goveming specific performance,
injunctive relief and other equitable remedies. Neither the execution and delivery of this
Agreement by Parent or Merger Sub nor the consummation of the Merger will: (i) result in a
violation by Parent or Merger Sub of any provision of the Articles of Incorporation or bylaws or
other equivalent organizational documents of Parent or Merger Sub, any material provision of
30
sd-625790
Exhibit D-2 Page 31 of85
any material contract by which Parent or Merger Sub is bound or any law or governmental
regulation applicable to Parent or Merger Sub, except in each case where such violation would
not have a material adverse effect on Parent's or Merger Sub's ability to fulfill its obligations
under this Agreement; or (ii) render Parent insolvent or unable to pay its debts as they become
due.
Section 4.3 No Consent. Except as may be required under or in relation to (a) the
ACC, (b) the HSR Act, (c) any other Antitrust Laws, (d) the RCA and (e) WUTC, IPUC, OPUC
and MPSC (collectively, the "Parent Required Governmental Approvals"), no consent,
approval, authorization order, filing, registration or qualification of or with any governmental
authority or any other Person is necessary for the consummation by Parent or Merger Sub of the
transactions contemplated by this Agreement, except for such authorizations, consents, approvals
or filings that, if not obtained or made, would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on Parent's or Merger Sub's ability to fulfill its
obligations under this Agreement.
Section 4.4 Merger Sub. Merger Sub was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement and has engaged in no other business
activities of any type or kind whatsoever, or entered into any agreements or arrangements with
any Person, or become subject to or bound by any obligation or undertaking.
Section4.5 Capitalization.
(a) As of the date hereof, the authorized capital stock of Parent consists of
200,000,000 common shares and 10,000,000 preferred shares. Except as set forth in the Parent
SEC Documents, there are no (i) outstanding options, warrants, stock options or rights to acquire
from Parent any shares of the capital stock or other equity securities of Parent; or (ii) outstanding
securities of Parent that are convertible into any shares of capital stock or other equity securities
ofParent.
(b) As of the date hereof, the authorized capital stock of Merger Sub consists
of 100 common shares, no par value. Parent is the sole shareholder of Merger Sub and is the
Iegal and beneficial owner of all 100 issued and outstanding shares, free and clear of all liens.
All such shares were duly authorized, validly issued, fully paid and nonassessable. There are no
(i) outstanding options, warrants, stock options or rights to acquire from Merger Sub any shares
of the capital stock or other equity securities of Merger Sub; or (ii) outstanding securities of
Merger Sub that are convertible into any shares of capital stock or other equity securities of
Merger Sub. Merger Sub does not have any Subsidiaries.
Section 4.6 Parent Stock Matters. All shares of capital stock of Parent that may be
issued as contemplated or permitted by this Agreement, are or will be when issued, (a) duly
authorized and validly issued, fully paid and nonassessable and not subject to any preemptive
rights, rights of repurchase or forfeiture, right of participation, right of maintenance, any similar
right or any encumbrances of any kind (other than as set forth in this Agreement), (b) issued and
granted in material compliance with (i) all applicable securities laws, all other applicable laws,
and the rules and regulations of the securities exchange applicable to such capital stock and
(ii) all requirements set forth in any applicable agreements, (c) ranking pari passu in all respects
3l
sd-625790
Exhibit D-2 Page 32 of 85
with the other issued shares of capital stock of Parent, (d) registered on the New York Stock
Exchange and (e) freely tradable, salable and transferrable.
Section 4.7 SEC Filings. Parent has timely filed with or furnished to, as applicable,
the SEC all registration statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated by reference) required to be
filed or furnished by it with the SEC during the period of time between January 1,2009 and the
date hereof (the "Parent SEC Documents"). Parent has made available to the Company
Shareholders all such Parent SEC Documents that it has so filed or furnished prior to the date
hereof. As of their respective filing dates (or, if amended or superseded by a subsequent filing,
as of the date of the last amendment or superseding filing prior to the date hereof), each of the
Parent SEC Documents complied as to form in all material respects with the applicable
requirement of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, and the rules and regulations of the SEC thereunder applicable to such Parent SEC
Documents. None of the Parent SEC Documents, including any financial statements, schedules
or exhibits included or incorporated by reference therein at the time they were filed (or, if
amended or superseded by a subsequent filing as of the date of the last such amendment or
superseding filing prior to the date hereof), contain any untrue statement of a material fact or
failed to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading.
None of the Parent SEC Documents are the subject of any unresolved, pending comment letters
or proceeding of the SEC.
Section 4.8 Adequacy of Funds. Parent has, and at the Closing will have, adequate
financial resources to satisfy its monetary and other obligations under this Agreement without
requiring the prior consent, approval or other discretionary action of any third-party, except for
necessary regulatory consents required by the authorities identified in Section 4.3. Parent and
Merger Sub expressly acknowledge that Parent's and Merger Sub's ability to obtain financing is
not a condition to any obligations of Parent and Merger Sub hereunder which may arise in the
future.
Section 4.9 Access. Parent and its representatives have been given full access to the
assets, books, records, contracts and employees of the Company, and have been given the
opportunity to meet with officers and other representatives of the Company for the purpose of
investigating and obtaining information regarding the Company's business, operations and legal
affairs. Neither Parent nor any of its representatives has had unauthorized access to, or has used,
any confidential information of the Company regarding the process undertaken by the Company
in connection with the Company's solicitation of potential takeover offers or the terms of any
such other offers.
Section 4.10 Reliance. Except for the representations in Article 3, neither the
Company, any Company Subsidiary or any other Person has made or makes any other express or
implied representation or warranty, either written or oral, on behalf of the Company or any
Company Subsidiary. In connection with the investigation by Parent of the Company, Parent has
received from the Company certain projections, forward-looking statements and other forecasts
and certain business plan information. Parent acknowledges that there are uncertainties inherent
32
Exhibit D-2
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Page 33 of 85
in attempting to make such estimates, projections and other forecasts and plans, that Parent is
familiar with such uncertainties, that Parent is taking full responsibility for making its own
evaluation of the adequacy and the accuracy of all estimates, projections and other forecasts and
plans so furnished to them. Accordingly, Parent and the Merger Sub acknowledge that neither
the Company nor any Company Subsidiary makes any representation or warranty with respect to
such estimates, projects, or projections, forecasts or plans (including the reasonableness of the
assumptions underlying such estimates, projections, forecasts or plans).
Section 4.11 Litigation. As of the date of this Agreement, there is no lawsuit or other
legal proceeding pending before any court of competent jurisdiction (or, to the Knowledge of
Parent or Merger Sub, being overtly threatened) against Parent or Merger Sub challenging the
Merger.
Section 4.12 No Parent Vote Required. No vote or other action of the shareholders of
Parent is required by applicable law, the articles of incorporation of Parent, the bylaws of Parent
or otherwise in order for Parent and Merger Sub to consummate the Merger and the transactions
contemplated hereby.
Section 4.13 No Brokers. Except for UBS Investment Bank, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or any of the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent, Merger Sub or any affiliated Person.
Section 4.14 Tax Matters.
(a) To the Knowledge of Parent, none of Parent, Merger Sub nor any Affiliate
thereof has taken, proposed to take or agreed to take any action, not contemplated by this
Agreement, that would prevent the Merger from qualiffing as a "reorganization" within the
meaning of Section 368(a) of the Code.
(b) Except for amounts of Parent stock that may be acquired by Parent on the
open market as part of Parent's existing or future general market stock repurchase programs, and
not pursuant to any negotiations or understandings between Parent and either the Company or the
Company Shareholders, Parent has no plan or intention to redeem Parent Common Stock issued
to Company Shareholders pursuant to the Merger, and no Person related to Parent within the
meaning of Treasury Regulations Section 1.368-l(e)(4) has a plan or intention to purchase Parent
Common Stock issued to Company Shareholders pursuant to the Merger.
(c) Neither Parent nor Merger Sub is an investment company as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(d) Parent has no plan or intention to liquidate the Surviving Corporation
following the Merger or cause the Surviving Corporation to sell or otherwise dispose of any of
its assets, except for dispositions made in the ordinary course of business consistent with past
practice or transfers described in Section 368(a)(2)(C) of the Code and the Treasury Regulations
issued thereunder, including Treasury Regulations Section 1.368-2(k).
33
Exhibit D-2
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Page 34 of 85
(e) Following the Merger, Parent intends to cause the Surviving Corporation
to continue the Company's historic business or to use a significant portion of the Company's
historic business assets in a business, in each case within the meaning of Section 1.368-l(d) of
the Treasury Regulations.
(f) Parent has no plan or intention to cause the Surviving Corporation to issue
additional shares after the Merger that would result in Parent losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code.
ARTICLE 5.
COYENANTS AI\D AGREEMENTS.
Section 5.1 Conduct of Business of the Company. Except as permitted or
contemplated by the Principal Documents or as required by applicable law or governmental
regulation, during the period from the date of this Agreement through the Effective Time (the
"Pre-Closing Period"), without Parent's prior consent (which consent shall not be unreasonably
withheld, delayed or conditioned), the Company shall use commercially reasonable efforts to:
(i) conduct its business in the ordinary course in all material respects; (ii) preserve substantially
intact its business organization, (iii) maintain existing goodwill with governmental authorities,
customers, suppliers, and regulators, (iv) maintain in effect all material governmental permits,
franchises and authorizations; and (v) retain the services of its current officers and key
employees. Without limiting the generality of the foregoing, except as permitted or contemplated
by this Agreement, as set forth in Section 5.1 of the Disclosure Schedule, or as required by
applicable law or governmental regulation, during the Pre-Closing Period, the Company shall
not, without Parent's prior consent (which consent shall not be unreasonably withheld, delayed
or conditioned):
(a) issue, sell or deliver any shares of Company Common Stock, Voting
Preferred Stock, Preferred Stock or securities convertible into, or rights, warrants or options to
acquire, any shares of Company Common Stock, Voting Preferred Stock or Preferred Stock;
(b) redeem, purchase or otherwise acquire any outstanding shares of Company
Common Stock;
(c) split, combine, subdivide or reclassifr any shares of Company Common
Stock;
(d) sell, transfer or encumber any of its assets that, individually or in the
aggregate, are material to the Company's business as currently conducted (excluding any sales in
the ordinary course of business);
(e) prematurely terminate, materially amend or knowingly waive any material
right under any Significant Contract;
34
Exhibit D-2
sd-625790
Page 35 of 85
(0 make any capital expenditures, except in the ordinary course of business,
or if outside the ordinary course of business, in an amount not in excess of $5,000,000 in the
aggregate;
(g) make any acquisition of any material business or entity;
(h) increase in any material manner, individually or in the aggregate, the
compensation of any of its directors or employees or enter into, establish or amend any material
employment, bonus, incentive compensation, pension, retirement, severance, deferred
compensation or other compensation or benefit plan for the benefit of any director or officer of
the Company, other than: (i) as required pursuant to applicable law or governmental regulation
or the terms of contracts in effect as of the date of this Agreement; and (ii) increases in salaries,
wages and benefits effected in the ordinary course of business;
(i) commence a lawsuit or other similar legal proceeding, except: (i) for the
routine collection of bills; (ii) where the Company determines in good faith that failure to
commence such legal proceeding could result in the material impairment of a material right or
asset of the Company; or (iii) in connection with an alleged breach of this Agreement or any
related agreement or document;
0) make or change any material election concerning Taxes, file or amend any
income Tax Return, fail to provide a copy to Parent of each other filed or amended Tax Return
within fifteen (15) days after such filing or amendment, settle any material claim or assessment
in respect ofTaxes, surrender any right to claim a refund ofTaxes, consent to any extension or
waiver of the limitation period applicable to any material claim or assessment in respect of Taxes
or enter into any Tax Sharing Agreement;
(k) make any material changes in financial or Tax accounting methods,
principles or practices or change an annual accounting period, except to the extent required by a
change in GAAP or any applicable law or governmental regulation;
(l) amend the Company's Articles of Incorporation or bylaws;
(m) adopt a plan or agreement of complete or partial liquidation or dissolution;
(n) without the consent of Parent, make any material regulatory filing with
RCA, or otherwise resolve any action before the RCA, the resolution of which could result in a
Company Material Adverse Effect; or
(o) enter into a binding contract requiring that the Company take any of the
actions described in clauses (a) through (n) of this sentence.
Section 5.2 Company Shareholder Approval. As promptly as practicable after the
Registration Statement has been declared effective under the Securities Act by the SEC, the
Company shall, in accordance with its Articles of Incorporation and bylaws and the applicable
requirements of the ACC, (a) mail the Information Statement to the Company Shareholders and
35
Exhibit D-2
sd-625790
Page 36 of 85
(b) hold a special meeting of the Company Shareholders to solicit the approval of the Merger by
the Company Shareholders (the "Shareholder Meeting").
Section 5.3 Access to Information. Except as required by applicable law or
governmental regulation, during the Pre-Closing Period, the Company shall afford Parent and its
representatives such reasonable access, during normal business hours and upon reasonable
advance notice, to the Company's properties, books and records and other existing information
concerning the business of the Company as Parent may reasonably request; provided, however,
that in exercising its access rights under this Section 5.3, (a) Parent shall not be permitted to
interfere unreasonably with the conduct of the business of the Company, (b) such access shall be
conducted at Parent's expense, under the supervision of appropriate personnel of the Company
and in such a manner as to maintain the confidentiality of this Agreement and the transactions
contemplated hereby in accordance with the terms hereof and (c) nothing herein shall require the
Company to disclose any information to Parent if such disclosure would, in its sole and absolute
discretion (i)jeopardize any attorney client or other legal privilege or (ii)contravene any
applicable law, fiduciary duty or binding agreement entered into prior to the date of this
Agreement (including any confidentiality agreement to which the Company is a party).
Furthermore, the Company shall afford Parent and its representatives access to the Company's
properties for the pufpose of performing environmental site assessments, provided, however, that
such assessments shall not include environmental sampling or testing unless expressly authorized
by the Company, and shall not unreasonably interfere with the conduct of the Company's
business. Parent shall hold all information received pursuant to this Section 5.3 in confidence in
accordance with the terms of that certain Confidentiality Agreement, dated May 28, 2013,
between the Company and Parent (the "Confidentiality Agreement").
Section 5.4 Public Disclosure. Except as may be required by applicable law or
pursuant to the rules and regulations of any national securities exchange on which a parly's
securities are listed, during the Pre-Closing Period: (a) Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public statement or
making any other public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated hereby; and
(b) without limiting Parent's obligations under the Confidentiality Agreement, neither Parent nor
the Company shall issue any such press release or make any such public statement or disclosure
without the prior approval of the other party (which approval shall not be unreasonably withheld,
delayed or conditioned).
Section 5.5 Regulatory Approval; Further Assurances.
(a) Parent and the Company shall use commercially reasonable efforts to
effectuate the Merger and make effective the other transactions contemplated by this Agteement.
Without limiting the generality of the foregoing, each party to this Agreement shall: (i) make any
filings and give any notices required to be made or given by such party in connection with the
Merger and the other transactions contemplated by this Agreement, including filings and notices
required by the Federal Energy Regulatory Commission ("FERC"), RCA, WUTC, IPUC,
OPUC, MPSC, the U.S. Federal Trade Commission (the "FTC"), the Antitrust Division of the
U.S. Department of Justice (the "DOJ') and any other applicable regulatory bodies; (ii) use
36
Exhibit D-2
sd-625790
Page 37 of 85
commercially reasonable efforts to obtain any consents, permits, approvals and waivers required
to be obtained (pursuant to any applicable law, contract or otherwise) by such party in
connection with the Merger or any of the other transactions contemplated by this Agreement,
including consents, permits, approvals, and waivers required by the FERC, RCA, WUTC, IPUC,
OPUC, MPSC, the FTC, the DOJ and any other applicable regulatory body and shall provide
reasonable access to information necessary to acquire required consents and approvals, subject to
protective orders to prevent unauthorized disclosure where appropriate; (iii) use commercially
reasonable efforts to prevent and to lift any restraint, injunction or other legal bar to the Merger
and (iv) vigorously defend and challenge any lawsuits or other legal proceedings, whether
regulatory, judicial, administrative or other, to which it is a party challenging or affecting the
Merger, this Agreement or the transactions contemplated hereby (including all regulatory
proceedings necessary or advisable in connection with obtaining required regulatory provisions
in connection herewith) or seeking to prohibit or delay the consummation of the Merger or
rescind, vacate, or otherwise challenge any approvals granted by any governmental entity. Each
of Parent and the Company shall promptly deliver to the other a copy of each such filing made,
each such notice given and each such consent and approval obtained, taken, made, given, or
denied during the Pre-Closing Period. In addition, the Company and Parent shall use
commercially reasonable efforts to cooperate with each other in (l) determining whether any
other filings are required to be made with, or other consents, permits, approvals or waivers are
required to be obtained from, any third parties or other governmental authorities in connection
with the execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby and (2) timely making all such other filings and timely seeking all such
other consents, permits, approvals, or waivers.
