20140903Compliance Filing.pdf

August 31,2014
State of ldaho
ldaho Public Utilities Commission
Statehouse
Boise lD 83720
Attention: Jean D. Jewell, Secretary
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RE: Filing requirements under Order No. 32991
We are submitting the following information in compliance with the Commission's
Order No. 32991 for the issuance of shares of common stock for use in funding its
merger with Alaska Energy and Resources Company ('AERC").
1. Report of Securities lssued.
2. Copies of agreements entered into in connection with the Company's sales
and issuance of the Shares.
3. All merger closing documents.
4. AMinal closing journalentries.
Additionally, Avista
o ls maintaining its own utility operating books and records, separate from
AERC books and records, and will notify Commission Staff before any
future consolidation of the operating books in the future.
o ls maintaining separate Subaccounts.
o Will provide Staff access to all books and records including final merger
tax elections, and adequate audit trails for all affiliated operations related
to any affiliated transactions.
Will exclude from Avista utility operations for recovery from existing utility
customers, any costs related to Alaska merger sub AEL&P, AERC or any
purchase premium or goodwill without express approval from the
Commission.
Will continue to file reports with the Commission reflecting pertinent
quarterly financial information to include the following: (a) Debt to Equity
Ratio, (b) Enterprise Value, (c) Net Income Available to Common Stock,
and (d) Common Shares outstanding as required under Order No. 29947
and Order No. 30036.
lf any questions arise or additiona! information is needed, please do not hesitate to
contact Lauren Pendergraft at 509-495-2998.
Sincerely,
frrz*lnlk--.
Richard N Stevens
Director of Finance
Enclosures
Report of Securities lssued
July L,2OL4
Avista Corp
Description of Securities:
Under the Agreement and Plan of Merger among Avista Corporation, Alaska Merger Sub lnc.,
Alaska Energy and Resources Company ("AERC"), and William Corbus ("Merger Agreement") dated as of
November 4,2OL3, the Company issued 4,5OO,O74 shares of common stock. The following is the detail:
Shares Date Price
4.500.014 7/L/20L4 s33.3s
T'he shares were issued to acquire the equity interests in AERC.
The expenses paid in connection with the issuance of the common stock with regards to the AERC
Merger were as follows:
Description Amount
Underwrite/s Fees
Leeal Fees s345,82s
Accountant's Fees s29,048
Printine Fees S10,831
Misc s21,631
Total s408,335
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20lri SEP -2 &H 9: 38
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To ths Fomer Shareholders of Alaska Energy and Resources Company:
As you may know, Alaska Energr and Resources Company ("AERC') and Avista Corporation
(*Avista") recently reccived approval from the shareholders of AERC to merge AERC with and into a
subsidiary of Avista, a hansaction which will result in AERC being a wholly owned subsidiary of Avista.
We are pleased to announce that we completed that merger on July 1,2014. As a shareholder of AERC at
the time of the merger, you are now entitled to receive sharss of Avista in exchange for your shares of
AERC common stock. We will be issuing to you approximately 39.3 shares of Avista common stock for
each share of AERC common stock that you currently hold. If the conversion of your AERC shares to
Avista shares would leave you with less than a whole number of Avista shares, we will round down the
number of Avista shares you will be issued to the nearest whole number and also issue you a check for
cash equal to the fractional share interest times the conversion ratio described above.
In order to receive your shares of Avista (and cash in lieu of any fractional shares), you must
complete the enclosed Letkr of Transmittal, including the Form W-9 and FIRPTA Certificate provided
with that letter, and return it to the address provided in the Letter of Transmittal along with originals of
your currerit stock certificates. Copies ofyour stock certificates cannot be accepted for exchange. The
Letter of Transmittal provides instructions to Computershare Trust Company, N.A. ('Computershare"),
who is the transfer agent for Avista and is also acting as tle exchange agent for this transaction, regarding
the delivery of your Avista shares and any check you may be entitled to receive. The Form W-9 and
FIRPTA Certificate provide important tax information that will allow the exchange agent to determine
whether or not any tax is required to be withheld from your Avista shares. You will not be able to receive
your Avista shares (and cash in lieu of any fractional shares) unless and until you send the Letter of
Transmittal and other required documents. If you are not able to find your current AERC stock certificate
or for any reason do not submit originals of your current AERC stock certifioate with the Letter of
Transmittal, you will also be required to pay a fee to purchase a surety bond for the benefit of the
exchange agent as described in the Letter of Transmitral before you can receive your shares of Avista
stock (and cash in lieu of any fractional shares). This surety bond protects the exchange agent in the
event someone later comes forward with the AERC stock certificates and claims to be owed a portion of
the merger consideration paid out in this transaction.
Please note that no physioal stock certificates will be issued to you for your shares of Avista
common stock. Computershare will open a new account for you and deposit into that account the shares
of Avista common stock to be issued to you in exchange for your AERC shares. This new account will
be in your name, and the stock records will include your address and other identifying information from
AERC stock records at the time of the merger. If you later want to modifr that information or fansfer
your shares of Avista common stock from Computershare to another investment or brokerage account,
you can do so by contacting Computershare at l-800-546-5141 (or l-781-575-2765 from US Territories,
Canada, and locations outside of the US). You may also ask your existing broker or investrnent advisor if
they are able to assist you with completing a transfer into your existing brokerage or investment advisor
account.
Avista Crrp.
1411 East Missim
F08or3777 MSC-11
$pok*ne, Washing&fl 99??0-3727
Tslephone 509-495-{68
ttlark L Thies
Se*ior Vice Fresidant and
Chial Financial Oficer
DIitT 23835681 v5 0088333-0001 08
DlrT ei835681 v8 0088333-0001 08
A#wsrn'
CW
Flease also note that as a result of the merger, and following your completion of the steps
described in this lefter, you will be a holder of Avista common stock. As a result, any future dividends
that may become payable on your shares, as well as related tax forms, will be provided to you by
Computershare, as Avista's transfer agent.
The following checklist identilies the items that should be sent at your earliest convenience
in the enclosed return envelope to Computersharc at the appropriate address Hsted on the rwerse
side of the Letter of Trensmittal:
A properly completed Letter of Transmiual
The stock certificates evidencing your shares of AERC common stock (you must send
originals ofyour cunent stock certificates, dqnot send conie$ do not endorse the back side ofyour
stock ce*ificates)
The Form W-9 included with the Letter of Transmittal
The FIRPTA Certificate included with the LEtter of Transmittal
Please read the instructions provided in the Letter of Transmittal carefully. Failure to properly
cornplete the Letter of Transmittal or any other required documents could result in a delay in your
receiving your shares of Avista (and cash in lieu of any fractional shares).
If you have any questions concerning this process, you may call Computershare from 9 a.m. to 6
p.m. New York City time, Monday through Friday:
From within the USA, US territories & Canada:
l-800-546-5 14l (Toll Free)
From outside the USA, US territories & Canada:
| -7 8l -57 5 -2765 (Collect)
Sincerely,
Mark T. Thies
Trcasurer
DIflT X835681v5 0088333-0001 08
D\nT 8835681 v8 0088333-0001 08
sbs7075
ARTICLES OF MERCER
I\{ERGING
ALASKA MERGER SUR,INC.
AN ALASKA CORPORATION (ENTITY
AK Entity #: 50D
Date Filed: 0613012014
State of Alaska, DCCED
RECEIVED
Juneau
JUN 3 0 20ltt
Division of Corporations, Business
and Professional Licensing
100r6287),,/ZS,^=)
WITH AND INTO
ALASKA ENERGY AND RESOURCES COMPANY
AN ALASKA CORPORATTON (ENTITY 50D)
The urrdcrsigned corporations,
ibllorving Articles ol Merger:
FIRST: The nantes and
l. Alaska Energy and
50D (the "Company): and
pursuant to Alaska Statutcs 10.06.512-550, hereby e.xecutc lhe
Alaska entity numbers of the corporatiorrs proposing to nlcrgie are:
Resources Company, an Alaska corporation, Alaska entity nun:ber
2. Alaska Merger Sub, lnc,, an Alaska corporation, Alaska entity number I 0016287
("Mergcr Sub").
SECOND: Effcctivc as of the later of (a) l2:01 a.m. Iocal tirne in Juneau, Alaska, on Jrrly l,
2014. or (b) thc filing of thesc Articlcs of Merger rvith the State of Alaska, Dcpartnrelrt of Cornrnerce.
Conrmunit-y and Economic Developrnent, Division of Corporations, Merger Sub rvill rrrcrgc rvilh and into
thc Cornpany, and tlrc Company slrall be the surviving corporation in thc Mcrger and shall continuc its
existerrce under the narne "Alaska Energy and Resources Compa:ry" rvith entity nuntbcr 50D.
THIRD: Thc Plan olMcrger dated as of June 30, 2014 (the "Phn of Mcrger") sctting tbrth
the ternrs ol'the nrerger of Merger Sub rvith and into Conrpany (the "Mergcr") is attachcd hcreto as
Exhihit A.
FOU!{'fl'l: The Mcrger has been approved by the Board of Directors and shareholders ol'each
olthc constitucnt corporations in accordance rvith the Alaska Corporations Codc, rvith the lblloiving
voting inlbrntalion:
Nirrnc olerrtity: Alaska Mergcr Sub, lnc.
Nurnbcr ol outstanding shares: 100 shares
Nurnbc'r of sharcs cnlitk'd to vote: 100 shares
Nunrtrer of shares voting lor plan: 100 shares
Nunrber ol'shares voting against plan: 0 shares
Narne ol'errlity: Alaska Errergy iurd Resources Cornpany
Nunrbcr ol'oulslandirtg slrorcs: I 14,504 shares
Nunrhcr ul'shures entitled lo vote: I 14,504 sharcs
l ltillu tilliltililLilt[ilt[lilllililfl il lil
Numl'rer of shares voting for plan: I 12,145 shares
Nurnber olshares abstaining or voling against plan: 2,359 shares
FIF'l'H: The Merger does not involve the merger of one or nlorc subsidiary corporations.
SIXTH: Tlrcse Arliclcs of Merger are signed by the president and sccrctary or assistant
secretary of each entity involved in tlte merger.
lRe.nruinde r oJ' page int ent i onal ly lcJi h lunkl
RECEIVED
Juneau
JUN 3 0 201{
Division of Corporations, Business
and Professional Licensing
-2-
IN Wl'l'NESS WHEREOF, the Conrpany and Merger Sub have caused thcsc Articles of lvlerger
to [rc signed by their respective authorized ofTicers, thc 306 day of June,20l4.
Al,nsK,r ENE,Rc\' AND REsol,RCES Coi\tp/rNy
By:
Narne:
Tirle:
William A. Corbus
President
Name: Constance Hulbert
Title: AssistantSccrctary
AI,ASKA MERCER SI-IB, INC.
By:
By:
Nane:
Title:
Dennis P. Vermillion
President
By:
Name:
Titlc:
Karen S. Feltes
Secretary
RECEIVED
Juneau
JUN 3 0 20li
Divlsion of Corporations, Business
and Probssional Licensing
RECEIVED
Juneau
JUN 3 0 20t+
Divl8lonot Corporations, Businessand proheiionat t tcilnJii'.".
2)
3)
EXHIBIT A
PLAN OF MERGER
Between
ALASKA MERGER SUB,INC. (ENTITY r00r6287)
ALAsKA ENERGy AND REsot',Lm corvrpANy (ENTrry soD)
Tlris Plan of Mergcr is entered into by anclbetween Alaska Merger Sub, lnc.. an Alaska
corporatiorr ("Merger Sub"), and Alaska Energy and Resources Company. an Alaska corporation
("AERC").
I) NAME AND-SLJRVMR. At the Eflective Tinre (as dcfined in Section 2 below), Merger
Suh shall be rnerged into AERC, which shall be the surviving corporation (such transaction,
thc "N4erger"),
EFFECTM TIME. The "Efflective Tinre" of the Merger shall be the later of (a) l2:01 a.nr.
local tinre in Juneau. Alaska on July l,2Al4 or (b) the time at rvhich the Articles of Merger
rvith respect to tlre Merger(in the fornr required by the Alaska Corporations Codc, includng
Alaska Statutes 10.06.532-550) are filed rvith the State of Alaska, Department of Contmcrce,
Community and Economic Devclopment, Division olCorporations.
TERM.S ANI) CONDITIONS. The Merger shall have the ctlccts set forth in this Plan of
lr4erger and the Merger Agreement (as defined hercin) and the applicable provisions of the
Alaska Corporatiorrs Codc. 'l'he terms and conditions of thc Merger Bre set lbrth hcrein and
arc supplenrerrted by the Merger Agreenrent as dellned hcrein. Without limitirrg the
gcncrality of tlrc fbrogoing. at the Effective Tinre, except as otherrvise provided in that
ccrtain Agrccnrcnt and Plan of Mergcr (thc "Mcrgcr Agrcenrcnt"), dated as of Novernbcr 4,
2013, by and anrong the AERC, Merger Sub, and Avista Corporation. a Washingtorr
corporation ("Pafent"), allthe property, rights, privileges, powers and franchiscs of AERCI
and lr4crger Sub shall vcst in AERC, and all debts, liabilitics and duties of A ERC and Merger
Subshall lreconrethedcbts, liabilitiesanddutiesofAERC. 1'heMergerAgreernentisonfile
at tlre principul place of business of AERC and a copy of the Merger Agreement will be
furnishcd by AERC, on rcquest and rvithout cost, to any shareholder of AERC or Merger
Sub.
4) CONVERSION OF SIIARES. At the Effective Time, by virtuc of thc Mcrger and without
any firrther action on the part of Parent, Merger Sub, AERC, their respectivc sharcholders or
any othcr pilrty:
each sharc of AERC Common Stock issued and outstanding immediutely prior to
the Effective Time (other than any shares of AERC Comnron Stock that are
issuc'd and outstanding inrmediately prior to the Effective Tirne and are hcld by a
slrareholder rvho is entitlcd to exercise, and properly exerc.ises, dissenter's riglrts
with rcspect to such shares pursuant to, and who conrplies in all respects rvith, the
provisions of the Alaska Corporations Code rvith respcct to such shares) slrall be
-?-
canceled and converted into the right to receive (i) the number of shares of Parent
Cc'rnrmon Stock equal to onc share of AERC Cornrnon Stock multiplied by the
Exchange Ratio (as deflned in thc Merger Agreerncnt) and (ii) a portion of the
Representative Reirnbursement Antount (as defirred in the Mcrger Agreenrent) in
accordance rvith Mergcr Agrccmcnt; and
ii. each share of the conrmon stock, no par value, of Merger Sub outstanding
ilnnrediately prior to the Effective Tirne shall be converted into one share of
conunon stock of AERC.
-5) STATE,MENI OF CHANGES IN ARTICLES OF INCORPORATION. The Articles ol
Irrcorporatiorr oIAERC, the surviving corporation, shall be arncnded as follolvs:
a) Articlcs II, II[, V and lX of AERC's Articles of lncorporation are hcreby amended to
rcad as tbllows:
(i) ARI'ICLE ll: PURPOSE. This corporation is organized for the purpose of
cngaging in any business, trade oractivity which nray be conducted larvfully
by a corporation organized under thc Alaska Corporation Code (AS 10.06).
(ii) ARTICLE lll: SHARES. 'l'his corporatiorr is authorized to issuc one hundrcd
(100) shares of comnron stock.
(iii)ARTICLE V: NO CUMULATIVE VOTING. At each election for directors,
cvery shareholdcr cntitlcd to vote at such election has the right to vote in
pcrson or by proxy the number o[shares held by such shareholder fbr as many
persons as there are directors to be elected. No cumulativc voting for directors
shall be pemritted.
(iv)ARTICLE IX: LIMITATION OF DIREC'|ORS' LtABILITY. A dircctor
shallhave no Iiability to thecorporation or its shareholders fbr ntonetary
damages for conduct as a director, cxccpt tbr acts or omissions that involve
intentional nrisconduct by the director, or a knorving violation of larv by the
director, or lbr conduct violating Section 10.06.480 of the Code, or for any
transaction from which tlrc dircctor will pcrsonally receive a benefit in nroney,,
property or services to which the director is not lcgally entitled. lf the Code is
hereafter anrcnded to authorize corporate action further eliminating or linriting
the personal liability of directors, thcn the liability of a director shall be
eliminated or limited to the fullextent pennitted by the Code, as so anrended.
Any repeal or nrodification of this Article shall not adversely aflect any right
or protection ol a director of the corporation existing at the tinre of such repeul
or modification for or with rcspect to an act or onrission of such director
occurring prior to such repeal or modification.
b) AIIRC's Articles of lncorporation are hereby amended to add a ncw Article Xl as
RECEIVED
Juneau
JUN 3 0 20li
Divleion of Corporations, Business
and Professional Licensing
tbllorvs:
-t-
RECEIVEI)
Juneau
JUN 3 0 20ll
(i) ARTICLE Xl: INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Scction 10.1 Right to Indenrnil-rcation. Each person who was, is, or is
threatened to be made a party to or is otherwisc involved (including, rvithout
litnitation, as a witness) in any threatened, pending or complcted action, suit
or proceeding, whcther civil, crinrinal, adnrinistrative or investigativc and
rvhether formalor informal, by reason of thc fact that he or she is or rvas a
director or officer of the corporation or, while a director or officer, he or she is
or lvas serving at the request of the corporation as a director, trustee, ofiicer,
parlner, employee or agent of another corporation or of a partnership,.ioint
venture, trust or other enterprise, including service with respect to employec
bcnefit plans, whetlrer the basis of such procceding is alleged action in an
official capacity as a director, trustee, olficer, partner, ernployee or agent or in
any otlrcr capacity rvhile sen,ing as a director, truslee, officer, partner,
ernployce or agent, shall be indemnified and held harmless by the corporation,
to the fullextent pennincd hy applicatrle law as then in effect, against all
expense. liability and loss (including attorney's t'ees, judgnrents, fines, ERISA
excisc taxcs or pcnalties and amounts to be paid in seftlement) actually and
reastlnably incurred or suffered by such person in conncction tlrerervith, and
such indemniflcation shallcontinue as to a person who has ceased to bc a
director, trustee, officer, partner, cmployee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, horvever.
that except as provided in Section 10.2 of this Article with respect to
proceedings seeking to enlorce rights to indenrnitlcation, the corporation shall
indcmnify any such person seeking indcmnification in connection lvith a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereot) was authorized by tlre board of dircctors of the corporation.
'l'he right to indernnification conferred in this Arlicle X shall be a conlract
right and shall include the right to be paid by thc corporation tlre expenses
incurred in dcfcnding any such proceeding in advance of its t'inal disposition,
without regard to the limitations in thc Codc, or any other limitation rvhich
may hereafler be enacted to the extent such limitation may be disrcgarded if
authorized by these Articles of Incorporation, to the full extent and under all
circumstanccs pcrrnitted by applicable law.
Section 10.2 Right of Claimant to Bring Suit. lf a claim under
Section l0.l of this Article is not paid in full by the corporation rvithin sixty
(60) days aftcr a wrinen claim has been rcceived by the corporation, except in
thc casc of a claim for cxpenses incurred in dcfcnding a proceedirrg in
advancc of its finaldisposition, in which case thc applicable period shallbc
twenty (20) days, the claimant may at any timc thercafier bring suit against thc
corporation to recover the unpaid amount of the claim and, to the extent
Divlslon of corporalion., BuBiness successtul in rvhole or in paft, the claimant shallbe cntitlcd to be paid also thc- and Prores;ronarLicone ns fiff,:T;1I;H:Ti;:f,,'#Hi:'ft,I1'.',:i:'[:lJl;l'i,:i:';:[Tli?,[:
claim (and, in an action brought to enforce a clainr for expenses incurrcd in
defending any proceeding in advance of its final disposition, rvhere the
RECEIVEIJ
Juneau
JUN 3 0 20lf
Division of Corporations, Buslnesrr olherwise.
and Probssional Licensing
Scction 10.6
requircd unde(aking 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 cclrporation (including its
board of directors, independent legalcounsel or its shareholders) to havc made
a determination prior to thc conrnlencenlent of such action that
indcmnification of or rcimbursement or advancemerrt of expenses to the
claimant is proper in the circumstanccs nor an actual detcrmination by the
corporation (including its board of directors, independcnt legal counsel or its
shareholdcrs) that the claimant is not entitled to indenrnification or to the
reinrbursement or advancemcnt of expenscs shall be a defense to the action or
creale a presumption tlrat the clairnant is not so entitled.
Section 10.3 Noncxclusivity of Rights. The right to indemnification
and thc payment of expcnses incurred in defending a procecding ln advance of
its finaldisposition conlerred in this Article shall not be exclusive of any other
right rvhich any person may havc or hereafter acquire undcr any statute,
provision of the Articles of Incorporation. Bylarvs, agreement, vote of
shareholders or disinterested directors or otherwisc.
Scction 10.4 Insurancc, Contracts and Funding. The corporation nray
ruraintain insurance, at its expense, to protecl itself and any director, trustee,
olllcer, partner, employee or agent of the corporation or another corporation,
parlnership, joint venturc, trust or othcr cnterprise against any expense,
liabiliry or loss, whether or not the corporation would have the power to
indernnify such person against such expense, liabiliry or loss under tlre Code.
The corporation may, without further sharcholder action. enter into contracts
rvith any director, trustee, officer, partner, ernployee or agent of the
corporation in tirrthcrancc of the provisions of this Articlc and may create a
lrust fund, grant a security interest or use other nreans (including, rvithout
lintitation, a letter of credit) to ensure tlre paymcnt olsuch amounts as may be
necessary to effect indernnificaiion as provided in this Articlc.
Scction 10.5 Indcmnification of Enrployccs and Agents of the
Corporation. 'l'he corporation may, by action of its board of directors flrom
time to tirnc, provide indemnification and pay expenses in advance of the final
disposition of a procceding to ernployees and agents of the corporation with
the same scope and effect as the provisions of this Article with respect to the
indenrnification and advancement of expenses of directors and ofllcers of the
corporation or pursuant to rights granted pursuant to, or provided by, the Code
Pcrsons Serving Other Entities. Any pcrson who, while a
director, officer or employee of the corporation, is or was serving (a) as a
dircctor or officer of another foreign or donrestic corporation of which a
nrajority 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 cxecutivc or
ntanagemcnt capacity in a partnership. joint venture, trust or other enterprise
-5.
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 scrving
at the request of the corporation and entitled to indemnification and
advancement of expenses under this Article.
6) OTHER PROVISIONS DEEMED NECESSARY OR DESIRABLE.
lr4crgcr Sub's oftlccrs and directors shall continue as the officers and directors,
respectivcly, of AERC from and after the Effective Time until their successors shall have
bccn duly elccted or appointed and qualified or until their earlier death, resignation or
rcnruval in accordance with the Articles of lncorporation and Bylaws of AERC as the
sante nray be in efl'ect from time to tirne. A separate Notice of Change of Ofllcials is
being filed herewith.
l:rom time to time. as and when requested by AERC, or by its successors or assigns, any
party hcrcto shall execute and deliver or cause to be exccuted and delivered all such
deeds and other instruments, and shall take or cause to be taken all such f'urthcr or other
actions, as AERC. or its successors or assigns, may deem necessary or desirable in ordcr
to vest in and confirm to AERC, and its successors or assigrrs, title to and possession of
all the property, rights, privileges, powers and franchises rcferrcd to hcrcin and othcrwise
to carry out thc intcnt and pulposes of this Plan of Merger, and the of ficers and directors
of AERC are fully authorized in the name and on behalf of Merger Sub or otherwise to
take arry and all such action and to execute and deliver any and all such deeds and other
instruments.
This Plan of Merger may be amended or terminated for any reason at any tinre before the
liling of Articles of Merger rvith the State of Alaska, Departmcnt of Commerce,
Cornmunity orrd Economic Developnrent, Division of Corporations by action takcn by
Merger Sub and AERC for any reason dcemed appropriate by them.
a)
b)
c)
RECEIVED
Juneau
JUN 3 O ZOIi
o'',:l,Jf[?,Tr,B'#lijlg"-n;:,i"".
.6-
DATED this 30th day of June,20l4.
NON-SUIIVIVINGCORPORATION: SLIRvIvINGCOIIPORATION:
AI"ASKA MERCER SUB, INC. ALASKA ENERCY AND RESOURCES
COMPANY
tly:By:
Denrris Vermillion, President
AND
William A. Corbus, Prcsident
AND
By:By:
Karen Feltes, Secretat,y Constance Hulbert, Asst. Secretary
RECE,VED
Juneau
JUN 3 O ZOIT
o''';lT
8[?,Tf8l1l',.18;
F,X l,l " ".
DATED this 30th day of June,2014.
NON-SURVIVI NG CORPORATION:
AI,ASKA MERCER SUB, INC.
Derrnis Vermil I ion, President
A*P.oh.By,
SURVIVING CORPORATION :
ALASKA ENERCY AND RESOURCES
COMPANY
William A. Corbus, President
AND
By'
Constance Hulbert, Asst. Secretary
By:
RECEIVED
Juneau
JUN 3 0 20tr
'''fl"J;l,ff,3'fJi'llLlJ;I"',
AND
lN WITNESS WHEREOF, thc Con:pany and Merger Sub have caused these Arlicles of Merger
to be signed by their respective authorized olllcers. the 30s day ofJune.20l4.
AI,/\SKA EN ERG}' AND IILSOT IRCES CONIPAN}'
By:
Name:
Titlc:
William A. Corbus
President
By:
Narne: Constance Hulbert
Title: Assistant Secretary
ALASKA MERCER SI.IB, INC.n-/ &L
RECEIVEU
Juneau
JUN 3 0 201{
Divislon of Corporations Busines
and Professionat Licensing
aren S, F
DATED this 30th day of June, 2014.
NON.SURVTVING CORPORATION :
ALASKA MERCER SUB.INC.
Dennis Vermil lion, President
AND
By:
Karen Feltes, Sccrctary
SURVIVING CORPORATION:
ALASKA ENERGY AND RESOURCES
COMPANY
,1ay, /)',*' ,1 1. &1,.,.
William A. Corbus, Prcsidcnt
AND
ay, fuq6-* il,4,*
Constancc Hulbert, Asst. Secretary
By,
RECEIVEIJ
Juneau
JUN 3 0 20li
Division of Corporations, Busrnesr
and Prohssional Licensing
IN WITNESS WHEREOF, the Conrpany and Merger Sub havc causcd these Articles of Merger
to bc signed by their respective authorized officers, the 306 day ofJune, 2014.
ALASKA ENERGY AND RESOURCES CONfPANV
Namc: Willianr A. Corbus
Titlc: President
sy, (r4qbrr/, -/rf/,ilrr?-
Namc: Constancc Hulbcrt
Titlc: AssistantSccrctary
ALASKA MeRcen Sus.Ixc.
Name: Dennis P. Vermillion
Titlc: Prcsidcnt
Name: Karen S. Feltes
Titlc: Sccrctary
By:
By:
RECEIVED
Juneau
JUN 3 0 20t{
Divlsion of Corporations, Busines.and Professionat t-icensng --
ARTICLE II
Rf,STATED ARTICLES OF INCORPORATION
OF
AT,ASI(A ENERGY AI\ID RESOURCES COMPA.hIY
Pursuant to the provisions fo the Alaska Corporations Code, the undersigned corporation hereby
restates is Articles of lncorporation. The following Restated Articles of Ineorporation correctly set out
the provisions as amended up to this time. The Restated Articles of Incorporation supersede the original
Articles of Ineorporation and all arnendments to thern and any prior restatements of them. The Restated
Articles of lncorporation of Alaska Enerry and Resources Company adopted by the corporation are as
follows:
ARTICLE I
NAME
The name of the corporation is Alaska Energy and Resources Company
ARTICLE TI
PIJRPOSS
This corporation is organized for the ptrpose of engaging in any business, trade or
activity which may be conducted lawflrlly by a corporation organized under the Alaska
Corporation Code (AS 10.06).
ARTICLE III
SHARES
This corporation is authorized to issue one hundred (100) shares of common stock.
Norn#friffiJL"*,
The shareholders shall have no preemptive right to acquire additional or trea$ry shares
of the corporation.
ARTICLE V
NO CUMT]LATWE VOTING
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 fot as many
persons as there are directors to be elected. No cumulative voting for directors shall be
permitted.
DWT 24209325v2 008E333{00 I 08
ARTICLE U
ARTICLE VI
REGISTERED AGENT AND OFFICE
The name of the registered agent of this corporation and the address of its registered
oflice are as follows:
Name
CT Corporation
Address
9360 Glacier Highway, Suite 202
Juneau, AK 99801
ARTICLE VII
ALIEN ATT'ILIATES
The corporation has no alien affiliates.
ARTICLE YIII
DELEGATION OF AUTHORITY
The powers, duties, priveleges and liabilities conferred on or imposed upon the board of
directors of the corporation may be exercised, performed, extended and assumed to the extent
and by the person or persons to whom they are delegated by the Board, including committees or
any other reasonably qualified person.
ARTICLE IX
LIMITATION OT DIRECTORS' LIASILITY
A director shall have no liability to the eorporation 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 tansaction 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 firrther eliminating or
Iimiting the personal liability of directors, then the liability of a director shall be eliminated or
Iimited to the full extent permitted by the Code, as so amended. Any repeal or modification of
this A*icle 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 AFID OFrICERS
Section 10.1 Right to Indemnilication. Each person who was, is, or is threatened to
be made a party to or is otherwise involved (including, without limitatioru as a witness) in any
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whethet 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 et the request of t}e corporation as a director, trustee, officer, pmtner, employee or
DW'l' 24209325v? 0088333-000 I 08
ARTICLE II
agent of another coqporation or of a partnership, joint venture, tnrst 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, officrr, partner, employee or agent or in any
other capacity while serving as a director, trustoe, officer, parber, employee or agent, shall be
indemnified and held harmless by the corporation, to the fulI extent permitted by applicable law
as then in effect, against all expense, liability and loss (including attomey's fees, judgments,
fines, ERISA excise taxes or penalties and amounts to be paid in settlernent) 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
adrninisffators; pI$ridgd, however, that except as provided in Section 10.2 of this Article with
respect to proceedings seeking to enforce rights to indemnification, the corporation shall
indemnily any such person seeking indemnificarion in comection with a proceeding (or part
thereof) initiated by such person only if zuch 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
incuned in defending any such proceeding in advance of its final disposition, without regard to
the lirnitations in the Code, or any other limitation which may hereafter be enacted to *re extent
zuch limitation may be disregarded if authorizedby these Articles of tncoqporation, to the full
extent and under all circumstances permitted by applicable law.
Section 10.2 Right of Claimant to Bring Suit If a claim under Section 10.1 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 rocover
the unpaid amount of the claim and, to the extent successful in vftole 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 indenrnification 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 &e corporation shall have the burden of proof to overcome the
presumption that the claimant is so entitled. Neither tlrc failure of the corporalion (including its
board of directors, independent legal counsel or its shareholders) to have made a determination
prior to the commencement of such action that indemnitication of or reimbursement or
advancement of expenses to the claimant is proper in the circunstances nor an actual
determination by the corporation (including its board of directors, independent legal counsel or
its shareholders) thai the claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shaIl be a defense to the action or create a presumption that the
claimant is not so entitled.
Section I0.3 Nonexclusivity of Righto. The right to indemnification and the payment
of expenses incurred in defending aproceediog io advance of its final disposition conferred in
this Article shall not be exclusive of any o&er right which any person may have or hereafter
acquire under any statute, provision of the Articles of lncorporaticn, Bylaws, agreemenl vote of
shareholders or disinterested directors or otherwise.
Dwl' 24209325v2 0088333-000108
ARTICLE TI
Seetion 10.4 fnsurance, Contracts and Funding. The corporation may maintain
insurance, at its expense, to protect itself and any director, tn$tee, officer, partner, employee or
agent ofthe 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,
trustee, officer, partner, employee or agent of the corporation in furtherance of the provisions of
this Article and may create a trust fimd, grant a security interest or use other means (including,
without limitation, a lefter 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 expeoses 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 saving (a) as a director or officer of another
foreign or domestic corporation of uihich 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 partrrer or has a majority
ownership shall be deemed to be so senring at the request of the corporation and eatitled to
indemnification and advancement of expenses under this Article.
oerno:{tt(,r (rzat4
lJ &-('u
Name: Denni s Vermillion
Title: President
S-r" 't - Fkw.r,1
Name, Susan Y. F er,tng I
Title: Assistant Corporate Secretary
Dwr 24209325v2 0088333-000 I 08
ol u
Alaska Entity #50D
State of Alaska
Department of Commerce, Community and Economic Development
Corporations, Business and Professional Licensing
Certificate of Merger
The undersigned, ds Commissioner of Commerce, Community and Economic
Development of the State of Alaska, hereby certifies that a duly signed and verified
filing pursuant to the provisions of Alaska Statutes has been received in this office and
has been found to conform to law.
ACCORDINGLY, the undersigned, as Commissioner of Commerce, Community and
Economic Development, and by virtue of the authority vested in me by law, hereby
issues this certificate to
the survivor
ALASKA ENERGY AND RESOURCES COMPANY
an Alaska entity
lN TESTIMONY WHEREOF, I execute the certificate
and affix the Great Seal of the State of Alaska
effective June 30, 2014.
#+.rl
Susan K. Bell
Commissioner
H|
Secretary's Certifi cate (Company)
The undersigned hereby certifies that she is the duly elected and acting Assistant
Secretary of Alaska Energy and Resources Company, an Alaska corporation
(the "Compatry"), and that, as such, is duly authorized to execute and deliver this
Secretary's Certificate on behalf of the Company pursuant to Section 2.1(c)(iii) of that
certain Agreement and Plan of Merger among Avista Corporation, a Washington
corporation, Alaska Merger Sub, [nc, an A]aska corporation, the Company and William
A. Corbus as the Shareholders' Representative dated as ofNovember 4, 2013 (the
"Merger Agreement"). The undersigned hereby further certifies on behalf of the
Company that:
1. Attached hereto as Exhibit A is a true, correct and complete copy of resolutions of
the board of directors of the Company (the "Resolutions"). The Resolutions were duly
and validly adopted by the board of directors of the Company and evidence the
authorization by the Company of the execution and delivery of the Merger Agreement
and the other Principal Documents (as that term is defined in the Merger Agreement) to
which the Company is a party or signatory, and the consummation of the transactions
contemplated by the Merger Agreement. The Resolutions have not been rescinded,
amended or otherwise modified since the date of their adoption and are in full force and
effect on the date hereof.
IN WITNESS WHEREOF, the undersigued has executed this Secretary's Certificate
on behalf of the Company as of this 30s day of June, 2014.
ALASKA ENERGY AND
RESOURCES COMPANY
By *n *U*,-Jlr//**
Name: Constance Hulbert
Title: Assistant Secretary
DW 2428067 4v I 0088333-000 I 08
Exhibit A
I. AppnovaIoFMERGERANDMBncBnAcREEMENT
Wurnrls, the Board has received a proposal under which a
wholly-owned subsidiary ("Merger Sub") of Avista Corporation, a
Washington corporation ("Parent"), will merge with and into the
Company, with the Company as the surviving entity (the "Merger"),
pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), by and among the Company, Parent, Merger Sub, and
William A. Corbus, solely in his capacity as Shareholders' Representative
(as defined in the Merger Agreement).
WHgnr.ls, the Board has considered a number of factors,
including, among others: (i) the business, operations, financial condition,
competitive position and prospects of the Company and the nature of the
industry in which the Company participates; (ii) a review of feasible
alternatives to the Merger, including alternative competing offers; (iii) the
amount, type, timing, conditions, adjustnents and contingencies of and
with respect to the consideration to be received by the shareholders of the
Company in connection with the Merger (including, without limitation, the
floor and eeiling priees related to the exchange ratio with respect thereto),
as well as the other financial terms of the Merger Agreement; (iv) the
additional terms of the proposed Merger Agreement, the exhibits,
schedules, documents and other agreements referenced in the Merger
Agreement, attached thereto or contemplated thereby, including, among
others, the operation of the escrow and indemnification arrangements, and
conditions to the parties' obligations to consummate the Merger
(including, without limitation, the requisite regulatory approvals), (v) the
business, operations and financial condition of Parent and (vi) the impacts
of the Merger on the ratepayers, employees, shareholders and other
business relationships of the Company and its subsidiaries.
WueRnas, the material facts as to the Merger and the participation
and interests in the Merger (including his role as Shareholdersl
Representative) of William A. Corbus, an officer, director and major
shareholder of the Company, and certain relatives and affiliates thereof
have been fully disclosed and are known to the Board.
WunRBls, following its review of the terms and conditions of the
Merger Agreement, the Board deems that the Merger is just and
DWT 24280674v I 0088333-000 I 08
reasonable and that it is in the best interests of the Company and its
shareholders to effechtate the Merger pursuant to the Merger Agreement.
Now, TnnRBroRE, BE IT RBsot vBu, that the proposed Merger
pursuant to the Merger Agreement is hereby authorized and approved in
all respects.
RBsolvrp, FURTHER, that the terms, conditions, provisions and
form of the Merger Agreement, in substantially the form attached hereto
as Exhibit A, are hereby authorized and approved in all respects, together
with any such changes or modifications as the officers or directors of the
Company shall deem necessary or appropriate in their sole discretion, the
execution thereofto constitute conclusive evidence of such approval.
Rrsolvno, Funtnrn, that the exhibits, schedules, certificates,
documents and other agreements referenced in the Merger Agreement,
attached thereto or contemplated thereby (collectively with the Merger
Agreement, the "Merger Documents") are hereby authorized and
approved in all respects, together with any such changes or modifications
as the officers or directors of the Company and its subsidiaries shall deem
necessary or appropriate in their sole discretion, the execution thereofto
constitute conclusive evidence of such approval.
Rusor,vso, Funlueq &at the Board trereby declares the Merger
and the Merger Agreement to be advisable and in the best interests of the
Company and its shareholders and recommends that the Company's
shareholders ratiff and adopt the same.
Rrsolvuo, FuRrnng that the officers of the Company and its
subsidiaries are hereby authorized and directed to submit the Merger and
the Merger Documents to the Company's shareholders for approval and
provide such other documentation to the Company's shareholders in
connection with the Merger and Merger Documents as the officers deem
necessary and appropriate in their sole discretion.
Rnsolvro, FuRrnrn, that the offrcers of the Company and its
subsidiaries are hereby authorized and directed to perform any and all of
the following in connection with the Merger, the Merger Documents and
the actions contemplated thereby: (i) to negotiate on behalf of the
Company regarding the final terms, conditions, provisions and form of the
Merger Documents, along with any additional changes or modifications to
the Merger Documents as such officers in their sole discretion may
approve, such approval to be conclusively evidenced by the execution and
delivery thereof; (ii) to execute and deliver on behalf of the Company the
DWT 24280674v I 0088333-000108
Merger Documents; (iii) to file (a) any filings, reports or materials
required or permitted to be filed with any governmental authorities,
instrumentalities or agencies, including, without limitation, appropriate
documents with federal, state, local or foreign authority which such proper
offrcer shall deem necessary or appropriate, and (b) subject to the adoption
of the Merger Agreement by the shareholders of the Company, articles of
merger and other appropriate merger documents required by the Alaska
Corporations Code and such other documents as may be required by other
applicable law and (iv) to generally perform any and all actions (and to
execute such documents, certificates, writings, instruments and
agreements) whatsoever as said officers shall deem necessary, appropriate,
and"/or desirable in connection with the execution, delivery and
performance of the Company's and its subsidiaries' obligations and
exercise of its rights under the Merger Documents, and the consummation
of the transactions contemplated thereby, the determination of the
necessity, appropriateness or desirability of such action to be conclusively
evidenced by the taking of such action by such officers.
Rnsolvtru, Funtnnn, that any and all actions taken by the
officers and directors of the Company and its subsidiaries in connection
with the negotiation of the Merger and/or Merger Agreement prior to the
date hereofare hereby ratified and approved in all respects.
II. DISSENTERS' RJGHTS
Wnnnus, any shareholders who do not approve the Merger
Agreement (the "Dissenting Shareholders") may be entitled to
dissenters' rights under the Alaska Corporations Code (the "ACC").
WunnEls, the ACC requires the Company to provide certain
notices to the Dissenting Shareholders relating to their rights thereunder,
within certain time periods as set forth therein.
Now, THgRsnoRE, BE IT RBsoLvno, that in the event that the
Merger Agreement is approved by the requisite vote of the Company's
shareholders, the offrcers of the Company be, and each of them hereby is,
authorized, for and on behalf of the Company, to prepare and send, within
the time periods required by the ACC, appropriate notices to the
Dissenting Shareholders, prepared in accordance with the ACC, and to
take any and all actions necessary or appropriate to comply with the
provisions of the ACC regarding dissenters' rights.
Rrsolvnp, FURTHBR, that any and all actions taken by the
officers and directors of the Company and its subsidiaries in connection
DWT 24280574v1 0088333-0001 08
III.
with the provision of information to shareholders of the Company
regarding the Merger and Merger Agreement prior to the date hereof are
hereby ratified and approved in all respects.
AppRovel oF INDEMNIFICATIoN AcRBBlrrBxrs
WunRnls, in connection with the Merger, it is deemed to be in the
best interests of the Company and its shareholders to enter into
indemnification agreements with each of the offrcers and directors of the
Company and its subsidiaries in substantially the form attached as
Exhibit B hereto (the "Indemnification Agreements").
Now, THnnsroRE, Bn It RBsor,vBp, that the officers of the
Company, and each of them, are hereby authorized and empowered,
jointly and severally, for and in the name and on behalf of the Company,
to execute and deliver the Indemnification Agreements to each current and
future officer of the Company and each current and future member of the
Board with such additional modifications as such offrcer determines
necessary or advisable, such determination to be conclusively evidenced
by the execution and delivery thereof.
RrsolvBp, FURTHER, that the officers and directors of the
Company and its subsidiaries are hereby authorized to take all such actions
and to execute and deliver all such certificates and such other instruments
and documents as such officer may deem necessary or appropriate in order
to fully effeCfuate the purpoSe of e#h of the fori:going resolutioni.
Rnsouvro, FuRtnnn, that any and all actions taken by the
officers and directors of the Company and its subsidiaries in connection
with the foregoing resolutions, including, without limitation, that entrance
into Indemnification Agreements with officers and directors of the
Company and its subsidiaries, prior to the date hereof are hereby ratified
and approved in all respects.
GBxenllAurHomrv
RrsolvBn, that any and all actions whether previously or
subsequently taken by the officers and directors of the Company, which
are consistent with the intent and purposes of the foregoing resolutions,
shall bie and the same hereby are, in all respeets, ratified, approved and
confirmed.
Rtsol,vBp, FURTHER, that the Company's officers and such
persons appointed to act on their behalfpursuant to the foregoing
resolutions, are hereby authorized and directed in the name of the
Company and on its behalf, to execute any additional certificates
IV.
DWT 24280674v I 0088333-000 I 08
(including any offrcers' certificates), agreements, instruments or
documents, or any amendments or supplements thereto, or to do or to
cause to be done any and all other acts as they shall deem necessary,
appropriate or in furtherance of the full effectuation of the purposes of
each of the foregoing resolutions and the transactions contemplated
therein.
D1NT 2428067 4v I 0088333-000 I 08
DWT 24280674v I 0088333400 I 08
PARENT OFilCER'S CERTIFTCATE
July I, 2014
l"his certiticate is delivered pursuant to Sggliggzlft)fii) of the Agreemcnt and PIan of
Merger, dated aq nfNovemtrer 4, 2013 (tlte "1\g(eems&!") among Avista Corporation. o
WashingXon corporation (the'*Parent"), Alaska Mergm Sub, Inc., an Alaska coryoretiCIn
("MeIggL-S&'). Alaska Energy and Resourees Cornpany, an Al*ska curporation
(the'ueernpgny") and William A Corbus as the Shareholders' Rcprcscntative. Capitalircd terms,
unless othenvise defined herein, shall have thc same nreanings as in the Agreenrenl
The undersigned, in his or her capacity as an officer of the Parent with the title set forth
below, herehy certifies, solely in sush capaciry and not individually" as follclws:
The representations and wananties of Parent and Merger $ub contained in the
Agrcenrent are accurate in all respects as of thc date hercof, with the sams force snd
effect as if made as ol'the date hereof (except ts the extent any such representatiein or
warranty speaks as of the date of the Agreement or any other spccific date, in which
case such represeutation or waranty shall have hecn Sccurots in all re-spcct$ &s of
such date). except any inaccuracies that, considsrEd collectively, do not }ave a
material adverse effect ort the economic benefits lo be derived by the Company
Shareholders from the Merger, it being understood that" ftrr purposes of determining
the accuraey of such repre$entations and $mrrenties, all 'h:aterjal. adverse eff,ect" and
other qualific.utions using the tsfins "in any rna{erjal re$pect'o or *'i$ a}l material
respects" in such reprssentations artd wsffanties will be disregarded.
Parent and Merger Sub hsve pcrformsd in all material respects all agreements and
covenants required to tre perfarmed by it urrdEr the Agreernent et or priar to the
Closing, including but not l^imitcd to obtaining any required gove,rnmental consents,
permits, regulrtory approvuls, waivem, and making any required filings or conrpleting
any required registrations with govemmerrtal authorities.
[Signature Page Fol lowsl
2.
DWT 24?4923ft I m$83}j-fi{Xlr08
IN WIINESS WHEREOF, the undersigned has eNecutid this Farent Officer's Certificate
on the date first set forth above.
AVISTA CORPORATION
By: {fl6-_r*-..,*-/'lf. . | }t ."t/-.
Name: i*{ &e,,/il }1 ,*br:r.c}- i,t.J ii
DWT 24?49U34YI tr)X83334m1$lt
lSigndure Page to Parent 0fficer's Certi{icate]
$ecretary's Certilicate (Parent)
The undersigned hcreby certifies that he or, she is the duly elccted and acting
Seeretary of Avista Corporation" a Washingtou corporation ('?nrent"), ffid that, as such,
is duly authorizcd to execute and deliver this Secretary's Certifieate on hehalf of Parent
pursuam to Section z.2(c)(iii) of that certain Agreement and Plan of Merger anlong
Parent. Alaska Merger Sub, lnc., an Alaska corporation, Al.aska linergy and Resources
Cornpany" an Alaska corporation and Willianr A. Corbrrs as the Shareholders'
Representative dated as of Noverntrer 4, ?013 (thc "Merger Agreement")" Tihe
undersigned hereby fWher certifies on behelf of Farsnt that:
I . Attached hereto as Hxhibit A is a true, correct and complete copy of resolutions of
the bosrd of directnrc af Parent (the "Resolutions"). The Resolutions were duly and
validly adopted by the board eif directrors ofthe Parent and evidence ths auth,Jrir.,etion try
Parent of the exe.cution and delivery af the Merger Agxeeureat and the other Principal
Documents (*s that {:errn is defined in the Mergr:r Agrc*ment} ts which l}arent is a party
or signatory. and the consummation of the transactions contemplated by the Merger
Agreement. Thc Resotutions have nat been rescinded, arnended or otherwise modified
sinee the date of their adoption arrd ms in full force and eflbqt on the date hereerf.
lN WI'I}{ESS WI-IHREOIT, the undersigned has executed this Secretary's Certi{icate
on bchalf of Parent as of this 306 day of Jrrne,2014,
AVISTA CORPORATION
S. Fcltes
Title: Secretary
DWT ?{18$$?3v I 0088"113-0001 08
AVISTA CORPORATION
Excerpt of Minutes of a
Special Meeting of the Board of Directors
Held on October 31,2013
BE IT RESOLVED that the appropriate Officers of the Company be, and they
hereby are, authorized and empowered to take any and all actions as shall be
necessary or convenient to review, approve or disapprove of the terms and
conditions of, to execute and deliver all applications, agreements, filings, notices
and other documents as may be necessary or convenient for the Company to file
with the Washington Utilities and Transportation Commission, the Idaho Public
Utilities Commission, the Public Utility Commission of Oregon, the Montana
Public Service Commission, and the public utility commission of any other state
and any other regulatory authority having jurisdiction over the Company, any
necessary or appropriate applications for additional authority (collectively,
"Regulatory Authority") to issue additional shares of the Company's Common
Stock in the acquisition by merger of all shares of common stock of AERC, such
shares of Common Stock to have an aggregate value (determined as provided in
the merger agreement hereinafter authorized) equal to the merger consideration of
$170 million (subject to adjustment pursuant to the terms of the merger agreement
hereinafter authorized) (the "Merger Consideration"), and the number of such
shares to be determined pursuant to the terms of the merger agreement hereinafter
authorized (the shares of Common Stock to be issued by the Company being
hereinafter called the "Shares"), together with any and all such amendments or
supplements to such applications, agreements, filings, notices and other
documents, or any amendments or supplements thereto, as in the judgment of
such Officers may appear necessary or desirable; and
BE IT RESOLVED FURTHER that the appropriate Officers of the Company be,
and they hereby are, authorized and empowered to take any and all actions as
shall be necessary or convenient for the Company to prepare, execute (including
by facsimile signature) and file with the Securities and Exchange Commission
(the "SEC") an appropriate registration statement for the registration with the
SEC under the Securities Act of 1933, as amended, and applicable rules and
regulations promulgated thereunder, of the Shares, together with any and all such
further amendments to such registration statement and any and all exhibits thereto
and all prospectuses, prospectus supplements and/or other documents pertaining
to such registration statement or any amendment thereto, as in the judgment of
such Officers may appear necessary or desirable; and
BE IT RESOLVED FURTHER that Marian M. Durkin, Senior Vice President,
General Counsel and Chief Compliance Officer, and J. Anthony Terrell, as
securities counsel, are hereby appointed as the Company's agents for service in
connection with the filing with the SEC of required registration statement or
amendment thereto; and
BE IT RESOLVED FURTHER that the Company hereby appoints Scott L.
Morris, Chairman of the Board, President and Chief Executive Officer, Mark T.
Thies, Senior Vice President and Chief Financial Officer, Marian M. Durkin,
Senior Vice President, General Counsel and Chief Compliance Officer, and J.
Anthony Terrell, and each of them severally, as the true and lawful attomey or
attorneys of the Company with full power to act with or without the others and
with full power of substitution or resubstitution to sign any such registration
statement and/or any amendments or supplements thereto for and on behalf of the
Company; that each Director of the Company and each Officer thereof who may
be required to sign such registration statement and any amendments or
supplements thereto is hereby authorized to appoint said Scott L. Morris, Mark T.
Thies, Marian M. Durkin and J. Anthony Terrell, and each of them severally, as
the true and lawful attomey or attorneys of each such Director and Officer of the
Company with full power to act with or without the others and with full power of
substitution or resubstitution to sign said registration statement and any
amendments or supplements thereto, for or on behalf of each such Director and/or
Officer in his/trer capacity or capacities as such; and that each Director of the
Company and each Officer thereof who may be required to sign such registration
statement and any amendments thereto is hereby authorized and empowered to
execute an appropriate power of attorney to evidence such appointments as
aforesaid; and
BE IT RESOLVED FURTHER that the appropriate Officers of the Company be,
and they hereby are, authorized and empowered to execute and deliver, in the
name and on behalf of the Company a merger agreement among the Company,
Alaska Merger Sub, Inc., a newly formed, wholly-owned subsidiary of the
Company, incorporated in Alaska ("Merger Sub"), AERC and William A.
Corbus, solely as the AERC shareholders' representative, providing for the
merger of Merger Sub into AERC, with AERC surviving, whereby the stock of
Merger Sub would be converted into stock of AERC and the shares of AERC
stock immediately prior to the merger would be converted to the right to receive
the Merger Consideration, consisting of Shares of Common Stock, with the
Shares being valued at the average of the closing sale prices of the Common
Stock on the composite tape for the ten (10) trading days immediately preceding,
but not including, the trading day prior to the closing date of the merger, but in no
event lower than the Floor Price or higher than Ceiling Price, all as provided in
the merger agreement; and that such merger agreement shall be in substantially
the form of the form of merger agreement distributed to the directors, with such
changes therein as the officers executing the same shall approve, their execution
thereof to be conclusive evidence of such approval (such merger agreement, as so
executed and delivered by the Company, being hereinafter called the "Merger
Agreement"); and
BE IT RESOLVED FURTHER that, subject to the receipt by the Company of
Regulatory Authority and the satisfaction, or waiver by the Company, of all other
conditions set forth in the Merger Agreement, the appropriate Officers of the
Company be, and they hereby are, authorized and empowered to cause the
Company to perform its obligations, and otherwise effectuate the transactions on
its part to be effectuated, under the Merger Agreement including, without
limitation, the issuance and delivery of the Shares to be delivered pursuant to the
Merger Agreement; and
BE IT RESOLVED FURTHER that, based upon the presentations and analyses
on AERC and the proposed transaction prepared by management and UBS
Securities LLC presented to this Board of Directors, as well as the competitive
bidding process by which the stock of AERC was offered for sale, this Board of
Directors hereby determines that the shares of AERC common stock to be
2
received by the Company pursuant to the Merger Agreement will be adequate
consideration for the Shares to be issued and delivered by the Company pursuant
to the Merger Agreement as hereinbefore outlined, and that the Shares issued by
the Company pursuant to the Merger Agreement shall be fully paid and non-
assessable when so issued; and
BE IT RESOLVED FURTHER that the appropriate Officers of the Company are
hereby authorized and empowered, in the Company's name and behall to cause
certificates for the Shares to be issued and delivered to the parties entitled thereto
upon consummation of the Merger; and
BE IT RESOLVED FURTHER that certificates for the Shares shall be signed by
the Chief Executive Officer, the President or a Vice President and either the
Corporate Secretary or an Assistant Corporate Secretary, whose signatures may
be facsimile if the certificate is countersigned by a transfer agent, or registered by
a registrar, other than the Company or an employee of the Company; that such
certificates may be sealed with the seal of the Company or a facsimile thereof;
and that any such facsimile signature of any such Officer of the Company
appearing on certificates for shares of said Common Stock is hereby ratified and
confirmed as and for the signature of any such Officer of the Company, and that
any such seal of the Company affixed or imprinted on said certificates is hereby
ratified and confirmed as and for the seal of the Company; and
BE IT RESOLVED FURTHER that for the purpose of an original issuance of the
Shares, Computershare Shareowner Services LLC, as Transfer Agent and
Registrar for the Company's Common Stock, is hereby authorized:
to record, countersign and register certificates for the Shares; and
to deliver said certificates, when so recorded, countersigned and registered, in
accordance with the written order or orders of the Company, signed by the Chief
Executive Officer, the President, any Vice President, the Treasurer, or any
Assistant Treasurer of the Company, such certificates to be registered in such
names, to be for such numbers of shares, and to be in such denominations as shall
be specified in said written order or orders of the Company; and
BE IT RESOLVED FURTHER that following the original issuance of such
certificates as contemplated by the immediately preceding resolution,
Computershare Shareowner Services LLC, as Transfer Agent and Registrar for
the Common Stock of the Company, is hereby authorized from time to time to
record, countersign, register and deliver new certificates upon transfers of
certificates representing the Shares, and to record, countersign, register and
deliver new certificates in replacement of the certificates for such Shares as may
allegedly have been lost, stolen, or destroyed, in accordance with such procedures
as may be authorized by the appropriate Officers of the Company; and
BE IT RESOLVED FURTHER that the appropriate Officers of the Company are
hereby authorized and empowered, in the Company's name and behalf, to
prepare, execute and file with the New York Stock Exchange appropriate
applications for the listing on such stock exchange of the Shares, together with
any and all such applications, and any and all such exhibits and other documents
a)
b)
or
in
pertaining to such applications or any amendments thereto, as in the judgment of
such Officers are necessary or desirable; and
BE IT RESOLVED FURTHER that the appropriate Officers of the Company be,
and they hereby are, authorized and empowered to execute and deliver any and all
such further agreements, instruments, and other documents and to do and perform
any and all such further acts and things as in the judgment of the Officer or
Officers taking such action may appear necessary or appropriate to perform all of
its obligations under the Merger Agreement as contemplated in the foregoing
resolutions, including without limitation the issuance and delivery of the Shares
pursuant to the Merger Agreement, and generally to carry out the purposes of this
and the foregoing resolutions; and
BE IT RESOLVED FURTHER that the appropriate Officers of the Company for
purposes of the foregoing resolutions shall include Scott L. Morris, Chairman of
the Board, President and Chief Executive Officer, Mark T. Thies, Senior Vice
President and Chief Financial Officer and Treasurer, Marian M. Durkin, Senior
Vice President, General Counsel and Chief Compliance Officer, Karen S. Feltes,
Senior Vice President and Corporate Secretary, Christy M. Burmeister-Smith,
Vice President, Controller and Principal Accounting Officer, David J. Meyer,
Vice President and Chief Counsel for Regulatory and Governmental Affairs,
Kelly O. Norwood, Vice President, Jason R. Thackston, Vice President, Don M.
Falkner, Assistant Treasurer, Ryan L. Krasselt, Assistant Treasurer, and Susan Y.
Fleming, Assistant Corporate Secretary, and that the authorities granted to such
Officers by the foregoing resolutions shall be exercisable by such Officers
individually, unless the foregoing resolutions expressly provide otherwise, and by
each person succeeding and holding such same capacity as any of the foregoing
Officers during the term of such successor's office.
COMPAI{Y OFFICER'S CERTIFICATE
July 1,2014
This certificate is delivered pursuant to Section 2.2(bXii) of the Agreement and Plan of
Merger, dated as of November 4,2013 (the "Aereemenf') among Avista Corporation, a
Washington corporation (the "Parent?'), Alaska Merger Sub, Inc., an Alaska corporation
("Me(ger Sub"), Alaska Energy and Resources Company, an Alaska corporation
(the "Conopauy") and William A Corbus as the Shareholders' Representative. Capitalized terms,
unless otherwise defined herein, shall have the same meanings as in the Agreement.
The undersigned, in his capacity as President of the Company, hereby certifies, solely in
such capacity and not individually, as follows:
l.The representations and warranties of the Company contained in the Agreement are
accurate in all respects as of the date hereof, with the same force and effect as if made
as of the date hereof (except to the extent any such representation or warranty speaks
as of the date of the 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 any inaccuracies that, considered collectively, do not have a Company
Material Adverse Effect as of the Closing Date, it being understood that, for purposes
of determining the accuracy of such representations and warranties, all "Company
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
Company has performed in all material respects all agreements and covenants
required to be performed by it under the Agreement at or prior to the Closing,
including but not limited to obtaining any required governmental consents, perrnits,
regulatory approvals, waivers, and making any required filings or completing any
required registrations with govemmental authorities.
The Merger has been approved by the Requisite Shareholders.
2.
J.
[Signahre Page Follows]
DWT 24252120v I 00883334001 08
IN WITNESS WFEREOF, the undersigned has executed this Company Officer's
Certificate on the date first set forth above.
ALASKA ENERGY AND RESOURCES
COMPANY
By:
Name: William A. Corbus
Title: President
[Signature Page to Company Officer's Certificate]
DWT 24252 l20vl 0088333{001 08
Secretara's Certi{icate (Merger Su b}
The undersigned hereby ceflifies that he or she is the duly elected and acting
Secretary of Alaska Merger Subo Inc., an Alaska coryoration ("iVferger Sub"). and that,
a$ *uch, is duly flut.hori?.sd to execute and deliver this Secretary's Certifisate on behalf o.[
Merger Sub pursuant to Section 2.2(cXiii) of that certain Agreemcnt and Plan of Merger
among Avista Corporation, a Washing,ton corporation, Merger Sub, Alaska Energy and
Resources Company, an Alaska corporation, and William A. Corbus as the thareholders'
Representative dated as of Novamber 4n 2013 (the "Mergcr Agreexrent"). The
undersigned hereby furtlrer ceflifies on behalf of Merger Sub that:
1. Attached hereto as Exhibit A is a hren correct and complete copy of resolutions of
thc board ot'directors ollMerger Sub (the o'Resolutious"). ilhe Resolutions u'ere duly and
vatrid.ly adopted by the board of directors of Merger Sub and evidence thE autharjzation
by Merg*r Sub af,the execution and delivery of the Merger Agreernent and the other
Priucipal Docr,rments (as that term is defined in the fuIerger Agreement) to which Merger
Sub is a party or signatr:ry, and dr'e consu$rmation oftl,re transaclions conternplated by the
Merger Agreernent. The Resolutions have not bcerr rescinded, amended or dtherwise
modified since the datc of their adoptiorr and are in full force and *ffect on the date
hereoL
IN WITNESS WHEREOF, the undersigne.d has executed tlris Secretary's Certificate
cn txhalf of Mmger Sub as of this 30th day of June,2014.
ALASKA MERCNR SUB,
DwT 24480{i74r I S0SS33}.00S10S
ACTION BY UNAMMOUS WRITTEN CONSENT OT
THE BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER OT
ALASKA MERGER SUB,INC.
The Resolutions set forth herein are hereby adopted by the Board of Directon (the
"Boardi') of Alaska Msrger Sub. lnc., a Alaska corporation ("MgggglsubJ, without a
meeting pursuant to AS 10,06.470, and by the sole shareholder of Merger Sub, Avista
Corporation, a Washington corporation ('Eg!ent'), without a meeting pursuant to AS
1"A.06.423., which Resolutions shall be effective as of November l, 2013 which shall be filed
with the minutes of Merger Sub pronrytly upon the rlelivery of same.
BE IT RESOLVED that the Bomd believes that it is in the best interests of
Merger Sub to enter into the Agreement and Plan of Mcrger, substantially in the
fomr attached as Exhibit A here.to (the "Merger Agreernent'), by and among
Parent, Merger Sub, Alaska Energy and Resources Company, an Alaska
coqporation (the "$ER1l') and William A. Corbus, pu$uant to which, among
other things, Merger Sub will be merged with and into AERC, and AERC will
survive the merger as a wholly-orryned subsidiary of Parent (the "Mgfgef"); and
BE IT RESOLVED FURTHER that the Board has detsrmi[€d that the terms of
the Merger Agreement and each of the &ansactions contemplated thereby,
including without limitation, the Merger, are fair and reasonable to, and in the
best interests of, Merger Sub; and
BE IT RESOLVED FURTHER that the terms of the Merger Agieement and
the ffansactions and related qgreements contemplated thereby, and the
agrcernents and arrangement$ contemplated by or in connection with the
for*going, including withorrt limitation the Merger, are hereby adopted and
approved by the Board and recommended to Parent for approvat; and
BE fT RESOLVED FURTHER that Parent hereby approves tho Merger, and the
adoption of, the MErger Agreement in the fupp presented to Parent, with such
additisns, ainendmanls aod changes as the offlcers of Merger Sub, or any of
thern shall deteruine are appropriato; and
BE IT RESOLVED FURTHER. that the appmpriate Officers of Merger $ub be,
and they hereby are, authorized and empowored to eNec.ute and delivq, in the
narne and on behalf of MergerSub the Merger Agreement; and
BE IT RESOLVED FURTIIER that the appropriate Officers of Merger Sub be,
and they hereby dre, authorized and empowered to cause Merger Sub to psrform
its obligations, and otherwise effectuate the fransactions on. its part ts be
effectuated, under the Merger Agreement; and
DWT ?2908376v I 0088333400108
BE IT RESOLVED FURTHER rhat the appropriate Offic€rs of Merger Sub be,
and they hereby arq authorized and empowered to execrrte and deliver any aod all
such firrther agreements, instruments, and other documents and to do and perform
any and all such firrther acts and things as in ths judgment of the Officer or
Officers taking such action may appear necessary or appropriate to perform all of
Merger Sub's obligations under the Merger Agreement as oontemplated in the
foregoing resolutions and generally to carry out the pu{pose$ of this and. the
fore goi n g resoluti ons-; aud
BE IT RESOLVED FURTHER that the appropriate Officers of the Company for
purposes of the foregoing resolutions shal inslude Dennis Vennillion, President,
Mark Thies, Treasurer, Marian Durkirq Vi'ce President, Karen F'eltes, Secretary,
and Sue Fleming, Assistant Secretnry, and that the ar*horities grarrted to such
Ofiicers by the foregoing resolutions shall be exercisable by such Officers
individually, unless the foregorng resolutions expressly plovide otherwise, and by
each person succeeding and holding such sarne capacity as any ofthe foregoing
Officers during the term of such $ucssssor's office.
BE m RESOLVED FURTHER that the appropriate Officers of Merger Sub are
authorized and empourered to make, Brovide, execute, deliver and file all
statemerls, representations, application$, agreenrents, certificates, payments?
notiflcations and other documents and instrurnents, and to take or cause to be
taken all such action as may be necessary or advisable to oar{y out the intent
and accomplish the p{rposs of the foregoing resolutions, all of which actions to
be taken or prcviously taken are hereby ratilied and confirmed in all respects.
[Signature Page Follows]
DwT 229083?6v t 00s8333-0001 98
This consent may be signed in two or more counte{parts, each of whieh shall be deemed an
original and all of which" taken together, shall constitute one and the same document.
BY THE DIRECTORS:
L-fr/t;
Scott L. Morris
Lp"
BY THE SHAREHOI,DER:
AVISTA COPPORATION, a Washington
corporation
By:
Narue:
Title:
[Signature Fagp lO Joint Consent of Dire,ctors and Sole Shareholdcr of Alaska Merg€r $ub;
DWT 22908376v 1 00883334001 08
Dennis P. Vermillion
MINUTES OF THE SPECIAL MEETING OF THE SHAREHOLDERS
OF
ALASKA ENERGY AND RESOURCES COMPANY
A special meeting of the shareholders of Alaska Energy and Resources Company (the
"Company'') was held on June 10, 2014 at 1 l:00 a.m. A number of shareholders were present
including William A. Corbus, Neil MacKinnon (by phone), Tom Quinlan, Jim Webb, Barc
Corbus, Clay Corbus, Tim & Geri Mcleod, Connie & Erik Hulberq Robert MacKinnon, Jane
MacKinnon, Firm & Willie Larsen, Peter Hanson, Rod Ahlbrand! Scott Willis, Catherine
Johnson, Patti Bavard, and Albert Shaw. William A. Corbus, as President and Chainnan of the
Company, acted as Chairman of the meeting. Debbie Driscoll acted as the Secretary of the
meeting, and upon William Corbus' request as a shareholder, as the Inspector of Elections.
William A. Corbus, as Chairman of the meeting, called the meeting to order.
As the first order of business, Mr. Corbus introduced many of the attendees, including the
non-shareholders guests: Parker Weil and John Cesarz (by phone) of Stifel Financial (the
company's investment advisor), Steve Rowles and Jim Krenn of Morrison & Foerster (the
company's transaction counsel (by phone) and Eric Kueffrrer of Faulkner Banfield, the
company's local counsel.
Mr. Corbus then noted that as provided in the Notice of Special Meeting and Information
Statement previously fumished to the Company's shareholders, the record date for voting at this
special meeting of shareholders was the close of business on April 21,20L4, and that an
alphabetical list of shareholders on the record date was available for review by shareholders.
Debbie Driscoll, as Secretary of the meeting, reported that as of the record date of
April 21, 2014, there were ll4,5D4 shares of common stock outstanding and entitled to be voted
by the holders of record. Ms. Driscoll stated that on or about May 12,2014, the Company
mailed the Notice of Special Meeting and Information Statement to all shareholders of record as
of April 21,2014. She further stated that 113,207 shares were represented by proxy or in person
at the meeting.
Ms. Driscotl asked if any shareholder desired to vote in person, to raise their hand to
request a ballot, adding that ifthe shareholders had already delivered their proxy and did not
wish to change their vote, that they need not request a ballot. No ballots were requested.
Mr. Corbus declared that a quomm existed and that the meeting was duly convened and
open for business. He further stated that the pu{pose of the meeting was to oonsider and vote
upon the two following proposals:
(l) To approve the plan of merger contained in the Agreement and Plan of Merger, dated
as of November 4,20L3, by and among Avista Corporation ("Avista"), Alaska
Merger Sub, Inc., a wholly-owned subsidiary of Avista, the Company, and William
A. Corbus, solely as the shareholders' representative, as such agreement may be
arnended from time to time, and the merger described therein(the "Merger Proposal");
and
(2) A proposal to adjourn this meeting, if necessary, if a quorum is present, to solicit
additional proxies if there are not sufficient votes to approve the Merger Proposal (the
"Adjournment Proposal").
Mr. Corbus asked if there were any questions regarding the two proposals. There were
no questions. With no other matters brought before the meeting, Mr. Corbus stated that the vote
would be held. He noted that if a proxy had previously been submitted, there was no need to
vote in person unless any shareholder wished to change their vote. He asked if any shareholders
lvere present who had either not sent in their proxy or who wished to change their vote.
Mr. Corbus declared at I l:08 a.m. that the polls were open. No ballots were requested.
Mr. Corbus declared at 11:09 a.m. that the polls were closed.
Debbie Driscoll reported that based upon a tally of the votes cast, each of the Merger
Proposal and the Adjournment Proposal received ll2,l45 "For" votes; these are sufftcient votes
for each proposal to be approved.
Mr. Corbus thanked Ms. Driscoll. He informed the shareholders that the merger with
Avista is currently anticipated to close on or about July 1, 2014, and that no further action by
shareholders was required at this time. He noGd that shortly following the closing of the merger,
each shareholder will receive documentation from Computershare Trust Company, N.A.
("Computershare"), who is the transfer agent for Avista and who is also acting as the exchange
agent for this transaction. The documents provided by Computershare will include instnrotions
for retuming original AERC stock certificates and the other requisite actions to be taken by each
shareholder in order to receive their portion of the merger consideration.
Mr. Corbus then announced that shareholders of record as of June 5,2014, would shortly
be receiving a special dividend of $35.00 per share.
Mr. Corbus asked if there was otherbusiness. There was no other business.
Mr. Corbus made some closing comrnents, remarking upon flre challenges that the
Company and its subsidiary, Alaska Electric Light and Power Company, had faced in the last
117 years. He noted especially the climate challenges, financial challenges, and political
challenges. He mentioned many past managers and employees who had helped the Company
overcome those challenges.
With no other business brought before the meeting, Mr. Corbus requested a motion for
adjournment of the meeting. It was moved by Barc Corbus and seconded by Clay Corbus that
the meeting be adjourned. The motion was approved by a voice vote. the meeting was
adjourned at 11:21 a.m.
{ a*/;;*, -/)u/.1."-*-^
Assistant Secretary
Avisla Corp.
l41l East Mission
P0 Box37?7 MSC-]1
Spokane, Wrshingra fi gn?o.gl 17
Telephone 5B-f9&4639
Ma* T.Ihios
Senior Vice President and
Chiel 6nancial Otlicsr
Aiffwsrg
C-arp.
June 30,2014
Cornputershare Shareowner Services LLC
4&0 Woshington Boulevard, 27tb Floor
Jsrryy City, New Jersey 07310
Attention: Gwen Minott
Ladies and Gentlemen:
In accordance with the Agreement and Plan of Merger among Avista Corporation (the "Company'o), Alaska
Merger Sub, Inc., Alaska Enerry and Resowpes Company (*AERC") and William A. Corbus as the
Shareholders' Representative dated as ofNovember 4, 2013 (the "Merger Agreement"), the Company may
issue to shareholders of AERC in exchange for their shares of AERC, pursuant to the terms of the Merger
Agreement, up to 7,250,000 shares (the *Shares") of Common Stock of the Company, no par value (the
"Common Stock"), ineluding certain shares to be initially issued into an escrow account to be maintained by
Computershare Trust Company, N.A. (the "Escrow Agent") for a period of time.
Computershare Shareowner Services LLC, as Transfer Agent and Registrar for the Common Stock, is hereby
authorized and instructed, in connection with the original issuance of Shares to establish an account registered
to:
Computershare as agent for
Unexchanged holders of Alaska
Energy and Resources Comparry
250 Royall Street
Canton, MA 02021
in the amount of 4,500,014 of Company Shares to effectuate fte exchange of AERC Common Stock.
All authority heretofore granted to Computershare Shareowner Services LLC, as Transfer Agent and Registrar
for the Common Stock, is hereby extended to include the Shares.
Yours very truly,
AVISTA CORPORATION
DWT 24330754v3 00883334001 08
Table of Contents
As filed with the Securities and Exchange Commission on May E,2014
Registration No. 333-194310
UNITED STATES
SECURITIES AND EXCHANGE COMIVIISSION
Washington, D.C. 20549
FORM S-4/A
AMENDMENT NO. I.
to
REGISTRATION STATEMENT
Under
THE SECARITIES ACT OF 1933
Washington
(Statc or other jurisdicdon of
lncorporadon or orgrnlzstlor)
MARIAN M. DURKIN
Senior Vice President General Counsel and
Chief Complisnce Offi cer
Avista Corporation
l4l1 East Mission Avenue
Spokane, Washington 99202
WILLIAM A. CORBUS
Chairman of the Board and President
Alaska Energy and Resources Company
5601 Tonsgard Court
Juneau, Alaska 99801
AVISTA CORPORATION
@xact name of Registrant as specified in its charter)
4931
(Primery Strndard Industrhl
Clrssifiotion Number)
l41l East Mission Avenue
Spokane, Washington 99202
(s09) 4E9-0500
(Addrms, including zip code, end telephone number, includlng rrs codc, ofRegistmnt's principd executive ofllces)
9t-0462470
(I.R,S, Employer
ldentlllcetion No.)
J. ANTHONY TERRELL
Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, New York 10036
(212) Es8-1000
STEVENG.ROWLES
Morrison & Foerster LLP
12531 High BluffDrive, Suite 100
San Diego, California 92130
(509) 489{s00
(Nlme end addrsq lncludlng zip code, rtrd telephone number, includlng arer code, ofagents for ieryice)
Copies to
Approximate date ofcommencement ofthe proposed sale ofthe securities to the publicl As soon as practicable after this registration statement becomes
effective and upon completion ofthe merger described in the enclosed document.
lfthe securities being registered on this Form are being offered in connection with the formation ofa holding company and there is compliance with
Generat Instruction G, check the following box. [J
Ifthis Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. E
Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. E
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitioos of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule l2b-2 of the Exchange Act (check one):
E Large accelerated filer
E Non-accelerated filer (Do not check if a smaller reporting Company)
Ifapplicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule I 3e-4(i) (Cross-Border Issuer Tender Offer) El
Exchange Act Rule l4d-l(d) (Cross-Border Third-Party Tender Offer) E
E Accelerated filer
El Smaller reporting company
Table of Gontents
lnformation contained herein is subiect to completion or amendment. A registration statement relating to these securities has been filed with the Securities and
Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the regiskation statement becomes effective, This
document shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such
offer, solicitation or sale is not permitted.
PRELIMINARY, SUBJIICT TO COITIPI,ETION, DATED lflay 8.2014
Information Statement
of
ALASKA ENERGY AND
RESOURCES COMPANY
.1/J .;"*d A' &'r'"'1-
William A. Corbus
Chairman olthe Board and President
Alaska Energ5r and
Resources Company
Prospectus
of
AVISTA
CORPORATION
MERGER PROPOSED-YOUR VOTE IS VERY IMPORTANT
To Shareholders ofAlaska Energy and Resources Company:
Alaska Energy and Resources Company ("AERC") and Avista Corporation ("Avista") have agreed to a strategic business combination under the terms
of an Agreement and Plan of Merger, dated as ofNovember 4, 201 3. Ifthe merger is approved by the shareholders ofAERC and various other conditions to
closing are satisfied or waived, Alaska Merger Sub, Inc., a wholly-owned subsidiary of Avista, would merge with and into AERC, with AERC surviving,
which would result in AERC becoming a wholly-owned subsidiary of Avista. A special meeting of AERC shareholders to consider and vote upon the proposed
transaction will be held on June 10, 2014 in Juneau, Alaska. No approval ofAvista shareholders is required. This document constitutes an information
statement and proxy solicitation of AERC with respect to the merger and the special meeting ofshareholders.
If the merger is consummated, AERC shareholders would have the right to receive shares of Avista common stock (with cash paid in lieu of fractional
shares), based on a lormula set forth in the agreement relating to the merger and described in detail under T HE MERGER AGREEMENT-"Merger
Consideration; Conversion ofShares in the Merger" on page 45. Avista common stock is listed on the New York Stock Exchange, and the reported last sale
price of Avista common stock on November I, 2013, the trading day immediately before the announcement of the merger, was $27.89, as shown on the
composite tape. This document also constitutes a prospectus of Avista relating to the offering of its common stock in the merger,
The AERC Board of Directors has carefully considered the proposed combination with Avista and, as discussed in detail in this document, has
determined that it is in the best interests of AERC and its shareholden. The AERC Board of Directors believes that Avista's utility experience, as well as its
corporate culture, will be of great benefit to AERC, its shareholders aDd the Juneau community in general. Accordingly, the AERC Board of Directors invites
you to attend the special meeting of shareholders and recommends that you approve the m€rger. Whether or not you plan to attend the special meeting, the
AERC Board of Directors asks you to sign and date the enclosed proxy card and promptly retum it as instructed on the proxy card.
AERC and Avista urge you to read this information statemenUprospectus, including the documents of Avista that are incorporated
by reference in this document, carefully and in their entirety. In particular, but without limitation, you should consider the risks
and uncertainties described or referred to under RISK FAcToRs on page 15.
$"tr/{t;
Scott L. Morris
Chairman ofthe Board, President
and Chief Exocutive OfJicer
Avista Corporation
Neither the Securities and Exchange Commission nor atry state securities commission has approved or disapproved the merger and other
transaction described in this information statemenUprospectus, nor have they approved or disapproved the issuance of the Avista common stock
in connection with the merger, or determlned ifthis information statemenUprospectus is accurate or complete. Any representation to the contrary
is a criminal offense,
This document is dated May 8, 2014, and is first being mailed to the shareholders of AERC on or about May 12,2014.
Tablo of Contsnts
NOTICE OF SPECIAL SHAREHOLDER MEETING
To Shareholders ofAlaska Energy and Resources Company:
Alaska Energy and Resources Company C'AERC) will hold a special meeting of its shareholders on June 10, 2014 at I l:00 a.m., Alaska
Daylight Savings Time, in the registered offrces ofAERC located at 5601 Tonsgard Court, Juneau, Alaska 99801, to consider and vote upon:
(l ) a proposal to approve the plan ofmerger contained in the Agreement and Plan ofMerger, dated as ofNovember 4,2013, (the "Merger
Agreement') by and among Avista Corporation ("Avista'), Alaska Merger Sub, Inc., a wholly-owned subsidiary of Avista, AERC and William
A. Corbus, solely as the shareholders' representative, a copy ofwhich is included as Annex B to the information statemenVprospectus attached to
this notice, as such agreement may be amended from time to time, pursuant to which Alaska Merger Sub, Inc. will be merged with and into
AERC and each outstanding share of common stock of AERC will be converted into the right to receive shares of common stock of Avista, with
cash to be paid in lieu of any fractional shares (the 'Merger Proposal"); and
(2) a proposal to adjoum the AERC special meeting, ifnecessary, ifa quorum is present, to solicit additional proxies ifthere are not sufficient
votes to approve the Merger Proposal (the "Adjoumment Proposal").