(b) Without limiting the generality of anything contained in Section 5.5(a),
each party hereto shall use commercially reasonable efforts to file, as promptly as practicable
after the date of this Agreement, all notices, reports and other documents required to be filed by
such party with any governmental authority with respect to the Merger and the other transactions
contemplated by this Agreement. In furtherance and not in limitation of the foregoing, each of
Parent and the Company shall use its commercially reasonable efforts to: (i) make or cause to be
made the registrations, declarations and filings required of such party in connection with an
Application for Authorization to Acquire a Controlling Interest with the RCA, any other
Company Required Governmental Approvals and the Parent Required Govemmental Approvals,
and under any other Regulatory Laws, the HSR Act and any other Antihust Laws with respect to
the transactions contemplated by this Agreement as promptly as reasonably practicable and
advisable after the date of this Agreement (and, in the case of any filings required under the HSR
Act, in no event later than 30 days from the execution of this Agreement); (ii) furnish to the other
pafty as promptly as reasonably practicable all information required for any application or other
filing to be made by the other party pursuant to any applicable law in connection with the
transactions contemplated by this Agreement; (iii) respond as promptly as reasonably practicable
to any inquiries received from, and supply as promptly as reasonably practicable any additional
information or documentation that may be requested by, the FERC, RCA, WUTC, IPUC, OPUC,
MPSC, the DOJ, the FTC or by any other govemmental authority in respect of such registrations,
declarations and filings or such transactions; (iv) to the extent not prohibited by a governmental
authority, promptly notify the other party of any material communication between that party and
the FERC, RCA, WUTC, IPUC, OPUC, MPSC, the FTC, the DOJ or any other governmental
37
Exhibit D-2
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Page 38 of 85
authority and of any material communication received or given in connection with any Action by
a private paQ, in each case regarding any of the transactions contemplated hereby (including
any communication relating to the antitrust merits, any potential remedies, commitments or
undertakings, the timing of any waivers, consents, approvals, permits, orders, decrees,
injunctions or other agreements or authorizations (including the expiration or termination of any
waiting periods), or any agreement regarding the timing of consummation of the Merger and the
other transactions contemplated by this Agreement), provided, that any communication between
a party and the FERC, RCA, WUTC, IPUC, OPUC, MPSC, the FTC, the DOJ or any other
governmental authority shall be jointly made (unless such party received prior written consent of
the other party to communicate on its own with such governmental authority); (v) subject to
applicable law, and all applicable privileges (including attorney client privilege), discuss with
and permit the other party (and its counsel) to review in advance, and consider in good faith all
reasonable additions, deletions or changes suggested by the other party in connection with, any
proposed filing or communication to the FERC, RCA, WUTC, IPUC, OPUC, MPSC, the FTC,
the DOJ or any other governmental authority or, in connection with any Action by a private party
or any other Person, relating to any Antitnrst Law, Regulatory Law or any Action pursuant to
any Antitrust Law or Regulatory Law in connection with the Merger and the other transactions
contemplated by this Agreement; (vi) to the extent practicable, not participate or agree to
participate in any substantive meeting, telephone call or discussion (including any meeting,
telephone call or discussion relating to the antitrust merits, any potential remedies, commitments
or undertakings, the timing of any waivers, consents, approvals, permits, orders, decrees,
injunctions or other agreements or authorizations (including the expiration or termination of any
waiting periods), and any agreement regarding the timing of consummation of the Merger and
the other transactions contemplated by this Agreement) with the FERC, RCA, WUTC, IPUC,
OPUC, MPSC, the FTC, the DOJ or any other governmental authority in respect of any filings,
investigation or inquiry relating to any Antitrust Law, Regulatory Law or any Action pursuant to
any Antitrust Law or Regulatory Law in connection with this Agreement or the Merger or the
other transactions contemplated hereby unless, as to material matters, it uses reasonable best
efforts to consult with the other party in advance and, to the extent permitted by such
governmental authority, gives the other party the opportunity to attend and participate in such
meeting, telephone call or discussion; (vii) use reasonable efforts to furnish the other party
promptly with copies of all material correspondence, filings and communications relating to any
Antitrust Law, Regulatory Law or any Action pursuant to any Antitrust Law or Regulatory Law
between them and their Affiliates and their respective representatives on the one hand, and the
FERC, RCA, WUTC, IPUC, OPUC, MPSC, FTC, the DOJ or any other governmental authority
or members of their respective staffs on the other hand, with respect to this Agreement and the
Merger and the other transactions contemplated hereby; (viii) not consent to any voluntary delay
of the Closing at the behest of any governmental entity without the consent of the other party,
which consent shall not be unreasonably withheld, delayed or conditioned, (ix) not, directly or
indirectly through one or more of their respective Affiliates, take any action, including acquiring
or making any investment in any corporation, partnership, limited liability company or other
business organization or any division or assets thereof, that would reasonably be expected to
cause a material delay in the satisfaction of the conditions contained in Article 6, and (x) act in
good faith and reasonably cooperate with the other pa(y in connection with any of the foregoing.
sd-625790
Exhibit D-2 Page 39 of 85
(c) Without limiting the foregoing, Parent agrees to use its commercially
reasonable efforts to take, or cause to be taken, any and all steps and to make, or cause to be
made, any and all undertakings necessary to avoid or eliminate each and every impediment
asserted by any governmental entity in connection with obtaining the required regulatory
approvals applicable to Parent, Merger Sub, the Surviving Corporation, the Company or any
Company Subsidiary so as to enable the Closing to occur as promptly as practicable.
Notwithstanding the foregoing sentence of Section 5.5(c), or anything in this Agreement to the
contrary, Parent shall not be required to, and the Company shall not without Parent's written
consent, in connection with obtaining any consents or approvals hereunder, or in connection with
otherwise complying with any provisions of this Agreement, consent to any regulatory condition
or requirement other than such regulatory conditions and requirements that are (i) normal and
customary for regulatory approvals requested in connection with similar transactions and (ii) do
not materially and adversely affect either (l) the business of Parent, the Company, Alaska
Electric Light and Power Company or Snettisham Electric Company, each considered separately,
or the Surviving Corporation and Merger Sub taken as a whole (including, but not limited to, the
reasonable opportunity to recover prudently incurred costs and earn the authorized rate of return,
as applicable) or (2) the ability of Parent to continue to operate the business of the Company and
the Company Subsidiaries, taken as a whole, consistent with past practices. Other than as
provided in the preceding sentence, the Company shall not be required to, and Parent and Merger
Sub shall not without the Company's written consent, in connection with obtaining any consents
or approvals hereunder, or in connection with otherwise complying with any provisions of this
Agreement, consent to the imposition of any terms, conditions, limitations, or standards of
service on, or with respect to, the Company, Parent, Merger Sub, the Surviving Corporation, the
Company Subsidiaries or any of their Subsidiaries or Affiliates or any of their respective
businesses.
Section 5.6 Escrow Agreement. At or before the Effective Time, Parent and the
Shareholders' Representative shall, and Parent shall use commercially reasonable efforts to cause
the Escrow Agent to, execute the Escrow Agreement.
Section 5.7 Information Statement and Parent Stock Matters.
(a) As soon as reasonably practicable after the execution of this Agreement,
Parent, in consultation with the Company, shall prepare and file with the SEC a registration
statement on Form S-4 (together with all amendments thereto, the "Registration Statement")
relating to the Merger. The Registration Statement shall contain a document that will constitute
(i) a prospectus relating to the offering of Parent Common Stock to be issued to the Company
Shareholders in the Merger and (ii) a solicitation of the Company Shareholders for their approval
of the Merger at the Shareholders' Meeting (such document being herein called the
"Information Statement"). The Registration Statement, including the Information Statement,
and any other related filings shall comply in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, and the rules and regulations promulgated
thereunder, and shall contain all required information with respect to, among other things,
Parent, the Company, the Shareholders' Meeting and the Merger. Parent, in consultation with
the Company, shall prepare the Registration Statement and the portions of the Registration
Statement relating to Parent and the Merger; the Company, in consultation with Parent, shall
39
Exhibit D-2
sd-625790
Page 40 of 85
initially prepare the portions of the Information Statement relating to the Company and the
Shareholders' Meeting; and Parent and the Company shall cooperate with each other to see that
all other portions of the Registration Statement are appropriately prepared for filing by Parent
with the SEC. Parent shall use its commercially reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable and to keep the Registration Statement
effective for so long as necessary to complete the transactions contemplated hereby. Parent shall
take all or any action required under any applicable securities laws in connection with the
issuance of Parent Common Stock hereunder. Each of Parent and the Company shall furnish all
information conceming it and the holders of its capital stock as the other may reasonably request
in connection with such actions and the preparation of the Registration Statement and
Information Statement and Parent and the Company shall reasonably coordinate and cooperate in
connection with the preparation of the Registration Statement, the Information Statement, and
any other related filings.
(b) Parent and the Company shall provide the other party copies of any
written comments and advise the other party of any oral comments with respect to the
Registration Statement or Information Statement received by such party from the SEC as
promptly as practicable after receipt thereof. Parent shall prepare and file all responses to such
comments; provided, however, that, with respect to comments relating to the Company or the
Shareholders' Meeting, such responses shall be prepared in consultation with the Company.
Parent shall file with the SEC, and shall furnish the Company copies of, all amendments to the
Registration Statement, all supplements to the Information Statement and all other filings with
and transmiuals to the SEC to the extent not publicly available on EDGAR. Parent shall advise
the Company promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed, of the issuance
of any stop order, the suspension of the qualification of the Parent Common Stock issuable
hereunder for offering or sale in any jurisdiction, or any request by the SEC for amendment of
the Registration Statement or comments thereon and responses thereto or requests by the SEC for
additional information. Parent shall prepare and file in a timely manner, information, documents
and reports in compliance with the Exchange Act so as to comply with the requirements of the
Exchange Act. If at any time Parent is not required to file reports in compliance with either
Section 13 or Section l5(d) of the Exchange Act, Parent shall reasonably promptly and at its
expense upon written request of any holder of Company Common Stock, make available
adequate current public information with respect to Parent within the meaning of Rule Aa@)Q)
under the Securities Act.
(c) The information supplied by Parent and the Company for inclusion in the
Registration Statement and the Information Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Information Statement (or any amendment
thereof or supplement thereto) is first mailed to the Company Shareholders, and (iii) the time of
the Shareholders' Meeting, 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. If at any time prior to the Effective Time Parent or the Company determines that the
Registration Statement or Information Statement includes a misstatement of a material fact or
omits to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, then the party (Parent or the
40
Exhibit D-2
sd-625790
Page 41 of85
Company) that makes such determination shall promptly notiff the other, Parent shall promptly
file an amendment or supplement to such document describing such information to the extent
required by applicable law, or the rules or regulations of the SEC, and the Company shall
promptly disseminate such amended or supplemented document to the Company Shareholders.
Section 5.8 Indemnification of Officers and Directors of the Company.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company and any Company
Subsidiary pursuant to any agreement of the Company or any Company Subsidiary providing for
the indemnification of its officers or directors (the current and former officers and directors of
the Company or any Company Subsidiary, and-all other persons entitled to be indemnified
pursuant to such provisions or agreements, being referred to collectively as the "Indemnified
Parties"). Parent shall cause the Articles of lncorporation of the Surviving Corporation to
contain the provisions with respect to exculpation from liability set forth in the Company's
Articles of Incorporation immediately prior to the execution and delivery of this Agreement, and
Parent shall not permit any of such provisions, or any provisions of the organizational documents
of any Company Subsidiary, to be amended, repealed or otherwise modified after the Effective
Time in any manner that could adversely affect the rights thereunder of any Indemnified Party.
(b) From the Effective Time through the sixth anniversary of the Effective
Time, Parent shall cause the Surviving Corporation to maintain in effect, for the benefit of the
Indemnified Parties, the current level and scope of directors' and officers' liability insurance
coverage as set forth in the Company's current directors' and officers' liability insurance policy
in effect as of the date of this Agteement; provided, however, that in no event shall Parent or the
Surviving Corporation be required pursuant to this Section 5.8(b) to expend in any one year an
amount in excess of 250%o of the annual premium currently payable by the Company with
respect to such current policy, it being understood that if the annual premiums payable for such
insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a
policy with the gxeatest coverage available for a cost equal to such amount.
(c) If Parent or the Surviving Corporation or any of the successors or assigns
of Parent or the Surviving Corporation: (i) shall consolidate with or merge into any other Person
and shall not be the continuing or surviving corporation or entity of such consolidation or
merger; or (ii) shall transfer all or substantially all of its assets to any other Person, then proper
provisions shall be made so that the successors and assigns of Parent or the Surviving
Corporation (as the case may be) shall assume all of the obligations set forth in this Section 5.8.
(d) This Section 5.8: (i) shall survive the consummation of the Merger and
the Effective Time; (ii) is intended for the benefit of each Indemnified Purty, and will be
enforceable by, each Indemnified Party and his or her heirs and representatives; (iii) shall be
binding on all successors and assigns of Parent and the Surviving Corporation; and (iv) provides
rights that are in addition to, and not in substitution for, any other rights to indemnification or
contribution or similar rights that any Indemnified Purty, or any heir or representative of any
Indemnified Party, may have by contract or otherwise.
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Section 5.9 Employment and Benefits Arrangements. With respect to any
Company Employee who is subject to a collective bargaining agreement, this Section 5.9 only
shall apply to those employment terms, compensation and employee benefits to the extent they
are (i) not negotiated pursuant to collective bargaining or (ii) negotiated pursuant to collective
bargaining, but are intended to be equivalent to the employment terms, compensation and
employee benefits of Company Employees who are not subject to a collective bargaining
agreement; provided that, in all events, the employment terms, compensation and employee
benefits set forth in the applicable collective bargaining agreement (as in effect from time to
time) shall be respected by Parent, the Surviving Corporation and their Affiliates. For the
avoidance of doubt, nothing in this Section 5.9 shall limit the negotiating positions that may be
taken in connection with any renegotiation of any collective bargaining agreement following the
Closing Date.
(a) For a period of tvro years following the Closing Date (the "Continuation
Period"), Parent shall provide, or cause its Subsidiaries (including the Company and the
Company Subsidiaries) to provide (A) compensation (including any annual incentive
compensation opportunities and bonuses) to the Company Employees that, in the aggregate, is no
less favorable than the compensation provided to the Company Employees immediately prior to
the Closing Date and (B) benefits (including pension and retiree medical benefits) to the
Company Employees that, in the aggregate, are no less favorable than the benefits provided to
the Company Employees immediately prior to the Closing Date. The foregoing shall not
prohibit Parent from causing the Company and the Company Subsidiaries to adopt employment
or other policies substantially similar to those applicable to employees of Parent and its other
Subsidiaries provided that such policies don't prohibit or frustrate the foregoing compensation
and benefits obligations during the Continuation Period. During the Continuation Period, Parent
and the Surviving Corporation shall not terminate the employment of any Company Employee
without "cause" (as determined by Parent in its reasonable discretion).
(b) During the Continuation Period, Parent shall provide or cause its
Subsidiaries (including the Company and the Company Subsidiaries) to provide each former
employee of the Company or any Company Subsidiary who, immediately prior to the Closing
Date, is receiving long-term disability payments or benefits (which shall be deemed to include
medical benefits) or retiree medical benefits from the Company or any Company Subsidiary
retiree medical benefits or long-term disability payments or benefits (as applicable) at a level that
is substantially comparable to the level of such payments or benefits provided to such individuals
immediately prior to the Closing Date.
(c) Parent shall, and shall cause its Subsidiaries (including the Company and
the Company Subsidiaries) to, cause any "employee benefit plan" (as defined in Section 3(3) of
ERISA, whether or not subject to ERISA) maintained by Parent or any of its subsidiaries
(including the Company and the Company Subsidiaries) (including any vacation, paid time-off
and severance plans) to recognize each Company Employee's service with the Company or any
of the Company Subsidiaries (as well as service with any predecessor of the Company or any
Company Subsidiary, to the extent service with such predecessor is recognized by the Company
or such Company Subsidiary at Closing), for all purposes, including determining eligibility to
participate, level of benefits, vesting, benefit accruals and early retirement subsidies; provided,
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however, that such service need not be recognized to the extent that such recognition would
result in any duplication of benefits.
(d) During the calendar year in which the Closing Date occurs, Parent shall,
and shall cause its Subsidiaries (including the Company and the Company Subsidiaries) to,
waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work
requirements and waiting periods under any welfare benefit plan maintained by Parent or any of
its Subsidiaries in which Company Employees (and their eligible dependents) will be eligible to
participate from and after the Closing Date, except to the extent that such pre-existing condition
limitations, exclusions, actively-at-work requirements and waiting periods would not have been
satisfied or waived under the comparable benefit plan of the Company immediately prior to the
Closing Date. Parent shall, or shall cause its Subsidiaries (including the Company and the
Company Subsidiaries) to, recognize, or cause to be recognized, the dollar amount of all co-
payments, deductibles and similar expenses incurred by each Company Employee (and his or her
eligible dependents) during the calendar year in which the Closing Date occurs for purposes of
satisfying such year's deductible and oo-payment limitations under the relevant welfare benefit
plans in which such Company Employee (and his or her eligible dependents ) will be eligible to
participate from and after the Closing Date.
(e) From and after the Closing Date, Parent shall, and shall cause its
Subsidiaries (including the Company and the Company Subsidiaries) to, provide any required
notice under WARN, and any similar state or local law, and otherwise comply with such laws
with respect to the Company Employees. Notwithstanding the foregoing, no provision of this
Agreement shall create any right in any employee to continued employment by the Company,
Parent, or any respective Subsidiary or Affiliate thereof, or preclude the ability of the Company,
Parent, or any respective Subsidiary or Affiliate thereof to terminate the employment of any
employee for any reason, except as set forth in Section 5.9(a). This Section 5.9 shall be binding
upon and shall inure solely to the benefit of the parties hereto (it being understood that other than
the Shareholders' Representative, no Company shareholder, including any shareholder that is
also a Company Employee, is a party to this Agreement), and nothing in this Section 5.9, 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 Section 5.9 or is intended to be, shall constitute or be
construed as an amendment to or modification of any employee benefit plan, program,
arrangement or policy of the Company, Parent, or any respective Subsidiary or Affiliate thereof.
No Company Employee (including any beneficiary or dependent thereof) shall be regarded for
any purpose as a third-party beneficiary of this Agreement pursuant to this Section 5.9 and this
Section 5.9 shall not create such rights in any such person.
(f) Parent shall, for at least the first two years following the Closing, maintain
the Company's existing corporate offices in Juneau, Alaska and maintain the artifacts and
property contained therein, continue the charitable contribution practices of the Company and the
Company Subsidiaries and community support practices of the Company and the Company
Subsidiaries. In addition, Parent shall honor the commitments of the Company and the Company
Subsidiaries under existing collective bargaining agreements.
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Section 5.10 Control of Operations. Without in any way limiting any party's rights or
obligations under this Agreement, the parties understand and agree that (a) nothing contained in
this Agreement shall give Parent, directly or indirectly, the right to control or direct the
Company's operations prior to the Effective Time and (b) prior to the Effective Time, the
Company shall exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its operations.
Section 5.11 Tax Matters.
(a) Parent shall prepare, or cause to be prepared, and timely file, or cause to
be timely filed, all Tax Returns relating to the Company and its Subsidiaries that are required to
be filed after the Closing Date. All such Tax Returns for any taxable period ending at the end of
or before the Closing Date or for any Straddle Period (each a "Pre-Closing Tax Return") shall
be prepared in a manner consistent with past practices of the Company to the extent such past
practices comply with applicable Tax law. Parent shall provide the Shareholders' Representative
with a copy of a completed draft of each Pre-Closing Tax Retum for Taxes based on or measured
by income (and any other material Pre-Closing Tax Return) at least thirty (30) days prior to the
due date for filing thereof, along with supporting work papers, for the Shareholders'
Representative's review and comment, and shall make any reasonable changes requested by the
Shareholders' Representative on such Pre-Closing Tax Returns. Parent shall timely pay any
Taxes of the Company and its Subsidiaries due after the Closing Date but, for the avoidance of
doubt, without prejudice to any indemnification rights Parent otherwise is entitled to hereunder
(other than, for the avoidance of doubt, with respect to penalties and interest incurred as a result
of Parent's failure to timely pay such Taxes).
(b) Parent shall have the exclusive right to control any audit, litigation or
other proceeding with respect to Taxes (a "Tax Contest"), provided, however, that with respect
to any Tax Contest for any Pre-Closing Tax Period for which the Company Shareholders
reasonably could be expected to have any indemnification obligation under Section 8.2 (each a
"Pre-Closing Tax Contest"): (i) Parent will notiff the Shareholders' Representative in writing
of such Pre-Closing Tax Contest and will keep the Shareholders' Representative reasonably
informed with respect to the defense thereof; (ii) the Shareholders' Representative, on behalf of
the Escrow Participants, will have the right to participate in the defense of such Pre-Closing Tax
Contest at the sole expense of the Escrow Participants; (iii) Parent will consult with the
Shareholders' Representative before taking any significant action in connection with such Pre-
Closing Tax Contest; and (iv) the Shareholders' Representative shall have the right to approve
any settlement of such Pre-Closing Tax Contest, such approval not to be unreasonably delayed,
conditioned or withheld. To the extent of any conflict between the provisions of this Section
5.1 1(b) and Article 8, this Section 5.11(b) shall control.
(c) Each of the parties hereto shall, unless prohibited by applicable law, treat
the current taxable periods of the Company and each Company Subsidiary as ending as of the
close of the Closing Date. In the case of any Straddle Period: (i) the amount of any Taxes based
on or measured by income, receipts or payroll allocable to a Pre-Closing Tax Period shall be
determined based on an interim closing of the books as of the close of business on the Closing
Date (and for such pulpose, the taxable period of any partnership or other pass-through entity in
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which the Company or any Company Subsidiary holds a beneficial interest shall be deemed to
terminate at such time); and (ii) the amount of any other Taxes allocable to a Pre-Closing Tax
Period shall be deemed to be the amount of such Taxes for the entire Straddle Period multiplied
by a fraction, the numerator of which is the number of days in the Straddle Period ending on the
Closing Date and the denominator of which is the number of days in such Straddle Period.
(d) Any Tax refunds that are received by Parent or any of its Affiliates (or
credits for overpayments for Tax to which any of the foregoing are entitled) and that relate to
Taxes paid by the Company or any of its Subsidiaries on or prior to the Closing Date or Taxes
reflected in Final Closing Net Working Capital shall be for the account of the Escrow
Participants, other than refunds (or credits) that were included as an asset in determining Final
Closing Net Working Capital or are attributable to any loss incurred after the Closing applied as
a carryback to income in a Pre-Closing Tax Period. Parent shall pay to the Escrow Participants
any such refund (or the amount of any such credit), net of any expenses or Taxes incurred by
Parent or any of its Affiliates and specifically and separately attributable to such refund (or
credit), within fifteen (15) days after receipt of such refund (or fifteen (15) days after the due
date of the Tax Return claiming such credit). Except in connection with the preparation of Tax
Retums pursuant to Section 5.ll(a) or to the extent reasonably and timely requested by the
Shareholders' Representative, Parent shall have no obligation to claim or obtain any refund or
credit that will give rise to a payment to Escrow Participants pursuant to this Section 5.1l(d).
(e) Without the consent of the Shareholders' Representative, which shall not
be unreasonably withheld, conditioned or delayed, none of Parent or any Affiliate thereof shall
amend, refile or otherwise modiff any Tax Return of the Company or its Subsidiaries, or waive
any limitations period with respect to such Tax Retums, if such amendment, refiling,
modification or waiver would reasonably be expected to result in Damages for which
indemnification of Parent would be required hereunder.
(f) Parent shall not make, or cause to be made, any election under Section 338
of the Code with respect to the transactions contemplated by this Agreement.
(g) Any and all Tax sharing agreements between the Company or any
Company Subsidiary on the one hand and any other Person on the other hand shall be terminated
as of the Closing Date and, from and after the Closing Date, neither the Company nor any
Company Subsidiary shall be obligated to make any payment pursuant to any such agreement for
any past or future taxable period.
(h) All Transfer Taxes incurred in connection with the transactions
contemplated by this Agreement shall be paid by Parent.
(i) Each of the parties hereto will cooperate, as and to the extent reasonably
requested by any other party to this Agreement, in connection with any Tax matters relating to
the Company or its Subsidiaries (including by the provision of reasonably relevant records or
information (including information required by Code Sections 6043 and 60434, if applicable)),
including the filing of Tax Returns pursuantto Section 5.ll(a) and any audit, litigation or other
proceeding with respect to Taxes of the Company or any Company Subsidiary. Such
cooperation shall include the retention and (upon another party's request) the provision of
45
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Exhibit D-2 Page 46 of 85
records and information reasonably relevant to any such audit, litigation or other proceeding.
The party requesting such cooperation will pay the reasonable out-of-pocket expenses of the
other parties. Parent shall cause the Company and the Company Subsidiaries to retain all books
and records with respect to Tax matters of the Company and the Company Subsidiaries relating
to any taxable period beginning before the Closing Date until the expiration of the statute of
limitations of the respective taxable periods and to abide by all record retention agreements
entered into with any Tax authority.
0) Unless otherwise required by applicable Tax law (as determined by a "Big
Four" accounting firm in an opinion concluding that it is not more likely than not that the Merger
qualifies as a "reorganization" under Section 368(a) of the Code) or a "determination" within the
meaning of Section l3l3 of the Code (or corresponding or similar provision of state or local
law), each of the parties hereto shall report the Merger for federal and applicable state and local
income Tax purposes in a manner consistent with the characterization of the Merger as a
"reorganization" under Section 368(a) of the Code, including the timely filing of the statements
required by Treasury Regulations Sections 1.368-3. For the avoidance of doubt: (i) except with
respect to the representations and warranties of Parent and Merger Sub contained in Article 4 and
the covenant contained in this Section 5.ll(i), Parent makes no representations or warranties to
the Company or any Company Shareholder regarding whether the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code; and (ii) the Company
acknowledges the Company and the Company Shareholders are relying solely on their own Tax
advisors in connection with the Merger and the other transactions contemplated by this
Agreement.
Section 5.12 Company Cash. The Company agrees to use its commercially reasonable
efforts to, during the Pre-Closing Period, dividend to the Company Shareholders and/or pre-pay
indebtedness in an aggregate amount equal to at least (a) $8,000,000 /ess (b) the aggregate
amount of out-of-pocket fees and expenses paid by the Company to brokers, financial advisors,
accountants or legal advisors for services performed in connection with the negotiation,
execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby (such dividends and/or other payments or distributions, the "Pre-Closing
Distributions").
Section 5.13 Company Indebtedness. At the Closing, the Company and the Company
Subsidiaries shall have no indebtedness for borrowed money other than (a) the Closing
Indebtedness and (b) inter-company indebtedness among the Company and any Company
Subsidiary. For purposes of clarity, indebtedness for borrowed money shall not include any
amounts owing by the Company or any Company Subsidiary pursuant to the Snettisham
Agreements (as defined in the Disclosure Schedules).
ARTICLE 6.
CONDITIONS TO THE MERGER.
Section 6.1 Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction (or waiver, if
permissible under applicable law) on or prior to the Closing Date of the following conditions:
46
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Exhibit D-2 Page 47 of 85
(a) the representations and warranties of the Company contained in this
Agreement shall be accurate in all respects as of the Closing, with the same force and effect as if
made as of the Closing (except to the extent any such representation or warranty speaks as of the
date of this Agreement or any other specific date, in which case such representation or warranty
shall have been accurate in all respects as of such date), except that any inaccuracies in such
representations and warranties will be disregarded for purposes of this Section 6.1(a) if such
inaccuracies (considered collectively) do not have a Company Material Adverse Effect as of the
Closing, it being understood that, for purposes of determining the accuracy of such
representations and warranties, all "Company Material Adverse Effecf' and other qualifications
using the terms "in any material respecf'or "in all material respects" in such representations and
warranties will be disregarded;
(b) the Company shall have performed in all material respects all agreements
and covenants required to be performed by it under this Agreement at or prior to the Closing,
including but not limited to obtaining any required governmental consents, permits, regulatory
approvals, waivers, and making any required filings or completing any required registrations
with governmental authorities;
(c) the Merger shall have been approved by the Requisite Shareholders;
(d) the Company Required Governmental Approvals and the Parent Required
Governmental Approvals shall have been obtained, and no such Company Required
Governmental Approval or Parent Required Govemmental Approval shall have imposed a
Burdensome Condition not otherwise agreed to or approved by Parent;
(e) the Shareholders' Representative and the Escrow Agent shall have
executed the Escrow Agreement;
(0 since the date of this Agreement, there shall have been no occurrences
that, individually or in the aggregate, have had a Company Material Adverse Effect;
(g) there shall not be pending any action by a governmental authority seeking
to restrain, prohibit or enjoin the consummation of the Merger;
(h) the waiting period under the HSR Act, if applicable, shall have expired or
been terminated; and
(i) no injunction or other order preventing the Merger shall have been issued
since the date of this Agreement by any United States federal or state court of competent
jurisdiction and shall remain in effect; and no United States federal or state law that makes the
Merger illegal shall have been enacted since the date of this Agreement and shall remain in
effect.
Section 6.2 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction (or waiver, if permissible under
applicable law) on or prior to the Closing Date of the following conditions:
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(a) the representations and warranties of Parent and Merger Sub contained in
this Agreement shall be accurate in all respects as of the Closing, with the same force and effect
as if made as of the Closing (except to the extent any such representation or waranty speaks as
of the date of this Agreement or any other specific date, in which case such representation or
warranty shall have been accurate in all respects as ofsuch date), except that any inaccuracies in
such representations and warranties will be disregarded for purposes of this Section 6.2(a) if such
inaccuracies (considered collectively) do not have a material adverse effect on the economic
benefits to be derived by the Company Shareholders from the Merger, it being understood that,
for purposes of determining the accuracy of such representations and warranties, all "material
adverse effect" and other qualifications using the terms "in any material respect" or "in all
material respects" in such representations and warranties will be disregarded;
(b) Parent and Merger Sub shall have performed in all material respects all
agreements and covenants required to be performed by it under this Agreement at or prior to the
Closing, including but not limited to obtaining any required governmental consents, permits,
regulatory approvals, waivers, and making any required filings or completing any required
regi strations with governmental authorities ;
(c) Parent shall have provided the Company with satisfactory evidence that
the payments required to be made at the Closing pursuant to Article 2 will be made at the
Closing;
(d) the Company Required Govemmental Approvals and the Parent Required
Govemmental Approvals shall have been obtained, and no such Company Required
Govemmental Approval or Parent Required Govemmental Approval shall have imposed a
Burdensome Condition not otherwise agreed to or approved by the Company;
(e) the Merger shall have been approved by the Requisite Shareholders;
(D Parent and the Escrow Agent shall have executed the Escrow Agreement
and Parent shall have deposited all amounts required by Section 2.5 to be contributed to the
Escrow Fund with the Escrow Agent;
(g) The Registration Statement shall have been declared effective by the SEC
under the Securities Act and no stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that purpose shall have been
initiated or threatened by the SEC;
(h) The Parent Common Stock to be issued hereunder shall have been
approved for listing on the New York Stock Exchange, subject to customary conditions and
offi cial notice of issuance;
(i) since the date of this Agreement, there shall have been no occurrences
that, individually or in the aggregate, have had a material adverse effect on the business of Parent
taken as a whole or the Parent Common Stock;
sd-625790
Exhibit D-2 Page 49 of 85
0) there shall not be pending any action by a governmental authority seeking
to restrain, prohibit or enjoin the consummation of the Merger;
(k) the waiting period under the HSR Act, if applicable, shall have expired or
been terminated; and
(l) no injunction or other order preventing Merger shall have been issued
since the date of this Agreement by any United States federal or state court of competent
jurisdiction and shall remain in effect; and no United States federal or state law that makes the
Merger illegal shall have been enacted since the date of this Agreement and shall remain in
effect.