Please refcr to the aftached information statemenVprospectus and the Merger Agreement for further information with respect to the Merger Proposal
to be voted on at the AERC special meeting. Please give all of this information your careful attention. AERC will not transact any other business at the AERC
special meeting.
Only holders of record of shares of AERC common stock at the close ofbusiness on April 21,2014, the record date for the AERC special
meeting, are entitled to notice of, and to vote at, the AERC special meeting and any adjoumments or postponements thereof. A list ofthese shareholders will be
available for inspection by any AERC shareholder at AERC's registered office, 5601 Tonsgard CoM, Juneau, Alaska 99801 during normal business hours
at least 20 days before the AERC special meeting as well as at the time and place of dre AERC special meeting.
Your vote is important. AERC cannot complete the merger described in the information statemenUprospectus unless holders of at
least two-thirds of all shares of AERC's common stock outstanding on the record date for the AERC special meeting vote in favor of the Merger
Proposal.
Even if you plan to sttend the AERC special meeting in person, AERC requests that you complete, sign and return the enclosed proxy card
and thus ensure that your shares will be represented at the AERC special meeting if you are unable to attend. If you fail to return your proxy
card or vote at the AERC special meeting the effect will be that your shares will not be counted for purposes ofdetermining whether a quorum is
present at the AERC special meeting and as a vote against the Merger Proposal. If you do attend the AERC special meeting and wish to vote in
person, you may withdraw your proxy and vote in person.
The AERC Board of Directors has carefully considered the merger and the Merger Proposal and has determined that the merger is
fair, advisable and in the best interests of AERC and its shareholders. The AERC Board of Directors unanimously recommends that AERC
shareholders vote "!Q!'the Merger Proposal and the Adjournment Proposal.
For a discussion of interests of AERC's directors and executive officers in the merger that may be different from, or in addition to, the interests of
AERC's shareholders generally, see disclosure included in the information statemenVprospectus attached to this notice under the heading T HE
MERGER-"lnterests of Certain Persons in the Merger" on page 34.
Do not send any share certificates at this time. Ifthe merger is completed, you will be notified ofthe procedures for exchanging AERC share
certificates for shares ofAvista.
By Order of the Board of Directors,
William A. Corbus, Chairman of the Board and President
Juneau, Alaska
May 8,2014
Table of Contsnts
TABLE OF CONTENTS
ADDITIONAL INFORMATION
OUESTIONS ANDANSWERS
SUMT4ARY
SELECTED FINANCIAL DATA OF AVISTA
MARKET INFORMATION AND DIVIDENDS
RISK FACTORS
Risks Relatinq to the Merser
Risks Relatins to an Investment in Avista Conrmon Stock
fusks Relatinq to Avista's Businesses and Ooerations
Risks Relating to AERC's Businesses and Operations
FORWARD-LOOKING STATEMENTS
THECOMPANTES
Avista Comoration
Alaska Enersv apd Resources Comoanv
Alaska Mereer Sub. Inc.
THE AERC SPECIAL MEETING
Date. Time and Place of the AERC Soecial Meetins
Pumose of the AERC Soecial Meetine
Recommendation o{'the AERC Board of Directors
AERC Record Date: Outstandine Shares: Shares Entitled to Vote
Ouorum
Vote Reouired
Votins bv AERC's Directors and Executive Officers
Votine ofProxies
llow to Vote
Revokins Your Proxv
Proxv Solicitation
Assistancc
PROPOSALS SUBMITTED TO AERC'S SHAREHOLDERS
The Merger Prooosal
The AERC Adioumment Prooosal
THE MERGER
Qeneral Descriotiou of the Merqer
Backsround of the Mereer
AERC's Reasons for the Merecr
Interests of:Certain Persons in the Merser
Avista's Reasons for the Merser
Manaeement Following the Merger
lv
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34
35
36
Table of Contents
Indemnifi cation and Insurance
Listing of Avista Common Stock
Dividends
Material U.S. Fcderal lncome Tax Considerations
Accountinq Treatment
Dissenters' Rights of AERC Shareholders
Caoital Structure Followine the Mereer
Princioal Comorate Offices
Resale ofAvista Conunon Stock
REGTJLATORY MATIERS
Hart-Scott-Rodino Altitrust [norovement Act
State Rezulatorv Aooroval
THE MERGER AGREEMENT
Cautionarv Statement Conceming Representations and Warranties Contained in the Mereef Agreement
General
Mereer Consideration: Conversion of Shares in the Merser
Fractional Shares
Escrow Fund
Shareholders' Representative
Sharehoklers' Reoresentative Exnense Fund
Closine and Effectiveness of the Merser
E4chanqe Fuud
Exchanee of AERC Stock Certificates for the Merser Consideration
Dissenters' Rishts
Reoresentations and Warranties
Suwival: Indernnifi catiorr
Certain Covenants of Avista and AERC
Conditions to the Comoletion of the Mereer
Definition of "Comoanv Material Adverse Effect"
Defi nition of "Burdensome Condition"
l'ermination of the Merger Aereement
Effect of Termination
Fees and Expenses
SECURIry OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANACEMENT OF AERC
DESCRIPTION OF COMMON STOCK._COMPARISON OF SHAREHOLDER NGHTS
Dividend Riehts: Riehts upon Liouidation: No Pre-Emntive Rights
Votine Riehts
Advancq Notice of Shareholder Nominations for Director and Proposals oIOther Business
Soecial Meetinss of Shareholdcrs
36
36
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Tablo of Contents
Board of Directors
Indenrnification of Directors and Officers: Elimination of Liabililv
"Fair Price" Provision
Statutpry Limitatiou on "Significant Business Transactions"
Anti-Takeover Effect
Misccllaneous
WHERE YOU CAN FIND MORE INFORMATION ABOUTAVISTA
General
lncorporation of Documents bv Reference
LEGAL MATTERS
EXI'ERTS
ANNEX A--4lossary of Certain f)efined Terms
ANNEX B-Agreement and Plan of Merser
62
62
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65
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65
65
66
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Tabla qf Gontents
ADDITIONAL INFORMATION
Avista Corporation ("Avista") has filed a regisfation statement with the Securities and Exchange Commission (the "SEC") to register the Avista
common stock to be issued in the merger to shareholders of Alaska Energy and Resources Company (.'AERC). This document is part of that registration
statement. The regisEation statement and the exhibits thereto contain additional informatiotr about Avist4 the Avista commoD stock and the merger. This
document also incorporates by reference important furancial and other information about Avista from other documents that Avista has not included in or
delivered with this document. The regisfation statement and the information incorporated by reference are available for you to read and copy at the SEC's
Fublic Reference Room located at 100 F Street, N.E., Room 1580, Washington, DC 20549, and through the SEC's website, www.sec.gov. You can also obtain
those documents free of charge by requesting them in writing or by telephone from Avista at Avista's address and telephone shown below.
This document is not required to and does not include or incorporate the consolidated financial statements or other financial information ofAERC.
AERC shareholders can obtain AERC's consolidated annual financial statements, as well as AERC's articles ofincorporation and bylaws, free ofcharge by
requesting them in writing or by telephone from AERC at AERC's address and telephone number shown below.
Avista Corporation
l4l I East Mission Avenue
Spokane, WA99202
Attention: Marian M. Durkin, Esq.
Senior Vice President, General Counsel
and Chief Compliance Offrcer
(509) 49s-8687
See WHERE You CAN FIND MoRE INFoRMATIoN ABour AVISTA oD page 65.
Alaska Energy and Resources Company
5601 Tonsgard Court
Juneau, AK 99801
Attention: William A. Corbus
Chairman ofthe Board and President
(907) 463-63t2
Table 9f Contsnts
QUESTTONS AND ANSWERS
Thefollowing are certain questions that you, as a shareholder ofAERC, may have regarding the merger and the Merger Agreemenl and
briefanswers to those questions. You should read the remainder ofthis information statement/prospectus carefully because the information in this
section does not provide all the information that might be importanl to you with respect to the merger. Additional important information is also
contained in the annexes to, and the documents incorporated by reference in, this information statement/prospectus.
Q: Why am I receiving this document?
A: The AERC Board of Directors is using this document to provide notice of a special meeting of the shareholders of AERC in connection with the Merger
Agreement and the merger and as an information statement and proxy solicitation with respect to that meeting. In addition, Avista is using this document as a
prospectus because Avista is offering to AERC shareholders the shares of Avista common stock into which AERC common stock will be converted in the
merSer.
Q: When and where is the special meeting of the shareholders?
A: The AERC special meeting will take place at l1:00 a.m., Alaska Daylight Savings Time, on June 10, 2014, at AERC's registered oflices located at 5601
Tonsgard Court, Juneau, Alaska 99801. For additional information on the AERC special meeting, please see "T HE AERC SPECIAL MEETING" on page 26.
Q: Who can vote at the AERC special meeting?
A: Ifyou were an AERC shareholder of record as ofthe close ofbusiness on Apnl 2 l, 2014, the record date for the AERC special meeting, you are entitled to
receive notice ofand to vote at the AERC special meeting.
Qr How do I vote?
A: You may cast your vote by either:
. Completing, signing and dating your proxy card and returning it by mail in accordance with the instructions provided; or
. Attending the AERC special meeting in person or by legal representative.
For additional information on the AERC special meeting and voting procedures, please see "T HE AERC SPECIAL MEETING" on page 26.
Q: How will my proxy be voted?
A: Ifyou complete, sign, date and retum your sigred proxy card, your proxy will be voted in accordance with your instructions. Ifyou sign, date, and send
your proxy card and do not indicate how you want to vote, your shares will be voted " &,8" the Merger Proposal and the Adjoumment Proposal. See "T HE
AERC SPECTAL MEETING-Voting of Proxies" on page 28.
Q: What do I do if I want to change my proxy vote?
A: You may revoke a proxy at any time after such proxy has been given and before it is voted, in one of the following ways:
by a writing deliver€d to AERC stating that your proxy is revoked;
by a subsequent proxy executed by the person executing the prior proxy and delivered to AERC; or
by attendance at the AERC special meeting and voting in person by the person executing the proxy.
Tabls of Contents
The dates contained on the forms ofproxy presumptively determine the order ofexecution, regardless ofthe postmark dates on the envelopes in which the
proxies are mailed.
Q: May I vote in person?
A: Yes. If you were a shareholder of record of AERC common stock at the close of business on April 21, 2014, the record date for the AERC special meeting,
you may aftend the AERC special meeting and vote your shares in person, in lieu of returning your signed proxy card. Ifyou hold your shares through a
bank, broker, custodian or other record holder, you must provide a "legal proxy" at the AERC special meeting, which you must obtain from your broker or
other nominee.
However, even ifyou plan to attend the AERC special meeting in person, please complete, sigr and retum the enclosed proxy card so that, ifyou are unable to
attend the meeting, your shares will still be represented at the meeting.
Q: What must I bring to attend the special meeting?
A: Only shareholders of AERC or their authorized representatives may attend the AERC special meeting. If you wish to attend the AERC special meeting,
please bring photo identification so that your identity can be confirmed against the AERC shareholder records.
What will happen in the merger?
A: Prior to entering into the Merger Agreement, Avista formed a new Alaska corporation, Alaska Merger Sub, Inc. ("Merger Sub"). If the merger is completed,
Merger Sub will merge with and into AERC, with AERC surviving, as a result of which AERC will become a wholly-owned subsidiary of Avista.
Q: What will I receive in the merger?
A: Under the Merger Agreernent, the number of shares of Avista common stock to be issued as consideration in the merger is affected by a number of factors
described in this information statemenVprospectus. Each share of AERC corrrmon stock would be converted into the right to receive shares of common stock
of Avista at an exchange ratio that is dependent on several variables including the final calculation ofthe Merger Consideration, the number ofshares ofAERC
common stock outstanding and the average closing stock price ofAvista's common stock for a period often trading days prior to the trading day preceding the
Closing Date (as defined below), with cash to be paid in lieu ofany fiactional shares. For more information on how the exchange ratio is calculated including
an illustration of such calculation, see T HE MERGER AcREEMENT-"Merger Consideration; Conversion of Shares in the Merger" on page 45. All non-
dissenting AERC shareholden also will have a portion ofthe Merger Consideration that they would otberwise be entitled to receive deposited in (a) an escrow
fimd that will be used to compensate Avista if Avista is entitled to indemnification under the Merger Agreement and (b) a shareholders' representative expense
fund that will be used to reimburse William A. Corbus, as shareholders' representative (the "Shareholders' Re.presentative"), for expenses incurred in
performance ofhis duties as the Shareholders' Representative (including overhead expenses and legal fees and related expenses).
Q: Why have AERC and Aviste declded to enter into the plan of merger?
A: AERC, after considering its strategic altematives, decided to enter into the plan of merger with Avista, among other reasons, to provide for enhanced scale,
scope and geographic diversity, as well as management succession and increased shareholder liquidity. Avista determined that a business combination with
AERC would provide, among other things, the benefits ofincreased scale, scope and geographic diversity. Furthermore, both companies have a similar focus
on providing reliable service to customers with a high level of customer satisfaction, providing opportunities for employees, eaming a reasonable retum for
shareholders and being involved in and supportive of the communities they serve. See T HE MERGER-"AERC's Reasons for the Merger" on page 33 and TIIE
MERGER-"Avista's Reasons for the Merger" on page 35.
Table of Contpfts
Q: Who will the ollicers and directors of AERC be following completion of the merger?
A: The directors and officers of AERC following the completion of the merger will be selected ollicers of Avista. Alaska Electric Light and Power Company
C'AEL&P"), AERC's wholly-owned subsidiary wbich operates AERC'S regulated utility business, will continue to be operated by the existing employees,
including the existing management team.
Q: Where will AERC be headquartered following the completlon of the merger?
A: Avista, as the parent company of AERC, will maintain its current headquarters in Spokane, Washington, however, Avista will also maintain the existing
AERC corporate offices in Juneau, Alaska for at least two years after the completion of the merger,
Q: Will the operations of AERC and AEL&P become part of the operations of Avista?
A: The customers, service territory, facilities and generating resources of AEL&P are geographically isolated. If the merger is completed, Avista intends to hold
and manage AEL&P as a stand-alone subsidiary.
Q: What is the recommendation of the AERC Board of Directors?
A: The AERC Board of Directors has determined that the merger is fair, advisable and in the best interests of AERC and is shareholders. The AERC Board of
Directors unanimously recommends that the AERC shareholders vote "l@" the Merger Proposal and the Adjournment Proposal, either by retuming your
properly executed proxy card or attending the AERC special meeting. See THE AERC SPECIAL MEETlNG-"Recommendation of the AERC Board of
Directors" on page 27 and THE MERGER-"AERC's Reasons for the Merger" on page 33.
Q: What will happen to my future dividends?
A: Subject to AERC Board approval, AERC expects to pay regular quarterly dividends until the merger is consummated. In addition, pursuant to the Merger
Agreement, the parties agreed that AERC would use its commercially reasonable efforts to make special dividend payments to AERC shareholders and/or
prepay indebtedness in a minimum amount of$8 million in the aggregate, less certain fansaction expenses incurred by AERC in connection with the merger.
AERC has madc an initial special dividend payment of$4 million in the aggregate, declared on November 12, 201 3 and paid to shareholders on December I,
201 3. AERC currently anticipates paying a second special dividend in an amount to be determined shortly before the consummation ofthe transactions
contemplated by the Merger Agreement (the "Closing') in order to satis$ certain contractual obligations under the Merger Agreement. Ater the merger, as
holders ofAvista comrnon stock, fonner AERC shareholders will receive dividends when and as declared by the Avista Board ofDirectors and paid on all
shares of Avista conrmon stock. For more information about Avista's dividend policy, see RISK FACTons-"Risla Relating to an lnvestnent in Avista
Common Stock " on page 18, MARXET INFoRMATIoN AND DIVIDENDS on page 14 and THE MERGER-"Dividends" on page 36.
Q: Why is my vote important?
A: The merger cannot be completed unless AERC shareholders approve the plan ofmerger contained in the Merger Agreement. The approval ofthe holders ofat
least two-thirds ofthe outstanding shares ofAERC common stock is required to approve the plan ofmerger contained in the Merger Agreement. Ifyou do not
return your properly completed proxy card or otherwise attend the AERC special meeting and vote your shares in favor ofthe merger, this would have the same
effect as voting against the proposal.
Regardless of the number of shares you own, your vote is important. The AERC Board of Directors unanimously recommends that AERC shareholders
approvo the merger.
Q: Can I exercise dissenters' rights?
A: Ifyou are an AERC shareholder who does not vote to approve the merger at the AERC special meeting, either in person, by legal representative or by
properly completing your proxy card, you may, by complying with Sections
T,able of Contents
574 and 576 ofthe Alaska Corporations Code, be entitled to the dissenters' rights described therein. Sections 574 through 582 ofthe Alaska Corporations
Code are attached to this information statement/prospectus as Annex C. Failure to follow precisely any ofthe statutory procedures set forth in Annex C may
result in the loss or waiver ofdissenters' rights under Alaska ldw.
Q: Should I send in my stock certificates now?
No. You will receive instructions shortly prior to the anticipated Closing Date explaining how to exchange your AERC shares for Avista shares.
Q: When do you expect to complete the merger?
A: The parties currently expect to complete the merger by July I, 2014. However, the parties cannot assure you when or if the merger will occur. The parties
obtained an early termination of the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") on December 6,
201 3, however, the parties must also obtain approval ofAERC shareholders and satis$ other conditions to completing the merger, including regulatory
approvals from the Regulatory Cornmission of Alaska (the "RCA"), the Washington Utilities and Transportation Commission (the "UTC"), the Idaho Public
Utilities Commission (the "IPUC"), and the Public Utility Commission of Oregon (the "OPUC"). Approval has been received from the UTC, the IPUC and
the OPUC. See REGULAToRYMATTERS on page 43.
Q: Will I be taxed on the shares of Avista common stock that I receive?
A: Generally, no. Tbe merger has been sfructured to qualifo as a "reorganization" within the meaning of Section 368(a) ofthe lntemal Revenue Code of I 986,
as amended (the "Code"). As a result, it is anticipated that AERC shareholders generally should not be subject to tax upon their receipt of Avista common stock
in the merger.
However, completion ofthe merger is not conditioned upon the merger qualiffing as a reorganization and the merger will occur even ifAERC shareholders are
taxed on the shares of Avista common stock they receive in the merger. The merger could be fully taxable to all AERC shareholders if, for example, AERC
shareholders holding a significant amount ofAERC stock dissent to the merger.
Assuming the merger qualifies as a reorganization, an AERC shareholder generally should not recognize any gain or loss for U.S. federal income tax purposes
on the exchange ofshares ofAERC stock for shares ofAvista common stock in the merger, except for (a) gain or loss attributable to cash received in lieu ofa
fractionalshareofAvistacommonstock,@)incomeorgainatributabletotheshareholder's proralashareoftheexpensefundestablishedforthe
Shareholders' Representative, (c) income or gain attributable to cash subsequently released from the escrow fund and (d) in certain limited circumstances,
income attributable to a portion of the Avista common stock subsequently released from the escrow fund. AERC shareholders that fail to provide certain
certifications as to their tax status when requested may be subject to applicable withholding taxes. Certain AERC shareholders may be subject to special tax
rules. AERC shareholders are urged to consult their own tax advisors for a full explanation ofthe specific U.S. federal income and other tax consequences of
the merger to them. See THE MERGER-"Material U.S. Federal Income Tax Considerations" on page 37.
Q: Who should I call if I have questions?
A: Ifyou have questions about the merger or the AERC special meeting or ifyou need additional copies ofthis document please contact: William A. Corbus,
AERC's Chairman of the Board and President at [e-mail], [phone] or 5601 Tonsgard Court, Juneau, AK 99801 or Connie Hulbert,
AEL&P's Vice President, Treasruer and Secretary, at [e-mail], [phone] or 5601 Tonsgard Court, Juneau, AK 99801.
Table of Contents
AERC
Risk Factors
Agreement and Plan of Merger
Consideration.for Your Shares
SUMMARY
This summary, which is presented solely to fumish limited introductory information regarding Avista, AERC and the merger, is based on the
more detailed information contained or incorporated by reference in this document and is qualified in its eDtirety by reference thereto. It does not contain all
of the information that may be important to you. You should read carefully this entke document and the documents to which it refers you. See W HERE
You CAN FIND MoRE INFoRMATIoN ABour AVISTA on page 65.
Parties to the Merger
Avista Avista is an energy company engaged primarily, through its operating division Avista Utilities, in the
generation, transmission and distribution ofelectricity and the distribution ofnatural gas, serving electric
and gas customers in eastem Washington and northem Idaho, and gas customers in parts ofOregon. See
THE CoMPANIES--"Avista Corporation" on page 24.
AERC is engaged primarily, through its wholly-owned subsidiary AEL&P, in the generation,
transmission and distribution ofelectricity in the City and Borough ofJuneau, Alaska. See T He
CoMPANIES-"Alaska Energy and Resources Company" on page 25.
In evaluating the merger and the Merger Agreement, you should read carefully this information
statement/prospectus, tbe documents incorporated by reference into this information statemenvprospectus
and especially consider the factors discussed in the section entitled R ISK FACTORS beginning on page I 5.
The "Merger Consideration" is equal to $170 million, subject to various adjustments relating to, among
other things, the amounts of cash and cash equivalents of AERC at the time of the completion of the
merger, certain indebtedness, certain transaction expenses (including the deposit of $500,000 into the
Shareholders' Representative expense fund) and net working capital ofAERC. Based on current estimates
ofthese adjustments, the Merger Consideration (as adjusted) is estimated to be approximately $145
million.
AERC had I 14,504 shares ofcommon stock outstanding at April 21,2014, the record date for the
special meeting. Assuming no change in this number ofshares at the Closing Date (as defined below), the
Merger Consideration, as estimated above, for each share of AERC cornmoD stock (the "AERC Per Share
Amount") would be $1,266.33, payable in shares ofAvista co[lmon stock. For this purpose, except as
noted below; shares of Avista common stock will be valued at the average closing price of Avista common
stock as reported on 0re composite tape for the ten trading days immediately preceding but not including
the trading day prior to the Closing Date (as defined below) (the "Avista Average Closing Price").
Each share of AERC common stock will be converted into a number of shares of Avista common stock
equal to the actual AERC Per Share Amount divided by (i) $21 .48, if the Avista Average Closing Price is
less than or equal to $21.48, (ii) the Avista Average Closing Price, if the Avista Average Closing Price is
greater than $21.48 and less than $34.30 or (iiD $34.30, ifthe Avista Closing Price is grcater than or equal
to $34.30 (the "Conversion Price").
Table ot Contents
Fractional Shares
Escrow Fund
Shareholders' Representative Expense
Fund
For example, if the AERC Per Share Amount were $1,266.33 per share and the Avista Average Closing
Price were $27.50, each share of AERC common stock would be converted into 46.05 shares of Avista
comrnon stock. As described further below, approximately 90% of such amount would be payable in
connection with the Closing and approximately l0% ofsuch amount would be deposited into an escrow
fund. See THE MERGER AGREEMENT-"Escrow Fund" on page 46.
As noted above, the Merger Consideration is subject to the adjustrnents referred to above and cannot be
determined with any degree of certainty at this time. In addition, the number of AERC shares outstanding
may change, although any such change is not expected at this time to be material. Finally, the market
price ofAvista common stock cannot be predicted. See FoRwARDLooKINc STATEMENTSon page 23,
RISK FACTORS-"Risks Relating to an Investment in Avista Common Stock" on page 18, M ARKET
TNFORMATION AND DIVIDENDS on page 14 and Tgf MERGER AGREEMENT-"Merger Consideration;
Conversion of Shares in the Merger" on page 45.
Avista will not issue fractional shares in the merger. Specifically, no fractional shares of Avista common
stock will be issued to former AERC shareholders at the Closing of the merger, and no fractional shares
of Avista common stock will be deposited in or released from the escrow fund. In lieu of the issuance of
any such fractional share, Avista will pay to each former AERC shareholder who otherwise would be
entitled to receive a fractional share of Avista common stock, or deposit in the escrow fund, an amount in
cash (without interest) determined by multiplying (a) the fraction of a share of Avista common stock
which such holder would otherwise be entitled to receive (aggregating all fractional shares such holder
would otherwise be entitled to receive at such time) by (b) the Conversion Price. See T HE MERGER
AcREEMENT-"Fractional Shares" on page 46.
Upon completion of the merger, Avista will deduct from the Merger Consideration payable to AERC
shareholders at the Closing an amount equal to l0% ofthe sum of(a) the Merger Consideration (as
adjusted) and (b) $500,000 (the amount deposited into the Shareholders' Representative expense fund),
and deposit those shares into an escrow fund. The escrow fund will be used to compensate Avista if
Avista is entitled to indemnification under the Merger Agreement. Escrowed shares remaining in the
escrow fund after settlement of all claims (together with any dividends paid in respect of zuch shares) will
be distributed to AERC shareholders in accordance with their respective deemed contributions. Pursuant
to the Merger Agreement, on or about March 4,2015, the escrow agent will be instructed to release from
escrow all Avista shares other than that number of shares with a value equal to any pending
indemnification claims. See THE MERGER AcREEMENT-"Survival; Indemnification" on page 49 and
THE MERGER AcREEMENT-"Escrow Fund" on page 46.
Upon completion of the merger, Avista will also deduct from the Merger Consideration payable to AERC
shareholders at Closing the amount of$500,000 and will deposit that amount into an expense fund that,
pursuant to the Merger Agreement, will be available for reimbursement of expenses incurred by the
Shareholden' Representative, who initially will be William A. Corbus. At such time, on or after March 4,
2015, as the Shareholders' Representative reasonably believes that all ofhis obligations as the
Shareholders' Representative have been satisfied pursuant to the terms ofthe Merger Agreement and the
escrow agregmont to be entered into by and
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among Avista, the Shareholders' Representative and the escrow agent for the merger (the "Escrow
Agreement"), the Shareholders' Representative will distribute any remaining funds in such account to the
escrow agent for distribution to AERC shareholders on a pro rata basis. See T HE MERGER
AcREEMENT-"Shareholders' Representative Expense Fund" on page 47.
Closing Date The Closing is expected to take place on the second business day following the satisfaction or, to the
extent permitted under the Merger Agreement and by applicable law, waiver of all conditions to the
obligations of the parties set forth in the Merger Agreement (other than such conditions as may, by their
terms, only be satisfied at the Closing), or on such other date as Avista and AERC mutually agree (the
"Closing Date"). See THE MERGER AGREEMENT-"Closing and Effectiveness of the Merger" on
page 48.
Conduct ofBusiness Prior to Closing AERC has agreed that, except as permitted by the Merger Agreement or as required by applicable law or
governmental regulation, prior to the Closing Date, it will use commercially reasonable efforts to
(i) conduct its business and the business ofis subsidiaries in the ordinary course ofbusiness in all
material respects; (ii) to preserve substantially intact the business organization and assets ofAERC,
(iii) maintain existing goodwill with govemment authorities, customers, suppliers and regulators;
(iv) maintain in effect all material govemmental permits, franchises and authorizations; and (v) retain the
services of the current offrcers and key employees. AERC has also agreed that neither it nor its
subsidiaries will take certain other actions during the period between the execution of the Merger Agreement
and the Closing Date, subject to certain limited exceptions as set forth in the Merger Agreement, without
the prior written consent of Avista. See THE MERGER AGREEMENT-"Certain Covenants of Avista and
AERC" on page 50.
Dbsenters' Rights Holders of AERC shares who do not vote in favor of the merger may, under certair circumstances and by
following procedures prescribed by Alaska law, exercise dissenters' rights and receive cash for their
shares ofAERC stock instead ofshares ofAvista comrnon stock. A dissenting shareholder ofAERC
must follow ttre appropriate procedures under Alaska law or the dissenting shareholder will lose such
rights. See THE MERGER-"Dissenters' Rights of AERC Shareholders" on page 40.
Conditions to the Merger A number of conditions must be met before the merger can be completed, including:
. Approval by AERC shareholders ofthe plan ofmerger contained in the Merger Agreement;
. Receipt ofall required govemment consents and approvals;
. No issuance ofany injunction or other order preventing the merger since the date ofthe Merger
Agreement by any U.S. federal or state court ofcompetentjurisdiction;
. No U.S. federal or state law enacted since the date of the Merger Agreement and still in effect that
makes the merger illegal;
. Declaration ofthe effectiveness ofthe registration statement, ofwhich this information
statement/prospectus forms a part, and such registration statement not being subject to a stop
order or proceedings seeking a stop order; and
. Approval for listing on the New York Stock Exchange (the "I.[YSE') ofadditional shares of
Avista's common stock to be
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Termination of the Merger Agreement
issued in the merger.
AERC's obligation to complete the merger is subject to Avista and Merger Sub satisffing a number of
conditions (in addition to the above), including (i) that the representations and warranties ofAvista and
Merger Sub shall be accurate in all respects as of the Closing Date, except for inaccuracies that,
considered collectively, do not have a material adverse effcct on the economic benefits to be derived by
AERC shareholders from the merger, and (ii) that Avista and Merger Sub shall have pcrformed in all
material respects all agreements and covenants required to be performed by Avista and Merger Sub under
the Merger Agreement at or prior to the Closing Date.
Avista's obligation to complete the merger is subject to AERC and its subsidiaries satisfring a number of
conditions (in addition to the above), including (i) that the representations and warranties ofAERC shall
be accurate in all respects as ofthe Closing Date, except for inaccuracies that, considered collectively, do
not have a Company Material Adverse Effect, and (ii) that AERC shall have performed in all material
respects all agreemeDts and covenants required to be performed by AERC under the Merger Agroement at
or prior to the Closing Date. See THE MERGER AGREEMENT-"Conditions to the Completion of the
Merger" on page 53 and TtIg MERGER AGREEMENT-"Definition of Company Material Adverse Effect"
on page 55.
The Merger Agreement may be terminated at any time before the Closing of the merger:
. by mutual written consent of Avista and AERC;
. by either Avista or AERC if:
. the merger has not closed by December 31, 2014, provided the party seeking to
terminate the Merger Agreement is not responsible for such failure to close; or
. any injunction or other order by any govemmental authority having the effect of
seeking to restrain, prohibit or enjoin the consummation of the merger, provided the
party seeking to terminate the Merger Agreement is not responsible for such
injunction or other order.
. by AERC if Avista has breached its obligation to make certain payments, or if Avista has
breached in any material respect any of its representations, warranties, covenants, agreements
or obligations contained in the Merger Agreement and fails to cure such breach as provided in
the Merger Agreement.
. by Avista ifAERC has breached any ofits representations, warranties, covenants, agreements
or obligations contained in the Merger Agreement, and fails to cure such breach as provided in
the Merger Agreement, and such breach would result in any of (a) a Company Material Adverse
Effect, (b) a material adverse effect on the business ofAvista as a whole, (c) a material adverse
effect on the ability ofAvista to continue to operate the business ofAERC and its subsidiaries,
taken as a whole and consistent with past practices, or (d) a material adverse effect on the
ability of the parties to consummate the merger as contemplated by the Merger Agreement.
See THE MERGER AGREEMENT-"Termination of the Merger
Table ot Contonts
Amendment of the Merger Agreement
Approval of the Plan of Merger
contained in the Merger Agreement
Persons Entiiled to Vote; Record Date
Special Shareh o lder M eet in g
Required Yote
Outslanding Shares
AERC Directors and O/ficers
Recommendation of the Board of
Directors of AERC
Agreement" on page 55.
The Merger Agreement may be amended, modified or supplemented by Avista and AERC by action taken
or authorized by their respective boards ofdirectors at any time prior to the completion of the merger.
The record date for shareholders ofAERC is the close ofbusiness on April 2l,2014. Only shareholders
as of the record date are being notified of, and will be entitled to attend, the AERC special meeting and vote
on the Merger Proposal and the Adjoumment Proposal. See THE AERC SPECIAL MEETING-"AERC
Record Date; Outstanding Shares; Shares Entitled to Vote" and "Vote Required" on page 28.
The AERC Board of Directors is asking shareholders of AERC to attend the AERC special meeting (either
in person or by proxy) and vote on the Merger Proposal to approve the plan ofmerger contained in the
Merger Agreement through which Merger Sub will merge with and into AERC, so that AERC, as the
surviving entity, will become a wholly-owned subsidiary of Avista, as described in this information
statemenuprospectus. See THE AERC SPECIAL MEETING on page 26.
Approval ofthe plan ofmerger contained in the Merger Agreement requires the approval ofthe holders of
two-thirds of the outstanding shares of AERC common stock.
No shareholder approval of Avista is reguired by the Merger Agreement or applicable law.
As ofthe close ofbusiness on April 21,2014, the record date for the AERC special meeting, the
outstanding voting securities of AERC consisted of 114,504 shares of AERC commou stock.
As ofApril 21,2014, directors and executive offrcers ofAERC beneficially owned approximately 57.1%
Of AERC COMMON StOCK, SEE SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND
MANAGEMENT or AERC on page 56 for further information.
AERC currently expocts that AERC's directors and executive officers will vote their shares of AERC
common stock in favor of each ofthe proposals to be considered at the AERC special meeting, although
none ofthem has entered into any agreements obligating them to do so.
The AERC Board of Directors has unanimously approved the plan of merger contained in the Merger
Agreement and recommends that AERC shareholders approve the plan of merger contained in the Merger
Agreement by either signing, dating and retuming a proxy card for the special meeting or attending the
AERC special meeting and voting in favor of the Merger Proposal and Adjoumment Proposal. The AERC
Board of Directors reviewed several factors in reaching its decision to recommend that shareholders
approve the plan of merger contained in the Merger Agreement and believes that the merger is fair,
advisable and in the best interests of AERC and its shareholders. See THE AERC SPECIAL
MEETlNc-"Recommendation of the AERC Board of Directors" on page 27 and T HE
MERGER-"AERC's Reasons for the
Table of Contsnts
Merger" on page 33.
Interests of Certain Persons in the In considering the recommendation of the AERC Board of Directors with respect to the Merger AgreementMerger and the merger, AERC shareholders should be aware that certain executive officers and directors of AERC
have interests in the merger that may be different from, or in addition to, the interests of AERC
shareholders generally. These interests, which are described more fully in THE MERGER-"Interests of
Certain Persons in the Merger" on page 34 of this information statement/prospectus, include, without
limitation, the following:
. employees who are shareholders may have interests that diverge from those ofother shareholders
because Avista has agreed that for a period of two years following the Closing Date, it will (a)
cause AERC and its subsidiaries to continue to provide such entities' employees with
compensation and benefits no less favorable than that provided to such employees immediately
prior to the Closing Date and O) not teminate the employment of such employees without
cause; and
. Mr. William A. Corbus, AERC's President and Chairman of the Board, and certain of his
relatives and certain othsr directors, olficers and/or employees ofAERC and/or its subsidiaries
collectively own a substantial percentage ofthe outstanding shares ofAERC common stock.
Ihe merger transaction has been sfiuctured to limit the tax impact ofthe merger and to provide
ll,Tlit,-";Hllfix jjf [:;:I,tffi ffi]ff :,:::*1H:"j:$ifn',;l;:*'ders''[hev
shareholdings.
The AERC Board of Directors was aware of tbese interests and considered them, among other matters, in
making its recommendation.
The Management of the Companies The directors and executive oflicers of Avista immediately prior to the completion of the merger will
Following the Merger continue to be the directors and executive officers of Avista following the Closing. The directors and
officers of AERC immediately following the Closing will be selected officers of Avista. AEL&P, AERC's
wholly-owned subsidiary, will continue to be operated by the existing employees, including the existing
management team, following the Closing of the merger. William Corbus, AERC's President and
Chairman of tlre Board, will end his service to AERC following the Closing of the merger.
The Merger Agreement The Merger Agreernent is attached to this document as Annex B. You should read carefully the Merger
Agreement in its entirety. It is the principal document goveming the merger,
Accounting Treatment Avista prepares its financial statements in accordance with accounting principles generally accepted in the
United States. If completed, the merger will be accounted for by applying the acquisition method with
Avista treated as the acquiror.
Materlal U.S. Federal Income Tax The merger has been structured to qualift as a "reorganization" within the meaning of Section 368(a) ofConsiderations the Code, but will occur even ifit does not so qualifr. Each ofAvista and AERC has received a legal
opinion from tax counsel, based on certain representations and assumptions, to the effect that the merger
will quali$ as a reorganization. Accordingly, it is
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Regulatory Matters
Comparison of Shareholder Righ*
anticipated that an AERC shareholder generally should not recognize any gain or loss for U.S. federal
income tax purposes on the exchange ofshares ofAERC stock for shares ofAvista common stock in the
merger, except for (a) gain or loss attributable to cash received in lieu ofa fractional share ofAvista
common stock, (b) income or gain attributable to the shareholder's pro rala share ofthe expense firnd
established for the Shareholders' Representativo, (c) income or gain attributable to cash subsequently
released from the escrow fund and (d) in certain limited circumstances, income attributable to a portion of
the Avista common stock subsequently released from the escrow fund. AERC shareholders that fail to
provide certain certifications as to their tax status when requested may be subject to applicable
withholding taxes. Certain AERC shareholders may be subject to special tax rules.
Completion of the merger, however, is not conditioned upon the merger qualiffing as a reorganization.
Moreover, the tax opinions received by Avista and AERC are based both on representation letters provided
by Avista and AERC as to factual matters and on certain factual assumptions, including with respect to
the number ofAERC shares held by, and the amount ofconsideration payable to, AERC shareholders, if
any, that dissent to the merger. Ifany ofthe representations or assumptions on which the tax opinions are
based proves incorrect, the U.S. federal income tax consequences ofthe merger described above may be
adversely affected. For example, ifAERC shareholders holding a significant amount ofAERC stock were
to dissent to the merger, the merger could be fully taxable to atl AERC shareholders.
The discussion ofmaterial U.S. federal income tax consequences ofthe merger contained in this
document only provides a general summary, is based on existing law and certain factual assumptions,
and is not a complete analysis or description ofall potential U.S. federal income tax consequences ofthe
merger. The discussion does not address tax consequences that may vary with, or are contingent on,
individual circumstances. In addition, it does not address the effects ofany foreign, state or local tax
laws.
AERC shareholders are urged to consult with their own tax advisors regarding the specific tax
consequences of the merger that may apply to them, including the effects of U,S. federal, state,
local, foreign and other tax laws.
For additional information, please see THE MERcER-"Material U.S. Federal [ncome Tax
Considerations" on page 37.
To complete the merger, Avista and AERC must obtain approvals or cotrsents from, or make filings with,
a number ofUnited States federal and state regulatory authorities. The parties have already received from
the antitrust division of the Deparsnent of Justice and the Federal Trade Commission an early termination
ofthe waiting period required by the HSR Act. The parties still need to obtain approval from the RCA.
Approval has been received from the UTC, the IPUC and the OPUC. The parties have already submifted
applications requesting approval from these state commissions. See R EGULAToRYMATTERS on page 43.
AERC is an Alaska corporation. Avista is a Washington corporation. The shares of Avista common stock
that AERC shareholders will receive in the merger will be shares of a Washington corporation. AERC
shareholder rights under Alaska law and Avista shareholder rights under Washington
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law are different. In addition, Avista's articles ofincorporation and its bylaws contain provisions that are
different from AERC's articles of incorporation and bylaws.