Section 6.3 Frustration of Closing Conditions. None of the Company, Parent or
Merger Sub may rely on the failure of any condition set forth in Section 6.1 or Section 6.2, as the
case may be, to be satisfied if such failure was caused by such party's failure to use its
commercially reasonable efforts to perform any of its obligations under this Agreement.
ARTICLE 7.
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement abandoned atany time prior to the Effective Time:
(a) by the mutual written consent of the Company and Parent duly authorized
by each of their respective Boards of Directors;
(b) by either of the Company or Parent if the Merger shall not have been
consummated on or before December 31,2014; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to a parry if the failure of the
Merger to have been consummated on or before December 31,2014 was caused by the failure of
such party or any Affiliate of such party to perform any of its obligations under this Agreement;
(c) by Parent, by notice to the Company, if (i) the Company has breached any
representation, warranty, covenant, agreement or obligation in this Agreement, (ii) such breach
has not been cured within thirly (30) days following a written notification thereof; provided,
however, that if, at the end of such thirty (30) day period, the Company is endeavoring in good
faith, and proceeding diligently, to cure such breach, the Company shall have an additional thirty
(30) days in which to effect such cure and (iii) such breach (to the extent not cured) would result
in any of a (w) Company Material Adverse Effect, (x) material adverse effect on the business of
Parent taken as a whole, (y) material adverse effect on the ability of Parent to continue to operate
the business of the Company and the Company Subsidiaries, taken as a whole, consistent with
past practices or (z) material adverse effect on the ability of the Company, the Company
Subsidiaries, Parent, or Merger Sub to consummate the Merger as contemplated by this
Agreement;
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(d) by the Company, by written notice to Parent, (i) immediately if Parent has
breached its obligation to pay any amounts required to be paid pursuant to Article 2, or (ii) if
Parent breached in any material respect any other representation, warranty, covenant, agreement
or obligation in this Agreement and such breach has not been cured within thirty (30) days
following a written notification thereof; provided, however, that il at the end of such thirty (30)
day period, Parent is endeavoring in good faith, and proceeding diligently, to cure such breach,
Parent shall have an additional thirty (30) days in which to effect such cure; or
(e) by either of the Company or Parent if any injunction or other order having
the effect set forth in Section 6.1(g) shall be in effect and shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement under this Section
7.1(e) shall not be available to a parly if the imposition of such injunction or other order was
caused by the failure of such party or any Affiliate of such party to perform any of its obligations
under this Agreement.
Section 7.2 Effect of Termination. In the event of the termination of this Agreement
by the Company or Parent as provided in Section 7.1, written notice thereof shall be given to the
other parties, speciffing the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void (other than the provisions of Article 9,
which shall survive termination of this Agreement), and there shall be no liability on the part of
Parent, Merger Sub or the Company or their respective directors, officers and Affiliates, except
that nothing shall relieve any party hereto from liability for any breach of this Agreement.
ARTICLE 8.
INDEMNIFICATION, ETC.
Section 8.1 Expiration of Representations, Etc. AII representations and warranties
of the Company set forth in this Agreement and any covenants of the Company set forth in this
Agreement and required to be performed prior to or at the Closing, shall terminate and expire on,
and shall cease to have any further force or effect following, the date which is 16 months from
the date of this Agreement (the "Expiration Date"); provided, however, that if at any time prior
to the Expiration Date, Parent has duly delivered to the Shareholders' Representative and the
Escrow Agent a valid Notice of Indemnification Claim (satisfying the requirements set forth in
Section 8.8(a) with respect to the applicable representations and warranties or covenants of the
Company), then the specific Indemnification Claim asserted in such Notice of Indemnification
Claim shall survive the Expiration Date until such time as such claim is resolved.
Notwithstanding the foregoing, all covenants contained in this Agreement that by their terms are
to be performed following the Closing shall survive the Closing in accordance with their terms.
Section 8.2 Indemnification. From and after the Effective Time (but subject to
Section 8.1, Section 8.3, Section 8.4 and Section 8.5 and the other provisions of this Article 8),
Parent shall be entitled to be indemnified against (a) any Damages actually incurred by Parent as
a direct result of any inaccuracy in the representations and warranties of the Company set forth in
Article 3 of this Agreement, (b) any Damages actually incuned by Parent as a direct result of any
breach of any of the covenants of the Company, (c) the excess, if any, of the aggregate amount
ultimately required to be paid to holders of Dissenting Shares with respect thereto by the
50
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Company pursuant to dissenters rights under the ACC over the aggregate amount such holders
would have otherwise received with respect to such Dissenting Shares, plus any reasonable out-
of-pocket costs incurred by Parent or the Surviving Corporation arising out of any demands for
such dissenters' rights and (d) all lndemnified Taxes. For purposes of this Article 8, "Damages"
means out-of-pocket losses or damages, but excluding any special, indirect, consequential,
exemplary or punitive damages.
Section 8.3 Certain Limitations. Not'withstanding any other provision of this Article
8:
(a) Parent's indemnification rights under this Agreement shall be limited to
the amount, if any, then remaining in the Escrow Fund.
(b) Notwithstanding the fact that Parent may have the right to assert claims for
indemnification under or in respect of more than one provision of this Agreement in respect to
any fact, event, condition or circumstance, Parent shall not be entitled to recover the amount of
any Damages more than once under this Agreement in respect of such fact, event, condition or
circumstance, and Parent shall not be entitled to indemnification for any item to the extent that
the amount of the Damages incurred with respect to such item has been taken into account in the
calculation of either the Estimated Closing Net Working Capital or Final Closing Net Working
Capital, or Parent has otherwise been fully compensated on a dollar-for-dollar basis for such
Damages pursuant to either of the Closing Net Working Capital adjustments set forth in Section
2.8.
(c) Notrvithstanding any other terms of this Article 8, Parent shall have no
right to indemnification under this Agreement with respect to any material inaccuracy in any
representation and warranty of the Company set forth in Article 3 of this Agreement if Parent has
Knowledge on the date hereof that such representation and warranty is inaccurate as of the date
hereof.
Section 8.4 Limitations on Liability.
(a) No current or former shareholder, optionholder, director, officer,
employee, Affiliate or advisor of the Company shall have any personal or individual liability of
any nature to Parent, the Surviving Corporation or any Affiliate of Parent or the Surviving
Corporation with respect to any inaccuracy in or breach of any representation or warranty set
forth in, or any other breach of, this Agreement, except as specifically provided herein.
(b) Without limiting the effect of any other limitation set forth in this Article
8, the indemnification provided for herein shall not apply, and Parent shall not be entitled to
exercise any indemnification rights under this Agreement, except to the extent that the aggregate
amount of the Damages against which Parent would otherwise be entitled to be indemnified
exceeds $850,000. tf the aggregate amount of such Damages exceeds $850,000, then Parent
shall, subject to the other limitations set forth in this Agreement, be entitled to be indemnified
only against the portion of such Damages in excess of $850,000.
5l
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(c) Parent acknowledges that it has conducted, to its satisfaction, an
independent investigation and verification of the financial condition, results of operations, assets,
liabilities, properties, products, prospects, employees and projected operations of the Company
and, in making its determination to proceed with the transactions contemplated by this
Agreement, Parent is relying and has relied only on the results of its own independent
investigation and verification and the representations and warranties of the Company expressly
and specifically set forth in Article 3. Parent acknowledges that, except as expressly provided in
Article 3, Parent is not relying and has not relied on any representations or warranties whatsoever
regarding the subject matter of this Agreement, express or implied. The representations and
warranties of the Company set forth in Article 3 constitute the sole and exclusive representations
and warranties to Parent in connection with the transactions contemplated by this Agreement,
and Parent understands, acknowledges and agrees that all other representations and warranties of
any kind or nature, express or implied (including any representations or warranties relating to the
future or historical financial condition, results of operations, assets or liabilities of the Company
or the quality, quantity or condition of the assets of the Company) are specifically disclaimed by
the Company. Parent acknowledges and agrees that no current or former shareholder, director,
officer, employee, Affiliate or advisor of the Company has made or is making any
representations, warranties or commitments whatsoever regarding the subject matter of this
Agreement, express or implied.
(d) Nothing in this Article 8, including the limitations set forth in Section 8.3,
Section 8.4 and Section 8.5, prevents Parent or Surviving Corporation from bringing a common
law action for fraud against any Person whose own fraud has caused Parent or Surviving
Corporation to incur Damages or limit the Damages recoverable by Parent or Surviving
Corporation in such common law action, provided that neither Parent nor Surviving Corporation
shall be entitled to recover Damages more than once for the same indemnifiable matter.
Section 8.5 Defense of Third-Party Claims. Promptly (and in no event more than
five Business Days) after Parent, the Surviving Corporation or any Affiliate of Parent or the
Surviving Corporation receives notice or otherwise obtains knowledge of any actual or possible
claim, demand, suit, action, arbitration, investigation, inquiry or proceeding that has been or may
be brought, commenced or asserted by a third party against Parent, the Surviving Corporation or
any of Parent's other Affiliates and that may give rise to an lndemnification Claim by Parent
under this Article 8 (any such actual or possible claim, demand, suit, action, arbitration,
investigation, inquiry or proceeding by a third party being referred to as a "Third-Party
Claim"), Parent shall deliver to the Shareholders' Representative a written notice stating in
reasonable detail the nature and basis of such Third-Party Claim and the dollar amount of such
Third-Party Claim, to the extent known. The timely delivery of such written notice by Parent to
the Shareholders' Representative shall be a condition precedent to Parent's right to receive
indemnification payments from the Escrow Fund with respect to such Third-Party Claim or with
respect to any of the facts or circumstances giving rise to such Third-Party Claim only to the
extent the failure to timely deliver such notice materially prejudices the Shareholders'
Representative's ability to defend such Third-Party Claim. The Shareholders' Representative
shall have the right, at its option, within fifteen (15) Business Days of receipt of Parent's written
notice to assume the defense of any such Third-Parry Claim with its own counsel. If the
Shareholders' Representative elects to assume the defense of any such Third-Party Claim, then:
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(a) Parent shall be entitled to monitor (but not control) such defense (and
Parent shall not admit, and shall ensure that the Surviving Corporation does not admit, any
liability with respect to such Third-Party Claim), provided that notwithstanding anything to the
contrary contained in this Agreement, Parent shall not be entitled to be indemnified (from the
Escrow Fund or otherwise) for any costs or expenses incurred by Parent in connection with the
defense of such Third-Party Claim following the Shareholders' Representative's election to
assume the defense of such Third-Party Claim so long as the Shareholders' Representative
continues to diligently defend such Third-Party Claim to a final, non-appealable decision or
settlement of the same;
(b) Parent shall make available to the Shareholders' Representative all books,
records and other documents and materials that are under the direct or indirect control of Parent
or any of Parent's Affiliates and that the Shareholders' Representative reasonably considers
necessary or desirable for the defense of such Third-Party Claim, shall execute such documents
and take such other actions as the Shareholders' Representative may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or adjustment relating to,
such Third-Parry Claim, and shall otherwise cooperate as reasonably requested by the
Shareholders' Representative in the defense of such Third-Party Claim; and
(c) the Shareholders' Representative shall not enter into any settlement
agreement providing for the settlement of such Third-Party Claim without the prior written
consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned).
If the Shareholders' Representative elects not to assume the defense of such Third-Party Claim,
then Parent shall proceed diligently to defend such Third-Party Claim with the assistance of
counsel reasonably satisfactory to the Shareholders' Representative; provided, however, that
neither Parent nor the Surviving Corporation shall settle, adjust or compromise such Third-Party
Claim, or admit any liability with respect to such Third-Party Claim, without the prior written
consent of the Shareholders' Representative (which consent shall not be unreasonably withheld,
delayed or conditioned).
SectionS.6 Mitigation;Insurance.
(a) Promptly after Parent or the Surviving Corporation becomes aware of any
event or circumstance that could reasonably be expected to constitute any breach of any
representation or warranty set forth in Article 3, Parent or Surviving Corporation will take
commercially reasonable steps to mitigate and minimize any Damages that may result from such
breach.
(b) The amount of any Damages that are subject to indemnification out of the
Escrow Fund or otherwise under this Article 8 shall be calculated net of the amount of (i) any
third-party insurance proceeds from any third party insurance paid or certain of payment to
Parent or Surviving Corporation in connection with such Damages or any of the events or
circumstances giving rise or otherwise related to such Damages, and (ii) any federal, state or
local Tax savings attributable to such Damages that are actually recognized by Parent in the
taxable year in which such Damages are calculated and paid. Nothing in this Section 8.6 shall
obligate Parent to provide copies of its or its Affiliates' Tax Returns to the Shareholders'
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Representative and Parent shall be required to disclose only such information related to such Tax
Returns as is reasonably necessary to confirm the Tax savings, or lack of Tax savings, described
in this Section 8.60).
Section 8.7 Exclusivity. Other than Damages that result from fraud by the Company
or any Company Subsidiary, the right of Parent to receive indemnification payments pursuant to
this Article 8 shall be the sole and exclusive right and remedy exercisable by Parent the
Surviving Corporation or any of Parent's Affiliates with respect to any inaccuracy in or breach of
any representation or warranty contained in, or any other breach of, this Agreement.
SectionS.8 IndemnificationClaims; EscrowArrangements.
(a) Parent shall not be entitled to indemnification under this Article 8 unless it
has duly delivered a written notice to the Shareholders' Representative and the Escrow Agent
(any such notice being referred to as a "Notice of Indemnification Claim," and the claim for
indemnification described in such Notice of Indemnification Claim being referred to as
an "Indemnification Claim"), setting forth: (i) the specific representation and warranty of the
Company alleged to have been inaccurate or specific covenant of the Company alleged to have
been breached or other specific circumstance entitling Parent to such indemnification; (ii) a
reasonably detailed description of the facts and circumstances giving rise to the alleged
inaccuracy in such representation and warranty or breach of such covenant or other specific
circumstance entitling Parent to such indemnification; and (iii) the aggregate dollar amount of the
Damages that have been incurred by Parent as a direct result of the inaccuracy or breach or other
circumstance referred to in such notice (the aggregate amount of such estimate being referred to
as the "Claimed Amount").
(b) During the 60-day period commencing upon the receipt by the
Shareholders' Representative of a Notice of Indemnification Claim, the Shareholders'
Representative may deliver to Parent and the Escrow Agent a written response (the "Response
Notice") in which the Shareholders' Representative: (i) agrees that the full Claimed Amount is
owed to Parent; (ii) agrees that part (but not all) of the Claimed Amount is owed to Parent; or
(iii) asserts that no part of the Claimed Amount is owed to Parent. Any part of the Claimed
Amount that is not agreed by the Shareholders' Representative to be owed to Parent in the
Response Notice shall be referred to as the "Contested Amount."
(c) If the Shareholders' Representative delivers a Response Notice to Parent
agreeing that all or any part of the Claimed Amount is owed to Parent then, within three days
following the receipt of such Response Notice by Parenf Parent and the Shareholders'
Representative shall jointly execute and deliver to the Escrow Agent a written notice instructing
the Escrow Agent to release such amount agreed to by the Shareholders' Representative (or such
lesser amount as may remain in the Escrow Fund) to Parent from the Escrow Fund by the release
of shares of Parent Common Stock (valued at the Parent Closing Price) held in the Escrow Fund
to Parent. If the Shareholders' Representative fails to deliver a Response Notice within 60 days
after its receipt of a Notice of Indemnification Claim, the Escrow Agent shall release to Parent
such portion of the Claimed Amount as Parent shall have certified in writing to the Escrow Agent
as having been actually incurred by Parent prior to such date by the release of shares of Parent
Common Stock (valued at the Parent Closing Price) held in the Escrow Fund to Parent.
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(d) If the Shareholders' Representative and Parent are unable to resolve any
dispute relating to any Contested Amount during the 30-day period commencing upon the receipt
of the Response Notice by Parenl then such dispute will be resolved in accordance with Section
9.5.
(e) If the aggregate amount remaining in the Escrow Fund, including any
interest accrued or income otherwise earned thereon (other than Shareholder Distributions), as of
the Expiration Date (the "Aggregate Escrow Balance") exceeds the aggregate dollar amount, as
of the Expiration Date, of the Contested Amounts associated with all Indemnification Claims that
have not been finally resolved and paid prior to the Expiration Date in accordance with this
Section 8.8 (each, an "Unresolved Escrow Claim," and the aggregate dollar amount of such
Contested Amounts as of the Expiration Date being referred to as the "Aggregate Pending
Claim Amount"), then the Escrow Agent shall release from the Escrow Fund to each Escrow
Participant the amount determined by multiplying such Escrow Participant's Escrow
Participation Percentage by the Aggregate Distribution Amount, in the form of Stock
Consideration valued in the same fashion as Stock Consideration paid by Parent to each
Company Shareholder at the Closing. For purposes of this Section 8.8, the "Aggregate
Distribution Amount" shall be the Aggregate Escrow Balance as of the Expiration Date minus
the Aggregate Pending Claim Amount.
(0 Following the Expiration Date, if an Unresolved Escrow Claim is finally
resolved, Parent and the Shareholders' Representative shall jointly execute and deliver to the
Escrow Agent, within three days after the final resolution of such Unresolved Escrow Claim, a
written notice instructing the Escrow Agent to release from the Escrow Fund to each Escrow
Participant an aggregate amount of Stock Consideration determinedby multiplying such Escrow
Participant's Escrow Participation Percentage by the amount (if any) by which the aggregate
amount remaining in the Escrow Fund, including any interest accrued or income otherwise
earned thereon, as of the date of resolution of such Unresolved Escrow Claim exceeds the
aggregate amount of the Contested Amounts associated with all other remaining Unresolved
Escrow Claims, payable in the form of Stock Consideration valued in the same fashion as Stock
Consideration paid by Parent to each Company Shareholder at the Closing.
(g) The parties agree that any amounts released to Parent from the Escrow
Fund pursuant to this Article 8 shall be treated as a reduction in the aggregate consideration paid
or to be paid to the Company Shareholders in connection with the Merger for U.S. federal
income tax purposes. The parties further acknowledge and agree that a portion of any amounts
released to the Escrow Participants pursuant to this Article 8 and the Escrow Agreement will be
treated as imputed interest for federal income Tax purposes (and corresponding provisions of
state, local and foreign Tax law).
55
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ARTICLE 9.
MISCELLANEOUS PROVISIONS
Section9.l Shareholders'Representative.
(a) The rights of the Escrow Participants to receive disbursements from the
Escrow Fund pursuant to the Escrow Agreement shall be subject to the right of William A.
Corbus (the "Shareholders' Representative") to take any and all actions and make any and all
decisions required or permitted to be taken or made by the Shareholders' Representative under
this Agreement or the Escrow Agreement, including the exercise of the right to: (i) give and
receive notices and communications under Article 8 or the Escrow Agreement; (ii) authorize
delivery to Parent of Parent Common Stock from the Escrow Fund in satisfaction of claims for
indemnification made by Parent under Article 8; (iii) object to claims for indemnification made
by Parent under Article 8; (iv) agree to, negotiate, enter into settlements and compromises of and
comply with court orders with respect to claims for indemnification made by Parent under
Article 8; (v) undertake any defense of Third-Party Claims; (vi) amend or waive the Escrow
Agreement and (vii) take all actions necessary or appropriate in the good faith judgment of the
Shareholders' Representative for the accomplishment of the foregoing. The identity of the
Shareholders' Representative may be changed, and a successor Shareholders' Representative
may be appointed, from time to time (including in the event of the resignation or the death,
disability or other incapacity of the Shareholders' Representative) by Escrow Participants whose
aggregate Escrow Participation Percentages exceed sixty percent (60%), and any such successor
shall succeed the Shareholders' Representative as Shareholders' Representative hereunder. No
bond shall be required of the Shareholders' Representative, and the Shareholders' Representative
shall be reimbursed for costs and expenses (including overhead expenses) incurred in such
capacity from the Representative Reimbursement Amount. From and after the Effective Time, a
decision, act, consent or instruction of the Shareholders' Representative shall be final, binding
and conclusive upon each Escrow Participant.
(b) At the Closing, Parent shall make a cash payment to the Shareholders'
Representative, by wire transfer of immediately available funds to an account designated by the
Shareholders' Representative prior to the Closing Date, in the amount of $500,000 (the
"Representative Reimbursement Amount"). The Representative Reimbursement Amount
shall be held by the Shareholders' Representative for reimbursement payable to the
Shareholders' Representative under this Section 9.1 (the "Representative Reimbursement
Fund"). Parent and Merger Sub shall have no further obligation or liability with respect to the
Representative Reimbursement Amount other than payment of the same to the Shareholders'
Representative pursuant to this Section 9. I (b). Any portion of the Representative Reimbursement
Fund that has not been utilized by the Shareholders' Representative pursuant to the terms of this
Agreement on or prior to the date specified by the Shareholders' Representative on or after the
Expiration Date, shall be paid by the Shareholders' Representative to the Escrow Agent for
distribution to the Escrow Participants pro rata in accordance with their respective Escrow
Participation Percentages.
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(c) The Shareholders' Representative shall not be liable for any liability, loss,
damage, penalty, fine, cost or expense incurred without gross negligence by the Shareholders'
Representative while acting in good faith and in the exercise of its good faith judgment and
arising out of or in connection with the acceptance or administration of its duties or the exercise
of its rights hereunder (it being understood that any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith).
(d) The Shareholders' Representative shall be entitled to deduct and recover
from any amounts payable to the Escrow Participants pursuant to this Agreement or the Escrow
Agreement any costs and expenses reasonably incurred by the Shareholders' Representative in
connection with actions taken by the Shareholders' Representative pursuant to the terms of this
Agreement or the Escrow Agreement (including the hiring of legal counsel and the incurring of
legal fees and costs), after the Representative Reimbursement Fund has been exhausted.
(e) From and after the Effective Time, Parent and the Surviving Corporation
shall promptly afford to the Shareholders' Representative reasonable access to the books, records
(including accountants' work papers) and employees of Parent and the Surviving Corporation to
the extent reasonably determined by the Shareholders' Representative to be necessary to permit
it to investigate or determine any matter relating to (i) its rights or obligations or the rights or
obligations of the Escrow Participants under this Agreement or the Escrow Agreement, or (ii) the
rights or obligations (under any law or otherwise) of the Escrow Participants with respect to any
period ending on or before the date of this Agreement. Unless otherwise consented to in writing
by the Shareholders' Representative, neither Parent nor the Surviving Corporation shall, for a
period of four years after the date of this Agreement, destroy, alter or otherwise dispose of any of
the books and records of the Surviving Corporation relating in whole or in part to any period
prior to the date of this Agreement without first offering to surrender to the Shareholders'
Representative such books and records or any portion thereof which Parent or the Surviving
Corporation may intend to destroy, alter or otherwise dispose of.
(f) Parent may rely and shall be protected in acting, or refraining from acting,
upon any written notice, instruction or request furnished to it hereunder or under the Escrow
Agreement and reasonably believed by Parent to be genuine and to have been signed or presented
by the Shareholders' Representative as if such written notice, instruction or request had been
furnished to it by all the Escrow Participants.
(g) Parent hereby consents to the retention by the Shareholders'
Representative of Morrison & Foerster LLP as counsel following the Closing, notwithstanding
that Morrison & Foerster LLP has represented Company in connection with the transactions
contemplated by this Agreement, including the negotiation of this Agreement, and waives any
right Parent or the Surviving Corporation may have to object to such representation.
Section 9.2 Expenses. Except as otherwise provided herein, each party shall pay all
of its own fees, costs and expenses (including fees, costs and expenses of legal counsel,
investment bankers, brokers or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the negotiation of this Agreement and the other
agreements contemplated by this Agreement, the performance of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and thereby, except
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that filing fees pursuant to any Antitnrst Laws (including the HSR Act) shall be paid by Parent.
All fees and expenses of the Paying Agent and the Escrow Agent shall be paid by Parent.
Section 9.3 Waiver.
(a) Except as expressly set forth in this Agreement, no failure on the part of
any party to exercise any power, right, privilege or remedy under this Agreement, and no delay
on the part of any party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or remedy.
(b) No party shall be deemed to have waived any claim arising out of this
Agreement, or any power, righg privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such pa(ry; and any such waiver shall not be applicable or
have any effect except in the specific instance in which it is given.
Section 9.4 Entire Agreement; Counterparts; Exchanges by Facsimile. This
Agreement, the Confidentiality Agreement, the Escrow Agreement and the other agreements
referred to in this Agreement constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among or between any of the parties with respect to
the subject matter hereof and thereof. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one and the same
instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by
facsimile or by electronic delivery in .pdf format shall be sufficient to bind the parties to the
terms and provisions of this Agreement.
Section 9.5 Governing Law; Consent to Jurisdiction. This Agreement and the
transactions contemplated hereby, and all disputes between the parties under or related to this
Agreement or the facts and circumstances leading to its execution, whether in contract, tort or
otherwise, shall be governed by, and construed in accordance with, the laws of the State of
New York applicable to contracts executed in and to be performed entirely within such State,
without regard to conflict of law principles that would result in the application of any law other
than the law of the State of New York; provided, however, all disputes between the parties under
or related to Article 2 of this Agreement, shall be governed by, and construed in accordance
with, the laws of the State of Alaska applicable to contracts executed in and to be performed
entirely within such State, without regard to conflict of law principles that would result in the
application of any law other than the law of the State of Aiaska. Each of the parties to this
Agreement hereby irrevocably and unconditionally submits, for itself and its assets and
properties, to the exclusive jurisdiction of any state court, or Federal court of the United States of
America located within San Francisco, California, and any appellate court from any thereof in
any action or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, or for recognition or enforcement of any judgment relating thereto, and
each of the parties to this Agreement hereby irrevocably and unconditionally (a) agrees not to
commence any such action or proceeding except in such courts; (b) waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter have to the laying
58
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of venue of any such action or proceeding in any such court; and (c) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court. Each of the parties to this Agreement hereby agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Each of the parties
to this Agreement hereby irrevocably consents to service of process in the manner provided for
notices in Section 9.7. Nothing in this Agreement shall affect the right of any party to this
Agreement to serve process in any other manner permitted by applicable law.
Section 9.6 Assignability; Third Party Rights.
(a) Subject to Section 9.6(b), this Agreement shall be binding upon, and shall
be enforceable by and inure solely to the benefit of, the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any of the rights or
obligations of any party hereunder may be assigned or delegated by such party without the prior
written consent of the other parties, and any attempted assignment or delegation of this
Agreement or any of such rights or obligations by any party without the other parties' prior
written consent shall be void and of no effect.
(b) Except as set forth in the final sentence of this Section 9.6, nothing in this
Agreement is intended to or shall confer upon any Person (other than the parties hereto) any
right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement (but without limiting any
of the rights of the Shareholders' Representative under this Agreement): (i) the Persons who
hold shares of Company Common Stock immediately prior to the Effective Time shall be third
party beneficiaries of the provisions set forth in Article 2; (ii) the Indemnified Parties shall be
third party beneficiaries of the provisions set forth in Section 5.8; and (iii) all current and former
shareholders, directors, officers, employees, Affiliates and advisors of the Company shall be
third party beneficiaries of the last sentence of Section 8.a(c).
Section 9.7 Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given or made as
follows: (a) if sent by registered or certified mail in the United States return receipt requested,
upon receipt; (b) if sent designated for overnight delivery by an intemationally recognized
overnight air courier (such as UPS, DHL or Federal Express), two Business Days after dispatch
from any location in the United States; (c) if sent by facsimile transmission before 5:00 p.m. on a
Business Day, when transmitted and receipt is confirmed; (d) if sent by facsimile transmission on
a day other than a Business Day or after 5:00 p.m. on a Business Day and receipt is confirmed,
on the following Business Day; and (e) if otherwise actually personally delivered, when
delivered, provided that such notices, requests, demands and other communications are delivered
to the address set forth below, or to such other address as any party shall provide by like notice to
the other parties to this Agreement:
59
Exhibit D-2
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if to the Company (prior to the Closing):
Alaska Energy and Resources Company
5601 Tonsgard Court
Juneau, AK 99801-7201
Attention: William A. Corbus
Facsimile: 907 -463-6332
with a copy to (which shall not constitute notice):
Morrison & Foerster LLP
12531High BluffDrive, Suite 100
San Diego, CA92l30
Attention: Steven G. Rowles
Facsimile: [phone]
if to Parent, Merger Sub or the Surviving Corporation:
Avista Corporation
l4l I East Mission Avenue
Spokane, WA 99202
Attention: General Counsel
Facsimile: [phone]
With a copy to (which shall not constitute notice):
Davis Wright Tremaine LLP
1201 Third Avenue, #2200
Seattle, WA 98101
Attention: Scott W. MacCormack
Facsimile: 206-7 57 -7263
if to the Shareholders' Representative (after the Closing):
William A. Corbus
209 S Franklin St, Suite 209
Juneau, AK 99801
Facsimile: 907 -463-6332
with a copy to (which shall not constitute notice):
Morrison & Foerster LLP
12531High BluffDrive, Suite 100
San Diego, CA92l30
Attention: Steven G. Rowles
Facsimile: (858) 523-28 l0
60
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Page61 of85
Section 9.8 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions of this Agreement or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction. If a final judgment
of a court of competent jurisdiction declares that any term or provision of this Agreement is
invalid or unenforceable, the parties hereto agree that the court making such determination shall
have the power to limit such term or provision, to delete specific words or phrases or to replace
such term or provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or provision, and this
Agreement shall be valid and enforceable as so modified. In the event such court does not
exercise the power granted to it in the prior sentence, the parties hereto agree to replace such
invalid or unenforceable term or provision with a valid and enforceable term or provision that
will achieve, to the extent possible, the economic, business and other purposes of such invalid or
unenforceable term or provision.
Section 9.9 Construction. '
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; the feminine gender shall include the masculine and neuter
genders; and the neuter gender shall include masculine and feminine genders.
(b) As used in this Agreement, the words "include" and "including," and
variations thereof shall not be deemed to be terms of limitation, but rather shall be deemed to be
followed by the words "without limitation."
(c) Except as otherwise indicated, all references in this Agreement to
"Articles," "Sections," "Exhibits" and "Schedules" are intended to refer to Articles or Sections
of this Agreement and Exhibits or Schedules to this Agreement.
(d) The bold-faced headings set forth in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to
in connection with the construction or interpretation of this Agreement.
Section 9.10 Attorney-Client Privilege. The attorney-client privilege of the Company
related to the Merger shall be deemed to be the right of the Escrow Participants, and not that of
the Surviving Corporation, following the Closing, and may be waived only by the Shareholders'
Representative. Absent the consent of the Shareholders' Representative, neither Parent nor the
Surviving Corporation shall have a right to access attorney-client privileged material of the
Company related to the Merger following the Closing.