For a summary ofcertain differences between the rights ofAvista shareholders and AERC shareholders,
see DESCRTPTIoN oF CoMMoN STocK--CoMpARISoN oF SHAREHoLDER RIGHTS beginning on
page 57.
t2
Table of Contents
SELECTED FINANCIAL DATA OF AVISTA
The table below contains certain selected consolidated financial information lor the years ended December 31, 2009, 2010,2011,2012 and2013
and for the three months ended March 31, 2013 and 2014. This information has been selected from the consolidated financial statements ofAvista, which are
incorporated herein by reference. This information is qualified in its entirety by reference to the consolidated financial statements and related notes,
nanagement's discussion and analysis offinancial condition and results ofoperations and other financial information that is incorporated herein by reference
and should be read together therewith.
As ofand for the three months
ended March 31,As ofand for the years ended December 3 I,
2013
s 437,574 s 411,57744,384 42,4079,454 9,372: (qso) '(4so)
$ 490962, $ 482,906
,' ' .,,,$ 90,868 $ 82,7s1
2,798 , 2,924(s26) (613)
$ 93,140 '$ 85,062
$ 48,981 $ 43,101
2013 2012 201 I 2010
(in thouands, except per share data)
OperatingRev€nues:., .: ::
Avista Utilities
Ecova
Other
Intersegment eliminations
Total
Income (Loss) fiom Operations (pre-tax):
Avista Utilities
Other
Total
Net income
Net income attributable to noncontolling
interests
Net Income (Loss) attributable to Avista
Corporation Shareholders:
Avista Utilities
Ecova
Other
Total
Average coinmon shares oubtanding, ,
basic
Average common shares outstanding,
diluted
Common shares outstanding at period-
end
Income from continuing operations per
Avista Corporation common share:
Diluted
Basic
Dividends paid pff "om-on ih"r"
Book value per common share
Total Assets:
Avista Utilities
Ecova
Other
Total
Long-Term Debt and Capital Leases
(including current portion)
Nonrecourse l-ong-Term Debt (inoluding
current portion)
Long-Term Debt to Affiliated Trusts
Total Avista Corporation Shareholders'
Equity
(a82) : $ (760) $ (1,217) $, (590)
$ 1,443,322 $1,419,646137,848 102,03540,410 61,067(r.800) (24,008)g.1gg9 !-1,ss8,719
$ 202,373 $ 198,20020,917 15,8654,'714 5.669
$ 228,004 $ 219,734
$ 103,539 $ 94,948
$ (3,315) $ (2,523)
$ 47,996
I,l I I
(608)
$ 48,499
$ 0.81....-$ 0.3175s 22.12
$ 3,qe3,474
'.,3M,;8t:8
77,776
$ 4,316,078
$1,272,902
',..$ 13,872$ 51,547
$ 1,330,482
60,122 . 59,866
60,168 59,898
:.:
60,161 .: 59,912
$ 42,250
1,198
(1, l0z;
$ 42,341
$ ,,0.71
$ 0.71
-
$ 0,305s 21.43
$ 3,878,347' 361,376
92,415
$ 4,332,138
$ 1,229,120
$ 29,181$ 5l,547
..
$ 1,283,976
$ 108,598
7,129
(4,650)
s I I r,077
: 59,960
59,997.,]
60,077
E , , 11,85
s 1.85
-
$ t.22s 21 .61
$ 3,940,998
339;643
81,282
$,4,361,923
t,272,783
17,838
51,547
$1,298,266
l3
$ , 81,704
l,825
(s,3 19)
$ 78,2 l0
-
59,028
59,201
:,,59,813
$ ,', ' 1;32
$ 1.32
-
$, 1.16$ 2l .06
$ 3,894,82 I
' , 122,?20
9s,63 8
$ 4,3I3,179
$ 1,228,739
g 3r,sol$ s r,547
sl,259,A77
$, 90,902
9,6'7 r
(349)
$ 100,224
5'.7,872
,58,092 ,
, ,,581A23
$ . : 1,72,
$ 1.73r-,$' '. , t.t0,S 20.30
'L,
$ 3,809,446
292,94a.
112,14s
$,4,214,531
$ 1,r77,300
$ ; 46,471$ s r,s47
$ 1,185,701
$ 86,681
7,433
(1,68e)
$ 92,425
55,595
55,824
57,120
$',s 1.66
-
$ ', ' I.oo$ r9.7r
$ 3,s 89,23 s
,221,fr86
129,774
$ 3;940,095
$ 1,101,857
$ .58,934$ 5l,s47
$ 1,125,784
$ 1,395,201
77,275
40,089
$lJrrJ6s
$ r88,5lr
I I,603
(7, I 03)
$ 193,011
$ 88,648
$ (1,577)
$ 86,744
5,329' (5,Q02)
$ p7,97 r
s4,694
54,942
54,837
s 1.58
$ l.s9
-
$ 0.81s 19.17
.......$ 3,400,384' ,143,060
63,515
$ 3;606,959
$ 1,071,338
l.
$ 5 r,s47
$ r,osr,z8l
$ 1,403,995
176,761
39,549
(1,800)
$ l ,61 8,s05
$ 232,572
I 3,304
( l ,483)
s 244,393
$ 112,294
$ 1,354,185,155,664
38,953
'(1,S00)
$ 1,547,002
$ 188,778
2,9.12
(r,680)
s 190,070
$ 78,800
0;81
$
s
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Avista
MARKET INFORMATION AND DIVIDENDS
Avista's common stock is currently listed on the NYSE under the ticker symbol 'AVA". As of March 31,2014, there were 60,161,140 shares of
our common stock outstanding and9j97 registered shareholders.
The Avista Board of Directors considers the level ofdividends on common stock on a regular basis, taking into account numerous factors
including, without limitation:
. results ofoperations, cash flows and financial condition,
. the success ofbusiness strategies, and
. general economic and competitive conditions.
Avista's net income available for dividends is generally derived from regulated utility operations.
The payment of dividends on common stock could be limited by:
. certain covenants applicable to preferred stock (when outstanding) contained in Avista's articles ofincorporation (currently there are no
preferred shares outstanding);
. certain covenants applicable to Avista's outstanding long-term debt and committed line ofcredit agreements; and
. certain provisions incorporated in Avista's hydroelectric licenses.
The following table presents quarterly high and low prices of Avista common stock, as reported on the consolidated reporting system, as well as
dividend information:
Three Months Ended
March 3l June 30
2013 ',, i :r],, ir ,::.: ,
Diyidgndq paid- per share
Tniding price nnge pgr Chare:
High
.: LoW
2012
DiviaenAs,pEia pir share ,
Trading price range per share:
':i::,:',:II'gh. 1r::;:,: :
,
Low
$ 0.305
:,:: :: .]
s 27.48
i$r.,f+rlO
$ 0;29
$ 26.18
$ 24.48
$ 0.30s
,: i,
$29.26
$25.68
$ 0.29
$ 27.a1
$24.9s
September,30
$ 0.305
s 29.21
S, ,.t:..S5i55
$: .., : ,0.29
$ ,: 29,05$ 2s.07
Dccember 3lffi$ 0.305
: r:i::, ' .' l$ 28.45
$': ZS;88
$,:, 0;29
$: L6;77s 22.78
The reported last sale price of Avista common stock as shown on the composite tape for November l,2013, the trading day immediately before
the announcement ofthe merger, was $27.89.
The high and low prices ofAvista cornmon stock during the first quarter of2014 were $30.83 and $27.71, respectively, and during the second
quarter of20l4 (through May 6) were $32.37 and $30.02, respectively. On March 14, 2014, Avista paid a dividend of$0.3175 per share to shareholders of
record as ofFebruary 21,2014.
The market price of Avista common stock will fluctuate between the date of this document and the completion of the merger. No assurance can be
given conceming the market price of Avista common stock before or after the completion of the merger.
t4
Tabla of Contents
AERC
AERC is a privately-held company, and there is no public trading market for AERC common stock.
AERC paid dividends on its common stock in the aggregate amount of $0.98 million in 2012, consisting of quarterly dividends of $1.375 per
share on each ofMarch 1,2012, June 1,2012 and September 1,2012 and $1.425 per share on December l,2012 and a special dividend of$3.00 per share
on December 14,2012. AERC paid dividends on its common stock in the aggregate amount of $4.67 million in 2013, consisting of quarterly dividends of
$1.425 pershare on each ofMarch l,2013, June l,2013 and September l,2013 and $1.475 pershare on December 1,2013 and aspecial dividend of
$35.00 per share on December I, 2013. Thus far in 2014, AERC paid a regular quarterly dividend on its common stock in the aggregate amount of
$168,894, or $1.475 per share, on March 1,2014.
Subject to approval by the AERC Board ofDirectors, AERC anticipates continuing to pay regular quarterly cash dividends in the future prior to
the Closing, as well as a special dividend in an amount to be determined shortly prior to Closing in order to satisff certain confactual obligations under the
Merger Agreement.
AERC is a holding company and does not have any significant assets other than shares ofstock ofits subsidiaries. AERC does not produce any
operating income of its own. As a result, AERC's ability to pay its indebtedness, if any, and dividends on its common stock is dependent on the receipt of
dividends and other payments from its wholly-owned subsidiaries, AEL&P and/or AJT Mining Properties, Inc. ("AJT"). The payment of dividends on AERC
common stock is restricted by provisions of certain covenants applicable to preferred stock (when outstanding) contained in AERC's articles of incorporation.
There are currently no shares ofpreferred stock ofAERC outstanding. The payment ofdividends from AEL&P to AERC is restricted by provisions ofcertain
covenants in AEL&P's credit facility.
RISKFACTORS
ln addition to the other information included and incorporated by reference into this document, AERC shareholders should carefully
consider the following rislcs before deciding how to vote. In addition, you should read and consider the isks and uncertainties associated with each of
the businesses ofAvista and AERC. You should also read and consider the other information in this document and the documents incorporated herein
by reference. See lVnmt You CAN F1ND MoRE INF1RMATIoN ABow Ayrsru, on page 65.
Risks Relating to the Merger
Avista's share prtce mayfluctuate prior to lhe complefion of the merger,
Upon completion of the merger, each share of AERC common stock will be converted into Merger Consideration consisting of shares of Avista
cornmon stock, with the number ofshares ofAvista conrmon stock to be issued per share ofAERC common stock to be based on the average ofthe closing
price of Avista's common stock on the composite tape for the ten trading days immediately preceding but not including the trading day prior to the Closing
Date. Changes in the price of Avista's common stock prior to the completion of the merger will affect the number of shares of Avista common stock issued in
exchange for a share ofAERC common stock, except that Avista's share price for the purposes ofdetermining the exchange ratio will not be greater than $34.30
and will not be lower than $2 I .48, even if the average closing stock price for that period is outside of that range. In particular, ifthe market price of Avista
common stock decreases to an amount lower than $21.48, the number of shares of Avista common stock to be issued in the merger will not be increased to
reflect that decrease. For more information on the calculation of the exchange ratio, see T HE MERGER AGREEMENT-"Merger Consideration; Conversion of
Shares in the Merger" on page 45.
The market price of Avista common stock at the time of completion of the merger may vary significantly from the market prices of Avista
common stock on the date the Merger Agreement was executed, the date of this document and/or the date of the AERC special meeting. Accordingly, at the time
of the AERC special meeting you will not know the market price of Avista common stock as of the Closing Date and, given the maximum and minimum price
limitations to be used in determining the exchange ratio described above, you will not be able to calculate the number ofshares ofAvista common stock you
will receive upon completion of the merger. Changes in the price of Avista common stock could result from a variety of factors, including general market and
economic
l5
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conditions, changes in Avista's business, operations and prospects and regulatory considerations. See "fusks Relating to an Investment in Avista Common
Stock" on page I 8. While AERC will not be required to close the merger in the event that there have been any occurrences that, individually or in the aggregate,
have had a nraterial adverse effect on the business of Avista taken as a whole or the common stock of Avista, AERC is not otherwise permitted to terminate the
Merger Agreement solely because of changes in the market price of Avista's common stock.
In addition, the merger might not be completed until a sigrificant period of time has passed after the AERC special meeting. Because the Merger
Consideration (as adjusted) will not be firther adjusted to reflect any changes in the value ofAERC or its common stock, the Merga Consideralion and the
aggregate market value of the Avista common stock issued in connection with the merger may be lower than the value of AERC or its common stock as of
earlier dates.
If AERC shareholders holding a significant amount of AERC stock dissent to the merger, the receipt of Avisla common stock pursuanl to the
merger could befully taxable to all AERC shareholders.
The merger has been structured to qualiff as a "reorganization" within the meaning ofSection 368(a) ofthe Code. However, completion ofthe
merger is not conditioned upon the merger qualiffing as a roorganization and, ifAERC shareholders holding a significant amount ofAERC stock were to
dissent to the merger, the merger could be fully taxable to all AERC shareholders. See THE MERGER-"Material U.S. Federal Income Tax Considerations" on
page 37.
Current AERC shareholders will have a reduced ownership and voting interest afier the merger.
Assuming an aggregate adjusted Merger Consideration of approximately $145 million and the minimum Conversion Price of $21.48, the
maximum number of shares that Avista anticipates it would issue or reserve for issuance to AERC shareholders in the merger is approximately 6.75 million
shares. Based on the number of shares of common stock of Avista outstanding on March 3l,20I4 and that minimum Conversion Price, upon the completion
of the merger, former AERC shareholders would own at most approximately l0% of the common stock of Avista.
AERC shareholders currently have the right to vote for AERC directors and on other matters affecting A-ERC. When the merger occurs, each
AERC shareholder who receives shares of Avista common stock will become a shareholder of Avista with a percentage ownership of the combined company
that will be substantially smaller than the shareholder's percertage ownership of AERC. As a result of this reduced ownership percentage, former AERC
shareholders will have substantially less voting power in the combined company than they now have with respect to AERC.
The Merger Agreemenl contains no provisions tha permit AERC to purcue alternatives to the merger.
The Merger Agreement does not permit AERC to enter inlo an altemative transaction in lieu of the merger, unless and until the Merger Agreement is
terminated. This would prohibit AERC from entering into a transaction with a third party that might have an interest in acquiring all or a sigaificant part of
AERC, even if such third party were prepared to pay consideration with a higher per share cash or market value than the consideration proposed to be received
or realized in the merger.
The issuance of shares of Avista common stock to AERC shareholders in the merger may have a negative impact on Avista's earnings per share.
If the merger is completed, new shares of Avista common stock will be issued to AERC shareholders, increasing the total number of outstanding
shares of Avista common stock. This initially will result in Avista's eamings per share being lower than what it would have reported in the absence of the
merger unless and until the effect ofthe inclusion ofAERC's consolidated results ofoperations in Avista's consolidated results ofoperations is suffrcient to
offset the effect of the issuance of such additional shares. There can be no assurance, however, as to if or when the recovery ofAvista's earnings per share will
occur.
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The merger is subject to the receip ofconsent or approvalfrom governmental entities that could delay the completion ofthe merger or impose
conditions that could haye a material adverse effect on the combined compmy or thal could cause abandonment of the merget.
Completion of the merger is conditioned upon the receipt of consents, orders, approvals or clearances, to the extent required, from the public
utility commissions or similar entities in certain states in which the companies operate. The merger has already been reviewed by the United States Department
of Justice Antitrust Division (the "DOJ"), and the Federal Trade Commission, (the "FTC"), under the HSR Act, and the parties received notice of the early
termination ofthe waiting period required under the HSR Act effective December 6, 2013. The parties still need to obtain approval from the RCA. Approval
has been received fiom the IPUC, the UTC and the OPUC. The AERC special meeting at which the Merger Proposal will be considered may take place before
the RCA approval has been obtained and before all conditions io such approval, ifany, are known. In this event, if the shareholder proposal required to
complete the merger is approved, Avista and AERC may subsequently agree to conditions without further seeking shareholder approval, even ifsuch
conditions could have an adverse effect on Avista, AERC or the combined company.
Avista and AERC cannot provide assurance that they will obtain the required RCA approval or that this approval will not contain terms,
conditions or restrictions that would be detrimental to the combined company after the completion of the merger. The Merger Agreement generally permits each
party to terminate the Merger Ageement if the final terms of any of the required regulatory consents or approvals require a budensome condition which is not
normal and customary for regulatory approvals requested in connection with similar transactions or materially and adversely affects either the business of
Avista, AERC, or certain subsidiaries and partners oftheirs, or the ability of Avista to continue to operate AERC and its subsidiaries, taken as a whole,
consistent with past practices. The conditions imposed by the UTC, the IPUC and the OPUC are acceptable to Avista and AERC. Any substantial delay in
obtaining satisfactory RCA approval or the imposition ofany terms or conditions in connection with such approval could delay the completion ofthe merger
or adversely impact the consolidated results ofoperations ofAERC or Avista.
There has been no public markct for AERC common stock, and the lack of a public marka htakes it ef,remely dfficult to deurmine the fair
market value of AERC.
The outstanding capital stock ofAERC is privately held and is not traded on any public market. The lack ofa public market makes it exhemely
diflicult to determine the fair market value ofAERC. The value ascribed to AERC securities in privately negotiated transactions that have occurred from time
to time or in other contexts may not be indicative of the price that AERC corrmon stock may have traded at if it were traded on a public market. The number
of shares of Avista common stock to be issued to AERC shareholders was determined based on negotiations between the parties, and likewise may not be
indicative of the price at which AERC common stock may have traded if it were traded on a public market.
The acquisition of AERC by Avista could result in additional costs, some olwhich may not bc recoverable,
Avista and AERC expect to incur a number of non-recurring tansactional expenses associated widr completing the merger. Avista may also incur
additional unanticipated costs in the process ofacquiring AERC, and may face other risks in connection with those acquisition efforts, including difficulties
in coordinating cost assignment and other ratemaking issues among the regulatory commissions in Washington, Idaho and Oregon, which have jurisdiction
over Avista, and the RCA, which has jurisdiction over AEL&P, and difficulties in implementing intemal controls over accounting and financial reporting
consistent with Avista's requirements under federal securities regulations. IfAvista does encounter challenges to the acquisition process beyond those
anticipated, those difficulties may adversely impact Avista's financial condition and results of operations.
AERC will be subject to various uncertaintics and contractual restrictions while the merger is pending that may cause disruption and could
adversely affect its financial results,
Uncertainty about the effect ofthe merger on employees, suppliers and customers may have an adverse effect on AERC. These uncertainties may
impair the ability ofAERC and its subsidiaries to attract, retain and motivate key personnel until the merger is completed and for a period oftime thereafter, as
employees and prospective employees may experience uncertainty about their future employment and career path, and could cause customers, zuppliers and
others who deal with AERC or its subsidiaries to seek to change existing business
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relationships with AERC or its subsidiaries. The pursuit of the merger and the preparation for the merger may also place a burden on the management and
intemal resources ofAERC and its subsidiaries. Any significant diversion ofmanagement attention away from ongoing business concems and any difficulties
encountered in the transition and acquisition process could affect AERC's financial results.
Avista will record goodwill that could become impaired and adversely affect its operating results,
If completed, the merger will be accounted for as an acquisition of AERC common stock by Avista and will follow the acquisition method of
accounting for business combinations. The assets and liabilities ofAERC will be included on the balance sheet ofAvista and its consolidated subsidiaries.
The excess ofthe purchase price over the fair values ofAERC's assets and liabilities will be recorded as goodwill.
The amount of goodwill, which is estimated to be approximately $48 million based on Merger Consideration of $170 million (before
adjustments), will be allocated to the appropriate reporting units within AERC and its subsidiaries. Avista is required to assess goodwill for impairment at
least annually by comparing the fair value ofreporting units to the carrying value ofthose reporting units. To the extent the carrying value ofany ofthose
reporting unis is greater than the fair value, a second step comparing the implied fair value of goodwill to the carrying amount would be required to determine
if the goodwill is impaired. Such a potential impairment could result in a material charge that would have a material impact on Avista's future operating results
and consolidatcd balance sheet.
Directors and oflicers ofAERC may hove conJlicts ofinterest lhat may have influenced them to support or approve the merger,
Although the AERC Board of Directors recommended to AERC shareholders that they approve the plan of merger contained in the Merger
Agreement, AERC shareholders should be aware that certain members of the AERC Board of Directors and executive officers of AERC have interests in the
merger that may be different from, or are in addition to, the general interests of AERC shareholders, as described in The Merger-"lnterests of Certain Persons
in the Merger" on page 34. AERC shareholders should consider whether these interests may have influenced these directors and executive officers to support or
recomrnend the merger.
The righ* oIAERC shareholders who become Avista shareholders in the merger will be governed by lltashington law and by Avista's articles of
inco rp o rotio n a nd by l.ants,
AERC shareholders who receive shares of Avista common stock in the merger will become Avista shareholders. Avista is a corporation formed
under the laws of Washington. As a result, AERC shareholders who become shareholders in Avista will be governed by the Washington Business Corporation
Act and Avista's articles of incorporation and Avista's bylaws, rather than being govemed by the Alaska Corporations Code and AERC's articles of
incorporation and AERC's bylaws. There may be material differences between the current rights of AERC shareholders, as compared to the rights they will
have as Avista shareholders. For more information, see DESCRJPTIoN oF CoMMoN STocK-{oMpARISoN oF SHAREHoLDER RIGIITS on page 57.
Risks Relating to an Investment in Avista Common Stock
The marka price of Avista's cornmon stock fluctuates conlinuously.
Avista's common stock is listed on the NYSE and is traded on that exchange and elsewhere. The market price fluctuates continuously.
The fluctuation in the market price ofAvista's cornmon stock is caused by a variety offactors, many ofwhich are beyond Avista's control.
These factors include, but are not limited to:
. any and all factors that affect the U.S, and global financial markets generally including, but not limited to, general U.S. and global
economic conditions;
. events or circumstances relating to Avista, particularly those related to the risk factors discussed in Avista's periodic reports frled with the
SEC;
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. periodic variations in Avista's operating results, the perceived value ofAvista's assets or its business prospects, or the perceptions or
expectations of investors or securities analysts as to such variations;
. periodic developments in, or changes in the prospects for, the electric and natural gas utility industries, or the perceptions or expectations
of investors or securities analysts as to such developments or changes;
. Avista's ability to continue to pay dividends or any change in the level ofdividends, or the perceptions or expectatioDs ofinvestors or
securities analysts as to dividends; and
. future sales by Avista ofequity and other securities.
Any reduction, interruption or elimination ofthe quarlerly dividend on Avista's common stock would likely have an adverse effect on the market
price of i* common stock
The payment of dividends on Avista's common stock is solely within the discretion of Avista's Board of Directors. Avista's Board of Directors
conside$ the level ofdividends on a regular basis, taking into account numerous factors including, without limitation:
. Avista's results ofoperation, cash flows and financial condition;
. the success ofAvista's business skategies; and
. general economic and competitive conditions.
Avista's credit facilities have a financial covenant that limits the percentage ofdebt in relation to Avista's overall capital structue. While Avista is
currently in compliance with this provision, in the funre, this could have the effect ofrestricting Avista's ability to pay dividends. In addition, the terms of
Avista's preferred stock contained in its articles ofincorporation prohibit the payment ofdividends on Avista's common stock unless all accumulated
dividends on prefened stock have been paid. There are currently no shares of prefened stock of Avista outstanding. Avista may agree to similar, or more
stringent, financial covenants or provisions in credit or other agroements in the future, and may issue preferred stock in the future. Avista's hydroelectric
licenses also incorporate provisions that could limit Avista's ability to pay dividends.
The market price of Avista's common stock couW be advercely alfectcd by luture sales of ils common stoch
Except for required regulatory approvals, Avista is not restricted from issuing additional shares of common stock, whether in this offering or in
any future offering. Avista is also not restricted from issuing other securities that are convertible into, or exercisable for, or exchangeable for, shares of Avista's
conrmon stock. The market prioe of Avista's common stock could be adversely affected by sales of substantial amounts of its common stock or any such
other securities, or the perception that these sales may occur.
The shares of Avista's common srock are structurally junior to all its other securities,
If Avista were to be reorganized, liquidated or dissolved in a bankruptcy, insolvency or similar proceeding, holders of debt securities and other
indebtedness, including hade payables, and holders ofpreferred stock would receive distributions ofAvista's available assots prior to holders ofAvista's
common stock. It is possible that, after making such distributions, insufficient assets, or no assets at all, would remain available for distribution to holders
of Avista common stock.
Avista and its existing subsidiaries are likely to incur additional indebtedness and may issue shares ofpreferred stock in the fufure. Furtherrnore,
if the merger is completed, Avista intends to cause AERC and AEL&P to incur additional indebtedness so that, after the merger, the consolidated capital
structure of AERC would more closely resemblc the consolidated capital struchre of Avista before the merger.
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The market price ofAvista's common stock could be adversely affected by the incurrence of additional indebtedness or the issuance ofpreferred
stock in substantial amounts by Avista and/or any of its existing or future subsidiaries.
Risks Relating to Avista's Businesses and Operations
The risks and uncertainties associated with Avista's businesses and operations include those discussed in fusk Factors, Forward Looking
Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations in Avista's annual and quarterly reports
incorporated herein by reference. See WHERE You Cet FIND MoRE INFoRMATIoN ABoUT AVISTA on page 65.
Risks Relating to Af,RC's Businesses and Operations
Regulators may not granl ratcs that provide timely or salJicient recovery of AEL&P's costs or alloht a reasonable rate of return for our
shareholders.
AEL&P's ability to recover costs associated with its utility operations and capital expenditures therefor depends on tbe amount and timeliness of
rate changes allowed by regulatory agencies. AEL&P expects to periodically file for rate increases with regulatory agencies to recover its costs and provide an
opportunity to earn a reasonable rate ofreturn for its shareholders. These proceedings typically involve multiple parties, including govemment bodies and
officials, consumer advocacy groups and various consumers ofenergy, who have differing concems, but who generally have the common objective oflimiting
rate increascs while also requiring AEL&P to ensure system reliability. Ifregulators grant substantially lower rate increases than AEL&P's requests in the
future or ifdeferred costs are disallowed, it could have a negative effect on AERC's consolidated financial results.
AEL&P is subject lo operating uncerTainties, including costs to maintain, repair and replace utilily systens and occurrences of catastrophic
events, which could adversely affect AERC's consolidaled linancial results.
The operation ofcomplex utility systems involves many operating uncertainties and events beyond AEL&P's control. These uncertainties and
potential events include the breakdown or failure ofelectricity generating equipment, transmission and disribution lines or other equipment or processes;
unscheduled outages; strikes, lockouts or other labor-related actions; shortage ofqualified labor; hansmission and distribution system constrdints, blackouts
or disruptions; cyberattacks; terrorist attacks; fuel shortages or interruptions; unavailability of critical equipment, materials and supplies; low water flows
and other weather-related impacts (for example, precipitation (consisting ofsnowpack, its water content and melting pattem plus rainfall) significantly affects
hydroelectric generation capability); performance below expected levels ofoutput, capacity or effrciency; operator error; third party excavation enors; design,
construction or manufacturing dcfects; and catastrophic events such as severe storms, avalanches, floods, fires, earthquakes and explosions. A catastrophic
event might result in injury or loss of life, extensive property damage, environmental damage or third party claims against AEL&P for property damage and/or
personal injuries. Any ofthese events or other operational events could significantly reduce or eliminate AEL&P's revenue or significantly increase its
expenses, which increased expenses AEL&P may not be able to recover in part or in full from its customers. For example, certain of the AEL&,P's
transmission lines are subject to avalanche risk and in 2008 and 2009 avalanches disrupted transmission fiom the Snettisham hydroelectric project for six
and three weeks, respectively. Further, the cost to implement rapid repair to such facilities could be significant and such events could disrupt AEL&P's ability
to supply power from certain facilities. Current and future insurance coverage might not be suflicient to replace lost revenue or cover repair and replacement
costs or other liabilities. The scope, cost and availability ofAEL&P's insurance coverage may change. In addition, AEL&P is subject to the risk that insurers
and/or other parties would dispute or be unable to perform on their obligations to AEL&P. Any reduction ofAEL&P's revenue or increase in its expenses
resulting from the risks described above, could adversely affect AERC's consolidated financial results.
Temperatures have a significafi elfect on AEL&P's resuhs of operations, /inancial condition and cash tlows.
Retail electricity demand varies directly with changes in temperatures. AEL&P normally has its highest retail energy sales during the winter
heating season in the first and fourth quarters ofthe year. In general, warmer weather in the beating season will reduce AEL&P's customers'energy demand
and retail operating revenues.
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AEL&P k actively pursuing, developing and constructing new or expandedfacilitics, the completion and *pected costs of which are subject lo
significant risk, and it has significantfunding needs relaled to its planned capital expenditures.
AEL&P actively pursues, develops and constnrcts new or expanded facilities. It expects to incur substantial annual capital expenditures over the
next several years. Such expenditures could include, among others, amounts for new elecEic generating facilities, electric transmission or distribution projects,
and upgrades ofexisting assets.
Development and construction ofmajor facilities are subject to substantial risks, including fluctuations in the price and availability of
commodities, manufactured goods, equipment, labor, siting and permitting and changes in environmental and operational compliance matters, load forecasts
and other items over a multi-year construction period, as well as counterparty risk and tle economic viability of AEL&P's suppliers, customers and
contractors. These risks could result in the inability to timely complete a project or higher than expected costs to complete an asset and place it in service. Such
costs might not be recoverable in the regulated rates or market or contract prices AEL&P is able to charge its customen. The inability to successfully and
timely complete a project, avoid unexpected costs or to recover any such costs could adversely affect AERC's consolidated financial results.
Furthermore, AEL&P depends upon both intemal and extemal sources of liquidity to provide working capital and to fund capital requirements. lf
it were unable to obtain funding from extemal sources, it could need to postpone or cancel planned capital expenditures. Failure to construct these planned
projects could limit opportunities for growth, increase operating costs and adversely affect the reliability of electricity service to its customers.
A signiftcant sustained decrease in demand for electricity in the City and Borough of Juneau, Alaska would decrease its operating r*enue and
could adversely affect its consolidated tinancial results.
A significant sustained decrease in demand for electricity in the City and Borough of Juneau, Alaska would significantly reduce its operating
revenue and adversely affect AERC's consolidated financial results. Factors that could lead to a decrease in market demand include, among otbers:
. sustained mild weather that reduces heating or cooling needs;
depression, recession or other adverss economic condition that results in a lower level ofeconomic activity or reduced spending by
consumers on electricitY;
. an increase in the market price ofelectricity or a decrease in the price ofcompeting sources ofenergy;
. efforts by customers, legislators and regulators to reduce the consumption ofenergy through various conservation and energy efficiency
measures and programs; and/or
movement of the state capital from Juneau, Alaska.
AERC's subsidiarics are subject b ertensive federal, state and local legistttion and regulation, including numerous environmental, health, safety
and other hws and regulafions that afiIecl its operations and cosh. These lnws and reguhtions are complac, dynamic and subject to nen'
interpretations or change, In addition, new hws and regulations are continually being proposed and enacled lhat create nen, or revised
requirements or standards on AERC's subsidiari.es.
AERC's subsidiaries are required to conrply with numerous federal, state and local laws and regulations that have broad application to AERC's
subsidiaries and limit their ability to independently make and implement management decisions regarding the operation of their businesses. These laws and
regulations are implemented and enforced by federal, state and local regulatory agencies, such as, among otbers, the FERC, the United States Environmental
Protection Agency and the RCA.
Compliance with applicable laws and regulations generally requires AERC's subsidiaries to obtain and comply with a wide variety of licenses,
permis, inspections, audits and other approvals. Further, compliance with laws and regulations can require significant capital and operating expenditures,
including expenditures for new equipment, inspection, cleanup costs, removal and remediation costs, damages arising out ofcontaminated
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properties and refunds, fines, penalties and injunctive measures affecting operating assets for failure to comply with environmental regulations. Compliance
activities puniuant to laws and regulations could be prohibitively expensive or otherwise uneconomical. As a result, AERC and its subsidiaries could be
required to shut down some facilities or alter their operations. Further, AERC's subsidiaries may not be able to obtain or maintain all required environmental or
other regulatory approvals and permits for its operating assets or development projects. Delays in or active opposition by third parties to obtaining any required
environmental or regulatory authorizations, failure to comply with the terms and conditions of the authorizations or enhanced regulatory or environmental
requirements may increase costs or prevent or delay AERC and its subsidiaries from operating facilities, developing or favorably locating new facilities or
expanding existing facilities. IfAERC and its subsidiaries fail to comply with any environmental or other regulatory requirements, they may be subject to
penalties and fines or other sanctions, including changes to the way its electric generating facilities are operated that may adversely impact generation. The
coss of complying with laws and regulations could adversely affect AERC's consolidated financial results.
To the extenl that AERC's subsidiaries are not allowed by its regulators to recover or cannot otherwise recover dre costs to comply with existing or
future laws or regulations, the costs ofcompliance could have a material adverse effect on AERC's consolidated financial results. Additionally, even ifsuch
costs are recoverable in rates, if they are substantial and result in rates increasing to levels that substantially reduce customer demand, this could have a
material adverse effect on AERC's consolidated financial rezults.
Disruptions in the financial markets could affect AERC and i* subsidiaries' ability to obtain debr linancing, draw upon or renew its xisting
creditfacility, and have other adverse elfects on AERC and its subsdiaies.
Disruptions in the financial mfikets could affect AERC and its subsidiaries' ability to obtain debt financing, draw upon or renew its existing
credit facility, and have other adverse effects on AERC and its subsidiaries. Significant dislocations and liquidity disruptions in the United States and global
credit markets, as occurred in 2008 and 2009, could materially impact liquidity in the bank and debt capital markets, making financing terms less attractive
for borrowers that are able to find financing and, in other cases, could cause certain types of financing, or any financing, to be unavailable. Additionally,
economic uncertainty in the United States or globally could adversely affect the United States' credit markets and could negatively affect the ability ofAERC
and its subsidiaries to access funds on favorable terms or at all. IfAERC or its subsidiaries were unable to access the bank and debt capital markets to meet
liquidity and capital expenditure needs. and could not meet such needs intemally, this could adversely affect the timing and amount of AERC and its
subsidiaries'capital expenditures, their ability to make dividend payments and AERC's consolidated financial condition.
The terms of AEL&P's indebredness could lirnit its ability to bonow additional funds or take certain actions
AEL&P's outsianding credit facility and debt related obligations contain various alfirmative and negative covenants that are customary for
comparable loan agreements and transactions. Such covenants could serve to reduce AEL&P's ability to incur additional debt, to make certain distributions,
to engage in certain transactions and to capitalize on business opportunities. In addition, should AEL&P fail to meet its obligations to repay amounts owed
with respect thereto or otherwise default on its other covenants and obligations thereunder, it could be deemed to be in default under such agreements. Any such
default could enable the counterparty to take actions which could have a material adverse effect on AERC's consolidated financial results. Furtber, any
subsequent refinancing ofAEL&P's current indebtedness or any new indebtedness could have similar or greater restrictions.
A majoriq ofAEL&P's hydroelectric power generation is provided by a singlefacility that is subject to a long-term power purchase agreement and
operating and maintenance agreement in connection with which AEL&P is required to make certain payments.
While AEL&P operates several hydroelectric power generation facilities and has diesel generating capacity from multiple facilities to provide back-
up service to firm customerc when necessary, a single hydroelecfic power generation facility, the Snettisham hydroelectric project, currently accounts for
approximately two+hirds ofAEL&.P's hydroelectic power geoeration. Such facility was constructed and operated by the federal govemment and subsequently
purchased by the Alaska Industrial Development and Export Authority. AEL^&P has a long-term power purchase agreement and operating and maintenance
agreement with the Alaska Industrial Development and Export Authority to run and operate such facility. Such agreements and related documents require
AEL&P to make certain related payments, including payments related to debt service obligations for bonds issued by the Alaska Industrial Development and
Export Authority in connection with the Snettisham hydroelectric project, regardless of
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the amount ofpower actually received from such facility. Any issues that negatively affect the Snettisham hydroelectric project's ability to generate or transmit
power, any decrease in the demand for the power generated by Snettisham hydroelectric project or any loss by AERC and its subsidiarics oftheir contractual
rights with respect thereto or other adverse effect thereon could negatively affect AERC's consolidated financial results.
Sales to a limited number of customers represent a significafi ponion of AEL&P's revenues and the loss of, or a signilicant reduction in sales to,
any one of these customers could materially harm its business.
Sales to govemmental and mining customers represent a sigrificant portion of AEL&P's overall revenues. AEL&P currently expects that sales to
such customers will continue to represent a significant percentage ofits revenues for the foreseeable future, Any one ofsuch customers could, subject in certain
cases to contractual restrictions, decide to discontinue, decrease or delay its purchase ofpower from AEL&P. The loss ofany ofsuch customers could
significantly reduce AEL&P's revenues and adversely affect its operating results, AEL&P's ability to maintain or increase its revenues from such key
customers depends on a variety offactors, many ofwhich are beyond AEL&P's control. The amount ofsuch revenues may not reach or exceed historical
levels in any future period. Because these customers account for a substantial portion of AEL&P's revenues, the failure of any one of these customers to pay
on a timely basis would negatively impact AEL&P's cash flows.
AEL&P's success depends on the availability of the services of o qualif,ed worklorce and its ability to maintain satisfactory collective bargaining
agreements which cover a substantial number ofemployees
Approximately one-halfofAEL&P's employees are covered by a collective bargaining agreement with one union. The terms ofthis agreenrent
aflect AEL&P's labor costs. It is possible that labor disruptions could occur. In addition, it is possible that some of the remaining non-represented AEL&P
employees could join a union in the future. Further, AEL&P relies on its executive officers and senior management to execute its existing business operations
and identifr and pursue new growth opportunities. It is possible that AEL&P could face challenges in attracting and retaining senior management talent. The
loss ofkey employees could result in sigaificant disruptions to AEL&P's business, and the integration and training ofreplacement personnel could be time
consuming, cause additional disruptions to its business and be unsuccessful. Any such occurrences could negatively impact AERC's consolidated financial
condition and results of operations,
FORWARD-LOOKING STATEMENTS
From time to time, Avista and AERC make forward-looking statements such as statements regarding projected or future financial performance,
cash flows, capital expenditures, dividends, capital strucnue, other financial items, strategic goals and objectives, and plans for operations. These statements
are based upon underlying assumptions (many of which are based, in tum, upon further assumptions). These statements are made in press releases and
reports and other communications delivered to shareholders and, in the case ofAvista, in its reports filed under the Securities Exchange Act of 1934, as
amended. Forward-looking statements are all statements except those ofhistorical fact, including, without limitation, those that are identified by the use of
"projects", "predicts", and similar expressions.
Forward-looking statements are subject to a variety of risks and uncertainties and other factors. Most of these factors are beyond the parties'
control, and many ofthem could have a significant effect on the parties' operations, results ofoperations, financial condition or cash flows, which could
cause actual results to differ materially from those anticipated in the parties' statements. Such risks, uncertainties and other factors include, among others,
those listed or refened to under RISK FACTORS above.
The expectations, beliefs and projections ofAvista and AERC are expressed in good faith. The parties believe they are reasonable based on, among
other considerations, an examination of historical operating trends, data contained in the parties' records and other data available from third parties. However,
there can be no assurance that the parties' expectations, beliefs or projections will be achieved or accomplished. Furthermore, any forwardJooking statement
speaks only as ofthe date on which such statement is made. The parties undertake no obligation to update any forward-looking statement or statements to
reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence ofunanticipated events, except as required
by law. New risks, uncertainties and other factors emerge from time to time, and it is not possible for the parties to predict all such
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factors, nor can the parties assess the effect of each such factor on their businesses or the extent that any such factor or combination of factors may cause
actual results to differ materially from those contained in any forwardJooking statement.