Section 9.11 Disclosure Schedule. The representations and warranties contained in
Article 3 of the Agreement are subject to (a) the exceptions and disclosures set forth in the
applicable Section of the Disclosure Schedule corresponding to the particular Section of Article
3 in which such representation and warranty appears; (b) any exceptions or disclosures explicitly
cross-referenced in such Section of the Disclosure Schedule by reference to another Section of
the Disclosure Schedule; and (c) any exception or disclosure set forth in any other Section of the
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Disclosure Schedule to the extent it is reasonably apparent that such exception or disclosure is
intended to qualiff such representation and warranty. No reference to or disclosure of any item
or other matter in the Disclosure Schedule shall be construed as an admission or indication that
such item or other matter is material (nor shall it establish a standard of materiality for any
purpose whatsoever) or that such item or other matter is required to be referred to or disclosed in
the Disclosure Schedule. The information set forth in the Disclosure Schedule is disclosed solely
for the purposes of this Agreement, and no information set forth therein shall be deemed to be an
admission by any party hereto to any third parfy of any matter whatsoever, including of any
violation of law or breach of any agreement. The Disclosure Schedule and the information and
disclosures contained therein are intended only to qualiff and limit the representations,
warranties and covenants of the Company contained in this Agreement. Nothing in the
Disclosure Schedule is intended to broaden the scope of any representation or warranty
contained in this Agreement or create any covenant. Matters reflected in the Disclosure
Schedule are not necessarily limited to matters required by the Agreement to be reflected in the
Disclosure Schedule. Such additional matters are set forth for informational purposes and do not
necessarily include other matters of a similar nature. The contents of each of the contracts and
other instruments or documents referred to in the Disclosure Schedule shall be deemed to be
incorporated and referred to in the Disclosure Schedule as though set forth in full therein. From
time to time prior to the Closing, the Company may at its option supplement or amend and
deliver updates to the Disclosure Schedule (each a "Schedule Update") that are necessary to
complete or correct any information in the Disclosure Schedules or in any representation or
warranty of the Company or any Company Subsidiary that has been rendered inaccurate or
incomplete due to any change, event, effect or occurrence since the date of this Agreement. If
Parent has the right to initiate the termination of this Agreement pursuant to Section 7.1(c)
(subject to the Company's right to cure) and does not initiate such right in writing as a result of
such Schedule Update within ten (10) days of receipt of such Schedule Update and (b) the
Schedule Update pursuant to this Section 9.1 I relates to events occurring or conditions arising
after the date of this Agreement, then such Schedule Update shall be deemed to have amended
the appropriate Section or Sections of the Disclosure Schedule as of the date of this Agreement,
to have qualified the representations and warranties contained in Article 3 as of the date of this
Agreement, and to have timely cured any misrepresentation or breach of warranty that otherwise
might have existed hereunder by reason of the existence of such matter. If Parent does not have
the right to terminate this Agreement pursuant to Section 7.1(c) because no Company Material
Adverse Effect has resulted from any change, event, effect or occurrence since the date ofthis
Agreement, then such Schedule Update shall be deemed to supplement or amend the Disclosure
Schedule for the purpose of determining whether the conditions set forth in Article 6 have been
satisfied, but shall not be deemed to supplement or amend the Disclosure Schedule for the
purposes of determining the accuracy of any representation or warranty made by the Company in
this Agreement or the indemnification provisions of Article 8. For the avoidance of doubt,
Parent shall not be permitted to terminate this Agreement and it shall not otherwise be deemed a
breach of this Agreement as a result of any Schedule Updates that relate to any actions permitted
by or taken pursuant to this Section 9.1 l.
Section 9.12 Specific Performance. Each of the parties acknowledges and agrees that
the other parties would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise are breached
62
Exhibit D-2
sd-625790
Page 63 of 85
or violated. Accordingly, each of the parties agrees that, without posting bond or other
undertaking, the other parties will be entitled to seek an injunction or injunctions to prevent
breaches or violations of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action or proceeding instituted in any
court of the United States or any state thereof having jurisdiction over the parties and the matter
in addition to any other remedy to which it may be entitled, at law or in equity. Each party
further agrees that, in the event of any action for specific performance in respect of such breach
or violation, it will not assert that the defense that a remedy at law would be adequate. Further,
each party agrees that in any action for specific performance brought to enforce a parly's
obligations under this agreement, if specific performance or other equitable relief is granted, the
party obtaining such remedy or relief shall be entitled to be reimbursed for its reasonable
expenses incurred in connection with such action, including its attorney's fees and expenses.
[Remainder of page intentionally left blank]
63
Exhibit D-2
sd-625790
Page 64 of 85
IN WTTNESS WHEREOtr', the parties have caused this Agreernent to be executed as of
the date first above written.
Ar,lsx.a Eunncy eno RrsouRcEs CoMpAlIy
Bft I) 'attad Ll-
Name: William A. Corbus
Title: Preside,nt
Ar,lsxe Mrncpn Sun, Ixc.
By:
Name:
Title:
AVISTA CoRPoRATIoN
By:
Name:
Title:
And with respect to Article 8 and Section 9.1 only:
Wn r,lnvrA. CoRBUs,
as the Shareholden' Repreentative
By
Name: William A. Cotbus
Merger Agreement Signature Page
sd-625790 Exhibit D-2 Page 65 of 85
EXHIBITS
Exhibit A - Form of Articles of lncorporation of the Surviving Corporation
Exhibit B - Form of Articles of Merger
ExhibitC - FIRPTACertifioate
sd-625790
Exhibit D-2 Page 66 of 85
EXHIBIT A
FORM OF ARTICLES OF INCORPORATION OF THE SURVIYING CORPORATION
sd-625790
Exhibit D-2 Page 67 of 85
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ALASKA ENERGY AND RESOURCES COMPANY
Alaska Energy and Resources Company, a corporation organized and existing under and by virtue
of the Alaska Corporations Code (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the name of the Corporation is Alaska Enerry and Resources Company.
SECOND: That the Corporation's original Articles of Incorporation were filed with the State of
Alaska on March 15, 1905. Restated Articles of Incorporation of the Corporation were filed with the
State of Alaska on March 20,1996.
THIRD: That the Board of Directors of the Corporation duly adopted resolutions proposing to
amend and restate the Corporation's Restated Articles of Incorporation in their entirety, and that said
amendment and restatement was duly adopted in accordance with the provisions of the Alaska
Corporations Code on I I and that said amendment and restatement was approved by the holders
of the requisite number of shares of the Corporation in accordance with the Alaska Corporations Code as
follows:
Date amendment adopted: I I
Number of outstanding shares: 100 shares
Number of shares entitled to vote: 100 shares
Number of shares voting for amendment: I I shares
Number of shares voting against amendment: t I shares
FOURTH: That the provisions of each article of the Restated Articles of Incorporation of the
Corporation and all amendments thereto are hereby restated and further amended in their entirety to read
as set forth in Exhibit A attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Articles of
Incorporation to be signed by its duly authorized officer, this _ day of , 201f l.
ALASKA ENERGY AND RESoURCES COMPANY
By:
Name:
Title:
By:
Name:
Title:
I
Exhibit D-2
sd-628500
Page 68 of 85
VERIFICATION
STATE OF ALASKA
FIRST JUDICIAL DISTRICT
I l, being duly sworn upon oath, deposes and says:
That he/she is the President of Alaska Enerry and Resources Company, that he/she has read the foregoing
Amended and Restated Articles of Incorporation" knows the contents thereof, and states that they are true
and correct to the best of his/her information and belief
By:
Name:
Subscribed and sworn before me this _ day of _, 20lU
Notary Public for Alaska
My commission expires:
STATE OF ALASKA
FIRST JUDICIAL DISTRICT
l' l, being duly sworn upon oath, deposes and says:
That he/she is the Secretary of Alaska Enerry and Resources Company, that he/she has read the foregoing
Amended and Restated Articles of Incorporation, knows the contents thereof, and states that they are true
and correct to the best of his/her information and belief
By:
Name:
Subscribed and swom before me this _ day of _______- 201Ll
Notary Public for Alaska
My commission expires:
2
Exhibit D-2
)
) ss:
By:
)
) ss:
sd-628500
Page 69 of 85
EXHIBIT A
AuBxoBo nlro RnSTATED
Anrrcr,ns or INconpoRATroN
OF
Ar,n sxl Exnncy .Lxo RrsouRcEs Conrp.q.xy
ARTICLE I
NAME
The name of this corporation is Alaska Energy and Resources Company
ARTICLE II
PURPOSE
This corporation is organized for the purpose of engaging in any business, trade or
activity which may be conducted lawfully by a corporation organized under the Code.
*,$illTfit,ilf,,
The corporation has no alien afflrliates.
ARTICLE IV
SHARES
This corporation is authorized to issue one hundred (100) shares of common stock.
ARTICLE V
NO PREEMPTIVE RIGHTS
Except as may otherwise be provided by the Board of Directors, no preemptive rights
shall exist with respect to shares of stock or securities convertible into shares of stock of this
corporation.
No cuffilf%I,orlNc
At each election for directors, every shareholder entitled to vote at such election has the
right to vote in person or by proxy the number of shares held by such shareholder for as many
persons as there are directors to be elected. No cumulative voting for directors shall be
permitted.
sd-628500
Page 70 of 85
ARTICLE VII
BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal the Bylaws or
adopt new Bylaws. Nothing herein shall deny the concurrent power of the shareholders to adopt,
alter, amend or repealthe Bylaws.
ARTICLE VIII
REGISTERED AGENT A}ID OFFICE
The name of the registered agent of this corporation and the address of its registered
office are as follows:
Name
II
Address
II
[Anchorage, AK 99503]
LrMrrArI on offir'S%''.'5o, LrABrLrrY
A director shall have no liability to the corporation or its shareholders for monetary
damages for conduct as a director, except for acts or omissions that involve intentional
misconduct by the director, or a knowing violation of law by the director, or for conduct
violating Section 10.06.480 of the Code, or for any transaction from which the director will
personally receive a benefit in money, property or services to which the director is not legally
entitled. If the Code is hereafter amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director shall be eliminated or
limited to the full extent permitted by the Code, as so amended. Any repeal or modification of
this Article shall not adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification for or with respect to an act or omission of
such director occurring prior to such repeal or modification.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 10.1 Right to Indemnification. Each person who was, is, or is threatened to
be made a party to or is otherwise involved (including, without limitation, as a witness) in any
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, by reason of the fact that he or
she is or was a director or officer of the corporation or, while a director or officer, he or she is or
was serving at the request of the corporation as a director, trustee, officer, partner, employee or
agent of another corporation or of a partnership, joint venfure, trust or other enterprise, including
service with respect to employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, trustee, officer, partner, employee or agent or in any
other capacity while serving as a director, trustee, officer, partner, employee or agent, shall be
indemnified and held harmless by the corporation, to the full extent permitted by applicable law
as then in effect, against all expense, liability and loss (including attorney's fees, judgments,
2
Exhibit D-2
sd-628500
Page 71 of85
fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually and
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director, trustee, officer,
partner, employee or agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, lroweve1, that except as provided in Section 10.2 of this Anicle with
respect to proceedings seeking to enforce rights to indemnification, the corporation shall
indemniff any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the
board of directors of the corporation. The right to indemnification conferred in this Article X
shall be a contract right and shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition, without regard to
the limitations in the Code, or any other limitation which may hereafter be enacted to the extent
such limitation may be disregarded if authorized by these Articles of Incorporation, to the full
extent and under all circumstances perrnitted by applicable law.
Section 10.2 Right of Claimant to Bring Suit. If a claim under Section l0.l of this
Article is not paid in full by the corporation within sixty (60) days after a written claim has been
received by the corporation, except in the case ofa claim for expenses incurred in defending a
proceeding in advance of its final disposition, in which case the applicable period shall be twenty
(20) days, the claimant may at any time thereafter bring suit against the corporation to recover
the unpaid amount of the claim and, to the extent successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. The claimant shall be
presumed to be entitled to indemnification under this Article upon submission of a written claim
(and, in an action brought to enforce a claim for expenses incurred in defending any proceeding
in advance of its final disposition, where the required undertaking has been tendered to the
corporation), and thereafter the corporation shall have the burden of proof to overcome the
presumption that the claimant is so entitled. Neither the failure of the corporation (including its
board of directors, independent legal counsel or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of or reimbursement or
advancement of expenses to the claimant is proper in the circumstances nor an actual
determination by the corporation (including its board of directors, independent legal counsel or
its shareholders) that the claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create a presumption that the
claimant is not so entitled.
Section 10.3 Nonexclusivity of Rights. The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final disposition conferred in
this Article shall not be exclusive of any other right which any person may have or hereafter
acquire under any stafute, provision of the Articles of Incorporation, Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
Section 10.4 fnsurance, Contracts and Funding. The corporation may maintain
insurance, at its expense, to protect itself and any director, fustee, officer, partner, employee or
agent of the corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or loss under the Code. The
corporation may, without further shareholder action, enter into contracts with any director,
J
Exhibit D-2
sd-628500
Page 72 of 85
trustee, officer, partner, employee or agent of the corporation in furtherance of the provisions of
this Article and may create a trust fund, grant a security interest or use other means (including,
without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary
to effect indemnification as provided in this Article.
Section 10.5 Indemnification of Employees and Agents of the Corporation. The
corporation may, by action of its board of directors from time to time, provide indemnification
and pay expenses in advance of the final disposition of a proceeding to employees and agents of
the corporation with the same scope and effect as the provisions of this Article with respect to
the indemnification and advancement of expenses of directors and officers of the corporation or
pursuant to rights granted pursuant to, or provided by, the Code or otherwise.
Section 10.6 Persons Serving Other Entities. Any person who, while a director,
officer or employee of the corporation, is or was serving (a) as a director or officer of another
foreign or domestic corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the corporation or (b) as a trustee, partner or otherwise in an executive
or management capacity in a partnership, joint venture, trust or other enterprise of which the
corporation or a wholly owned subsidiary of the corporation is a general partner or has a majority
ownership shall be deemed to be so serving at the request of the corporation and entitled to
indemnification and advancement of expenses under this Article.
4
Exhibit D-2
sd-628500
Page 73 of 85
CONSENT TO SERVE AS REGISTERED AGENT
I I hereby consents to serve as Registered Agent, in the State of Alaska, for Alaska
Energy and Resources Company. l' I understands that as agent for said corporation,
I I will be responsible to receive service of process in the name of said corporation; to forward
all mail to said corporation; and to immediately noti$ the office of the Alaska Division of
Corporations, Business and Professional Licensing, in the event of I I resignation, or of any
changes in the registered office address of Alaska Energy and Resources Company.
Dated this _ day of ,2014.
II
5
Exhibit D-2
sd-628500
Page 74 of 85
DGIIBIT B
FORM OF ARTICLES OF MERGER
sd-625790
Exhibit D-2 Page 75 of 85
ARTICLES OF MERGER
MERGING
ALASKA MERGER SUB,INC.
AN ALASKA CORPORATION
WITH AND INTO
ALASKA ENERGY AND RESOURCES COMPANY
AN ALASKA CORPORATION
The undersigned corporations, pursuant to Alaska Statutes 10.06.532-550, hereby execute the
following Articles of Merger:
FIRST: The names and Alaska entity numbers of the corporations proposing to merge are:
l. Alaska Energy and Resources Company, an Alaska corporation, Alaska entity number
50D (the "Company); and
2. Alaska Merger Sub, Inc., an Alaska corporation, Alaska entity number 10016287
("Merger Sub").
SECOND: Upon the filing of these Articles of Merger with the State of Alask4 Department of
Commerce, Community and Economic Development, Division of Corporations, Merger Sub will merge
with and into the Company, and the Company shall be the surviving corporation in the Merger and shall
continue its existence under the name "Alaska Enerry and Resources Company".
THIRD: The Plan of Merger dated as of I l, 2014 (the "Plan of Merger") setting forth
the terms of the merger of Merger Sub with and into Company (the "Merger") is attached hereto as
Exhibit A.
FOURTH: The Merger has been approved by the Board of Directors and shareholders of each
of the constituent corporations in accordance with the Alaska Corporations Code, with the following
voting information:
Name of entity: Alaska Merger Sub, Inc.
Number of outstanding shares: 100 shares
Number of shares entitled to vote: 100 shares
Number of shares voting for plan: t I shares
Number of shares voting against plan: I I shares
Name of entity: Alaska Energy and Resources Company
Number of outstanding shares: 114,504 shares
Number of shares entitled to vote: 114,504 shares
Number of shares voting for plan: t I shares
DWT 22889749v4 0088333-000 I 08
Exhibit D-2 Page 76 of 85
Number of shares voting against plan: I I shares
FIFTH: The Merger does not involve the merger of one or more subsidiary corporations.
SIXTH: The Merger shall become effective upon filing of these Articles of Merger with the
State of Alaska, Department of Commerce, Community and Economic Development, Division of
Corporations.
lRemainder of page intentionally left blank)
-2-
Exhibit D-2
DW T 228897 49v4 008833 3-000 I 08
Page 77 of 85
IN WITNESS WHEREOF, the Company and Merger Sub have caused these Articles of Merger
to be signed by their respective authorized officers, the I I day of [ 1,201LJ.
ALASKA ENERGY AND [IEsoURcEs CoMPANY
: William A. Corbus: President
Name: Constance Hulbert
Title: AssistantSecretary
ALASKA MBRCnn SUB, INC.
By:
Name:
Title:
By:
Name:
Title:
By:
Name
Title:
By: -
DWT 22889749v4 0088333-0001 08
Exhibit D-2 Page 78 of 85
1
EXHIBIT A
PLAN OF MERGER
Between
ALASKA MERGER SUB,INC.
and
ALASKA ENERGY AND RESOURCES COMPAI\IY
This PIan of Merger is entered into by and between Alaska Merger Sub, Inc., an Alaska
corporation ("Merser Sub"), and Alaska Energy and Resources Company, an Alaska corporation
(*AERC").
l. At the Effective Time (as defined in Section 2 below), Merger Sub shall be merged into
AERC, which shall be the surviving corporation (such transaction, the "Merge!").
2. The "Effective Time" of the Merger shall be the time at which the Articles of Merger with
respect to the Merger (in the form required by the Alaska Corporations Code, including
Alaska Statutes 10.06.532-550) are filed with the State of Alaska, Department of Commerce,
Community and Economic Development, Division of Corporations, or, if a later effective
time is provided in the Articles of Merger, such later time.
The Merger shall have the effects set forth in this Plan of Merger and the Merger Agreement
(as defined herein) and the applicable provisions of the Alaska Corporations Code. Without
limiting the generality of the foregoing, at the Effective Time, except as otherwise provided
in that certain Agreement and Plan of Merger (the "Merger Agreement"), dated as of
November I l, 2013,by and among the AERC, Merger Sub, and Avista Corporation, a
Washington corporation ("Barent"), all the property, rights, privileges, powers and franchises
of AERC and Merger Sub shall vest in AERC, and all debts, liabilities and duties of AERC
and Merger Sub shall become the debts, liabilities and duties of AERC.
At the Effective Time, by virtue of the Merger and without any further action on the part of
Parent, Merger Sub, AERC, their respective shareholders or any other party:
each share of AERC Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of AERC Common Stock that are
issued and outstanding immediately prior to the Effective Time and are held by a
shareholder who is entitled to exercise, and properly exercises, dissenter's rights
with respect to such shares pursuant to, and who complies in all respects with, the
provisions of the Alaska Corporations Code with respect to such shares) shall be
canceled and converted into the right to receive (i) the number of shares of Parent
Common Stock equal to one share of AERC Common Stock multiplied by the
Exchange Ratio (as defined in the Merger Agreement) and (ii) a portion of the
Representative Reimbursement Amount (as defined in the Merger Agreement) in
accordance with Merger Agreement; and
each share of the common stock, no par value, of Merger Sub outstanding
a
Exhibit D-2
4.
DWT 22889749v4 0088333-000 I 08
Page 79 of 85
immediately prior to the Effective Time shall be converted into one share of
common stock of AERC.
5. The Merger Agreement is on file at the principal place of business of AERC and a copy of
the Merger Agreement will be fumished by AERC, on request and without cost, to any
shareholder of AERC or Merger Sub.
6. An amendment and restatement to the Articles of Incorporation of AERC, the surviving
corporation, shall be filed with the Secretary of State of Alaska as amended and restated in
their entirety in the form set forth on Exhibit A attached to this Plan of Merger.
7. At the Effective Time, the Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall become the bylaws of AERC, except that such Bylaws shall be
amended as of the Effective Time to change the name of Merger Sub as used therein to
"Alaska Energy and Resources Company."
8. Merger Sub's officers and directors shall continue as the officers and directors, respectively,
of AERC from and after the Effective Time until their successors shall have been duly
elected or appointed and qualified or until their earlier death, resignation or removal in
accordance with the Articles of Incorporation and Bylaws of AERC as the same may be in
effect from time to time.
9. From time to time, as and when requested by AERC, or by its successors or assigns, any
party hereto shall execute and deliver or cause to be executed and delivered all such deeds
and other instruments, and shall take or cause to be taken all such further or other actions, as
AERC, or its successors or assigns, may deem necessary or desirable in order to vest in and
confirm to AERC, and its successors or assigns, title to and possession of all the property,
rights, privileges, powers and franchises referred to herein and otherwise to carry out the
intent and purposes of this Plan of Merger, and the officers and directors of AERC are fully
authorized in the name and on behalf of Merger Sub or otherwise to take any and all such
action and to execute and deliver any and all such deeds and other instruments.
10. This Plan of Merger may be amended or terminated for any reason at any time before the
filing of Articles of Merger with the State of Alaska, Department of Commerce, Community
and Economic Development, Division of Corporations by action taken by Merger Sub and
AERC for any reason deemed appropriate by them.
-3-
Exhibit D-2
DWT 22889749v4 0088333-000 I 08
Page 80 of 85
DATED this I I day of [ 1,201U.
NON-SURVMNG CORPORATION: SURVTYING CORPORATION:
ALASKA MERGER SUB, INC. ALASKA ENERGY AND RESOURCES
COMPANY
By:By:President William A. Corbus, President
AND AND
By:By:Secretary Constance Hulbert, Asst. Secretary
-4-
Exhibit D-2
DWT 228897 49v4 0088333-000 t 08
Page 8'l of 85
EXHIBIT A
A*rprnnn axo RpSTATED
Anrrclrs or lxconpoRATroN
-5-
Exhibit D-2
DWT 228897 49v4 0088333-000 I 08
Page 82 of 85
EXHIBIT C
FIRPTA CERTIFICATE
FIRPTA CrRTrrTcaTB
Section 1445 of the Intemal Revenue Code (as amended, the"Code") provides that atransferee of
a "United States real properly interest" (within the meaning of the Code and including the stock of certain
U.S. corporations that own such interests) must withhold tax if the transferor is a "foreign person" (within
the meaning of applicable Treasury Regulations). For U.S. federal tax purposes (including Section 1445
of the Code), the owner of a disregarded entity that holds legal title to a United States real property
interest under local law, and not the disregarded entity, will be the transferor of the propefi. To inform
Avista Corporation, the transferee, that withholding of tax is not required upon the transfer by the
undersigned transferor of capital stock in Alaska Energy and Resources Company, the undersigned
transferor hereby certifies the following on behalf of himself or herself (in the case of an individual
transferor) or on behalf of the transferring entity (in the case of an entity transferor that is not an entity
disregarded as separate from its owner):
1. Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as
those terms are defined in the Code and Treasury Regulations) and is not a nonresident alien for purposes
of U.S. income taxation;
2. Transferor is not a disregarded entity as defined in Treasury Regulations Section 1.1445-
2(b)(2)(iii);
3. Transferor has the following U.S. taxpayer identif,ing number, which in the case of an
individual transferor is the transferor's social security number and in the case of an entity transferor is the
transferor's U.S. employer identification number :: and
4. Transferor has the following home address (in the case of an individual transferor) or office
address (in the case ofan entity transferor):
Transferor understands that this certification may be disclosed to the Internal Revenue Service
by Avista Corporation, the transferee, and that any false statement contained herein could be punished by
fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this certification and to the best of my
knowledge and belief it is true, correct and complete, and, in the case of an entity transferor, I further
declare that I have authority to sign this document on behalf of such transferor.
Signature:
Name:
Title (in the case of
an entity transferor):
Date:
sd-628986
Exhibit D-2 Page 84 of 85
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ExhibitD-4
Protocol for Direct Assignment
Date:
To:
From:
November 27,2013
t}f:siH:n lrntt I "t
Subject: Protocol for Direct Assignment of Costs Associated with the Acquisition and
Operations of Alaska Energy and Resources Company (AERC) and Alaska Electric
Light & Power (AEL&P)
Accountins for Costs Related to AERC and AEL&P Prior to Closing
Prior to the date of closing of the acquisition of AERC, presently anticipated to be on or before
July 1, 2014, all costs associated with due diligence and other activities will continue to be
recorded below the line to a non-utility account (FERC Account No. 426500). The following
table sunnmarizes the accounting for zuch expenses:
Scnrlcc Jurisdicltlon FERC Acct DcscriDtion
Protct
Numbcr Preict l)cscriptlon
FERC
Acct
42650/) 72.Mbcclhneo.s Incomc f)cdrctim n70522fi Prqiect Chinook
Direct Assienment of Costs to AERC and AEL&P Post-Closins
Following the date of closing, to the extent Avista employees dedicate time and incur costs
supporting the operation of AERC and AEL&P, those costs would be separately tracked and
diiectly assigped to AERC and AEL&P.I ln the future, if opportunities arise for the consolidation
of certain Avista and AEL&P utilrty functions, it may be appropriate to propose some form of
cost allocation between the two utilities.
With regard to Avista's existing subsidiary operations, some of Avista's general office employees
spend time providing services and support to our existing zubsidiaries. These employee costs are
charged to suspense accounts (Deferre.d Debit Account No. 186), are loaded for benefits, and are
then established as a receivable GERC Account No. 146) when billed to the subsidiary. If other
resources are expended dtring the course of this work, such as tavel or consulting services, these
costs axe also charged to suspense accounts and billed to the subsidiary. All corporate services
provide4 and costs inctrred, are direct billed to subsidiaries at cost. No additional margin or
profit is included and no assets axe allocated. Avista will use the same methodology for direct
1 Likewise, if AEL&P employees were to provide suppori for Avista's utility operations, sucfr costs would be directly
assigned to Avista. The Company expec-ts such assignmenl of cosis, both to AEL&P and tom AEL&P, to be
relatively small sine AEL&P will contnue to operate as a standalone utility.
Exhibit D-4 Page 1 of2
assignment of costs to the proposed AERC and AEL&P subsidiary operations, as we currently do
for existing subsidiary operations.
A summary of the accounting for post-closing costs directly assigned to AERC and AEL&P is
provided below.
To record transaction when employee charges time or incurs costs related to AERC/AEL&P:
Jurfu dicitioo FERC Acct DcscrlptioD
PmJe ct
Nurnbcr Pmicct DcacrlDtlon Dcbit Crcdtt
FERCAcct Scrlc:
186)0()(
13l)O(X
zz
72
7Z MiscellarcouDefenodDcbits
24. Cash
,Y Sub Billig - AmcIAIx-P
To record transaction to establish a receivable from AERC IAEL&P:
}.ERC
Acct scruh. Jurisdlciaior trnRC Acct Dc3criDdon
ProJcct
Number Pmicct DctcdDtlotr Dcbii Credit
I46XXX ZZ 7.iL
I86XXX 72 72
Accoub Receiwbh Assoo Cmpsny - AERC/AELP
Miscellaneous Dsfered Dcbits
TntW(. Sub Bi[ig - ABRC/AEI.P
Tffro@(. Sub Billing - AERC/AELP
To record transaction of a payment made to Avista Corp from AERC/AEL&P:
FERC pmicct
Acct Srnlcc Jurirdicitlon FnRC Acct DcscriDtion Numbcr Proicct Description Dcbtt (-'rcdit
r3lx)o(
146)00(
72
2Z
ZZ- Cash72 Accous Rec€ivabb Assoc Cdnpany - AERC/AFLP TfTrcg{x, Sub BininC - AERC/AEI-P
For questions regaxding direct assignment of costs associated with AERC or AEL&P or any
other subsidiary costs, please contact Keri Meister, Corporate Accounting Analyst at 495-2102,
or Jennifer Smith, Senior State and Federal Regulatory Analyst at 495-2098.
Exhibit D-4 Page 2 ol 2
Exhibit D-5
Form of Washington Application
BEFORE THE
WASH I NGTON UTI LITI ES AN D TRANSPORTATION COMMISSION
ln the matter of the request of
AVISTA CORPORATION
for an order establishing compliance
with RCW Chapter 80.08 with respect to the
issuance of securities, and compliance with RCW
Chapter 80.'1 6 regard ing affiliated transactions
Application
Docket No.
Avista Corporation (hereinafter referred to as "Applicant" or'Avista") hereby requests that the Washington
Utilities and Transportation Commission ("Commission') enter a written order establishing that the
proposed issuance by Avista of up to 7,250,000 of authorized but unissued shares of its common stock is
in compliance with the requirements of RCW Chapter 80.08, and that Avista has satisfied the
requirements of RCW Chapter 80.16 with respect to the proposed affiliated transactions.
l. lssuance of Securities
The following information is furnished in support of this Application, in accordance with the requirements
of RCW 80.08.040:
(1) A Description of the Purposes for Which the lssuance is Made, lncluding a Certification By an
Officer Authorized To Do So That the Proceeds from Such Securities Are For One Or More of
the Purposes Allowed By Chapter 80.08 RGW.
The issuance of common stock by Avista will be used for one or more of the following purposes:
(a) The acquisition of property, or the construction, completion, extension, or improvement of its facilities,
or (b) the improvement or maintenance of service, or (c) the issuance of stock dividends, or (d) the
discharge or refunding of its obligations, or (e) the reimbursement of moneys actually expended from
income or from the treasury of the Applicant to the extent permitted by RCW 80.08.030, or (f) for other
purposes permitted by law.
(2) A Description of the Proposed lssuance lncluding the Terms of Financing.
On November 4,2013, Avista entered into an Agreement and Plan of Merger (Merger Agreement),
with Alaska Merger Sub, lnc. (Merger Sub), and Alaska Energy and Resources Company (AERC). Merger
Sub is a wholly-owned corporation of Avista and was created solely for the purpose of facilitating Avista's
acquisition of AERC, which includes the utility operations of Alaska Electric Light and Power (AEL&P).
Upon receipt of all necessary approvals, Merger Sub would merge with and into AERC and dissolve as a
corporate entity, leaving AERC as a wholly-owned subsidiary of Avista. AEL&P is a vertically integrated
electric utility providing electric service to the City and Borough of Juneau, Alaska, and is regulated by the
Regulatory Commission of Alaska (RCA).
At the closing of the acquisition of AERC by Avista, the issued and outstanding shares of AERC
common stock would be exchanged for shares of Avista common stock, per the terms of the Merger
Agreement. The purchase price for AERC at closing is $170 million, less the assumption of then-
outstanding debt and other closing adjustments per the Merger Agreement. Using current projections, the
value of Avista common stock to be issued in exchange for AERC common stock is estimated to be $145
million. The actual number of shares of Avista common stock to be issued is dependent on the closing
price of Avista's shares over the 10 hading days preceding the closing of the transaction. Using only
Avista's closing stock price on November 26,2013 ($27.18), the Company would issue approximately 5.3
million shares of common stock to AERC shareholders to complete the transaction subject to the above
adjustments. The actual share price utilized to determine the number of Avista common shares to be
issued will be set at closing (subject to a floor per share price of $21.48 and a ceiling per share price of
$34.30). Additionally, the currently estimated $145 million net consideration will change at closing based
)
)
)
)
)
)
upon the actual amount of debt outstanding, and other adjustments per the Merger Agreement, at that
time. Avista is requesting authority to issue up to 7,250,000 shares of common stock.' Avista's request
for authorized shares up to 7,250,000 shares is limited to the acquisition of AERC. Any unused shares of
the 7,250,000 related to the AERC acquisition would be terminated. Following the closing of the
transaction, debt would be issued at AEL&P and AERC to rebalance the capital structure to achieve a
capital structure for AERC that is comparable to the existing capital structure at Avista. This debt would be
backed by the assets of AEL&P and AERC, and not the utility assets of Avista. The end result will be that
Avista's utility customers will experience the same capital structure after the completion of the transaction,
as they currently do prior to the transaction.