THE COMPANIES
Avista Corporation
Ovemiew
Avista, incorporated in the Territory ofWashington in 1889, is an energy company engaged in the generation, kansmission and distribution of
electricity and the distribution ofnatural gas, as well as other energy-related businesses. As ofDecember 31,2013, Avista employed 1,643 people in its utility
operations and 1,667 people in its subsidiary businesses. Avisla's corporate headquarters are in Spokane, Washington, the secondJargest city in Washington
Spokane serves as the business, transportation, medical, industrial and cultural hub ofthe Inland Northwest region (eastem Washington and northern Idaho).
Regional seryices include govemment and higher education, medical services, retail trade and finance. The Inland Northwest also coincides closely with
Avista's utility service area in Washington and ldaho. Avista's gas utility operations also include separate service areas in northeastem and southwestem
Oregon.
Avista has two reportable business segments as follows:
Avista Utilities-an operating division of Avista that comprises its regulated utility operations. Avista Utilities generates, transmits
and distributes electricity and distributes natural gas, serving electric and gas customers in eastem Washington and northern Idaho
and gas customers in parts ofOregon. The utility also engages in wholesale purchases and sales ofelectricity and natural gas.
Ecova-an indirect subsidiary of Avista (80.2 percent owned as of December 3 1, 201 3) that provides energy effrciency and cost
management programs and services for multlsite customers and utilities throughout North America. Ecova's service lines include
expense management services for utility and telecom needs, as well as strategic energy management and efficiency services that
include procurement, conservation, performance reporting, financial planning, facility optimization and continuous monitoring,
and energy effrciency program management for commercial enterprises and utilities. As discussed in Avista's Quarterly Report on
Form l0-Q for the quarter ended March 3l ,2014, Avista is in the process of exploring the possibility of selling its interest in Ecova.
Avista has other businesses, including a sheet metal fabrication business, emerging technology venture fund investments and commercial real
estate investments. These activities do not represent a reportable business segment and are conducted by various indirect subsidiaries ofAvista.
Avista Utilities
General
Through Avista Utilities, Avista's utility operating division, Avista generates, transmits and distributes electicity and distributes natural gas.
Retail electric and natural gas customers include residential, commercial and industrial classifications. Avista also engages in wholesale purchases and sales of
electricity and natural gas as an integral part ofenergy resource management and its load-serving obligation.
Avista Utilities provides electric distribution and transmission, as well as natural gas distribution, services in parts of eastem Washington and
northern Idaho. Avista also provides natural gas distribution service in parts ofnortheastem and southwestem Oregon. At the end of20l3, Avista supplied
retail electric service to approximately 366,000 customers and retail natural gas service to approximately 326,000 customers across its entire service territory.
Avista's service territory covers 30,000 square miles with a population of approximately 1.6 million. Certain of Avista's generating facilities are located in
Montana, and Avista supplies electricity to a small number of customers in Montana, most of whom are employees who operate one of such facilities.
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Utility Regulation
As a public utility, Avista is subject to regulation by state utility commission for prices, accounting, the issuance ofsecurities, mergeni and other
matters. The retail electric operations are subject to the jurisdiction of the UTC, the IPUC and the Public Service Commission of the State of Montana, and
retail natural gas operations are subject to the jurisdiction of the Washington and Idaho Commissions and the OPUC. The Montana Public Service
Commission generally does not have jurisdiction over Avista's issuance of securities and has advised Avista that its approval is not required for this
transaction. Avista is also subject to the jurisdiction ofthe Federal Energy Regulatory Commission (the "FERC') for licensing of hydroelectric generation
resources, and for electric transmission services and wholesale sales.
If the merger is approved and completed, Avista would be a "holding company" under the Public Utiliry Holding Company Act of 2005. As a
result, Avista and all of its subsidiaries (whether or not engaged in any energy related business) would be required to maintain books, accounts and other
records in accordance with the FERC regulations and to make them available to the FERC and the state utility commissions. In addition, upon the request of
any state utility commission, or of Avista, the FERC would have the authority to review assignment of costs of non-power goods and administrative services
among Avista and its subsidiaries. The FERC has the authority generally to require that rates subject to its jurisdiction be just and reasonable and in this
context would continue to be able to, among other things, review transactions between Avista and any affiliated company, including AERC.
Following the Closing ofthe merger, Avista Utilities will continue to operate its utility business subject to regulation by the state utility
commissions and the FERC, and AEL&P will continue to be subject to regulation by the Regulatory Commission of Alaska.
Alaska Energy and Resources Company
Ovemiew
AERC is a privately-held corporation based in Juneau, Alaska. AERC was incorporated under the laws ofthe State ofAlaska in 1905 and is
primarily engaged in the regulated electric utility business in the City and Borough ofJuneau, Alaska, the capital ofthe state ofAlaska, through its wholly
owned subsidiary, AEL&P, an Alaska corporation. AERC also owns all of the outstanding common stock of AJT, an Alaska corporation, and Snettisham
Electric Company, an Alaska corporation ("Snettisham").
AEL&P
AEL&P is the primary operating subsidiary of AERC. AEL&,P is the sole utility providing electrical energy in the City and Borough of Juneau,
Alaska. Juneau is a geographically isolated community with no electric interconnections with the transmission facilities ofother utilities and no pipeline access
to natural gas or other fuels. Juneau's economy is primarily driven by govemment activities, tourism, conrmercial fishing, and mining, as well as activities as
the commercial hub of southeast Alaska.
AEL,&P owns and operates electric generation, transmission and distribution facilities located in the City and Borough of Juneau. AEL&P
operates five hydroeleckic generation facilities with 102.7 megawatts ofrenewable hydroelectric generation capacity as ofDecember 31,2013. AEL&P owns
four of these generation facilities (totaling 24.7 megawatts ofcapacity) and has a power purchase commitment for the ouput of the Snettisham hydroelectric
project (totaling 78 megawatts ofcapacity). The Snettisham hydroelectric project is AEL&P's primary generation facility and the main power source for the
City and Borough ofJuneau, supplying approximately two-thirds ofthe area's electricity. The Snettisham hydroelectric project was constructed and operated
by the federal govemment and subsequently purchased by the Alaska Industrial Development and Export Authority. AEL&P has a long-term power purchase
agreement and operating and maintenance agreement with the Alaska Industrial Development and Export Authority to operate and maintain the facility. As of
December 31, 2013, AEL&P also had 93.9 megawatts of diesel generating capacity from tbree facilities to provide back-up service to firm customers when
necessary.
As of December 31, 2013, AEL&P served approximately 16,100 customers in the City and Borough of Juneau. AEL&P's customer classes
include residential, small commercial, large commercial, govemmental and stre€t lighting customer classes. Its primary customers include city, statc and
federal govemmental entities located
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in the City and Borough ofJuneau as well as a mine located in the Juneau area. Such primary customers accounted for approximately 34% ofAEL&P's
electricity revenues in 2013, including approximately I I % from its largest customer, Hecla Mining Company, for service at the Greens Creek Mine. Most of
AEL&P's customers are served on a firm basis while certain of its customers, including its largest customer, are served on an intem.rptible sales basis.
AEL&P maintains separate rate tariffs for each of its customer classes as well as separate seasonal rates.
AEL&P has experienced moderate load growth in recent years as a result oftourism, mining, growth ofstate, local and federal government
activities and the City and Borough of Juneau's status as a regional hub for southeast Alaska.
As of December 3l , 2013, AEL&P had 60 full+ime employees and employs approximately l5-18 temporary, seasonal employees each year.
Approximately half of AEL&P's full-time employees are members of the Intemational Brotherhood of Electrical Workers and subject to a collective bargaining
agreement. AEL&P is one of two members of Kwaan Electric Transmission Intertie Cooperative, Inc., an Alaska nonprofit cooperative.
AEL&P's operations are subject to regulation by the RCA with respect to rates, standard ofservice, facilities, accounting and certain other
matters. Rate adjustrnents for AEL&P's customers require approval by the RCA pursuant to RCA regulations. AEL&P is also subject to the jurisdiction of
FERC concerning the permits and licenses necessary to operate certain ofits hydroelectric facilities; tbe Snettisham hydroelectric project is subject to regulation
by the State ofAlaska with respect to dam safety and certain aspects ofits operations. In addition, AEL&P is subject to regulation with respect to air and
water quality, land use and other environmental matters under both federal and state laws.
AJT
AJT owns currently inactive mining properties and other real estate in and around the area of the City and Borough ofJuneau. Such real estate
includes approximately 1,1 50 acres ofpatented mining claims and tidelands. AJT currently leases portions of its surface mining lands to tourishrelated
interests in order to partially defray the carrying costs (including property taxes and insurance) ofthe properties and has a unitization agreement with the City
and Borough ofJuneau with respect to prospective mining related activities, ifany. Prior mining activities on certain ofAJT's properties by AJT's predecessors
have resulted in several such properties having been identified in the EPA's CERCLIS data base, with resulting remediation activities having been
implemented, including under the supervision of the Alaska Department of Environmental Conservation at one site. AJT is subject to regulation with respect to
air and water quality, land use and other environmental matters under both federal and state laws. AJT also has certain long term access rights to certain
mining records located at the State of Alaska Historic Library. '
Snettisham
Snettisham is a subsidiary ofAERC organized and maintained to hold an option to purchase the Snettisham hydroelectric project pumuant to an
agreement entered into with the Alaska Indusfial Development and Export Authority, the current owner ofthe Snettisham hydroelectric project.
Alaska Merger Sub, Inc.
Merger Sub is an Alaska corporation and a wholly-owned subsidiary of Avista. Merger Sub was incorporated on October 31, 2013, for the sole
purpose ofeffecting the merger. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated in the
Merger Agreement.
THE AERC SPECIAL MEETING
General
The AERC Board of Directors is using this document as an information statoment regarding the merger and to solicit proxies from the holders of
shares of AERC common stock for use at the AERC special meeting and any adjoumments or postponements thereof. AERC is first mailing this document
and accompanying proxy card to its shareholders on or about May 12,2014.
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Date, Time and Place of the AERC Special Meeting
The AERC special meeting will be held on June 10, 2014, at I I :00 a.m., Alaska Daylight Savings Time, at AERC's executive offices, located at
5601 Tonsgard Court, Juneau, Alaska 99801.
Purpose of the AERC Special Meeting
At the AERC special meeting, AERC shareholders will consider and vote on:
a proposal to approve the plan of merger contained in the Merger Agreement, pursuant to which Alaska Merger Sub, Inc. will be merged with and
into AERC and cach outstanding share of common stock of AERC will be converted into the right to receive shares of common stock of Avist4
with cash to be paid in lieu ofany fractional shares (the "Merger Proposal"); and
a proposal to adjoum the AERC special meeting, ifnecessary, ifa quorum is present, to solicit additional proxies ifthere are not sufficient votes to
approve the Merger Proposal (the "Adjournment Proposal').
Recommendation of the AERC Board of Directors
The AERC Board of Directors has carefully considered the merger and the Merger Proposal and has determined that the merger is fair, advisable
and in the best interests of AERC and its shareholders. The AERC Board of Directors unanimously recommends that the AERC shareholders vote " p!" the
Merger Proposal and the Adjoumment Proposal. See THE MERGER-'AERC's Reasons for the Merger'' on page 33. For a discussion of interests of AERC's
directors and executive officers in the merger that may be different from, or in addition to, the interests ofAERC's shareholders generally, see T HE
MERGER-"lnterests of Certain Persons in the Merger" on page 34.
AERC Record Date; Outstanding Shares; Shares Entitled to Vote
The AERC Board ofDirectors has fixed the close ofbusiness on April Zl,2014 as the record date for determination ofshareholders entitled to
notice of and to vote at, the AERC special meeting. Only holders ofrecord ofshares ofAERC common stock at the close ofbusiness on the record date are
entitled to notice of, and to vote at, the AERC special meeting and any adjoumments or postponements thereof.
On the record date, there were I 14,504 shares ofAERC common stock outstanding held by 122 holders ofrecord, and no shares ofAERC
preferred stock outstanding.
Each shareholder is entitled to one vote at the AERC special meeting for each share ofAERC common stock held by that shareholder at the close of
business on the record date. AERC's common stock is its only voting security for the AERC special meeting.
AERC will make a complete list of shareholders entitled to vote at the AERC special meeting, with the address and the number of shares held by
each such shareholder, available for inspection by any AERC shareholder, at AERC's registered office, 5601 Tonsgard Court, Juneau, Alaska 99801 during
normal business hours at least 20 days before the special meeting as well as at the time and place ofthe AERC special meeting.
Quorum
In order to conduct the AERC special meeting, holders of a majority of the outstanding shares of AERC commou stock entitled to vote must be
present in person or represented by proxy so that there is a quorum. It is important that you vote promptly by proxy or attend the AERC special meeting so that
your shares are counted toward the quorum. All shares of AERC conmon stock represented at the AERC special meeting, including abstentions, will be treated
as shares that are present and entitled to vote for purposes of determining the presence of a quorum.
0)
(2)
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Vote Required
Required Vole to Approve the Merger Proposal
The affirmative vote of the holders of record of at least two-thirds of the shares of AERC common stock outstanding on the record date for the
AERC special meeting is required to approve the Merger Proposal. If you abstain from voting or fail to vote on the Merger Proposal, it will have the same effect
as voting against this proposal.
Required Vote to Approve the Adjournment Proposal
The affrrmative vote of the holders of a majority of the AERC common stock represented at the AERC special meeting in person or by proxy is
required for the approval ofthe Adjournment Proposal. Ifyou are present at the meeting and abstain from voting or fail to vote on the Adjoumment Proposal, it
will have the same effect as voting against this proposal.
Voting by AERC's Directors and Execudve Oflicers
As of April 21,2014, the record date for the special meeting, the shares of AERC cornmon stock beneficially owned by all of AERC's directors
and executive officen constituted approximately 57.1% of the outstanding shares of AERC common stock entitled to vote at the AERC special meeting. See
SECURITY owNERsHIp oF CERTATNBEI.IEFICIAL OWNERS AND MANAGEMENT oF AERC on page 56 for further information. In addition, as of such
date, certain relatives ofthe foregoing beneficially owned, collectively, approximately 8.9% ofthe outstanding shares ofAERC colnmon stock. AERC
currently expects that AERC's directon and executive oflicers will vote their shares of AERC common stock in favor of the Merger Proposal and Adjoumment
Proposal, although none ofthem has entered into any agreements obligating them to do so.
Voting ofProxies
Giving a proxy means that an AERC shareholder authorizes the persons named in the enclosed proxy card, the proxy holder, to vote its shares at
the AERC special meeting in the manner that such shareholder directs. All shares represented by properly executed proxies received in time for the AERC
special meeting will be voted in the manner specified by the shareholders giving those proxies.
The proxy holders named in the proxy will vote properly executed proxies that do not contain voting instructions " [Q[" the approval of the
Merger Proposal and "FOR" the Adjournment Proposal.
If the AERC special meeting is postponed or adjourned a shareholder's proxy may remain valid for up to eleven months and may be voted at the
postponed or adjoumed meeting. A shareholder will still be able to revoke the shareholder's proxy rmtil it is voted.
How to Vote
A shareholder may vote at the special meeting in person or by the shareholder's authorized attorney-in-fact or by proxy executed in writing by the
shareholder or by the shareholder's authorized attomey-in-fact. A proxy executed by electronic transmission must: (l) be directed to the person who will be the
holder ofthe proxy or to a proxy solicitation firm, proxy support service organization, or similar agent that is authorized by the person who will be the holder
of the proxy to receive the transmission; and (2) include information that demonstrates that the shareholder authorized the transmission. The named proxy
holders will vote all shares at the meeting that bave been properly granted and not revoked.
Only shares aflirmatively voted for the approval ofthe proposals to be considered at the AERC special meeting or properly executed proxies that
do not contain voting instructions will be counted as favorable votes for the proposals.
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Revoking Your Proxy
A penon may revoke a proxy at any time after such proxy has been given and before it is voted, in one ofthe following ways:
by a writing delivered to AERC stating that the proxy is revoked,
by a subsequent proxy executed by thc person executing the prior proxy and delivered to AERC, or
by attendance at the AERC special meeting and voting in person by the person executing the proxy.
The dates contained on the forms ofproxy presumptively determine the order ofexecution, regardless of the postmark dates on the envelopes in
which the proxies are mailed.
Proxy Solicitation
Tbe AERC Board of Directors is soliciting proxies for the AERC special meeting from AERC shareholders. AERC will bear the entire cost of
soliciting proxies from AERC shareholders, except that Avista and AERC will each bear their own expenses incurred in preparing and filing the regisbation
statement of which this document is a part. ln addition to this mailing, AERC's directors, offrcers and employees (who will not receive any additional
compensation for such services) may solicit proxies personally, electronically or by telephone or other meail;.
AERC will also request that banks, brokerage houses, trustees and other custodians, nominees and fiduciaries send proxy materials to the
beneficial owners ofAERC comrDon stock and will, ifrequested, reimburse the record holden for their reasonable out-of-pocket expenses in doing so. The
extent to which these proxy-soliciting efforts will be necessary depends upon how promptly proxies are submitted.
Assistance
If you need assistance in completing your proxy card or have questions regarding AERC's special meeting, please contact either William A.
Corbus, AERC's Chairman of the Board and President, by phone at [phone]; by electronic conespondence at [e-mail]; or by mail at
AERC's headquarters, 5601 Tonsgard Court, Juneau, Alaska 99801 or Connie Hulbert, AEL&P's Vice President, Treasurer and Secretary, by phone at
(907) a63-63 I 3; by electronic correspondence at [e-mail]; or by mail at AERC's headquarters, 5601 Tonsgard Court, Juneau, AK 99801.
PROPOSALS SUBMIITED TO AERC'S SHAREHOLDERS
The Merger Proposal
(Item I on AERC Proxy Card)
The AERC Board ofDirectors is asking its shareholders to consider and vote on a proposal to approve the plan of merger contemplated by the
Merger Agreement and the terms and conditions of the Merger Agreement and thereby approve, among other things, the merger. Approval of the plan of merger
contained in the Merger Agreement will also constitute consent to the appointnent of William A. Corbus as the shareholders' representative for purposes of
taking certain actions and giving certain consents on behalfof AERC shareholders, as specified in the Merger Agreement. Holders of AERC common stock
should read this document carefully in its entirety, including the annexes, for more detailed information conceming the Merger Agreement and the merger. In
particular, holders of AERC common stock are directed to the Merger Agreement, a copy of which is attached as Annex B to this document.
The affirmative vote of the holders of record of at least two-thirds of the shares of AERC common stock outstanding on the record date for the
AERC special meeting is required to approve the Merger PropoSal. If you abstain from voting or fail to vote on the Merger Proposal, it will have the same effect
as voting against this proposal.
(t)
(2)
(3)
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The AERC Board of Directors recommends a vote " qOR' the Merger Proposal (Item l). See Tnr AERC SPEcHL
MEETlNc-"Recommendation of the AERC Board of Directors" on page 27 and T gr MERGER-"AERC's Reasons for the Merger" on page 33
for further information regarding the AERC Board of Directors' reasons for such recommendation.
The AERC Adjournment Proposal
(Item 2 on AERC Proxy Card)
The AERC special meeting may be adjoumed to another time or place, if necessary or appropriate, to permit, among other things, further
solicitation ofproxies to obtain additional votes in favor ofthe Merger Proposal.
If at the AERC special meeting, a quorum is present and the number ofshares ofAERC common stock present or represented and voting in favor
of the Merger Proposal is insufficient to approve such proposal, AERC intends to move to adjourn the AERC special meeting in order to solicit additional
proxies for approval ofthe Merger Proposal.
In the Adjoumment Proposal, the AERC Board of Directon is asking its shareholders to authorize the holder of any proxy solicited by the AERC
Board ofDirectors to vote in favor ofgranting discretionary authority to the proxy holders, and each ofthem individually, to adjoum the AERC special
meeting to another time and place for the purpose ofsoliciting additional proxies. Ifthe AERC shareholders approve the Adjournment Proposal, AERC could
adjoum the AERC special meeting and any adjoumed session ofthe AERC special meeting and use the additional time to solicit additional proxies, including
the solicitation ofproxies from AERC shareholders who have previously voted against the Merger Proposal.
The aftirmative vote of the holders of a majority of the AERC common stock represented at the AERC special meeting in person or by proxy is
required for the approval ofthe Adjoumment Proposal. Ifyou are present at the meeting and abstain from voting or fail !o vote on the Adjournment Proposal, it
will have the same effect as voting against this proposal.
The AERC Board of Directors recommends a vote " FOR' the Adjournment Proposal (Item 2).
. THEMERGER
The discussion in this document of the merger and the principal terms of the Merger Agreement is subject to, and is qualified in its entirety by
reference to, the Merger Agreement. You are urged to read carefully the Merger Agreement in its entirety, a copy of which is attached as Annex B to this
document and incorporated by reference herein.
General Description of the Merger
Upon completion of the merger, Merger Sub, a wholly-owned subsidiary of Avista formed for the sole purpose of effecting the merger, will merge
with and into AERC. AERC will be the surviving company of the merger between it and Merger Sub and will thereby become a wholly-owned subsidiary of
Avista.
In the merger, each outstanding share ofAERC common stock will be converted at the Closing ofthe merger into the right to receive shares of
Avista common stock, with cash to be paid in lieu of fractional shares. For an explanation and illustration ofthe exchange ratio to be used in determining the
number of shares of Avista corrmon stock to be issued for each share of AERC common stock see THE MERGER AcREEMENT-'Merger Consideration;
Conversion of Shares in the Merger" on page 45.
Upon completion ofthe merger, the cunent directors and officers ofAvista will continue to serve in their rospective roles, and the new directors
and officers of AERC will be selected officers of Avista. Avista will maintain its current headquarten in Spokane, Washinglon, but has also agreed to
maintain the current headquarters ofAERC for a period of at least two years following the Closing. Until the merger has received all necessary approvals and
the parties complete the merger, Avista and AERC will continue operating as separate entities. The companies are targeting the completion of the merger by
July l, 201 4, subject to receipt ofthe necessary shareholder and
Tahle of Contents
regulatory approvals discussed in this document, although the parties cannot assure completion by any particular date.
Background of the Merger
The AERC Board of Directors has engaged in a regular strategic planning process, including evaluating potential stategic opportunities. On
August 3, 2012, the AERC Board of Directo$ held a meetirg with members of AERC and AEL&P management to analyze strategic altematives for AERC. In
light of the business, operations, financial condition, ownership structure, competitive position and prospects of AERC and the nature of the industry in
which AERC participates, the AERC Board of Directors directed AERC's management to evaluate the potential sale of the company.
On October 11,2012, William A. Corbus, AERC's Chairman of the Board and President, received a presentation from Stifel, Nicolaus &
Company ("Stifel") which he subsequently discussed with the AERC Board of Directors with respect to the environment for mergers and acquisitions in the
utiliry market and for AERC.
On November 30, 2012 and December 7, 2012, the AERC Board of Directors held meetings with members of AERC and AEL&P management to
frirtber discuss the potential sale ofAERC. Following such discussions, the AERC Board ofDirectors selected Stifel as its frnancial adyisor for the proposed
sale and, following the negotiation and execution of an engagement letter with Stifel on March l, 2013, directed Stifel and AERC's managernent to identiff and
contact potential acquirors for AERC.
In early May 2013, Stifel began contacting prospective buyers regarding a sale of AERC. As part of that process, on May 23,2013, Parker Weil,
Managing Director of Stifel, contacted Mark Thies, Senior Vice President and Chief Financial Ofticer of Avista, to inquire about Avista's interest in an un-
named regulated electric utility company located in a single Pacific Northwest state. After initial internal consideration ofthe potential opportunity, Kevin
Christie, Senior Director of Finance of Avista, responded to Mr. Weil on May 23, 2013 requesting additional information and the proposed form of
confidentiality agreement required in order to leam more about the potential opportunity.
In May and early June 2013, AERC negotiated and executed confidentiality agreements with Avista and thirteen other interested prospective
acquirors and provided such prospective acquirors with certain preliminary due diligence information conceming AERC and its subsidiaries. As part of such
process, Avista and AERC exchanged comments on a draft confidentiality agreement between May 23rd and May 28th, and on May 28, 2013, Avista and
AERC executed a confidentiality agreement to govem the provisions of preliminary due diligence information on AERC. Between May 28th and June 14,2013,
AERC provided Avista with certain preliminary due diligence information conceming AERC and its subsidiaries.
In June 2013, AERC received confidential indications ofinterest from five prospective acquirors, including from Avista on June 14,2013,
outlining the principal terms and conditions by which such parties proposed to acquire AERC and its subsidiaries.
On June 21,2013, the AERC Board of Directors held a meeting with members of AERC and AEL&P management and representatives from
Stifel, Faulkner Banfield, P.C. ("Faulkner''), legal counsel to AERC, and Morrison & Foerster LLP ("Morrison"), legal counsel to AERC, to discuss the
status of the sale process, evaluate the indications of interest received from prospective acquirors, analyze the characteristics of such prospective acquirors,
discuss the AERC Board of Director's fiduciary duties and determine future direction regarding the proposed sale process. Following such discussion, the
AERC Board of Directors directed Stifel and AERC's management to continue to negotiate with a number ofprospective acquirors and request revised offers
therefrom.
Between July 9, 2013 and July 16,2013, Mr. Corbus, Timothy Mcleod, AEL&P's Presiden! Constance Hulbert, AEL&P's Vice President,
Secretary and Treasurer, and Scott Willis, AEL&P's Vice President and Generation Engineer, held a series of meetings in Seattle, Washington with
representatives from three prospective acquirors, including Avista on July 16,2013, to discuss AERC's business performance, financial metrics and growth
trends, and regulatory and operating environment, the feasibility ofa business combination between AERC and any ofsuch parties, and the shategic direction
for a combined company.
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On July 19, 2013, the AERC Board of Directors held a meeting with members of AERC and AEL&P management and representatives from
Stifel, Morrison and Faulkner to discuss the status ofdiscussions with prospective acquirors, the characteristics ofsuch parties and management's initial
impressions thereof following the recently completed management presentations, material considerations for a transaction and the expected timeline for the sales
process.
On July 31, 2013, John Cesarz, a director of Stifel, informed Mr. Christie that Avista's indication of interest was sufficient to permit Avista to
continue with second round activities, including a visil to certain AERC facilities, meetings with AERC personne! and access to additional due diligence
materials. The transmittal also included a form of Merger Agreement for Avista's review and comment.
Between July 31, 2013 and September 6, 2013, Avista undertook additional due diligence activities and engaged the services ofselected ouside
advisers to assist Avista in its due diligence activities.
Between August 12, 2013 and August 16,2013, Mr. Corbus, as well as other executives on AERC's management team, held an additional series
ofmeetings with representatives from three prospective acquirors, including Avista, in Juneau, Alaska, to provide such parties the opportunity to conduct
additional in-person diligence. As pad of such meetings and Avista's due diligence activities, on August l3 and 14, 2013, Dennis P. Vermillion, Senior Vice
President and President of Avista Utilities, Don F. Kopczynski, Vice President of Energy Delivery and Customer Service, Mr. Christie, together with several
other representatives of Avista responsible for generation, transmission and environmental matters, made site visits to AEL&P's generating stations and service
areas and participated in meetings with their counterparts at AEL&P. Their AEL&P counterparts included Mr. Corbus, Mr. Mcl-eod, Ms. Hulbert, Mr. Willis
and Eric Eriksen, AEL&P's Vice President and Transmission and Distribution Engineer.
On August 20, 201 3, the AERC Board of Directors held a meeting with members of AERC and AEL&P management and representatives from
Stifel, Morrison and Faulkner, to discuss the recently completed management presentations, the characteristics and management's views ofprospective
acquirors, and material timing and strategic considerations for a transaction.
On September 6,2013, three potential acquirors, including Avista, submitted confidential second round bids for the acquisition ofAERC and its
subsidiaries.
On September 11, 2013 and September 12,2013, the AERC Board of Directors held meetings with members of AERC and AEL&P management
and representatives from Stifel, Monison and Faulkner to discuss the status ofnegotiations with prospective acquirors, evaluate the feafures ofthe revised
offers received from such prospective acquirors and strategic considerations related thereto, and determine future direction regarding the proposed sale process.
The AERC Board of Directors discussed, among other things, the AERC Board of Directors' preferences among the prospective acquirors, the characteristics
thereof, and preferred strategy with regards to each as well as the issues the AERC Board of Directors considered in determining such preferences and sEategy,
including without limitation, the economic, risk allocation and other terms offered, the impact of the transaction on various AERC stakeholders, certain risks
related to the transaction and the certainty of completing a transastion with the various prospective acquirors. Based on the foregoing, the AERC Board of
Directors viewed Avista's offer as superior to competing offers and opportunities and directed Stifel and AERC's management to negotiate primarily with
Avista moving forward.
On September 16, 2013, Mr. Weil and Mr. Cesarz informed Mr. Christie that Avista had been selected as the party with which AERC wanted to
pursue negotiations ofa definitive merger agreement for the acquisition ofAERC and its subsidiaries.
Between September 16,2013 and November 4, 2013 Avista's management, and legal and financial advisors, worked with AERC'S management,
and legal and financial advisors, to finalize the terms and conditions ofthe Merger Agreement. Avista also continued its due diligence activities during this
period.
On October 30, 2013, the Avista Board of Directors held a meeting, at which members of Avista's management provided an update as to the
potential acquisition of AERC, and summarized various operational and financial aspects of AERC. Members of Avista's management also described the due
diligence that had been conducted to date with respect to AERC, summarized their findings and described the transaction timeline and next
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steps. By resolutions adopted at that meeting, the Avista Board of Directors unanimously approved the merger and the Merger Agreement and authorized
representatives of Avista's management to execute the Merger Agreement,
On October 31,2013, the AERC Board of Directon held a meeting, at which members of AERC's management, Stifel and Morrison provided an
update as to the potential acquisition of AERC by Avista. The AERC Board of Directors also discussed matters involving the interest of AERC and AEL&P
management team in the potential transaction. The AERC Board of Directors discussed with representatives of Stifel and AERC's management the potential
financial and strategic benefits that AERC shareholders might receive in a combination with Avista, as well as the potential risks related thereto, and a
comparison of those risks and benelits to competing offers and oppornrnities. The AERC Board of Directors discussed the key items to be addressed in
evaluating a combination with Avista, including the combined company strategy and organizational stucture to support that sftategy, the financial and other
key terms ofthe proposed transaction, the potential impact ofthe transactions on stakeholders ofAERC and the parties' regulatory approval stategy. The
members of the AERC Board of Directors considered the information presented at the meeting and at prior meetings and, by unanimous vote, detcrmined that
the Merger Agreement and the merger were advisable and in the best interests of AERC and its shareholders, approved the plan of merger contained in the
Merger Agreement, and authorized reprcsentatives of AERC's management to execute the Merger Agreement.
On November 4, 2013, Avista and AERC executed the Merger Agreement. A joint press release announcing the merger was issued on November 4,
20t3.
AERC's Reasons for the Merger
In reaching its decision to approve the Merger Agreement and recommend its approval by the AERC shareholders, the AERC Board of Directors
consulted with AERC's management and its legal and financial advisors, and considered a variety offactors with respect to the merger, including those
matters discussed in "Tge MERGER-Background of the Merger" on page 3 I . The following discussion of the information and factors considered by the
AERC Board of Directors is not exhaustive. In view of the wide variety of factors considered in connection with the merger, the AERC Board of Directors did
not consider it practical, nor did it attempt, to quantif, or otlenwise assign relative weight to different factors it considered in reaching its decision. In addition,
individual members of the AERC Board of Directors may have given different weight to different factors. The AERC Board of Directors considered this
information as a whole, and overall considered it to be favorable to, and in support of, its determination and recommendations.
In addition to the interests of certain directors and executive officers of AERC (see T HE MERcER-"lnterests of Certain Persons in the Merger" on
page34), among the material information and factors considered by the AERC Board of Directors were the following:
Alternatives to the Merger. Following a careful review of the strategic altematives to the merger, including altemative competing offers and
continuing to operate as a stand-alone entity, and in light ofthe current business, operations, financial condition, competitive position and
prospects of AERC, and the natue of the industry in which A-ERC participates, none of the altematives available to AERC are, in the view of
AERC's Board of Directors, as or more favorable to AERC and its shareholders than the merger.
Considerution to be received undet the rerms of lhe Merger Agreement. The amount, type, timing, conditions, adjustments and
contingencies ofand with rospect to the consideration to be received by the shareholders ofAERC in connection with the merger (including,
without limitation, the floor and ceiling prices related to the exchange ratio with respect thereto), as well as the other financial terms of the Merger
Agreement, are, in the view ofAERC's Board ofDirectors, fair and reasonable to the shareholders ofAERC and provide the shareholders of
AERC with enhanced liquidity in a tax eflicient manner.
Terms of the Merger Agreement. The additional terms of the Merger Agreement and other agreements referenced in the Merger Agreement,
attached thereto or contemplated thereby, including, among others, the operation of the escrow and indemnification arrangements, restrictions on
operations between signing and closing, and conditions to the parties' obligations to consummate the merger, are, in the view ofAERC's Board of
Directors, fair and reasonable to the shareholders of AERC.
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. Condition and Prospects ofAvista and Combined Operations. The business, operations and financial condition ofAvista following the
merger, including the scale, scope and geographic diversification of Avista following the merger, were superior to those ofAERC on a stand-alone
basis.
. Management Succession and Shareholder Liquidity. Avista's experience in the utility industry, similar corporate culture and focus, and
broad shareholder base and trading volume as a publicly traded NYSE listed company provided a compelling solution to the AERC Board of
Directors' desire to provide its long-term shareholder base additional liquidity and address AERC management succession plans and related issues
which the AERC Board ofDirectors had been evaluating and considering.
. Impact on Stakeholders, Due to Avista's cxpertise and experience in managing regulated utilities, the cultural similarities between Avista and
AERC, the common strategic visions for the future of AERC shared by AERC and Avista, and certain contractual assurances in the Merger
Agreement increasing the likelihood ofeffective implementation of such strategic visions (including covenants with respect to (i) compensating,
providing benefits to, and retaining the employees of AERC and its subsidiaries following the consummation of the merger (as of the date of this
document, only AEL&P has employees), (ii) maintaining AERC's existing corporate offices in luneau, Alaska and (iii) continuing the charitable
contribution practices and the community support practices ofAERC and its subsidiaries), the merger is expected to continue AERC's strategic
focus on its stakeholders including the ratepayers, employees, shareholders and other business relationships ofAERC and its subsidiaries.
. Likelihood of ComplAion of the Merger, Each party's experience in working closely with its respective state regulators is anticipated to enhance
the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will timely receive all requisite regulatory
approvals without imposition of unfavorable conditions or delay that could jeopardize the parties' ability or desire to close the merger. Such profile
helps mitigate the risks and costs to AERC relating to the announcement and pendency of the merger and if the closing of the merger is not timely,
or if the merger does not close at all, the impact on AERC's relationships with employees, customer, suppliers, regulators and other business
relationships and the costs of diverting management focus, employee attention and resources from other strategic opportunities and from
operational matters while working to complete the merger.
The AERC Board ofDirectors believed that, overall, the potential benefits ofthe merger to AERC and AERC's shareholders outweighed the risks
considered by the AERC Board ofDirectors.
The AERC Board ofDirectors recognized that there can be no assurance about future results, including results considered or expected as
described in the factors listed above. It should be noted that this discussion ofthe reasoning ofthe AERC Board ofDirectors and all other information
presented in this section are forwardJooking in nature and, therefore, should be read in light of the factors referred to under the heading F oRwARDLOoKINc
StnreurNTson page 23.
Interests of Certain Persons in the Merger
Members of the AERC Board of Directors and executive officers and employees of AERC and is subsidiaries may have interests in the merger
that are different from, or are in addition to, the interests of AERC shareholders generally. The AERC Board of Directors was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and in determining to recommend to AERC shareholders to approve the Merger
Proposal.
Continuing Service
The Merger Agreement provides that, for a period of two years following completion of the merger, employees of AERC and its subsidiaries (as of
the date ofthis document, only AEL&P has employees) will receive compensation (including any annual incentive compensation opportunities and bonuses)
and benefits (including pension and retiree medical benefits) that are each in the aggregate no less favorable than the compensation and benefits provided to
such employees immediately prior to the completion of the merger. The Merger Agreement further provides that, during such time period, the employment of
such employees may not be terminated absent cause (as determined by Avista in its reasonable discretion) and provides for certain other favorable provisions
with respect to benefits for such individuals. Such covenants with respect to employment and benefit arrangements will
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apply to employees who are subject to a collective bargaining agteement only to the extent that such employment terms are not negotiated pursuant to such
collective bargaining agreement or are negotiated pusuant to collective bargaining, but are intended to be equivalent to the employment terms, compensation
and employee benefits of employees of AERC and its subsidiaries who are not subject to a collective bargaining agreement. Avista will honor the commitments
ofAERC and its subsidiaries under existing collective bargaining agreements.
Indemn ification sn d I ns urance
The Merger Agreement provides that, following the completion of the merger, AERC will (i) continue to fulfill and honor in all respects the
obligations ofAERC and any of its subsidiaries pursuant to any agreement of the foregoing providing for the indemnification of its offrcers or directors (which
would include, without limitation, indemnification agreements entered into by the foregoing with AERC shortly prior to the signing of Merger Agreement),
(ii) cause the articles of incorporation ofAERC following the merger to contain the provisions with respect to exculpation from liability currently set forth in
AERC's articles of incorporation and not permit any such provisions, or any provisions of the organizational documents of any subsidiary of AERC, to be
amended, repealed or otherwise modified after the Closing of the merger in any manner that could adversely affect the rights thereunder ofsuch parties and
(iii) continue to maintain the level and scope of the directors' and officers' liability insurance policies maintained by AERC as of the time of the Merger
Agreement for six years following the consummation of the merger subject to cedain limitations on the amount of premiums payable under such policies. See
THE MERGER AGREEMENT-"Certain Covenants Of Avista And AERC-Director And OJficer IndemniJication on page 51 for further information.
Other Interests
William A. Corbus, an offrcer, director and major shareholder of AERC, and certain of his relatives have substantial ownership interests in
AERC. Mr. Corbus is the largest shareholder of AERC stock, owning approximately 42.2oh of AERC's outstanding shares as of April 21,2014, the record
date for the special meeting. Additionally, certain relatives of Mr. Corbus, including G. Barclay Corbus, William A. Corbus'brother and a director of AERC,
and relatives thereof, additionally owned approximately 15.ZVo of the outstanding shares of AERC as of April 21, 2014.1\/k. Corbus will also serve as the
shareholders' representative under the Merger Agreement and be reimbursed for costs and expenses incurred in such capacity. Such expenses include overhead
(including without limitation, reimbursement for continued rent payments for Mr. Corbus' office) and legal expenses. Ce(ain other directors, executive offrcers
and/or employees of AERC and/or its subsidiaries, or the relatives or affiliates thereof, also hold ownership interests in the Company. See S ECUNTY
OWNERSHIP oF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT oF AERC on page 56 for further information regarding the beneficial ownership of the
executive officers and directors of AERC. The merger transaction has been structured to limit the tax impact of the merger and to provide liquidity. While
AERC believes that these attributes should benefit all AERC shareholders, they will be ofparticular value to the foregoing individuals given the magnitude of
their shareholdings.