As part of the rebalancing of the capital structure at AEL&P and AERC, funds would be transferred
from AERC to Avista, which would be used to fund the utility capital budget and utility operating costs at
Avista. Therefore, a portion of the proceeds from the initial common equity issuance would ultimately be
used to fund the utility capital budget and utility operating costs at Avista. That is, absent the issuance of
Avista common stock related to the AERC transaction, Avista would have othenrise issued approximately
$70 million of common equity to fund the utility operations of Avista.
Following the announcement of the Agreement, Standard and Poor's affirmed the credit rating of
Avista as stiable, and Moody's stated that the acquisition of AERC was credit neutral.
The corporate structure of Avista both before and after completion of the proposed acquisition of
AERC is provided on pages 1 and 2 of Exhibit A. A copy of the Merger Agreement itself is provided in
Exhibit B.
(3) Statement As To Why The Proposed lssuance of Securities ls ln the Public Interest.
Following the issuance of securities proposed in this Application, the capital structure for Avista will
be essentially the same as it currently is prior to the issuance of the new securities. The regulated electric
utility operations of AEL&P will be operated on a stand-alone basis using the same AEL&P management
team and other employees, and will not adversely affect the utility operations of Avista. To the extent any
Avista employees dedicate time or incur costs related to AEL&P or AERC, those costs would be separately
tracked and directly assigned to AEL&P and AERC, as further explained later in this Application. Therefore,
Avista's existing utility customers would see a slight reduction of costs (benefit) as a result of this direct
assignment of costs.
The proposed issuance of securities is in the public interest. The acquisition of AERC and AEL&P
will result in no harm to Avista Utilities' existing customers, and will provide a benefit to customers through
the assignment of costs to AERC and AEL&P.
(4) Text of a Draft Order Granting Applicant's Request for an Order.
See Exhibit C.
ll. Gomoliance With RGW 80.16.020 Reqardinq Affiliated Transactions
AEL&P is a wholly-owned subsidiary of AERC, and would continue to be a wholly-owned subsidiary
of AERC following the completion of the proposed acquisition by Avista. AEL&P would continue to be
operated by the same employees operating the utility today, including the existing management team of
AEL&P. AEL&P has 60 fulltime employees. AEL&P serves approximately 15,900 retail customers under
the authority of the Regulatory Commission of Alaska, and is the sole electric utility serving the Cig and
Borough of Juneau.
I The requested authority to issue lhe7.25 million shares of Common Stock is in addition to the authority previously
granted by the Washington Utility and Transportation Commission through Order Numbers UE-931521, UE-051895,
and U-1 11687.
The customers, service territory, facilities and generating resources of AEL&P are geographically
and electrically isolated, which limits Avista's opportunity to integrate AEL&P's operations with its existing
utility operations in Washington, ldaho and Oregon. Avista intends to hold and manage AEL&P as a stand-
alone utility, as shown in the corporate structure on page 2 of Exhibit A. Exhibit D provides additional
details related to AEL&P. Page 1 shows the current corporate structure for AERC, including AEL&P. Page
2 includes a map showing the service area of AEL&P, as well as the location of its major generation and
transmission facilities. Page 3 of Exhibit D shows the installed capacity of owned and contracted-for
generating facilities, as well as the actual energy production from the facilities during 2012.
To the extent Avista employees dedicate time and incur costs supporting the operation of AERC
and AEL&P, those costs would be separately tracked and directly assigned to AERC and AEL&P.
Likewise, if AEL&P employees were to provide support for Avista's utility operations, such costs would be
directly assigned to Avista. The Company expects such assignment of costs, both to AEL&P and from
AEL&P, to be relatively small since AEL&P will continue to operate as a standalone utility. ln the future, if
opportunities arise for the consolidation of certain Avista and AEL&P utility functions, it may be appropriate
to propose some form of cost allocation between the two utilities.
With regard to Avista's existing subsidiary operations, some of Avista's general office employees
spend time providing services and support to our existing subsidiaries. These employee costs are charged
to suspense accounts (Deferred DebitAccount No. 186), are loaded for benefits, and are then established
as a receivable (FERC Account No. 146) when billed to the subsidiary.2 lf other resources are expended
during the course of this work, such as travel or consulting services, these costs are also charged to
suspense accounts and billed to the subsidiary. All corporate services provided, and costs incurred, are
direct billed to subsidiaries at cost. No additional margin or profit is included and no assets are allocated.
This assignment of Avista employee costs, which are then billed back to the subsidiary at cost, serve to
reduce the utility's expenses. Avista will use the same methodology for direct assignment of costs to the
proposed AERC and AEL&P subsidiary operations, as per the attached Protocol for Direct Assignment in
Exhibit E.
lll. Requested Authorizations
Avista, having provided herewith all information and statements required by RCW 80.08.030, WAC
480-100-242 (1)-(4) and WAC 480-90-242 (1)-(4), respectfully requests an order affirming compliance with
such requirements as part of the planned issuance of securities, and compliance with RCW Chapter 80.16
regarding affiliated transactions, and any other approvals as the Commission may deem necessary.
Done at Spokane, Washington this 3'd day of December 2013.
AVISTA CORPORATION
Vice President & Chief Counsel for
Regulatory & Governmental Affairs
2 Avista determines office space costs per square foot (including building costs, common area costs, computer
workstation costs, copier expense and annual office furniture rental, etc.), and using the relationship of labor hours
charged to subsidiary activities by employee compared to total labor hours by employee, assigns those costs to the
subsidiary operations.
STATE OFWASHTNGTON )
County of Spokane )
The undersigned certifies under penalty of perjury under the laws of the State of Washington that the
foregoing is true and correct to the best of my knowledge and belief, and that the proposed issuance of
securities will be used for the purposes allowed by Chapter 80.08 RCW.
Done at Spokane, Washington this 3d day of December 2013.
Vice President & Chief Counsel for
Regulatory & Governmental Affairs
Notary forWashington
My Commission Expires:
Exhibit D-6
Proposed Accounting
Proposed Accountinq for tssuance of Sharesl
The records of AEL&P would reflect the purchase by Avista as $122 million received for the net
asset value of AEL&P and $48 million received as an investment premium, or "goodwill" payment. At
closing, AEL&P is estimated to have $25 million of existing outstanding debt (net of any cash on hand),
which is netted from the purchase price of $170 million, resulting in net equity of $145 million.
Subsequent to closing, AEL&P will borrow approximately $79 million in new debt and repay the existing
$25 million of outstanding debt. AEL&P may leave the existing debt outstanding and only borrow an
incremental $54 million in new debt. AEL&P will then dividend approximately $5a million to AERC.
AEL&P's resulting capital structure will be 53.8% equity and 46.2% debt, which is the most recently-
approved capital structure by the Regulatory Commission of Alaska in Docket U-10-29.
The records of AERC will show the $145 million equity purchase by Avista, as described above,
as investment in a subsidiary (AEL&P). ln addition, AERC will borrow approximately $12 million in new
debt. AERC will then dividend to Avista $66 million, which includes the $54 million in dividends it
received from AEL&P, as described above, and the $12 million in new debt. These transactions result in
a capital structure at AERC that will be 47% equity and 53% debt.
This debt issued by AEL&P and AERC would be backed by the assets of AEL&P and AERC,
and not utility assets of Avista.
Avista's records will show the purchase of AERC, for the net amount of $145 million, as an
investment in a subsidiary. Avista will receive the $66 million dividend from AERC, as described above,
and use that to fund ongoing capital investments and the operations of Avista Utilities. Upon
consolidation of the AERC records with Avista, Avista's overall capital structure will be 47% equity and
53% debt, which is the most recent capital structure of Avista prior to the purchase of AERC. The 53%
debt ratio at Avista Corporation includes short-term debt. Excluding short-term debt, the ratio would be
approximately 5Oo/o debt, consistent with Avista's current capital structure.
As part of the rebalancing of the capital structure at AEL&P and AERC, funds would be
transferred from AERC to Avista, which would be used to fund the utility capital budget and utility
operating costs at Avista, as described above. Therefore, a portion of the proceeds from the initial
common equity issuance would ultimately be used to fund the utility capital budget and utility operating
costs at Avista. That is, absent the issuance of Avista common stock related to the AERC transaction,
Avista would have otherwise issued approximately $ZO million of common equity to fund the utility
operations of Avista. The end result will be that Avista's utility customers will experience the same
capital structure after the completion of the transaction, as they currently do prior to the transaction.
See Page 2 of Exhibit D-6 for a summary of the accounting transactions.
I Dollar amounts for the accounting entries would be based on the actual dollar amounts at the time of closing, per
the provisions of the Merger Agreement.
Exhibit D-6 Page I of2
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ExhibitD-7
Form of Idaho Order
EXH!BIT D.7
PROPOSED ORDER OF APPLICANT
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
!N THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION FOR AN ORDER
AUTHORIZING THE ISSUANCE OF
UP TO 7,25O,OOO SHARES OF COMMON STOCK
CASE NO.
ORDER NO.
On December _,2013, Avista Corporation (Avista) filed an Application with the ldaho Public
Utilities Commission (Commission) requesting an Order authorizing the proposed issuance by the
Applicant of up to 7,250,000 of authorized but unissued shares of its Common Stock, for the purposes
explained in the Application. The Commission, having fully considered the Application and exhibits
attached thereto, and all of the Commission's files and records pertaining to the Application, makes the
following findings of fact and conclusions of law, and enters this Order approving Avista's Application.
THE APPLICATION
Avista proposes to receive authorization to issue up to 7,250,000 sharesl of Common Stock. On
November 4, 2013, Avista entered into an Agreement and Plan of Merger (Merger Agreement), with
Alaska Energy and Resources Company (AERC), through which Avista would acquire the utility
operations of Alaska Electric Light and Power (AEL&P). AEL&P is a vertically integrated electric utility
providing electric service to the City and Borough of Juneau, Alaska, and is regulated by the Regulatory
Commission of Alaska (RCA).
At the closing of the acquisition of AERC by Avista, the issued and outstanding shares of AERC
common stock would be exchanged for shares of Avista common stock, per the terms of the Merger
Agreement. The purchase price for AERC at closing would be $170 million, less the assumption of debt
and other closing adjustments per the Merger Agreement. The value of Avista common stock issued in
exchange for AERC common stock is estimated to be $145 million. Accordingly, Avista would issue up
to 7,250,000 of authorized but unissued shares of common stock. Avista's request for authorized shares
up to 7,250,000 shares is limited to the acquisition of AERC. Any unused shares of the 7,250,000
related to the AERC acquisition would be terminated.
Following the closing of the transaction, debt would be issued at AEL&P and AERC to rebalance
the capital structure to achieve a capital structure for AERC that is comparable to the existing capital
structure at Avista. This debt would be backed by the assets of AEL&P and AERC, and not the utility
assets of Avista. The end result will be that Avista's utility customers will experience the same capital
structure after the completion of the transaction, as they currently do prior to the transaction.
As part of the rebalancing of the capital structure at AEL&P and AERC, funds would be
transferred from AERC to Avista, which would be used to fund the utility capital budget and utility
I The requested authority to issue the 7.25 million shares of Common Stock is in addition to the authority previously
granted by the Commission through Order No.(s) 25362,29947, and 32381.
page I of 3
EXHIBIT D.7
operating costs at Avista. Therefore, a portion of the proceeds from the initial common equity issuance
would ultimately be used to fund the utility capital budget and utility operating costs at Avista. That is,
absent the issuance of Avista common stock related to the AERC transaction, Avista would have
otherwise issued approximately $70 million of common equity to fund the utility operations of Avista.
No person has received or will be entitled to receive from Avista any fee (1) for services in
connection with the consummation of the issuance and sale of the above-referenced securities, other than
fees for underwriting, private placement, legal, accounting or similar professional or technical services, or
(2) for services in securing underwriters, sellers or purchasers of the securities. Avista is a Washington
corporation qualified to do business in the State of ldaho.
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
Avista is a public utility engaged in the generation, purchase, transmission, distribution and sale of
electric energy and the purchase, distribution and sale of naturalgas. Avista is an electric corporation
within the definition ol ldaho Code $ 61-1 19, a gas corporation within the definition ol ldaho Code $ 61-117 ,
and a public utility within the definition of ldaho Code $ 61-129. The Commission has jurisdiction over this
Application pursuant to the provisions of ldaho Code S 61-901 , et seq. The Commission further finds that
the Application reasonably conforms to Rules 141 through 1 50 of the Commission's Rules of Procedure,
TDAPA 31.01.01.141-1 50.
The Commission finds that the proposed issuance is for a lawful purpose and is within Avista's
corporate powers.
The Commission further finds that the proposed transaction is in the public interest and a formal
hearing on this matter is not required.
The Commission's approval of the issuance is not a finding of fact or a conclusion of law that the
particular use to which these funds are to be put is approved by this Order. The issuance of an Order
authorizing the proposed issuance does not constitute agency determination/approval of the type of
financing or the related costs for ratemaking purposes. The Commission does not have before it for
determination in this case and, therefore, does not determine the effect of issuance on rates to be charged
by Avista for electric or gas service to consumers in the State of ldaho. The Commission further finds that
the proposed transaction is in the public interest and a formal hearing on this matter is not required. Avista
has paid all lawful fees as provided by ldaho Code $ 61-905.
ORDER
lT lS HEREBY ORDERED that Avista Corporation, as of Month Dav, Year, is hereby authorized to
issue up to 7,250,000 shares of Common Stock for the purposes explained in its Application.
lT lS FURTHER ORDERED that Avista shall file the terms of the proposed issuance(s) of the
Securities and any subsequent changes to the terms with Staff upon issuance. This informational filing
should be made seven (7) days, or as soon as possible, prior to the lssuance.
Page 2 of 3
EXH!BlT D.7
lT lS FURTHER ORDERED that Avista shallfile, as soon as they become available and update lf
any changes occur, the following:
(a) The "Report of Securities lssued," and
(b) Verified copies of any Agreement entered into pursuant to this Order.
lT lS FURTHER ORDERED that the foregoing authorization is without prejudice to the regulatory
authority of the Commission with respect to rates, utility capital structure, service accounts, valuation,
estimates for determination of cost or any other matter which may come before this Commission pursuant
to its jurisdiction and authority as provided by law.
lT lS FURTHER ORDERED that nothing in this Order and no provisions of Chapter 9, Title 61,
ldaho Code, or any act or deed done or performed in connection therewith shall be construed to obligate
the State of ldaho to pay or guarantee in any manner whatsoever any security authorized, issued,
assumed or guaranteed under the provisions of Chapter 9, Title 61 ldaho Code.
lT lS FURTHER ORDERED that issuance of this Order does not constitute acceptance of Avista's
exhibits or other material accompanying the Application for any purpose other than the issuance of this
Order.
THIS lS A FINAL ORDER. Any person interested in this Order may petition for reconsideration
within twenty-one (21) days of the service date of this Order. Within seven (7) days after any person has
petitioned for reconsideration, any other person may cross-petition for reconsideration. See ldaho Code $
61€26.
DONE by Order of the ldaho Public Utilities Commission at Boise, ldaho this XXth day of MONTH,
YYYY.
, COMMISSIONER
, COMMISSIONER
, COMMISSIONER
ATTEST:
Commission Secretary
Page 3 of3