Avista's Reasons for the Merger
In evaluating the merger and the Merger Agreement, the Avista Board of Directon consulted with Avista's management and legal and financial
advisors, and considered a variety offactors with respect to the merger, including those matters discussed below. In view ofthe wide variety offactors
considered in connection with the merger, the Avista Board ofDirectors did not consider it practical, nor did it attempt, to quantiff or otherwise assign relative
weight to different factors it considered in reaching its decision. In addition, individual members of the Avista Board of Directors may have given different
weight to different factors. The Avista Board of Directors considered this information as a whole, and overall detcrmined that proceeding with the merger was
in the best interests ofAvista and its shareholders.
The Avista Board of Directors considered a number of factors pertaining to the rationale for the merger, including the following:
Increased Scale and Scope. Acquiring AERC, aod specifically AEL&P, is consistent with Avista's strategy of growing is utility
operations in a manner that provides long-term and stable benefits to Avista's customers, employees, shareholders and the
communities it serves. Both Avista and AERC have vertically integrated electric utility operations with extensive experience in
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hydroelectric and thermal openrtions. The combined company will have more geographic diversity with the addition of Alaska
electric utility operations.
Improved Business Risk Prolile. The combined company would be expected to have an improved business risk profile due to the
increased proportion ofregulated earnings and cash flows following completion ofthe merger.
Cultursl Fit. The assets, operations and culture of Avista and AERC and AEL&P are a good fit. Both companies have a similar
focus on providing reliable service to customers with a high level ofcustomer satisfaction and cost-effective pricing, providing
opportunities for employees, eaming a reasonable retum for shareholders, and being involved in, and supportive of, the
communities the companies serve.
Management Following the Merger
Neither the Avista Board of Directors nor the executive offrcers of Avista will change with the consummation of the merger. lnformation about
Avista's Board ofDirectors and executive offrcers, including biographical information, executive compensation and relationships and related transactions
between management and Avista. can be found in Avista's proxy statement for the 2014 annual meeting of shareholders and annual report on Form I 0-K for
the fiscal year ended December 31, 2013, both ofwhich are filed with the SEC and incorporated by reference herein. For more details about how you can
obtain copies of Avista's proxy statement and Form l0-K, see WHERE You CeN FIND MoRE INFoRMATToN ABour AvtsTA on page 65.
Indemnilication and Insurance
The Merger Agreement provides that, following the completion of the merger, AERC as the surviving company will maintain the existing
indemnification agreements of AERC or its subsidiaries providing for the indemnification of AERC officers or directors, maintain certain other
inderrnification rights and provide for a diectors' and officers' liability insurance policy providing comparable coverage to the directors' and officers'
liability insurance policy in place immediately prior to the execution of the Merger Agreement for all current and former directors and officers of AERC for a
period of six ycars from the Closing Date, See TI{E MERCER AGREEMENT-"Certain Covenants Of Avista And AERC-Director And Olficer
Indemnification" on page 5l .
Listing of Avista Common Stock
The Merger Agreement provides that the sales of Avista common stock to be issued to AERC shareholders in connection with the merger shall be
approved for listing on the NYSE, subject to official notice ofissuance.
Dividends
Subject to approval by the AERC Board ofDirectors, AERC anticipates continuing to pay regular quarterly dividends until the merger is
conzummated.
The parties agreed in the Merger Agreement that prior to the Closing, AERC will use its commercially reasonable efforts to pay one or more special
dividends to its shareholders and/or prepay indebtedness in an aggregate amount ofat Ieast $8 million less aggregate ouhof-pocket fees paid to brokers,
financial advisors, accountants and legal advisors by AERC in connection with the merger. An initial special dividend of an ag$egate $4 million was paid to
AERC shareholders on December I , 20 I 3, and AERC currently anticipates paying a second special dividend in an amount to be determined shortly before the
Closing in order to satis$ such contractual obligations under the Merger Agreement,
If the merger is completed, as holders of Avista common stock, former AERC shareholders will receive dividends when and as declared by the
Avista Board of Directors and paid on all shares of Avista common stock. See RISK FACTORS-"Risks Related To An Investment In Avista Common Stock"
on page l8 and M,.\RKET INFORMATION AND DMDENDS on page 14.
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Material U.S. Federal Income Tax Considerations
The following is a general summary of the material U.S. federal income tax consequences of the merger to AERC shareholders that are U.S.
persons (as defined below) and that receive shares ofAvista common stock in exchange for their shares ofAERC stock in the merger. This discussion and the
opinions of counsel referred to below are based on the Code, Treasury Regulations promulgated thereunder, administrative interpretations thereofand court
decisions, all ofwhich are subject to change, possibly witb rekoactive effect, as ofthe date ofthe registration statement on Form S-4 ofwhich this information
statemenVprospectus is a part. Any such change could affect the accuracy ofthe statements below regarding the U.S. federal income tax consequences ofthe
merger.
This discussion applies only to AERC shareholders that are U.S. persons (as defined below) that hold their shares of A-ERC stock, and will hold
the shares of Avista common stock received in exchange therefor, as "capital assets" within the meaning of Section 1221 of the Code. This discussion does not
address all U.S. federal income tax consequences of the merger that may be relevant to a particular AERC shareholder, including a shareholder that is subject
to special tax rules. Some examples ofshareholders that are subject to special tax rules are:
dealers in securities;
banls and other financial institutions;
insurance companies;
mutual funds, regulated investment companies and real estate investment trusts;
tax-exempt organizations ;
shareholders whose shares are part of a position in a "straddle" or are part of a "hedging", "conversion" or "constructive sale"
ffansaction;
shareholders that have a "firnctional currency" other than the U.S. dollar;
shareholders that are not U.S. persons;
shareholders that own their shares indirectly through partnerships, S corporations, trusts or other entities that may be subject to
special heatment; and
shareholders that acquired their shares ofAERC stock through the exercise ofstock options or otherwise as compensation, or
through tax qualified retirement plans.
This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or U.S. federal taxes
other than regular income taxes (for example, estate and gift taxes or the alternative minimum tax). This discussion also does not address the tax consequences
ofkansactions undertaken prior to or in connection with the merger, including the receipt of any dividends from AERC, the exercise ofoptions or the
conversion ofconvertible stock or securities, any tax consequences arising under the uneamed income Medicare contribution tax pursuant to the Health Care
and Education Reconciliation Act of20l 0, or the tax consequences for any AERC shareholder that exercises dissenters' righ* in connection with the merger.
Ifa partnership or other entity treated as a partnership for U.S. federal income tax purposes holds shares ofAERC stock, the tax treatment of a
partner generally will depend on the status ofthe partner and on the activities ofthe partnership. Partnerships (and other entities treated as partnerships for
U.S. federal income tax purposes) that own AERC stock and partners of partnerships (and owuers of other such entities) that hold AERC stock are urged to
consult their own tax advisors about the tax conscquences ofthe merger to them.
For purposes ofthis discussion, a "U.S. person" means:
an individual citizen or resident of the United States, as determined for U.S. federal income tax purposes;
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. a corporation or other entity taxable as a corporation created or organized in or under the laws ofthe United States, any state thereof
or the Disnict of Columbia;
. a trust, the substantial decisions ofwhich are controlled by one or more "United States persons" (as defined in the Code) and which
is subject to the primary supervision ofa U.S. court, or a trust that has elected under applicable Treasury Regulations to be treated
as a United States person for U.S. federal income tax purposes; or
estate that is subject to U.S. federal income tax on its income regardless of its source.
Holders of AERC stock that are not U.S. persons may have different U.S. federal income tax consequences than those described below and are
urged to consult their own tax advisors regarding the tax treatment of the merger to them under U.S. and non-U.S. tax laws.
AERC shareholders are urged to consult their own tax advisors as to the specific tax consequences to them ofthe merger, including the
applicability and effect of any state, local or foreign tax laws and of changes in applicable tax laws.
U.S. Federal Income Tqx Consequences of the Merger
The merger has been structured to quali! as a "reorganization" within the meaning of Section 368(a) of the Code. In coulection with this
information statemenVprospectus, Avista has received a tax opinion from Davis Wright Tremaine LLP and AERC has received a tax opinion from Morrison &
Foerster LLP, each dated as ofthe date ofthis infonnation statemenVprospectus, to the effect that the merger will quali$ as a reorganization (together, the "Tax
Opinions").
However, completion ofthe merger is not conditioned upon the delivery ofany additional opinions from counsel dated as ofthe closing date ofthe
merger, or any other determinations as of such date, that the merger will quali$ as a reorganization. ln addition, neilher Avista nor AERC intends to obtain a
ruling from the Internal Revenue Service with respect to the U.S. federal income tax consequences of the merger, and the Tax Opinions will not bind the courts
or preclude the Intemal Revenue Service from adopting a position contrary to those expressed therein. Moreover, the Tax Opinions themselves are based on
representation lefters provided by Avista and AERC and on certain factual assumptions, including the assumption that, ifany AERC shareholders dissent
from the merger, the aggegate number ofdissenting shares they hold and the aggregate amount ofcash paid to them will not equal or exceed such number and
amount as would cause the merger to fail to constitute a reorganization. Ifany ofthe representations or assumptions on which the Tax Opinions are based
proves incorrect, either in whole or in part (and regardless ofwhether such inaccuracy has occurred or occurs as ofthe date ofthis information
statement/prospectus or thereafter), the merger may not qualiry as a reorganization.
Assuming the merger qualifies as a "reorganization" within the meaning of Section 368(a) of the Code, the following are the anticipated material
U.S, federal income tax consequences to AERC shareholders who exchange their shares ofAERC stock for shares ofAvista common stock pu$uant to the
merger:
. An AERC shareholder generally will not recognize gain or loss on the receipt of Avista common stock upon the consummation of the
merger. However, an AERC shareholder generally will recogrize gain (but not loss) with respect to such shareholder's pro rata share
of the expense fund established for the Shareholders' Representative (which pro rata share will be Eeated for U.S. federal income tax
purposes as ifit had been received by such AERC shareholder upon consummation ofthe merger). Expenditures on behalfofan
AERC shareholder paid out of the expense fund wilt be treated as expenses incurred by such shareholder, and any subsequent
release ofunexpended funds to such shareholder will not result in additional income to such shareholder. Deductions for expenses
related to the merger may be subject to limitations.
. Cash received by an AERC shareholder in lieu of a fractional share of Avista common stock upon the consummation of the merger
or from the escrow fund will be treated as received in exchange for that fractional share, and gain or loss generally will be recognized
for U.S. Gderal income tax purposes on the receipt ofsuch cash equal to the difference between the amount ofcash received and the
portion oft}re tax basis ofsuch shareholder's AERC stock allocable to such fractional
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share. Such gain or loss will be long-term capital gain or loss ifthe AERC stock exchanged in the merger has been held for more
than one year at the time of the merger.
An AERC shareholder generally should not recognize gain or loss on the receipt ofAvista common stock released from the escrow
fund and should recognize gain (but not loss) on the receipt ofcash released from the escrow fund, except to the extent such
amounts constitute cash received in lieu ofa fractional share ofAvista common stock (as discussed above) or interest income (as
discussed below). Although unlikely, altemative characterizations ofthe escrow fund are possible for U.S. federal income tax
purposes. In particular, the Intemal Revenue Service could assert an AERC shareholder's right to receive Avista common stock and
cash representing dividends paid and interest accrued thereon, in itself, constitutes the taxable receipt by such shareholder of
property other than Avista common stock, in which case such shareholder generally would recognize gain (but not loss) with respect
to the receipt of such right upon the consummation ofthe merger. AERC shareholders are urged to consult their own tax advisors
regarding the treatment of the escrow fund and amounts released from it. The remainder of this discussion assumes an AERC
shareholder's right to receive Avista common stock and cash from the escrow fund, in itself, will not be taxable upon the
consummation of the merger.
Cash released to an AERC shareholder from the cscrow fiud will be reported to the Intemal Revenue Service as interest to the extent
it represents interest accrued on cash held in escrow during the escrow period. In addition, in the event Avista common stock and
cash are released from escrow more than one year after the merger, a portion of such cash and, under certain limited circumscances,
a portion of such Avista common stock, also will be reported as interest.
Each AERC shareholdsr's aggregate tax basis in the Avista common stock received pursuant to the merger (including, for this
purpose, such shareholder's allocable share ofAvista common stock placed in the escrow fund) generally will be the same as the
aggregate tax basis in the AERC stock surrendered in exchange therefor, increased by the amount ofany gain recognized in the
merger, and decreased by (i) any cash received or Feated as having been received for such AERC stock (other than cash received in
lieu of a fractional share of Avista conrmon stock) and (ii) the amount of any tax basis allocable to any fractional share ofAvista
corunon stock for which cash is received. If any shares ofAvista common stock held in the escrow fund are released to Avista,
each AERC shareholder will be required to recompute the tax basis of any remaining shares owned by such shareholder and, under
certain circumstances, may be entitled to claim a capital loss ifshares ofAvista cornmon stock were disposed ofbefore such
release. The holding period ofAvista common stock received pursuant to the merger (including, for this purpose, Avista common
stock released from the escrow fund) generally will include the holding period ofthe AERC stock surrendered in exchange therefor.
If an AERC shareholder has differing tax bases or holding periods in respect of such shareholder's AERC stock, such shareholder
should consult with a tax advisor in order to identiff the tax bases and holding periods ofthe particular shares ofAvista common
stock that the shareholder receives.
Ifthe merger failed to qualifr as a reorganization, the merger would be a fully taxable transaction. In that event, each AERC shareholder generally
would recognize gain or loss for U.S. federal income tax purposes equal to the amount by which the sum of the fair market value of the Avista common stock
and cash received (or treated as received) by such shareholder exceeded the ag$egate tax basis in the AERC stock surrendered in exchange therefor. AERC
shareholders are urged to consult their own tax advisors regarding the possibility ofthe merger failing to qualifr as a reorganization and the tax consequences
of such event. The remainder of this discussion assumes the merger will qualify as a reorganization.
Recordkeeping, Infonnation Reporting, Backup lYithhoWing and FIRPTA lfithholding
Ar AERC shareholder will be required to retain records pertaining to the merger. Each AERC shareholder who is required to file a U.S. federal
income tax retum and who is a "significant holder" that receives sh&es of Avista common stock generally will be required to file a statement with such
shareholder's U.S. federal income tax retum setting forth the names and employer identification numbers of Avista and AERC, the date of the merger, and
such shareholder's tax basis in, and the fair market value of, the AERC stock surrendered in the merger. A "significant holder" is a shareholder who,
immediately before the merger, owned either (i) at least l% (by vote or
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value) of the outstanding stock of AERC or (ii) securities of AERC with a tax basis of $1,000,000 or more and received Avista common stock in the merger.
Certain shareholders may b'e subject to information reporting with respect to the cash received in lieu of a fractional share of Avista common
stock, treated as received with respect !o the Shareholders' Representative expense fund or received in connection with the release ofAvista common stock from
the escrow fund. Shareholders who are subject to infonnation reporting and who do not provide appropriate information on an IRS Form W-9 (or substitute
Form W-9) when requested may also be subject to "backup withholding" currently at a rate of 28%, as well as penalties. Any amount withheld under the
backup withholding rules is not an additional tax and may be refunded or credited against such shareholder's U.S, federal income tax liability provided that
the required information is properly fumished by the AERC shareholder in a timely manner to the Internal Revenue Service.
Under the Foreign Investrnent in Real Property Tax Act ('FIRPTA'), the disposition of"United States real property interests" ("USRPIs"),
including stock in certain U.S. corporations that own significant amounts ofUSRPIs (such corporations being referred to as "United States real propefty
holding corporations" or "USRPHCs"), by an AERC shareholder who is not a "United States person" (within the meaning of the Code) is generally subject to
withholding at a rate of I 0% of the gross amount of consideration received in the disposition. Withholding is not required if appropriate certifications as to the
shareholder's non-foreign status zue provided. Due to uncertainty regarding whether AERC may currently be, or at some point during the relevant period prior
to the merger may have been, a USRPHC, AERC shareholders who do not provide 0re requested certification as to their status as United States persons will be
subject to FIRPTA withholding in an amount equal to l0% ofthe gross proceeds that they othenyise would have been entitled to receive in the merger. Any
amount withheld under the FIRPTA rules is not an additional tax, and in the case of a United States person, may be refunded or credited against such
shareholder's U.S. federal income tax liability, provided that the required information is properly furnished to the Internal Revenue Service by the AERC
shareholder in a timely manner.
This discussion of material U.S. federal income tax consequences is for general information only and does not constitute tax advice.
Holders of AERC stock are urged to consult their own tax advisors with respect to the application of the U.S. federal income tax laws to their
particular situations as well as any tax consequences arising under the U,S. federal estate, gifl alternative minimum and unearned Medicare
contribution tax rules or under tbe laws of any state, local, foreign or other taxing jurisdiction.
Accounting Treatment
Avista will account for the merger as an acquisition ofthe business, which requires the assets and liabilities of AERC to be measured and
recorded at their fair value. Such assets and liabilities, as so measured and recorded, will be included on the balance sheet ofAvista and its consolidated
subsidiaries. The results of operations of AERC will be included on the income statement of Avista and its consolidated subsidiaries from and after the
effective time that conkol of AERC transfers to Avista, which will occur on the date of the merger. The business combination will be accounted for by applying
what is referred to as the acquisition method, as described in Accounting Standards Codification Section 8O5-Business Combinations.
Dissenters' Rights of AERC Shareholders
Ifthe Merger Agreement is approved by the required vote ofAERC shareholders and is not abandoned or terminated, holders ofAERC common
stock who did not approve the merger by voting their shares in favor of the Merger Proposal at the special shareholders meeting may, by complying with
Section 574 and 576 of the Alaska Corporations Code, be entitled to dissenters' rights as described therein and, ifthe merger is consummated, receive cash
for the fair market value of their AERC common stock. The record holders of the shares of AERC common stock that are eligible to, and do, exercise their
dissenters' righs with respect to the merger are referred to herein as "dissenting shareholders," and the shares with respect to which tlrey exercise dissenters'
rights are referred to herein as "dissenting shares."
Please note that if you wish to receive your portion of the Merger Consideration selforth in the Merger Agreement and do not intend to
exercise your dissenters' ights, you do not need to take any action with respect to the infonndtion and materials setforth under this section,
" Dissenters' Rights of AERC Shareholders. "
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The following discussion is not a complete statemont ofthe law pertaining to dissenters' rights under the Alaska Corporations Code and is
qualified in its entirety by reference to Sections 574 tkough 582 ofthe Alaska Corporations Code, the full text ofwhich are attached to this information
statemenVprospectus as Annex C and incorporated herein by reference. Annex C should be reviewed carefi.rlly by any AERC shareholder who wishes to
exercise dissenters' rights or who wishes to preserve the right to do so, since failure to comply with the procedures of the relevant statute will result in the loss
ofdissenters' rights. The following discussion does not constitute any legal or other advice, nor does it constitute a recommendation that AERC shareholders
exercise their dissenters' rights.
ANY HOLDER OF AERC COMMON STOCK WISHING TO EXERCISE DISSENTERS' RIGHTS tS URGED TO CONSULT
LEGAL CO['NSEL BEFORE ATTEMPTING TO EXERCISE SUCII RIGIITS. TO PERFECT AND EXERCISE SUCH RIGHTS,
DISSENTINC SHAREHOLDERS MUST STRICTLY FOLLOW THE SPECIFIC PROCEDURES AND TTMELINES PRESCRJBED BY THE
ALASKA CORPORATIONS CODE. FAILURE TO TIMELY FOLLOW TrIE STEPS REQUTRED FOR PERFECTING DISSENTERS'
RIGHTS MAY RESULT IN THE LOSS OF THESE RIGHTS.
In order to exercise the right to dissent, a shareholder must satisfi each ofthe following requirements under Alaska law:
. the shares of AERC common stock must have been outstanding and held of record by the dissenting shareholder on April 21, 2014, the
record date for the special meeting ofshareholden at which the Merger Proposal is being submitted to a vote;
. the shareholder must file with AERC, before or at the special meeting of shareholders at which the Merger Proposal is submitted to a vote,
a written objection to the Merger Proposal, including a notice ofelection to dissent, the shareholder's name and residence address, the
number and classes of shares as to which the shareholder dissents, and a demand for payment ofthe fair value ofthe shares iftlre action
is taken; and
. at the time of filing the notice of election to dissent, or within thirty days thereafter, the shareholder must submit to AERC or its transfer
agent stock certificates representing the shares for which disseoters' rights are claimed, if certificates have been issued, and A-ERC or its
hansfer agent will note on the certificate that an election to dissent has been made with respect to such shares.
Unless a court, for good cause shown, otherwise directs, a disseniing shareholder who fails to comply with the requirement to retum such
dissenting shareholder's stock certificate loses the right to dissent granted by Sections 574 through 582 of the Alaska Corporations Code, if the surviving
company gives written notice that the dissenting shareholder's right to dissent will be lost within forty-five days from the date that such dissenting shareholder
filed the notice of election to dissent. Voting against the Merger Proposal or abstaining from voting for the Merger Proposal does not in and of itself constitute a
demand for appraisal under Alaska law.
Pursuant to Section 576 ofthe Alaska Corporations Code, within ten days ofthe shareholder vote authorizing the transaction, AERC is required
to give wrinen notice of such shareholder approval to all shareholders who have filed an election to dissent and any shareholders who did not vote in favor of
the Merger Proposal and was not given notice of the meeting. Ifa shareholder did not receive notice ofthe AERC special meeting in accordance with the Alaska
Corporations Code, that shareholder is excused from filing an election to dissent at or before the special meeting of the shareholders, but instead must file a
written election ofdissent within twenty days ofreceiving such written notice from AERC ofthe shareholder vote authorizing the merger.
Upon completion of the merger, all shareholders who have made an election to dissent with regard to the merger will cease to have the rights of a
shareholder and instead will have only the right to be paid the fair value for the shares of AERC common stock for which dissenter's rights are perfected under
the Alaska Corporations Code.
A dissenting shareholder may withdraw its election to dissent within sixty days ofthe Closing Date, so long as such shareholder has not already
accepted a settlement payment for the fair market value ofthe shares. In order to be effective, any such withdrawal must be accompanied by the retum ofany
advance payment previously made by the surviving company to such dissenting shareholder. The period for withdrawal may be extended for sixty days from
the date an offer is made to the dissenting shareholders for payment ofthe fair value. A shareholder may not
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withdraw its election to dissent following the expiration of such period without the consent of the surviving company.
Pursuant to Section 578 ofthe Alaska Corporations Code, within fifteen days after the Closing Date, or within fifteen days after the expiration of
the period within which dissenting shareholders' may file their notice ofelection to dissent, whichever is later, the surviving company is required to make a
written offer to all dissenting shareholders to pay the amount the surviving company estimates to be the fair value of the shares of AERC common stock. The
offer is to be made at the same price to all shareholders, and must be accompanied by:
. the most recent balance sheet ofAERC produced in the twelve months before such offer;
. a profit and loss statement ofAERC for at least the twelve months preceding the date ofthe balance sheet;
. a statement ofthe total number ofshares with respect to which notices ofelection to dissent have been received and the total number of
dissenting shareholders;
copy of Sections 578 and 580 ofthe Alaska Corporations Code; and
. advance payment ofthe estimated fair value offered for the shares (or a notice ofthe amount ofthe advance payment ifthe dissenting
shareholder has not yet submitted such shares), with a notice advising the dissenting shareholder that acceptance of such amount is not a
waiver of dissenters rights under the Alaska Corporations Code.
If a dissenting shareholder does not object to the payment offered within thirfy days after the advance payment is made to such dissenting
shareholder, the dissenting shareholder will be deemed to have accepted the offered payment as fair value for the AERC common stock.
Ifthe surviving company fails to make the offer of its estimated fair value for the shares or ifthe dissenting shareholder rejects the offer within the
thirty day period described above, then within twenty days after the expiration of such thirty day period, the suwiving company must file a petition in the
Juneau Superior Court requesting that the fair value ofthe shares be determined. Ifthe surviving company fails to file such a petition, a dissenting shareholder
may file such a petition within thirty days after the expiration ofthe twenty day period in which the surviving company had an obligation to file such petition.
All dissenting shareholders who have rejected the offer from the surviving company for payment ofestimated fair value will be made a party to the action, and
the court shall determine the fair value ofthe shares as of the close ofbusiness on the day before the vote was taken to approve the merger. Payment ofthe fair
value as determined by the court must be made by the surviving company to those disssnting shareholders who were a party to such court action within sixty
days after the final determination ofthe proceeding. The jurisdiction ofthe court shall be plenary and exclusive.
In determining the fair market value of the dissenting shares, the court may appoint one or more impartial appraisers to make the determination
and grant them such power and authority as the court may speciry in the order ofappointment. The fair value determination will include a rate ofinterest
deemed fair and equitable by the court from the date on which the vote was taken until the payment date, provided that the court is not required to provide for
interest to be paid if the court believes the dissenting shareholder's refusal to accept the offer of estimated fair value from the surviving company was arbitrary,
vexatious or otherwise in bad faith.
Each party must bear its own costs and expenses relating to the appraisal action. However, the court may require the dissenting shareholders to
pay all or part of the costs and fees of the suwiving company if the court determincs that the refusal to accept the surviving company's offer of fair value was
arbirary, vexatious or otherwise in bad faith. Likewise, if the court determines the fair value offered was materially less than the fair value for the shares
determined by the court, ifthe surviving company failed to make an offer or a required advance payment to the dissenting shareholders or timely instinrte
certain special proceedings, or ifthe action ofthe surviving company in complying with its obligations as provided in Sections 574 through 582 ofthe Alaska
Corporations Code was arbitrary, vexatious, or otherwise in bad faith, the court may require the surviving company to pay part or all of the costs and fees of
the dissenting shareholders.
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AERC shareholders considering whether to exercise dissentcrs' rights should consider that the fair value oftheir AERC common stock determined
under Section 578 or Section 580 ofthe Alaska Corporations Code could be more than, the same as or less than the value ofMerger Consideration to be paid
in connection with the merger, as set forth in the Merger Agreement. In fixing the fair value ofthe shares, the court will consider the nature of the hansaction
giving rise to the right to dissent, its effects on the surviving company and the AERC shareholders, the concepts and methods customary in the relevant
securities and financial markets for determining the fair value of shares of a corporation engaging in a similar transactioo under comparable circumstances,
and other relevant factors. Also, AERC reserves the right to assert in any appraisal proceeding that, for purposes thereof, the fair market value ofAERC
common stock is less than the value of the Msrger Consideration to be issued and paid in connection with the merger, as set forth in the Merger Agreement.
Strict compliance with certain technical prerequisites is required to exercise dissenters' rights. AERC shareholders wishing to exercise dissenters'
rights should consult with their own legal counsel in connection with compliance with the dissenten' rights provisions of the Alaska Corporations Code. Any
AERC shareholder who fails to comply with the roquirements of the dissenters' rights provisions of the Alaska Corporations Code, attached as Annex C to
this information statemenVprospectus, will forfeit the right to exercise dissenters' rights and will, instead, receive the Merger Consideration to be issued and
paid in connection with the merger, as set forth in the Merger Agreement.
Capital Structure Following the Merger
If the merger is completed, Avista intends to cause AERC and AEL&P to incur additional indebtedness so that, after the merger, the consolidated
capital structure of AERC would more closely resemble the consolidated capital structure of Avista before the merger.
Principal Corporate Offi ces
Following the merger, Avista will maintain its current headquarters in Spokane, Washington, but has also agreed to maintain the current
headquarters of AERC for a period ofat least two years following the Closing.
Resale of Avista Common Stock
Shares of Avista cornmon stock received in the merger by any AERC shareholder who becomes an "affiliate" of Avista upon or after completion of
the merger (such as AERC otficers who become oflicers ofAvista after the merger) may be subject to restrictions on transfer arising under the Securities Act
following completion ofthe merger. This document does not cover resales ofshares ofAvista common stock received by any person upon completion ofthe
merger, and no person is authorized to make any use ofthis document in connection with any resale.
REGULATORY MATTERS
To complete the merger, Avista and AERC must obtain approvals or consents from, or make filings with, a number of United States federal and
state public utility and antitrust authorities. The material United States federal and state approvals, consents and filings are described below. Avista and
AERC are not currently aware of any other material govemmental consents, approvals or filings that are required prior to the parties' completion of the merger
other than those described below. If additional approvals, consents and filings are required to complete the merger, Avista and AERC contemplate seeking or
making such consents, approvals and filings.
Avista and AERC will seek to complete the merger by July 1,2014. Although Avista and AERC believe that they will receive the required consents
and approvals described below to complete the merger, the parties caDlot give any assurance as to the timing ofthese consents and approvals or as to Avista's
and AERC's ultimate ability to obtain such consents or approvals (or any additional consents or approvals which may otherwise become necessary) or that the
parties will obtain such consents or approvals on terms and subject to conditions satisfactory to Avista and AERC.
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Hart-Scott-Rodino Antitrust Improvement Act
The merger is subject to the requirements ofthe HSR Act and the related rules and regulations, which provide that certain acquisition transactions
may not be completed until required information has been furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission
(the "FTC") and until certain waiting periods have been terminated or have expired. Avista and AERC provided the required information to the Department of
Justice and the FTC on November 26,2013 and received notice of early termination of the waiting period on December 6,2013. The early termination of the
waiting period does not preclude the Antitrust Division or the FTC from challenging the merger on antitrust grounds and seeking to preliminarily or
permanently enjoin the merger. Neither Avista nor AERC believes that the merger will violate federal antitrust laws, but the parties cannot guarantee that the
Antitrust Division or the FTC will not take a different position. If the parties do not complete the merger within 12 months after the termination of the HSR Act
waiting period, Avista and AERC will need to submit new information to the Antitrust Division and the FTC and wait for the expiration or early termination of
a new HSR Act waiting period before the parties could complete the merger.
State Regulatory Approval
Avista is currently subject to regulation by the utility commissions of Washington, Idaho, Oregon and Montana. AEL&P is currently subject to
regulation by the utility commission of Alaska. State utility commission approval of the issuance of securities in the merger is required by the UTC, the IPUC
and the OPUC, and approval of the merger is required by the RCA. The Montana Public Service Commission has advised Avista that its approval is not
required. The following subheadings contain a briefdescription ofthe required state regulatory commission approvals for the completion ofthe merger.
Washingnn Utilities and Transportation Commission
Under Washington law, in order to have the authority to issue additional shares of common stock in the merger and to provide management and
other services to AERC and AEL&P after the merger, Avista is required to demonstrate to the UTC that such issuance would be in compliance with the
requirements of state law and that Avista has complied with regulatory requirements with respect to the provision of such services. On December 4, 2013,
Avista filed an application with the UTC demonstrating such compliance and seeking an order confirming such compliance. The application provided a
description ofthe proposed transaction, including the expected recapitalization ofAERC and AEI,&P after the merger. On December 12,2013, the UTC
issued an order that confirms such compliance and evidences all necessary authority under Washington law.
Idaho Public Utilities Commissian
Undcr Idaho law, in order to have the authority to issue additional shares ofcommon stock in the merger, Avista is required to seek and receive
from the IPUC an order approving such issuance. On December 4, 201 3, Avista filed an application with the IPUC seeking suoh an order. The application
provided a description of the proposed transaction, including the expected recapitalization of AERC and AEL&P after the merger. On March 3,2014, the IPUC
issued such an order.
Public Utility Commission of Oregon
Under Oregon law, in order to have authority to issue additional shares ofcommon stock in the merger and to provide management and other
services to AERC and AEL&P after the merger, Avista is required to seek and receive from the OPUC an order approving such issuance and thc provision of
such services. On December 4, 2013, Avista filed an application with the OPUC seeking such an order. The application provided a description ofthe proposed
transaction, including the expected recapitalization of AERC and AEL&P after the merger. On April 10, 2014, the OPUC issued such an order.
Regulatory Commission of Alaska
Under Alaska law, authority granted by the RCA is required for a conholling interest in AEL&P, as a subsidiary of AERC, to be acquired by
Avista. On December 4, 2013, Avista and AERC jointly filed an application with the RCA seeking an order granting such authority. The application provided
background on each ofthe companies, a description ofthe proposed transaction, including the expected recapitalization ofAERC and AEL&P
Tablo of ContonG
after the merger, and Avista's intended oversight ofthe operations ofAEL&P following the merger, a discussion ofthe expected impact ofthe proposed
transactions on the respective customers of Avista and AEL&P, and a statement regarding the fitness, willingness and ability of Avista to satisff AEL&P's
public service obligations such that the acquisition is in the public interest. By law, the RCA must act on this application within six months ofits
submission.
TIIE MERGER AGREEMENT
Below is a summary of the Mergcr Agreement, which is attached to this information statement/prospectus as Annex B and is incorporated by
reference into this document. You should read the Merger Agreement in addition to this Summary.
Cautionary Statement Concerning Representations and Warranties Contained in the Merger Agreement
The Merger Agreement, this summary of its terms and disclosures about and regarding other agreements included or incorporated by reference in
this information statement/prosp€ctus are included to provide investors and shareholders with information regarding the terms ofthe Merger Agreement and
such other agreements, and are not intended to modiff any other factual disclosures about Avista, AERC or the other parties to the agreements made in filings
with the SEC. The Merger Agreement contains representations and warranties made by each of the parties and other agreements likewise may contain
representations and warranties made by each ofthe parties to the applicable agreement. These representations and warranties have been made solely for the
benefit of the other parties to the applicable agroement, and not for the purpose of providing information to be relied upon by shareholden ofAvista or AERC.
Accordingly, in reviewing the representations and warranties in the Merger Agreement or such other agreements and the descriptions of them included or
incorporated by reference in this information statemenvprospectus, it is important to bear in mind that the representations and warranties: should not be treated
as categorical statements of fact, but rather as a way of allocating risk between the parties; have in some cases been qualified by disclosures that were made to
the other parry in connection with the negotiation of the applicable agleement, which disclosures are not necessarily reflected in the agreement; may apply
standards of materiality in a way that is different from what may be material to investors; were made only as of the date of the applicable agreement or such
other date or dates as may be specified in the agreement and will not be revised notrrithstanding more recent developments; and may not describe the actual
state of affairs as of the date they were made or at any other time. Information about Avista can be found elsewhere in this information statement/prospectus
and in other public filings Avista makes with the SEC. Information about AERC can also be found elsewhere in this information statemenyprospectus.
General
The Boards of Directors of both Avista and AERC have unanimously approved the Merger Agreement, which provides for the acquisition by
Avista of AERC througb the merger. The merger will result in Merger Sub, an Alaska corporation and wholly-owned subsidiary of Avista, merging with and
into AERC, so that AERC, as the surviving entity, will become a wholly-owned subsidiary of Avista. The merger will become effective upon the filing of the
agreement ofmerger and other appropriate documents with the Division ofCorporations, Business & Professional Licensing ofthe Department ofCommerce,
Community and Economic Development of the State of Alaska, as referenced in the Merger Agreement. In exchange for their shares of AERC common stock,
AERC shareholders will receive shares ofAvista common stock. AERC shareholders will not have any direct equity ownership interest in the surviving
company.
Merger Consideration; Conversion of Sharss in the Merger
The Merger Consideration is equal to $170 million, (a) increased by the amount ofcash and cash equivalents ofAERC and any AERC
subsidiary as ofimmediately prior to the Closing (prior to the payment ofany ransaction expenses by AERC), O) decreased by the amount ofoutstanding
indebtedness immediately prior to the Closing under certain loans outstanding to AERC, but not including (i) inter-company indebtedness among AERC and
any subsidiary ofAERC or (ii) amounts owing by AERC or any subsidiary ofAERC pursuant to certain agreements related to the Snettisham hydroelectric
project, (c) decreased by the amount of certain transaction expenses payable by AERC, (d) decreased by the $500,000 cash deposit to an account for
reimbursement ofexpenses to the Shareholders' Representative, (e) ifthe estimated net working capital ofAERC at the Closing exceeds the target net working
capital agreed to by the parties in the Merger Agreement, increased by the amount of
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such excess, and (f) if target net working capital agreed to by the parties in the Merger Agreement exceeds the estimated net working capital at the Closing,
decreased by the amount of such excess. Based on current estimates ol the adjustments referred to in clauses (a) through (f) above, the Merger Consideration
(as adjusted) is estimated to be approximately $ 145 million. The Merger Consideration of $ 1 70 million (before adjustments) includes goodwill of
approximately $48 million.
After the Closing of the merger, the parties will determine AERC's actual net working capital as of the Closing, and, (a) if such amotrnt exceeds
the estimated net working capital at the Closing, Avista will issue to the AERC shareholders the amount of such excess in the form of additional shares of
Avista common stock valued at the Conversion Price and (b) if the estimated net working capital at the Closing exceeds such amount, such amount shall be
released to Avista from the escrow fund in the form ofadditional shares ofAvista common stock valued at the Conversion Price.
AERC had I 14,504 shares of common stock outstanding at April 21,2014, the record date for the special meeting. Assuming no change in this
number of shares at the Closing Date of the merger, the Merger Consideration, as estimated above, for each share of AERC common stock (the "AERC Per
Share Amount") would be approximately $l,266.33, payable in shares of Avista common stock. For this pupose, except as noted below, shares of Avista
common stock will be valued at the Avista Average Closing Price, which is the average closing price of Avista common stock as reported on the composite tape
for the ten rading days immediately preceding but not including the trading day prior to the Closing Date.
Each share of AERC common stock will be converted into a number of shares of Avista common stock equal to the actual AERC Per Share
Amount divided by the Conversion Price, which is (i) $21 .48, if the Avista Average Closing Price is less than or equal to $21 .48, (ii) the Avista Average
Closing Price, if the AvistaAverage Closing Price is greaterthan $21.48 and less than $34.30 or(iii) $34.30, if the AvistaAverageClosing Price isgreaterthan
or equal to $34.30.
For example, if the AERC Per Share Amount were S I ,266.33 per share and the Avista Average Closing Price were $27.50, each share of AERC
cornmon stock would be converted into 46.05 shares of Avista comlnon stock. As described further below, approximately 90% of sucb amount would be
payable in connection with the Closing and approximately l0% of such amount would be deposited into an escrow fund. See T HE MERGER
AcREEMENT-"Escrow Fund" on page 46.
As noted above, the Merger Consideration is subject to the adjustments referred to in clauses (a) through ($ in the first paragraph of this
subsection, as well as the post-Closing net working capital adjustnents referred to in the second paragraph of this subsection, and cannot be determined with
any degree ofcertainty at this time. In addition, the number ofAERC shares oustanding may change, although any such change is not oxpected at this time to
be material. Finally, the market price of Avista common stock cannot be predicted. See Forurard-Looking Statements on page 23, fusk Factors-"Risks
Relating to an lnvestment in Avista Common Stock" on page l8 and MARKET INFoRMATIoN AND DIVIDENDS on page 14.
Fractional Shares
No fractional shares of Avista cofirmon stock will be issued in connection wit]r the merger and no dividends or other disEibutions with respect to
the Avista common stock will be payable on or with respect to any fractional share. Specifically, no fractional shares of Avista cornmon stock will be issued to
former AERC shareholders at the Closing of the merger, and no fractional shares of Avista common stock will be deposited in or released from the escrow
fund. In lieu of the issuance of any such fractional share, Avista will pay to each former AERC shareholder who otherwise would be entitled to receive a
fractional share of Avista common stock, or deposit in the escrow fund, an amount in cash (without interest) determined by multiplying (a) the fraction of a
share ofAvista corlmon stock which such holder would otherwise be entitled to receive (aggregating all fractional shares such holder would otherwise be
entitled to receive at such time) by (b) the Conversion Price.
Escrow Fund
At the Closing, Avista will deduct from the Merger Consideration payable to AERC shareholders and deposit with Computershare Trust
Company, as escrow agent, shares ofAvista common stock (valued at the
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Conversion Price) in an amount equal to l0% ofthe sum of(a) th" M.rgu Corrideration (as adjusted) and (b) $500,000 (the amount deposited into the
Shareholders' Representative expense fund). The escrowed shares will not be voted while such shares are being held in escrow. For more on the shares held in
escrow, see the section entitled THE MERGER AGREEMENT-"Survival; Indemnification" on page 49.
From time to time after the completion of the merger, Avista may deposit additional shares of Avista comrnon stock to the escrow fund upon the
occurrence of any of the following events between the Closing Date and the expimtion ofthe escrow period:
. for each holder ofdissenting shares that withdraws his, her or its rights as a dissenting shareholder between the Closing Date and the
release of the escrow fund, Avista will deposit with the exchange agent a number of shares of Avista corrmon stock equal to (a) the number
of shares of Avista common stock that such holder of dissenting shares is entitled to pursuant to the terms of the Merger Agreement
multiplied by (b) l0% (subject to adjustment as provided in the Merger Agreement), on behalf of such dissenting shares as if it, he or she
were a shareholder as of the Closing Date; and
. any additional shares ofAvista common stock as may be issued after the Closing Date ofthe merger with respect to the shares constituting
the escrow fund upon any stock split, stock dividend or recapitalization effected by Avista after the merger.
Upon a successful claim by Avista for indemnification, a number ofshares ofAvista common stock held in escrow equal to the recoverable
damages underlying such claim (together with any dividends paid in respect of such shares) will be retumed to Avista and zuch shares and related dividends
will not be paid out to former AERC shareholders upon expiration ofthe escrow period. Further, shares may be distributed to Avista from the Escrow Fund as
a result of certain post-Closing net working capital adjustments. See the section entitled T HE MERGER AGREEMENT-"Merger Consideration; Conversion of
Shares in the Merger" on page 45, For the purposes ofdetermining the number ofshares ofAvista common stock to be delivered to Avista out ofthe escrow
fund, a share of Avista common stock will be valued at the Conversion Price.
Pursuant to the Merger Agreement, on or about March 4, 2015, the escrow agent will be instructed to release from escrow all Avista shares
(together with any dividends or other distributions paid in respect ofsuch shares) other than that number ofshares with a value, calculated at a per share price
equal to the Conversion Price, equal to the value ofany pending indemnification claims. Such released shares and related dividends and other distributions
will be distributed to former AERC shareholders in accordance with their respective contributions. Escrowed shares rernaining in tle escrow flmd after
settlement of all claims (together with any dividends or other distributions paid in respect of such escrowed shares) will be distributed to former AERC
shareholders in accordance with their respective contributions. See the section entitled T HE MERGER AcREEMENT-"Survival; Indemnification" on page 49.
Shareholders' Representative
Pursuant to the Merger Agreement, AERC shareholders will appoint a representative for purposes of taking certain actions and giving certain
consents on behalf of AERC shareholders, as specified in the Merger Agreement. Approval of the merger and adoption and approval of the plan of merger
contained in the Merger Agreement also constitutes consent to the appointment of William A. Corbus as the Shareholders' Representative.
Shareholders' Representative Expense Fund
Upon completion of the merger, Avista will deduct from the Merger Consideration payable to AERC shareholders and deposit into an expense fund
(the "Representative Reimbursement Fund") a cash payment of$500,000. The Representative Reimbursement Fund shall be available to reimburse the
Shareholders' Representative for expenses incurred in performing his duties as the Shareholders' Representative (including overhead expenses, legal fees and
related expenses). The Shareholders' Representative shall have the authority to disribute any amounts held in the Representative Reimbursement Fund to either
the Shareholders' Representative personally, or at his instruction, to any third party providing services in connection with the obligations of the Shareholders'
Representative. Any amount of the Representative Reimbursement Fund remaining will be distributed to the former AERC shareholders at such time, on or after
March 4, 201 5, as the Shareholders' Representative
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reasonably believes that all ofhis obligations as the Shareholders' Representative have been satisfied pursuant to the terms ofthe Merger Agreement and the
Escrow Agreement.
Closing and Elfectiveness of the Merger
The Closing is expected to take place on the second business day following the satisfaction or, to the extent permitted under the Merger Agreement
and by applicable law, waiver ofall conditions to the obligations ofthe parties set forth in the Merger Agreement and described below (other than such
conditions as may, by their terms, only be satisfied at the Closing, subject to such satisfaction or waiver thereo| (see T HE MERGER
AGREEMENT-"Conditions To The Completion Of The Merger" on page 53), or on such other date as Avista and AERC mutually agree. At the Closing,
Avista and AERC shall cause articles ofmerger, a plan ofmerger and other appropriate documents to be executed and filed with the Division ofCorporations,
Business & Professional Licensing of the Department of Commerce, Community and Economic Development of the State of Alaska.
Exchange Fund
The Merger Agreement provides that Avista will deposit wilh the exchange agent the shares of Avista common stock issuable to AERC
shareholders, less the shares deposited into the escrow fund and any dividends or distributions and any cash in lieu of fractional shares to which holders of
such shares are entitled. The exchange agent will be Computershare Inc. and Computershare Trust Company, acting together.
Exchange of AERC Stock Certificates for the Merger Consideration
The Merger Agreement provides that Avista will cause the exchange agent to mail, at least twenty business days prior to the Closing Date, to each
record holder of AERC common stock, a letter of transmittal and instructions for surrendering and exchanging the record holder's AERC share certificates.
Upon surrender ofan AERC share certificate for exchange to the exchange agent, together with a duly completed and validly executed letter oftransmittal, and
such other documents as the exchange agent may reasonably require, the record holder ofthe AERC certificate will be entitled to receive ttre following promptly
following the Closing of the merger:
. the shares of Avista common stock that such holder has the right to receive pursuant to the provisions of the Merger Agreement (which will
be in uncertificated book-entry form);
. dividends or other distributions, if any, to which such holder is entitled under the terms of the Merger Agreement; and
. any cash in lieu of fractional shares of Avista courmon stock to which such holder is entitled under the terms of the Merger Agreement.
Ifany AERC share certificate has been lost, stolen or destroyed, upon the making ofan affrdavit ofthat fact by the person claiming such
certificate to be lost, stolen or destroyed and, if required by Avista or the exchange agent, the execution of an indemnity by such person against any claim that
may be made against it with respect to such certificate, the exchange agent will deliver in exchange for such lost, stolen or destroyed certificate shares ofAvista
common stock and any dividends or other distributions payable on such shares, and any cash in lieu offractional shares ofAvista common stock payable in
respect thereof.
Dissenters' Rights
Any shares of AERC common stock that are issued and outstanding immediately prior to the Closing of the merger and that have not been voted
in favor ofthe Merger Proposal at the AERC special meeting (or with respect to which the holder has not otherwise effectively waived its rights under Sections
574 to 582 ofthe Alaska Corporations Code), and with respect to which an election to dissent has been properly made at or beforo the AERC special meeting
in accordance with Section 576 ofthe Alaska Corporations Code, will not be converted into the right to receive the Merger Consideration otherwise payable
with respect to such shares of AERC cornmon stock, except as set forth below. See T HE MERGER-"Dissenters' Rights of AERC Shareholders" on page 40.
Following the Closing, if a holder of dissenting shares withdraws his, her or its demand for zuch payment and appraisal, Avista
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Tablq of Contents
will deposit the holder's pro rata share of Avista common stock into the escrow fund as described below. See the section entitled T HE MERCER
AGREEMENT-"Escrow Fund" on page 46 for additional information.
Representations and Warranties
The Merger Agreement contaiDs customary representations and warranties of the parties . These include represeDtations and warranties of AERC
with respect to, among other things: organization; enforceability and authority; subsidiaries; capitalization; financial statements: undisclosed liabilities; legal
proceedings and orders; intellectual property; indebtedness with affiliates; absence ofcertain changes; corporate documents; property; receivables; contracts;
compliance with laws; permits; taxes; employee and labor matters; employee benefit plans; environmental matters; insurance; regulatory compliance;
financial advisors; consent requirements; and required filings. The Merger Agreement also contains customary representations and warranties ofAvista and
Merger Sub. including among other things: organization; enforceability and authority; consent required and required filings; no prior operation ofMerger Sub;
capitalization; Avista common stock matters; SEC reports; adequacy of funds; access to information about AERC; reliance on certain information; litigation;
no vote required ofAvista shareholderst brokers and finders; and tax matters. In addition, AERC, Avista and Merger Sub have made customary
representations as to factual matters related to the requirements for qualification of the merger as a "reorganization" within the meaning of Section 368(a) of the
Code.
The representations, wananties and covenants made by AERC in the Merger Agreement are qualified by information contained in a disclosure
schedule delivered to Avista and Merger Sub in connection with the execution of the Merger Agreement. Certain representations and warranties were mads as of
a specific date, and certain representations and warranties may be subject to conhactual standards of materiality different from those generally applicable to
Avista and AERC shareholders, or may have been used for the purpose ofallocating risk between the parties rather than establishing matters of fact. Avista
and AERC shareholders are not third party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or
any descriptions thereofas characterizations ofthe actual state offacts or condition ofAvista or AERC or any oftheir respective affiliates.
Survival; Indemnification
Survival of Representations and Warranties and Covenants
The representations and warranties of AERC, Avista and Merger Sub contained in the Merger Agreement survive until March 4,2015,If a valid
notice of an indemnification claim is delivered to an indemniffing party prior to March 4, 2015, the specific claim will survive until resolved. All covenants
of Avista, AERC and Merger Sub will terminate at the Closing unless such covenant is to be performed after the Closing, in which case it will survive until the
term of its performance is complete.
I ndemnifi catio n of Avis ta
Pursuant to the terms of the Merger Agreement, if the merger is completed Avista will be entitled to indemnification against any out-of-pocket losses
or damages actually incurred (and specifically excluding any special, indirect, consequential, exemplary or punitive damages) as a result of:
. any inaccuracies in the representations or warranties made by AERC in Article 3 of the Merger Agreement;
. any breach ofany covenant by AERC contained in the Merger Agreement;
. any amounts required to be paid to holders ofdissenting shares, including any interest required to be paid thereon, that are in excess of
what such shareholder would have received hereunder had such sharebolder not been a holder of dissenting shares; or
. any liabilities for taxes ofAERC incurred prior to the Closing (other than transfer taxes and taxes attributable to any transaction entered
into by Avista after the Closing that is outside ofthe ordinary course ofbusiness).
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Table of Contsnts
Other Limitations
Avista may not recover any loss as a result ofbreaches of any representation, warranty or covenants until the aggregate amount of loss equals or
exceeds $850,000, in which case the indemnifting party shall be liable only for the losses in excess ofsuch amount, except with respect to any damages
awarded in a common law fraud claim, which will not count towards or be subject to any indemnification deductible. The maximum aggregate amount of loss
which may be recovered by Avista arising out ofor relating to breach ofrepresentations or warranties made by AERC, other than a breach arising out of fraud,
will be equal to, and consist solely ol the value of the shares of Avista common stock in the escrow fund.
The maximum aggregate amount of loss which may be recovered by Avista as a result of fraud shall not be subject to any limitation.
Avista will be responsible for taking commercially reasonable steps to mitigate the amount of any indemnifiable damages, and all indemnification
claims are to be valued net of any third-party insurance proceeds paid to Avista and any federal or state tax savings realized in connection with such
indemnified damages actually recognized in the taxable year in which such damages are paid.
Certain Covenants of Avista and AERC
Covenants Relating u the Condua of AERC's Business
AERC has agreed that prior to the Closing Date, it will use commercially reasonable efforts to (a) conduct its business and the business of its
subsidiaries in the ordinary course of business; O) preserve substantially intact the business organization and assets of it and its subsidiaries, (c) maintain
existing goodwill with govemmental authorities, customers, suppliers and regulators; (d) maintain in effect all material govemmental permits, franchises and
authorizations; and (e) retain the services ofthe current ofiicers and key employees. AERC has also agreed that neither it nor its subsidiaries will take certain
other actions during the period between the execution ofthe Merger Agreement and the Closing Date, subject to certain limited exceptions as set forth in the
Merger Agreement, without the prior written consent of Avista, including the following:
. issue, sell, or deliver any shares ofcapital stock ofAERC or any ofits subsidiaries, or any warrants, options, securities convertible into
or other rights to acquire any such shares;
. redeern, or purchase or otherwise acquire any outstanding shares ofAERC common stock;
. split, combine, subdivide or reclassiff any shares of AERC common stock;
. sell, fransfer or encumber any ofits assets that, individually or in the aggregate, are material to AERC's business as currently conducted
(excluding sales made in the ordinary course);
. prematurely terminate, materially amend or knowingly waive any material right under any significant contract;
. make any capital expenditure, except in the ordinary course ofbusiness or, ifoutside the ordinary course ofbusiness, in an amount that
is not in excess of$5,000,000 in ttre aggregate;
. make any acquisition ofany material business or entity;
. increase in any material manner, individually or in the aggregate, the compensation to any ofAERC's directon or employees or enter into,
establish or amend any employment, bonus, incentive compgnsation, pension, rgtirement, severance, deferred compensation or other
compensation or benefit plan for the benefit ofany director or officer ofAERC (other than as required by applicable law or govemmental
regulation or the terms of contracts in elfect on the date the Merger Agreement was executed) except for increases in salaries, wages and
benefits effected in the ordinary course;
50
Table of Contsnts
cornmence any lawsuit or similar legal proceedings except (a) for the routine collection ofbills, (b) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment of a material right or asset of AERC, or (c) in connection
with an alleged breach of the Merger Agreement or any related agreement or document;
make or change any material tax election, file or amend any income tax retum, fail to provide a copy to Avista of each other filed and
amended tax retum within frfteen days after such filing or amendment, settle any material tax claim or assessment, surrender any right to
claim a refund oftaxes, consent to any extension or waiver ofthe limitation period applicable to any material tax claim or assessment or
enter into any tax sharing agreement;
make any material change in financial or tax accounting methods, principles or practices, or change an annual accounting period. except
as required by GAAP or any applicable law or govemment regulation;
amend AERC's articles of incorporation or bylaws;
adopt a plan or agreement ofcomplete or partial liquidation or dissolution;
without Avista's consent, make any material regulatory filing with the RCA or otherwise resolve any action before the RCA, the resolution
of which could result in a Company Material Adverse Effect; or
enter into any contract requiring that AERC do any ofthc foregoing.
Covenants Relating to Regulatory Matters and Further Assurances
Avista and AERC have a$eed to use commercially reasonable efforts to effect the merger, including cooperating to obtain required statutory
approvals of the merger; prevent or lift any restraint, injunction or other legal bar to the merger; defending or challenging any lawsuit or legal proceeding that
seeks to challenge or affect the merger or to prohibit or delay the consummation ofthe merger or rescind, vacate or otherwise challenge any regulatory approval
granted by any govemmental entity; determine what filings, consents, permits, approvals or waivers may be necessary to complete the mergfi and make all
filings required to seek such consents, permits, approvals or waivers,
Notwithstanding such agreemen! Avista will not be rcquired to consent to any regulatory condition or other requirement under any required
statutory approval other than conditions or requirements that are normal and customary for regulatory approvals requested in connection with similar
transactions and that do not materially and adversely affect either (a) the business ofAvista, AERC, AEL&P or Snettisham, each considered separately, or the
surviving company and Merger Sub taken as a whole, or (b) the ability ofAvista to continue to operate the business ofAERC and its subsidiaries, taken as a
whole, consistent with past practices.
As used in this summary of the Merger Agreement, "requked statutory approvals" means:
. compliance with and filings with the U.S. Federal Trade Commission and the U.S. Department of Justice under the HSR Act; and
. to the extent required, notice to and the approval ofstate regulatory agencies, including:
. the RCA;
. the UTC;
. the IPUC; and
. the OPUC.
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D irecto r and Oflicer I ndem nificatio n
Avista will cause the surviving company to fulfill and honor in all respects the indemnification obligations of AERC under any existing
indemnification agreements for the benefit of AERC's current and former officers and directors and agreements. In addition, Avista will cause the articles of
incorporation ofthe surviving cornpany to provide the same provisions on exculpation ofliability as are contained in the articles ofincorporation ofAERC
immcdiately prior to the Closing and will not permit such provision to be amended repealed or otherwise modified thereafter in any manner that could
adversely affect the rights of any individual entitled protection under such provision.
For a period of six years after the Closing Date, Avista will also cause AERC, as the surviving company, to provide a directors' and officers'
liability insurance policy with the same coverage level and scope as AERC's existing directors' and officers' insurance policy. In the event the cost ofsuch
policy exceeds 250% ofthe current annual policy premiums payable for such policy, the obligations ofAvista and AERC as the surviving company will only
require provision ofa policy with as much coverage as is available at a cost of250% ofthe current annual premiums.
In the event that Avista or AERC as the surviving company in the merger is subsequently sold pursuant to a merger or consolidation where Avista
or AERC is not the surviving entity, or pursuant to a sale ofall or substantially all assets, Avista will make provision in such transaction for the assumption
of the indemnification rights provided for in the Merger Agreement.
E mployment and B e neftts Arrangements
For a period oftwo ycars after the Closing Date, Avista has agreed to provide or to cause its subsidiaries to provide, aggegate compensation and
aggregate benefits to employees of AERC and its subsidiaries immediately prior to the Closing Date (the "AERC Employees") that are no less favorable than the
compensation and benefits such employees were receiving prior to the Closing Date (although the specific benefit plans or employment policies adopted by
Avista or its subsidiaries do not have to match the plans and policies in place at AERC). In addition, Avista and is subsidiaries will not terminate any AERC
Employee during that period unless such termination is for cause.
In addition, during such two year period, Avista and its subsidiaries will provide former employees of AERC and its subsidiaries who were
receiving retiree medical benefits or long-term disability benefits at ttre time ofthe Closing with retiree benefits or long-term disability benefits ofa comparable
level.
Avista and its subsidiaries will also recognize each AERC Employee's term of service with AERC for purposes of eligibility to participate and
qualification for a certain level benefits in any benefit plan of Avista or its subsidiary that is available to such AERC Employee, including vacation, paid time-
off and severance plans, so long as such recognition does not result in a duplication ofbenefits. In addition, during the calendar year in whicb the merger
closes, Avista and its subsidiaries will waive or cause to be waived for any AERC Employee any pre-existing condition limitations, exclusions, actively-at-
work requirements and waiting periods under any welfare benefit plans of Avista or its subsidiaries in which such AERC Employee has the right to participate
so long as such pre-existing condition limitation, exclusion or actively-at-work requirement would have been satisfied or waived under a comparable benefit
plan of AERC or its subsidiaries.
The covenants with respect to employment and benefit arrangements will only apply to employees who are subject to a collective bargaining
a8f,eement to the extent that such employment terms are not negotiated pursuant to such collective bargaining agreement or are negotiated pursuant to collective
bargaining, but are intended to be equivalent to the employment terms, compensation and employee benefits ofAERC Employees who are not subject to a
collective bargaining agreement. Avista will honor the commitrnents of AERC and its subsidiaries under existing collective bargaining agreements.
luneau Offrces, Charitable Giving and Community Involvement of AERC
For a period of at least two years from the Closing, Avista will maintain AERC's exisfing corporate offices in Juneau, Alaska. In addition, Avista
will continue the charitable contribution practices and community support pmctices of AERC and its subsidiaries for at least two years following the Closing.
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Tablo of Contents
Tax Matters
The parties have agreed to customary covenants regarding preparation of tax retums before and after the Closing Date; payment of taxes for any
tax period that straddles the Closing Date; the parties' rights and obligations with respect to any audit, litigation or other proceeding relating to taxes;
restrictions on making changes to tax elections and previously filed tax retums; certain tax elections and other similar matters. The covenants also require the
parties to cooperate, to the extent reasonably requested by the other, in any audit, litigation or other proceeding with respect to the taxes ofAERC or any ofits
subsidiaries.
In addition, AERC and Avista have agreed to report the merger for income tax purposes in a manner consistent with its characterization as a
"reorganization" within the meaning ofSection 368(a) ofthe Code, unless otherwise required by applicable 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) or a "determination" within the meaning of
Section I 3 I 3 of the Code (for example, a final decision by a court).
AERC Dividend Matters
Prior to the Closing, AERC is required to use its commercially reasonable efforts to declare one or more dividends to AERC shareholders and/or
prepay indebtedness in an aggregate amount ofnot less than $E million minus the aggregate out-of-pocket fees and expenses paid by AERC to brokcrs,
financial advisors, accountants and legal advisors in connection with the merger.
Company Indebtedness
AERC and its subsidiaries will not have any indebtedness for borrowed money at the Closing other than the indebtedness under certain loans that
is deducted from the Merger Consideration and inter-company indebtedness among AERC and its subsidiaries.
Conditions to the Completion of the Merger
Conditions to Each Pafi's Obligations to Effect the Merger
The obligations ofeach ofthe parties to effect the merger are subject to the satisfaction, at or prior to the Closing, ofvarious mutual conditions
(which may, to the extent permitted by applicable law, be waived in writing by any party in its sole discretion, with such waiver only effective as to the
conditions for the benefit of such party), which include the following:
the merger shall have been approved by AERC shareholders;
the required statutory approvals shall have been obtained;
there shall not be pending any action by a governmental authority seeking to restrain, prohibit or enjoin the consummation ofthe merger;
the waiting period under the HSR Act shall have expired or been terminated; and
no injunction or other order preventing merger shall have been issued since the date ofthe Merger Agreement by any United States federal
or state court ofcompetentjurisdiction 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 ofthe Merger Agreement and shall remain in effect.
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Table of CoFtBntF
Conditions to AERC's Obligotion to Effect the Merger
The obligation ofAERC to effect the merger is subject to the satisfaction ofseveral additional conditions (any ofwhich may be waived in writing
by AERC), including:
. the representations and warranties ofAvista and Merger Sub contained in the Merger Agreement shall be accurate in all respects as ofthe
Closing Date, with the same force and effect as ifmade as ofthe Closing Date (except to the extent any such representation or walraDty
speaks as of the date ofthe Merger 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 ofthis closing condition ifsuch inaccuracies (considered collectively) do not have a material adverse effect on the economic
benefits to be derived by AERC 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 iind warranties will be disregarded;
. Avista and Merger Sub shall have performed in all material respects all agleements and covenants required to be performed by it under the
Merger Agreement at or prior to the Closing Date, including but not limiled to obtaining any required govemmental consents, permits,
regulatory approvals, waivers, and making any required filings or completing any required registrations with govemmental authorities;
. Avista shall have provided AERC with satisfactory evidence that the payments required to be made at the Closing Date by Avista pursuant
to the Merger Agreement will be made at the Closing Date;
. no required statutory consent shall have imposed a Burdensome Condition (as defined below) not otherwise agreed to or approved by
AERC;
. Avista and the Escrow Agent shall have executed the Escrow Agreement and Avista shall have deposited all amounts required by the
Merger Agreement to be contributed to the Escrow Fund with the Escrow Agent;
. The Registration Statement on form S-4 registering the shares ofAvista cornmon stock to be issued in the merger shall have been declared
effective by the SEC under the Securities Act and no stop order suspending the effectivencss of such registration staternent shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated or threatened by the SEC;
. The Avista common stock to be issued in the merger shall have been approved for listing on the NYSE, subject to customary conditions
and official notice of issuance; and
. since the date ofthe Merger Agreement, there shall have been no occurrences that, individually or in the aggregate, have had a material
adverse effect on the business of Avista taken as a whole or the Avista common stock.
Conditions lo Avista's Obligation to Effect the Merger
The obligation of Avista and the Merger Sub to effect the merger is subject to the satisfaction of several additional conditions (any ofwhich may
be waived in writing by Avista), including:
the representations and warranties ofAERC contained in the Merger Agreement shall be accurate in all respects as ofthe Closing Date,
with the same force and effect as ifmade as ofthe Closing Date (except to the extent any such representation or warranty speaks as ofthe
date of the Merger 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
closing condition if such inaccuracies (considered collectively) do not have a Company Material Adverse Effect as of the Closing Date,
provided that for
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purposes ofdetermining dre accuracy ofsuch representations and warrdnties, all "Company 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;
AERC shall have performed in all material respects all agreements and covenants required to be performed by it under the Merger
Agreement at or prior to the Closing Date, including but not limited to obtaining any required govemmental consents, permits, regulatory
approvals. waivers, and making any required filings or completing any required registrations with governmental authorities;
no required statutory consent shall have imposed a Burdensome Condition (as defined below) not otherwise agreed to or approved by
Avista;
the Shareholders' Representative and the Escrow Agent shall have executed the Escrow Agreement; and
since the date ofthe Merger Agreement, there shall have been no occurrences that, individually or in the aggregate, have had a Company
Material Adverse Effect.
Delinition of "Company Material Adverse Effect"
For the purposes of this summary, "Company Material Adverse Effect" means any material adverse effect on the business of AERC and its
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, attributable 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 ofthe Merger Agreement or any ofthe transactions contemplated by
the Merger Agreement; (ii) conditions affecting the industry in which AERC 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 AERC has material operations or sales, except to the extent any such condition has
a substantially disproportionate effect on AERC relative to other persons principally engaged in the same industry as AERC; (iii) compliance with the terms o{
or the taking of any action required by, the Merger Agreement, or otherwise taken with the consent of Avista; (iv) any breach by Avista or Merger Sub of the
Merger Agreement or the Confidentiality Ageement between Avista and AERC; (v) the taking of any action by Avista or any of its afhliates; (vi) any cbange in
generally accepted accounting principles in the United States ('GAAP"); (vii) any change in applicable laws, except to the extent any such condition has a
substantially disproportionate effect on AERC relative to other percons principally engaged in the same industry as AERC, (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 AERC relative to other persons principally engaged in the same industry as AERC; (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 AERC to meet any projections or
forecasts for any period.
Definition of *Burdensome Conditiotr"
For the purposes of this summary, "Burdensome Condition" means 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 (1) the business of Avista, AERC, AEL&P
or Snettisham, each considered separately, or the surviving company and Merger Sub taken as a whole (including, but not limited to, the reasonable
opportunity to recover prudently incurred costs and eam the authorized rate ofretum, as applicable) or (2) the ability of Avista to continue to operate the
business ofAERC and its subsidiaries, taken as a v/hole, consistent with past practices.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time before the Closing:
. by mutual written consent of Avista and AERC;
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Table of Contents
by either Avista or AERC if:
the merger has not closed by December 3l, 2014. However, neither Avista nor AERC may terminate the Merger Agreement on this
basis ifthe failure of the party so requesting termination to perform any obligation under the Merger Agreement was the cause ofthe
failure of the merger to be consummated on or prior to such date; or
any injunction or other order by ary governmental authority having the effect of seeking to restrain, prohibit or enjoin the
consummation of the merger. However, this right to terminate is not available to a party if the imposition of such injunction or other
order was caused by a failure ofsuch party or its affiliate to perform any ofits obligations under the Merger Agreement.
by AERC if Avista has breached its obligation to pay any part of the Merger Consideration or any other payments due from Avista
pursuant to Article 2 of the Merger Agreement, or Avista or Merger Sub breaches or fails to perform in any material respect any other
representation, warranty or covenant contained in the Merger Agreement and such breach or failure to perform has not been cured wilhin
thirty days following dclivery ofwritten notice ofsuch breach or failure to perform, provided that ifat the end ofsuch thirtyday period
Avista is endeavoring in good faith, and proceeding diligently, to cure such breach, Avista will have another 30 days to effect such cure.
by Avista if AERC has breached any of its representations, warranties, covenants or obligations contained in the Merger Agreement and
such breach would result in any of (a) a Company Material Adverse Effect, @) a material adverse effect on the business of Avista as a
whole, (c) a material adverse effect on the ability of Avista to continue to operate the business of AERC and its subsidiaries, taken as a
whole and consistent with past practices, or (d) a material adverse effect on the ability of the parties to consummate the merger as
contemplated by the Merger Agreement, and further provided that such breach cannot be or has not been cured within thirty days
following delivery ofwritten notice ofsuch breach or failure to perform, provided that ifat the end ofsuch thirty-day period, AERC is
endeavoring in good faith, and proceeding diligently, to cure such breach, AERC will have another 30 days to effect such cure.
Elfect of Termination
If the Merger Agreement is terminated as described in T HE MERGER AGREEMENT-"Termination of the Merger Agreemont" above, the Merger
Agreement will be null and void, except for certain designated provisions ofthe Merger Agreement, including with respect to fees and expenses, notices, third-
party beneficiaries, governing law and submission to jurisdiction, and nothing will relieve either party from liability for any breach ofthe Merger Agreement
prior to termination.
Fees and Expenses
All fees and expenses incurrcd in connection with or related to the Merger Agreement aad the operative documents and the related transactions will
be paid by the parfy incurring such fees or expenses, whether or not such transactions are consunmated. However, ifthe merger is consummated, all of
AERC's transaction expenses will be paid as provided in the Merger Agreement. In the event of termination of the Merger Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party arising from a breach ofthe Merger Agreement by the other.
SECURITY OWIIERSHIP OF CERTAIN BENEFICIAL OWhIERS AND MANAGEMENT OF AERC
The following table sets forth information as ofApril 21,2014, the record date for the special meeting, regarding beneficial ownership ofthe
capital stock of AERC by (i) the persons known by AERC to beneficially own 5oZ or more of its shares; (ii) AERC's named executive officers and AERC's
directors; and (iii) AERC's executive oflicers and directors as a group. As ofApril 21, 2014 there were I 14,504 shares ofAERC common stock issued and
outstanding and no shares ofAERC preferred stock issued and outstanding. To AERC's knowledge, the persons named in the table have sole voting and
investment power with respect to all shares of AERC stock shown as beneficially owned by them, subject to community property laws where applicable and
the information contained in
56
Tabl3 of Contents
the footnotes to this table. Unless otherwise indicated, the address ofeach ofthe individuals named below is: c/o Alaska Energy and Resources Company,
5601 Tonsgard Court, Juneau, Alaska 99801.
Name rnd Address ofBcneflclal Ownen
Shares ofCommon
Stock Bcnellclelly
Owned (1):::
13,713,t , z,6to
Pcrcentrge of
Common Stock
Beneliclally Owned
(l)
5%Shareholders, , ,,,. rl,r,r I I:'r:i ::
Stanford Universiry (2)
National Financial Services (3)
Named Executive Oflicers and Directorsl
William A. Corbus
G. Barclay Corbus
E. NeitMacKiruron (4)
Thomas R. Quinlan (5)
Mdcblm A. Menzies:: :r ': I : :'r ',:::: : ::r:::: ::: '
James S. Webb
TimothyMCLeod(6) ''",:' 1"" ,,'l
Constance S. Hulbert (7)
Executive Officers and Directors as r group (13 persons)
z+8,375
8,729
1,806
576
2;892
895, 560
795
65,148
t2.0%
6.6o/p
42;2/o
7.6%
,t'.5%
+
,,2;56/o
*
;' '' '*"
51 .lo/o
(l)
(2\
(3)
(4)
(s)
Amount represents less than l% ofoutstanding shares ofAERC capital stock.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, based on factors including voting and
investment power with respect to shares, subject to the applicable community property laws, There are no options or other contractual rights for the
purchase ofAERC capital stock currently exercisable, or exercisable within 60 days after April 21,2014.
Address: 635 Knight Way, Stanford, CA94305-7297.
Address: 499 Washington Blvd Fl 5, Jersey City, NJ 073t0-2010.
Includes 1 ,786 shares held by E. Neil MacKinnon directly and 20 shares held in the name of Charity A. MacKinnon, E. Neil MacKinnon's spouse.
Includes 576 shares held in nanre of Thomas or Ann Quinlan, Trustees of the Quinlan Trust. Thomas Quinlan and Ann Quinlan are co-tnrstees and
have shared dispositive power under the Quinlan Trust.
Includes 560 shares held in name of Timothy Mcleod & Gerianne Mcl-eod, TTEEs, Tim and Geri McLeod LV TRDT 21512002. Timothy Mcleod
and Gerianne McLeod are co-tnrstees and have shared dispositive power urder the Tim and Geri Mcleod LV TRDT 215/2002.
lncludes 795 shares held in name of Constance S. Hulbert and Erik L. Hulbert, JTWROS. Constance S. Hulbed and Erik L. Hulbert have shared
dispositive power with respect to such shares.
(6)
(7)
DESCRIPTION OF COMMON STOCK -
COMPARISON OF SHAREHOLDER RIGIITS
General
Avista
The authorized capital stock of Avista, as set forth in the Avista articles of incorporation (the "Avista articles") consists of I 0,000,000 shares of
preferred stock, cumulative, without nominal or par value, which is issuable in series, and 200,000,000 shares of common stock without nominal or par
value. At the date ofthis information statement/prospectus, no shares ofAvistapreferred stock are outstanding, and at March 31, 2014 60,161,140 shares of
Avista common stock were outstanding.
The terms of the Avista common stock include those stated in the Avista articles and the Avista bylaws and those made applicable thereto by the
Washington Business Corporation Act (the "WBCA"). The following summary is not complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the Avista articles, the Avista bylaws and the WBCA. Avista has filed the articles and the bylaws as exhibits to the
registration statement ofwhich this prospecnrs forms a part. Whenever particular provisions of the articles or the
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bylaws are referred to, those provisions are incorporated as part ofthe statements madc in this prospectus and those statements are qualified in their entirety by
that reference.
AERC
The authorized capital stock ofAERC, as set forth in the AERC articles ofincorporation (the "AERC articles") consists of200,000 shares of
voting preferred stock, of no par value, 200,000 shares of non-voting preferred stock, ofno par value, and 600,000 shares ofcommon stock, ofno par value.
The voting preferred stock and the non-voting preferred stock are sometimes, together, referred to as the "preferred stock". At the date of this information
statement/prospectus, no shares ofAERC preferred stock and I 14,504 shares ofAERC common stock are outstanding.
The terms of the AERC common stock include those stated in the AERC articles and the AERC bylaws and those made applicable thereto by the
Alaska Corporations Code (the "ACC"). The following summary is not complete and is subject in all rospects to the provisions of, and is qualified in its
entirety by reference to, the AERC articles, the AERC bylaws and the ACC.
Dividend Rights; Rights upon Liquidation; No Pre-Emptive Rights
Avisn
After full provision for all Avista preferred stock dividends declared or in arrears, the holders ofAvista common stock are entitled to receive such
dividends as may be lawfully declared from time to time by Avista's Board of Directors.
In the event ofany liquidation or dissolution ofAvista, after satisfaction of the preferential liquidation rights ofthe Avista preferred stock
(including accumulated dividends), the holders ofAvista common stock would be entitled to share ratably in all assets ofAvista available for distribution to
shareholders.
No holder of Avista conrmon stock has any pre-emptive rights.
AERC
After all cumulative dividends on the AERC preferred stock for all past quarterly periods and the then current quarterly period have been paid in
full or declared and set aside for payment, the AERC Board of Directors may declare, and AERC may pay, dividends on the AERC common stock.
Upon any liquidation, dissolution or winding up of AERC, after payment of the full preferential amounts fixed for each series of AERC prefened
stock (including accrued and unpaid dividends), the holders of AERC common stock would be entitled to share ratably in gr" lsrn6ining assets of AERC.
No holder of AERC common stock has any pre-emptive rights.
Voting Rights
Avista
The holders ofthe Avista common stock have sole voting power, except as indicated below or as otherwise provided by law. Each holder ofAvista
common stock is entitled to one vote per share.
Under the WBCA, a majorify of the votes entitled to be cast on a corporate action by a voting group constitutes a quorum of that group for that
corporate action. If a quorum exists, a corporate action, other than the election of directon, is approved by the voting group if the votes cast within the voting
group favoring the corporate action exceed the votes cast within the voting group opposing the corporate action.
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Election of Directors
In an uncontested election ofdirectors, each vote may be cast "for" or "against" one or more candidates, or a shareholder may "abstain" with
respect to one or more candidates. A candidate is elected to the Avista Board ofDirectors only ifthe number ofvotes "for" such candidate exceeds the number
ofvotes "against" such candidate. Shares otherwise present at the meeting but for which there is an "abstention" or as to which no authority or direction is
given or specified with respect to a candidate are not counted as votes "for" or "against". If an incumbent director does not receive a majority ofvotes cast, he
or she would continue to serve a term that would terminate on the date that is the earliest of (a) the date ofthe commencement of the term ofa new director
selected by the Board of Directors to fill the offrce held by such director, (b) the effective date ofthe resignation of such director and (c) the later of (i) the last
day of the sixth calendar month commencing afrer the election and (ii) December 3 I of the calendar year in which the election occurred. In a contested clection
-that is, an election in which the number ofcandidates excecds the total number ofdirectors to be elected--+hareholders would be allowed to vote "fof'one or
more candidates (not to exceed the number of directors to be elected) or 'Vithhold" votes with respect to one or more candidates. The candidates elected would
be those receiving the largest number ofvotes (up to the number ofdirectors to be elected). Shareholders are not allowed to cumulate their votes in any election
of directors (whether or not contested).
Senior Class of Stock; Major Corporate Transaction
Under the Avista articles, the approval ofthe holders ofthe majority ofthe outstanding shares ofAvista corrrmon stock is required to ffeate a new
class of stock, including, for example, preference stock or any other class of stock senior to the common stock. In addition, in any circumstance in which
Washington law would require the approval ofshareholders to authorize (l ) the merger ofAvista with or into another entity or a statutory share exchange with
another entity, (2) a sale, lease, exchange or other disposition ofproperty ofAvista or (3) the dissolution ofAvista, the requisite shareholder approval (in
addition to any required approval by the holders ofAvista preferred stock) shall be the affrrmative vote ofthe holdcrs ofa majority ofthe outstanding shares of
Avista common stock, unless Washinglon law shall require a higher standard.
- Voting Rights ofPreferred Stock
Under the Avista articles, whenever and as often as, at any date, dividends payable on any shares of Avista preferred stock shall be in arrears in
an amount equal to the aggregate amount of dividends accumulated on such shares ofAvista preferred stock over the eighteen (l 8) month period ended on such
date, the holders of the Avista preferred stock, voting separately and as a single class, are entitled to elect a majority ofthe Avista Board of Directors, and the
holders ofthe Avista common stock, voting separately and as a single class, will be entitled to elect the remaining directors. Such voting rights ofthe holders
of the Avista preferred stock cease when all defaults in the payment of dividends on the Avista prefened stock have been cured.
In addition, the consent ofvarious proportions ofthe Avista preferred stock at the time outstanding is required to adopt any amendment to the
Avista articles which would authorize any new class of stock ranking prior to or on a parity with the Avista preferred stock as to certain matters, to increase
the authorized number of shares of the Avista preferred stock, to change any of the righs or preferences of outstanding Avista preferred stock or to issue
additional shares ofAvista preferred stock unless an earnings test is satisfied.
Under the WBCA, the approval of the holders of a majority of the outstanding shares of Avista prefened stock is required in connection with
certain changes in the capital stucture of Avista or in certain rights and preferences ofthe Avista preferred stock, including certain of the changes referred to in
the preceding paragraph. In addition, tbe WBCA requires approval ofcertain mergers, share exchanges and other major corporate transactions by the holden
ofnvo+hirds ofthe outstanding Avista preferred stock.
AERC
General; Quorum
Except as noted bclow, the holders ofAERC voting preferred stock are entitled to one vote per share on all matters on which the holders ofAERC
common stock are entitled to vote and, except as required by law, vote together with the holders of AERC common stock and not as a$parate class. The
holders ofthe AERC non-voting
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preferred stock have no voting rights, except as otherwise provided in the AERC articles or bylaws or as required by law. Each holder ofAERC common stock
is entitled to one vote per share.
A majority ofthe shares entitled to vote, represented in person or by proxy, constitutes a quorum at a meeting of shareholders. If a quorum is
present, the affirmative vote of the majority of shares represented at the meeting and entitled to vote on the subject matter is the act of the shareholders, unless
the vote of a greater number or voting by classes is required by the AERC articles or bylaws or as required by law.
Election of Directors
At an election for directors, each holder ofAERC common stock may vote the number ofshares owned by the shareholder for as many persons as
there are directors to be elected, or cumulate votes by giving one ofthe candidates votes equal to the number ofdirectors multiplied by the number of shares so
owned, or distribute votes on the same principle among any number of candidates.
Amendments to Articles; Major Corporate Transactions
Under the ACC, the approval of the holders of a majority of the outstanding shares entitled to vote is required for amendments to the AERC
articles, with certain exceptions; provided, however, that any amendment to the AERC articles that would change the authorized number ofshares ofa class,
change the preferences or relative rights of the shares of a class or create a new class of shares having rights and preferences prior or superior to those ofsuch
class, or make similar changes, would require the affirmative vote ofthe holders of a majority ofthe shares of such class. In addition, the approval ofthe
holders oftwothirds ofthe outsknding shares ofAERC ofall classes, voting together, and the approval ofthe holders oftwo-thirds ofthe outstanding shares
of each class entitled to vote as a class, are required, with certain exceptions, to approve mergers, consolidations and statutory share exchanges and the sale of
all or substantially all the assets other than in the ordinary course ofbusiness.
Voting Rights of Preferued Stock
Under the AERC articles, whenever dividends on the outstanding AERC prefened stoch or any series thereof, shall be in arrears in an amount
equal to six full quarterly dividends on all shares of any series of the AERC preferred stock then outstanding, then, until all dividends in arrears have been
paid, or declared and set aside for payment, the holden of the AERC prefened stock (both voting and non-voting), voting together as one class, are entitled to
elect the smallest number of directors necessary to constitute a majority of the full AERC Board of Directors, and the holders of the AERC common stock,
voting separately as a class, are entitled to elect the remaining members ofthe AERC Board ofDirectors.
In addition, under the AERC articles the approval ofthe holders ofat least two-thirds ofthe outstanding shares of AERC preferred stock is
required to change the express terms or provisions of the AERC prefened stock in any manner prejudicial to the holders thercof (except that if such change is
prejudicial of one or more, but not all series of the AERC preferred stoch the consent of the holders of trvo-thirds of the outstanding shares of the series so
affected is required) or to increase the authorized number of shares ofAERC preferred stock or authorize a class of shares senior to or on a parity with the
AERC preferred stock with respect to dividends or the distribution of assets.
Advance Notice of Shareholder Nominations for Director and Proposals of Other Buslness
Avista
Under the Avista bylaws, at an annual meeting of shareholders only such noninations of individuals for election to the Avista Board of Directors
shall be made as shall have been properly made and only such other business shall be transacted as shall be properly brought before the meeting, in
accordance with the timing and information requirements set forth in the bylaws. In general, a shareholder's notice ofintention to nominate a candidate for
director or bring other business before the meeting must be delivered in writing not less than 90 nor more than I 80 days prior to the first anniversary date of
the preceding year's annGl meeting, and the information contained in or accompanying such notice shall be updated periodically up to the time ofthe meeting.
Only shareholders ofrecord (as ofthe date ofthe notice and the date ofthe meeting) who have complied with the procedures set forth in the bylaws and appear
at the meeting in person or by qualified representative are eligible to nominate a candidate for director or bring other business before the meeting.
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A shareholder notice must contain information regarding the proponent, the nominee (if any) and their respective shareholdings and derivative
transactions and, in addition, information as to:
. Persons associated, afliliated or acting in concert with, the shareholder and the nominee (ifany);
. purchases and sales by the shareholder ofthe Avista's stock during the 24 month period preceding the shareholder notice;
. agreements, arrangements or understandings between or among the shareholder, any shareholder associated person or any other person
that relates to the proposed business or proposal; and
. additional information about a shareholder's nominee, including (i) the nominee's occupation, and (ii) any related person transactions
between the nominating shareholder and shareholder associated persons, and the nominee and nominee associated persons.
A shareholder proposing to nominate an individual for election as a director must submit a questionnaire (similar to Avista's directors' and
ofticers' questionnaire) completed and signed by the nominee, which also includes representations by the nominee conceming (i) the absence ofcertain voting
commitments and compensation or indemnification arrangements and (ii) the nomiuee's compliance with applicable law and Avista's policies.
Proposed business will not be transacted and proposed nominations will not be made ifthe shareholder (or qualified representative) does not
appear at the meeting and satisry the other requirements of the bylaws.
These procedures and information requirements apply to any nomination to be made at, or other business to be brought before, a shareholder
meeting, including any proposal that is to be included in Avista's Proxy Statement pursuant to Rule l4a-8 under the Securities Exchange Act of 1934.
AERC
The AERC articles and bylaws contain no provision requiring advance notice by a shareholder of his or her intention to nominate a candidate for
director or bring other business before a shareholder meeting.
Special Meetings of Shareholders
Avista
Under the WBCA, a special meeting ofshareholders ofa corporation may be called by the board ofdirectors, by persons authorized to do so in
the articles or bylaws or by the holders of I 0% ofthe votes entitled to be cast on any issue to be considered at the proposed special meeting; provided, however,
that the right of shareholders to call a special meeting may be limited or dcnied in the articles.
The Avista articles provide that a special meeting of shareholders may be called by certain corporate officers and shall be called by the President at
the request of the holders of rwo.thirds of the outstanding shares of Avista common stock.
AERC
Under the ACC and the AERC bylaws, a special meeting of shareholders may be called by certain corporate officers, the AERC Board of
Directors or by the holders of one-tenth of the outstanding shares entitled to vote at the meeting.
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Board of Directors
Avista
The Avista articles provide that the number ofdirectors ofAvista will be that number, not to exceed eleven, as the Avista Board ofDirectors
specifies from time to time in the Avista bylaws, subject to the rights of holders of the Avista preferred stock to elect directors in certain circumstances. Both
the Avista articles and the Avista bylaws provide that all directors will be elected at each amual meeting for a term that will expire at the next succeeding annual
meeting. Vacancies occurring in the Avista Board of Directors may be filled by the Avista Board of Directors. Directors may be removed only for cause and
only ifthe number ofvotes cast by holders ofAvista common stock for the removal ofa director exceeds the number ofvotes cast against such removal.
The Avista articles and the Avista bylaws further require an affrrmative vote of the holders of at least 80% of the outstanding shares of Avista
comtnon stock to alter, amend or repeal the provisions relating to the Avista Board of Directors and the filling of vacancies on, and tle removal of members
from, the Avista Board of Directors.
AERC
The AERC bylaws provide that there will be six directors and that all directors will hold olfice until the next annual meeting ofshareholders,
except as otherwise provided in the circumstance in which holders of the AERC preferred stock have the right to elect a majority of the AERC Board of
Directors. Under the ACC, vacancies occurring in the A-ERC Board of Directors may be filled by the remaining directors, provided, however, that a vacancy
occurring by reason ofthe removal ofa director may be filled only by approval ofthe shareholden. Under the ACC, a director may be removed by the board
if declared of unsound mind by a court order or by court order for fraudulent or dishonest acts, gross neglect of duty or gross abuse of authority; and a
director may be removed without reason by shareholders, provided, however, that, unless the entire board is removed, a director may not be so removed if the
votes cast against removal would be sufficient to elect a director ifvoted cumulatively at an election at which the same number ofvotes were cast.
Indemnilication of Directors and Oflicers; Elimination of Liability
Avista
The WBCA permits a Washington corporation to indemnifr an individual made a party to a proceeding because the individual is or was a
director or officer against liability incurred in the proceeding if(a) the individual acted in good faith and (b) the individual reasonably believed (i) in the case of
conduct in such individual's official capacity, that such conduct was in the corporation's best interests and (ii) in all other cases, that the individual's conduct
was at least not opposed to the corporation's best interests and (c) in the case ofcriminal proceeding, such individual had no reasonable cause to believe that
the individual's conduct was unlawful. Further, unless limited by the articles, a corporation is required to indemniry a director or officer who was wholly
successful, on the merits or otherwise, in the defense ofany such proceeding.
The Avista articles and bylaws provide that Avista shall, to the maximum extent permitted by applicable law, indemnifr any person made a party
to, or otherwise involved in, any proceeding by reason ofthe fact that he or she is or was a director ofAvista againstjudgments, penalties, fines, settlements
and reasonable expenses actually incurred.
Avista has also entered into agreements with each director reflecting the indemnification provided in the articles and bylaws and has purchased
and maintains directors' and officers' liability insurance.
The WBCA permits the articles of a Washington corporation to contain provisions that eliminate or limit the personal liability of a director to the
corporation or its shareholders for monetary damages for conduct as a director; provided, however, that such provisions may not eliminate or limit liability for
intentional misconduct or knowing violation of law, unlawful distributions, or for any transaction from which such director will personally receive a benefit
in money, property or services to which such director is not legally entitled.
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The Avista articles eliminate the personal liability ofa director to the corporation or its shareholders for monetary damages for his or her conduct
as a director, except to the extent that such liability may not be eliminated or limited under Washington law.
AERC
The ACC permits an Alaska corporation to indemniff any person who was, is or is threatened to be made a party to any action or proceeding,
civil or criminal, including a proceeding by or in the right of the corporation, by reason ofthe fact that such person is or was a director or officer ofthe
corporation ifsuch person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests ofthe corporation
and, with respect to a criminal proceeding, such person had no reasonable cause to believe the conduct was unlawful.
The AERC bylaws provide that directors and officers shall be indemnified against any and all claims and liabilities to which he or she shall
become subject by reason of having sewed as such director or officer, or by reason ofany action taken or omitted by him as such director or oflicer (except
claims by or in the right ofthe corporation); provided, however, that no such person is indemnified against any claim or liability arising out ofthe person's
own willful misconduct or gross negligence.
AERC has also entered into agreements with each of its directors and offrcers providing for indemnification to the fullest extent permifted by law;
provided, that no indemnitee will be entitled to indemnification pursuant to such agreement (i) in connection with a proceeding initiated by such indemnitee
against AERC or any of its subsidiaries or any director or officer ofthe foregoing unless AERC or such subsidiary has joined in or consented to the initiation
of such proceeding, (ii) on account ofany judgment rendered against such indemnitee pursuant to Section I 6(b) of the Securities Exchange Act of 1934, as
amended, (iii) with respect to any criminal proceeding if such indemnitee had reasonable cause to believe that the conduct was unlawful, (iv) for conduct
violating Section I 0.06.480 ofthe ACC (relating to unlawful distributions to shareholders or loans of corporate assets) or (v) for any transaction from which
the indemnitee will personally receive a benefit to which such indemnitee is not legally entitled, bu! is otherwise entitled to indemnification under the
agreement, only to the extent of such benefit.
The ACC permits the articles of an Alaska corporation to contain a provision eliminating or limiting the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary duty; provided, however, that the articles may not eliminate or limit liability for
(a) breach of the duty of loyalty, (b) acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law, (c) willful or
negligent payment ofdividends or repurchase ofshares from other than lawfully available funds or (d) a hansaction from which such director derives an
improper personal benefi t.
The AERC articles eliminate the personal liability ofa director to the corporation or its shareholders for the breach offiduciary duty to the fullest
extent permitted by law.
ttFair Price' Provision
Avista
The Avista articles contain a "fair price" provision which requires the affirmative vote of the holders ofat least 80% of the outstanding shares of
Avista common stock for the consummation ofcertain business combinations, including mergers, consolidations, recapitalizations, certain dispositions of
assets, certain issuances of securities, liquidations and dissolutions involving Avista and a person or entity who is or, under certain circumstances, was, a
beneficial owner of I 0% or more of tbe outstanding shares ofAvista common stock (an "Interested Shareholder") unless
such business combination has been approved by a majority ofthe directors unaffiliated with the Interested Shareholder, or
certain minimum price and procedural requirements are met. The Avista articles provide that the "fair price" provision may be altered,
amended or repealed only by the affirmative vote of the holders of at least 80% of the outstanding shares ofAvista common stock.
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AERC
There is no similar provision in the AERC articles.
Statutory Limitation on "Significant Business Transactions'
Avisu
General
The WBCA contains provisions that limit Avista's ability to engage in "significant business transactions" with an "acquiring person", each as
defined below. Avista has no right to waive the applicability ofthese provisions.
Significant Business Transactions Within Five Years of Share Acquisition Time
Subject to certain exceptions, for five years after an "acquiring person's" "share acquisition time", Avista may not engage in any "significant
business transaction" with such "acquiring person" unless:
before such "share acquisition time", a majority ofthe Avista Board ofDirectors approves either:
. such "significant business transaction"; or
the purchase ofshares made by such "acquiring person"; or
at or subsequent to such "share acquisition time", such "significant business transaction" has been approved by:
a majority of the Avista Board of Directors; and
the holders of 73 of the outstanding shares of Avista common stock (except shares beneficially owned by or under the voting control
of the "acquiring person"),
Signifcant Business Transactions More Than Five Years After Share Acquisition Time
Avista may not engage in certain "significant business transactions" (including mergers, share exchanges and consolidations) with any "acquiring
person" unless:
the transaction complies with certain "fair price" provisions specified in the statute; or
no earlier than five years after the "acquiring person's" "share acquisition time", the "significant business transaction" is approved at an
annual or special meeting ofshareholders (in which the "acquiring person's" shares may not be counted in determining whether the
"sigaificant business transaction" has been approved).
Definitions
As used in this section:
"Significant btuiness tansaction" means any ofvarious specified transactions involving an "acquiring person", including:
a merger, share exchange, or consolidation of Avista or any of its subsidiaries with an "acquiring person" or its affrliate;
a sale, lease, transfer or other disposition to an "acquiring person" or its affrliate of assets ofAvista or any of its subsidiaries having an
aggregate market value equal to 5olo or more ofall ofthe assets
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determined on a consolidated basis, or all the outstanding shares ofAvista, or representing 5% or more ofits eaming power or net income
determined on a consolidated basis;
. termination, at any time over the five-year period following the "share acquisition time", of 5% or more of the employees of Avista as a
result ofthe "acquiring person's" acquisition of l0oZ or more ofthe shares ofAvista; and
. the issuance or redemptior by Avista or any ofits subsidiaries ofshares (or ofoptions, warrants, or rights to acquire shares) ofAvista or
any of its subsidiaries to or beneficially owned by an "acquiring person" or its affiliate except pursuant to an offer, dividend distribution
or redemption paid or made pro rata to all shareholders (or holders ofoptions, warrirnts or rights).
"Acquiring person " means, with certain exceptions, a person (or group ofpersons) other than Avista or its subsidiaries who beneficially owns
l07o or more of the outstanding Avista common stock.
AERC
"Share acquisition time" means the time at which a person first becomes an "acquiring person" of Avista
There is no similar provision in Alaska statutory law.
Anti-Takeover Effect
Certain provisions ofthe Avista articles and the Avista bylaws described above under "Board ofDirectors" and the provisions ofthe Avista
articles described above under "'Fair Price' Provision", together with the provisions ofthe WBCA described above under "Statutory Limitations on
'Significant Business Transactions"', considered either individually or in the aggregate, may have an "anti-takeover" effect. These provisions could
discourage a future takeover attempt which is not approved by Avista's Board ofDirectors but which individual Avista shareholders might deem to be in their
best interests or in which Avista shareholders would receive a premium for their shares over current market prices. As a result, Avista shareholders who might
desire to participate in such a transaction might not have an opportunity to do so.
Miscellaneous
The presently outstanding shares of Avista common stock are fully paid and nonassessable. Upon issuance as contemplated by this prospectus,
additional shares of Avista common stock will bc fully paid and nonassessable. The holden of shares of Avista common stock are not and will not be subject
to liability for further calls or assessment by, or for liabilities of, Avista.
The outstanding shares of Avista corlmon stock are listed on the NYSE. The new shares of Avista common stock issued to AERC shareholders
will also be listed on that exchange subject to offrcial notice ofissuance.
The Transfer Agent and Registrar for the Avista common stock is Computershare Shareowner Services LLC,480 Washington Boulevard, 29th
Floor, Jersey City, New Jersey 073 10.
WHERE YOU CAI\ FIND MOR.E INFORMATION ABOUT AVISTA
General
Avista is subject to the informational reporting requirements ofthe Securities Exchange Act of I 934, as amended (the "Exchange Act"). Avista files
annual, quarterly and current reports, proxy statements and other documents with the SEC (File No. l-3701). These documents contain important business
and financial information. You may read and copy any materials Avista files with the SEC at the SEC's public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at l-800-SEC-0330 for further information on the public reference room. Avista's SEC filings are also available
to the public from the SEC's website at http://www.sec.gov. Other than those documents or portions of documents incorporated by reference into this
prospectus, infonnation on this website does not constitute a part ofthis prospectus.
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Incorporation of Documents by Reference
The SEC allows Avista to incorporate by reference the information that Avista files with the SEC. This allows Avista to disclose important
information to you by referring you to those documents rather than repeating them in full in this prospectus. Avista is incorporating into this prospectus by
reference:
the Arurual Report on Form l0-K for the year ended December 31, 2013;
the Current Reports on Form 8-K filed February 7, February 12, February 14 and April 22,2014;
the Quarterly Report on Form l0-Q for the quarter ended March 3 l, 2014; and
all other documents filed by Avista with the SEC pursuant to Section l3(a), l3(c), 14 or l5(d) ofthe Exchange Act after the date ofthis
document and prior to the date ofthe AERC special meeting ofshareholders;
and all ofthose documents are deemed to be a part of this prospectus from the date of filing such documents; it being understood that documents, or parts of
documents, that are "fumished" but not "filed", in accordance with SEC rules, will not be deemed to be incorporated by reference. The documents
incorporated into this prospectus by reference are referred to as the "Incorporated Documents". Any statement contained in an Incorporated Document may be
modified or superseded by a statement in this prospectus (ifsuch Incorporated Document was filed prior to the date ofthis prospectus) in any prospectus
supplement or in any subsequently filed Incorporated Document.
You may request copies of any of these filings, at no cost, by contacting Avista at the address or telephone number provided on page iv of this
information statement/prospectus. Avista maintains an Intemet site at http://www.avistacorp.com which contains information conceming Avista and its
affiliates. The information at or accessible through Avista's Internet site is not incorporated in this information statemenVprospectus by reference and you
should not consider it a part of this information statemenrprospectus.
LEGALMATTERS
The validity of the Avista common stock to be issued in the merger has been passed upon for Avista by Marian M. Durkin, Esq., Senior Vice
President, General Counsel and Chief Compliance Officer of Avista, and Pillsbury Winthrop Shaw Pittman LLP, counsel to Avista. In giving its opinion,
Pillsbury Winthrop Shaw Pittman LLP relied as to matters of Washington law upon the opinion of Marian M. Durkin, Esq. Certain matters of U.S. federal
income taxation relating to the merger have been passed upon for Avista by Davis Wright Tremaine LLP and for AERC by Morrison & Foerster LLP.
EXPERTS
The consolidated financial statements incorporated in this prospectus by reference from Avista's Annual Report on Form I 0-K for the year ended
December 3 I, 201 3, and the effectiveness of Avista's internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports which are incorporated herein by reference. Such consolidated financial statements have been so
incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim consolidated financial information, which is incorporated herein by reference, Deloitte & Touche LLP has
applied limited procedures in accordance with the standards ofthe Public Company Accounting Oversight Board (United States) for a review ofsuch
information. However, as stated in its report included in the Company's Quarterly Repoil on Form l0-Q and incorporated by reference herein, Deloitte &
Touche LLP did not audit and does not express an opinion on such interim financial information. Accordingly, the degree of reliance on the report on such
information should be restricted in light of the limited nature of the review procedures applied. Deloitte & Touche LLP is not subject to the liability provisions
of Section I I of the Securities Act of I 933 for its reports on the unaudited interim financial information because those reports are not "reports" or a "part" of
the Registation Statement prepared or certified by an accountant within the meaning ofSections 7 and I I ofthe Act.
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ANNEX A
GLOSSARY OF CERTAIN DEFINED TERMS
The following terms used in this information statement/prospectus are defincd therein with the meanings set forth below.
"ACC" means the Alaska Corporations Code.
"AEL&P" means Alaska Electric Light and Power Company, a wholly-owned subsidiary of AERC.
"AERC'means Alaska Energy and Resources Company.
"AJT'means AJT Mining Properties, Inc., a wholly-owned subsidiary of AERC.
"Avista" means Avista Corporation.
"Avista Average Closing Price" means the average closing price of Avista common stock as reported on the composite tape for the ten trading days
immediately proceeding but not including the trading day prior to the Closing Date.
"Closing" means the consummation of the transactions contemplated by the Merger Agreement.
"Closing Date" means the date on which the Closing actually takes place, which shall oocur no Iater than the second business day following the
satisfaction or, to the extent permitted under the Merger Agreement and applicable law, waiver of all conditions to the obligations of the parties set forth in the
Merger Agreernent (other than such conditions as may, by their terms, only be satisfied at the Closing), or on such other date as Avista and AERC mutually
agree.
"Conversion Price" means (i) $21.48, if the Avista Average Closing Price is less than or equal to $21.48, (ii) the Avista Average Closing Price, if the
Avista Average Closing Price is greater than $2 1.48 and less than $34.30 or (iii) $34.30, ifthe Avista Closing Price is greater than or equal to $34.30.
"Escrow Agreement" means the escrow agreement to be entered into by and among Avista, the Shareholders' Representative and the escrow agent for the
m6ger.
"FERC" means the Federal Energy Regulatory Commission,
"HSR Act" means the Hart-Scon-Rodino Antitrust Improvements Act of 1976.
"lPUC" means the Idaho Public Utilities Commission.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of November 4, 2013, by and among Avista, Merger Sub, AERC and William
A. Corbus, solely as the Shareholders' Representative. The Merger Agreement provides for the merger of Merger Sub with and into AERC, with AERC
surviving, as a result of which AERC will become a wholly-owned subsidiary of Avista.
"Merger Consideration" means $170 million (a) increased by the amount ofcash and cash equivalents ofAERC and any AIRC subsidiary as of
immediately prior to the Closing (prior to the payment ofany transaction expenses by AERC), (b) decreased by the amount ofoutstanding indebtedness
immediately prior to the closing under certain loans outstanding to AERC, but not including (i) inter-company indebtedness among AERC and any subsidiary
ofAERC or (ii) amounts owing by AERC or any subsidiary ofAERC pursuant to certain agreements related to the Snettisham hydroelectric project,
(c) decreased by the amount ofcertain transaction expenses payablc by AERC, (d) decreased by the $500,000 cash deposit to an account for reimbursement of
expenses to the Shareholders' Representative, (e) ifthe estimated net working capital ofAERC at tlre Closing exceeds the target net
A-l
I3E!E!-Cont€nts
working capital agreed to by the parties in the Merger Agreement, increased by the amount of such excess, and (f) if target net working capital agreed to by the
parties in the Merger Agreement exceeds the estimated net working capital at the Closing, decreased by the amount ofsuch excess.
"Merger Sub" means Alaska Merger Sub, Inc., a wholly-owned subsidiary of Avista.
"NYSE" means the New York Stock Exchange.
'OPUC" means the Public Utility Commission of Oregon.
"RCA" means the Regulatory Commission of Alaska.
"SEC" means the Securities and Exchange Commission.
"Shareholders' Representative" means William A. Corbus, as AERC shareholders' representative under the Merger Agreement.
"Snettisham" means Snettisham Eleckic Company, a wholly-owned subsidiary of AERC,
"UTC" means the Washington Utilities and Transportation Commission.
'WBCA" means the Washington Business Corporation Act.
A-2
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ANNEX B
AGREEMENT ATID PLAN OF MERGER
among:
AVISTA CORPORATION,
a Washington corporation;
ALASKA MERGER SUB, INC.,
an Alaska corporation;
ALASKA ENERGY AND RESOURCES COMPANY,
an Alaska corporation;
and
William A. Corbus,
as the Shareholders' Representative
Dated as ofNovember 4, 2013
Tabls of Cont6nts
AGREEMENTAND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") 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. l, 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 o( Parent and
Merger Sub and their respective shareholders and have approved this Agreement and the transactions contemplated by this Agreement, and (ii) Parent, 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 Agteement 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 qualiS as a "reorganization" described in Section 368(a) of the
Code, and that the execution ofthis Agreement constitute the adoption ofa "plan ofreorganization" within the meaning ofSection 354(aXl) ofthe Code and
Treasury Regulations Section 1.368-2(9); and
WHEREAS, pursuant to the Merger, among other things, each of the issued and outstanding shares of Company Common Stock shall be converted
into the right to receive consideration as set forth in Article 2.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the parties
hereto hereby agree as follows:
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ARTICLE 1.
DEFINITIONS
Section l.l Definitions. (a) The following terms, as used herein, have the following meanings:
"ACC" means the Alaska Corporations Code - AS 10.06.005 - AS 10.06.995.
"Action" means any action, suit or proceeding, arbitral action, govemmental 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 ofthe immediately preceding sentence, the term "contol" (including, with correlative meanings, the terms "contolling," "controlled by"
and '\mder 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 ofthe management and policies ofsucb Person, whether through ownership ofvoting securities, by contract or otherwise.
"Antitrust Laws" 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 ofmonopolization or restraint oftrade.
"Burdensome 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 ( I ) 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 eam the authorized rate ofreturn, as applicable) or (2) the ability ofParent to continue to
operate the business ofthe Company and the Company Subsidiaries, taken as a whole, consistent with past practices,
"Business Day" means any day (other than a Sanuday 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 investrnents, marketable securities, deposits, checks received that have not
been posted, and deposits in 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 I 8, 2006, by and between Alaska Electric Light and Power Company and the Alaska Industrial Development and Export
Authority and (iii) Wells Fargo
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Bank, National Association pursuant to that certain Business Loan Agreement, dated as of January 1,2012,by and between Alaska Electric Light and Power
Company and Wells Fargo Bank, National Association. For purposes ofclarity, Closing Indebtedness shall not include any ( I ) 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).
"Closlng Net Working Capital" means (i) the aggregate dollar amount of all current assets of the Company set forth on Schedule 2.9 as of
immediately prior to the Closing, minus (ii) the aggregate dollar amount of all cunent 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 lntemal 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 ofthe following shall be deemed, either alone or in combination, to constitute, and no change or effect arising from,
attributable to or relating to any of the following shall be taken into account in determining whether there has been a Company Materiat Adverse Effect: (i) tle
negotiation, execution, delivery, public announcement or pendency ofthis Agreement or any ofthe transactioDs 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 extetrt any such condition has a substantially
disproportionate effect on the Company relative to other Persons principally engaged in the same industy as the Company; (iii) compliance with the terms of,
or tbe taking of any action required by, this Agreement, or otherwise taken with the consent ofParent; (iv) any breach by Parent or Merger Sub ofthis
Agreement or the Confidentiality Agreement; (v) the taking ofany action by Parent or any ofParent'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 intemational 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 faihue) by the Company to meet any projections or forecasts for any period.
"Company Shareholders" means the holders of Company Common Stock.
3
Tabls of Contants
"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 9.1 I 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 ofapproval ofthe principal terms ofthe 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 Conrmon Stock (other than Dissenting Shares) immediately prior to the
Effective Time.
"Escrow Participation Percentage" means, with respcct 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 behalfofsuch 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 ifthe Parent Closing Price is less than or equal to $21.48,
(ii) the Parent Closing Price, ifthe 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 a1gregate number of shares of Company Common Stock outstanding immediately prior to tlre Effective
Time.
"GAAP" means generally accepted accounting principles in the United States.
"Indemnified Taxes" means all liabilities for Taxes (or the nonpayment thereof) ofthe Company or any Company Subsidiary for any Pre-Closing Tax
Period (determined, with respect to any Straddle Period, in the manner provided by Section 5,1 l(c)) to the extent such Taxes exceed the amount, ifany,
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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by Parent or any Affiliate thereof on tho Closing Date after the Closing that is not specifically contemplated by this Agrecment or that is not in the ordinary
course ofbusiness.
"IPUC" means the Idaho Public Utilities Commission.
"IRS" means the United States Intemal Revenue Service.
"Knowledge" means, (i) with respect to the Company and its Subsidiaries, the actual knowledge after due inquiry ofany executive offtcer ofthe
Company and (ii) with respect to Parent and is Subsidiaries, including the Merger Sub or the Surviving Corporation, the actual knowledge after due inquiry
ofany executive offrcer ofParent.
"Merger Consideration" means $170,000,000, (i) increasedby the amount of Cash and Cash Equivalents of the Company and any Company
Subsidiary as ofimmediately prior to the Closing (prior to the payment ofany Transaction Expenses), (ii) decreasedby the amount ofClosing Indebtedness,
(iil) decreasedby the amount ofTransaction Expenses, (iv) decreasedby the Representative Reimbursement Amount, (v) if the Estimated Closing Net
Working Capital exceeds the Target Net Working Capital,increasedby the amount of such excess, and (vi) if the Target Net Working Capital exceeds the
Estimated Closing Net Working Capital, decreasedby 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 fading day prior to the Closing
Date, as adjusted for any Parent Adjustrnent Event.
"Parent Common Stock" means Parent's co[lmon stock, no par value.
"Paying Agent" mean the Person authorized to receive Letters ofTransmittal 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 benreen the Paying Agent and Parent in a form reasonably acceptable to the Company (the " Paying Agent Agreement").
"Per Share Amount" means the amount determinedby dividing (a) the Merger Consideration 6y (b) the Fully Diluted Share Number.
"Person" meaffi aD individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a
govemment or political subdivision or an agency or instrumentality thereof.
"Pre-Closing Tax Period'means any taxable period ending at the end ofor before the Closing Date and the portion through the end ofthe Closing Date
for any Straddle Period.
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"Principal Documents" means (i) this Agreement, (ii) the Escrow Agreement, (iii) cach 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 governmental entity relating to the regulation of Parent,
the Company, their respective Subsidiaries, or the tansactions contemplated by this Agreement.
"Requisite Shareholders" means Company Shareholders holding at least two-thirds ofall shares ofoutstanding Company Common Stock.
'SEC" 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, limited liability company, joint venture or other legal entity ofwhich an entity (either alone or
through or together with any other Subsidiary), owns, directly or indirectly, fifty percent (50%) or more ofthe stock or other equity interests the holders of
which are generally entitled to vote for the election of the board ofdirectors or other goveming body of such corporation, partnership, limited liability company,
joint venture or other legal entity.
*Target Net Working Capital' means $ I ,500,000.
"Tat''or "Taxe$' 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, altemative oradd-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 retum, 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 ofany Tax and shall include any amended retums required as a result ofexamination adjusEnents made by any governmental Tax
authority.
"Total Consideration" means the sum of the Merger Consideration plus the Representative Reimbursement Amount.
"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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and the consummation ofthe transactions contemplated hereby, but only to the extent that any such fees and expenses remain unpaid as ofimmediately prior
to the Closing.
"Transfer TaxeC' means any statutory, governmental, federal, state, local, municipal, foreign and other transfer, documentary, real estate transfer,
mo(gage 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 ofthe transactions contemplated by this Agreement.
*WU"[C" means the Washington Utilities and Transportation Commission.
(b) Each of thc following terms is defined in the Section set forth opposite such term:
Term
Aggregate Distribution 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 Governmental Approvals
Company Retums
Company Stock Certifi cates
Confi dentiality Agreement
Contested Amount
Confinuation Period
Damages
Defened Compensation Plan
Dispute Notioe
Dissenting Holders
DOJ
Effective Time
Environment
Environmental Law
Sctior
Section 8.8(e)
Section 8.8(e)
Section 8.8(c)
Preamble
Section 2.2(a)
Section 2.8(d)
Section 3.19(f)
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 2.4(a)
Section 5.2
Section 8.8(b)
Section 5.9(a)
Section 8.2
Section 3. l9(i)
Section 2.8(d)
Section 2.8(e)
Section 5.5(a)
Section 2.2
Section 3.20(b)
Section 3.20@)
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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 Govemmental Approvals
Parent SEC Documents
Parent Stock Certifi cate
Paying Agent Agreement
Pre-Closing Distributions
Pre-Closing Period
Pre-Closing Tax Contest
Pre-Closing Tax Rctum
RCA
Registration Statement
Representative Reimbursement Amount
Representative Reimbursement Fund
Response Notice
Securities Act
Shareholder Distributions
Shareholder Meeting
Shareholders' Representative
Significant Contract
Stock Consideration
Surviving Corporation
Tax Contest
Tax Sharing Agreement
Third-Party Claim
Trademarks
Union
Unresolved Escrow Claim
Sectlon
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 2.4(a)
Recitals
Preamble
Section 8.8(a)
Preamble
Section 2.6
Section 4.3
Section 4.7
Section 2.4(g)
Section 1.1(a)
Section 5.12
Section 5.1
Section 5.1lO)
Section 5.1 l(a)
Section 3.24
Section 5.7(a)
Section 9.1@)
Section 9.1(b)
Section 8.8(b)
Section 4.7
Section 2.4(g)
Section 5.2
Section 9.1(a)
Section 3.15(a)
Section 2.3
Section 2. I (a)
Section 5.1 l(b)
Section 3. I 8(e)
Section 8.5
Section 3,8(a)
Section 3.19(c)
Section 8.8(e)
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Term
ffinN
Secfionffi'n 3.le(d)
ARTICLE 2.
TIIE 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 ofthe Effective Time to conform to Exhibit A and the bylaws ofthe 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
officcrs 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 ofthe transactions contemplated by this Agreement (the " Closing") shall take place as soon as practicable, but no later
than wo Business Days after the satisfaction or waiver ofthe last ofthe conditions set forth in Article 6 to be satisfied or waived (other than those conditions
that by their nature are to be satislied at the Closing, but subject to the satisfaction or waiver ofsuch conditions), unless the parties hereto otherwise agree in
writing. The Closing shall be held at the oflices of Morrison & Foerster LLP, 12531 High Bluff Drive, 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 Developmenl 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.
O) At ttre 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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(i) executed copies ofany Principal Documents to which it is a party or signatory (to the extent not previously delivered);
(ii) a certificate of an officer ofthe Company certifting that the conditions set forth in Section 6. I (a), Section 6. I (b) and Section 6. I (c)
have been satisfied;
(iii) a fue and complete copy, certified by the Secretary or an Assistant Secretary ofthe Company, ofthe resolutions duly and validly
adopted by the Board ofDirectors ofthe Company evidencing its authorization ofthe execution and delivery ofthis 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 Alask4 Deparfinent of Commerce, Community and Economic
Development, Division of Corporations dated as ofa 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. I :
(i) each ofParent and Merger Sub shall cause to be delivered to the Company executed copies ofany 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 ofan officer ofParent certifuing 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 ofeach ofParent and Merger Sub, respectively, ofthe resolutions duly and validly adopted by the Boards ofDirectors ofParent and
Merger Sub, respectively, evidencing their respective authorizations ofthe execution and delivery ofthis Agreement and the other Principal Documents to which
Parent and Merger Sub are parties or signatories and the consummation ofthe transactions contemplated by this Agreement.
Section 2.3 Conversion of Shares. At the Effective Time, by viftue of tie 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 ofcompany 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
l0
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(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 ofcommon stock ofthe 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 ofSection 2,5 in an amount equal to the product of(l) such Company Shareholder's Escrow
Participation Percentage multiplied by (2) the Escrow Amount, and in the fomr 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 ofthe Representative Reimbursement Amount shall
be withheld and placed in the Representative Reimbursement Fund in accordance with Section 9,1O) in an amount equal to the product of(1) such Company
Shareholder's Escrow Participation Percentage multiplied by (2) the Representative Reimbursement Amount. For Tax purposes, each Company Shareholder's
podon ofthe 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 ofthe shares ofCompany Common Stock (the " Company Stock Certificates') in exchange for the payments in accordance herewith. The Letter
ofTransmittal shall include, without limitation, a form ofcertificate, to be completed and signed under penalties ofperjury by the Company Shareholder, if
applicable, stating that the Company Shareholder is not a "foreign person," dated as ofthe Closing Date and in form and substance as required under
Treasury Regulations Section L1445-2(b)(2) and as set out in Exhibit C.
O) 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 afterthe 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 of, 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 offractional shares ofParent 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(g).
(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 kansfer and the Person requesting such payment shall inform the Paying Agent whether any kansfer or other similar Taxes are required as a result of
such
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payment to a Person other than the registered holder of such Company Stock Certificate, or establish to the reasonable satisfaction ofthe 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. Ii 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 ofthe Merger Consideration, cash in lieu offractional shares ofParent Common Stock and any dividends or other distributions with
respect to Parent Common Stock payable upon due surrender ofapplicable Company Stock Certificates, not distributed to Company Shareholden that was
deposiled 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) (tbe " Exchange Fund")
(including any interest received with respect thereto and other iitcome 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 ofthe
Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar laws.
(f) In the event any Company Stock Certificates shall have been lost, stolen or destroyed, upon the making ofan affidavit ofthat fact by the
Person claiming such Company Stock Certificate(s) to be lost, stolen or destroyed and, ifrequired by Parent or the Paying Agent, the execution ofan
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 ofthe shares ofCompany Common Stock represented by such lost, stolen or
destroyed Company Stock Certifi cates.
(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
ofany surrendered Company Stock Certificate with respect to the shares ofParent 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 distributions 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 ofsuch Company Stock Certificate in accordance with
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Section 2.4(h) below. Subject to the effect ofapplicable abandoned property, escheat or similar laws, following surrender ofany 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 ofParent Common Stock issued in exchange therefor, without interest, (i) at the time ofsuch surrender, the amount ofdividends or otber
distributions with a record date after the Effective Time therctofore paid with respect to such whole shares of Parent Common Stock and the amount of any
cash payable in lieu of a fractional share ofParent Common Stock to which such Company Shareholder is entitled pursuant to Section 2.4(h) below at
Closing, and (ii) at the appropriate paymeDt date, the amount ofdividends 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 ofParent Common Stock. Parent shall make
available to the Paying Agent cash for these purposes, ifnecessary. 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 ofParent Common Stock are released from the Escrow Account in accordance with
Section 8.8(e) simultaneously with the release ofsuch shares.
(h) No Parent Stock Certificates representing fractional shares ofParent Comnron 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 tactional 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 ofterwise have been entitled to receive a fractiooal 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 ofCompany Common Stock held by such holder at the Effective Time) would otherwise be entitled
by (ii) the Parent Closing Price. Parent shall make available to the applicable party cash for these purposes, 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 ofissuing 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,
sufticient (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 offractional shares ofParent Common Stock payable in connection with the Closing Stock Consideration.
Section 2.5 Escrow. An amount equal to l0% 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
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on or prior to the Effective Time, and shall be subject to the terms of the Escrow Agreement and this A$eement.
Section 2.6 Certain Adjustments. If the outstanding shares of Parent Common Stock as of ttre date of this Agreement changes into a different number
of shares by reason ofany reclassification, recapitalization or combination, stock split, reverse stock split, stock dividend or rights issued in rcspect ofsuch
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 Adjustrnent 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 Adjustrnent 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 ofthe 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 I 0.06.580 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 beeo converted into, and to have become exchangeable for, as ofthe Effective Time, the right to receive the Merger
Consideration and the applicable portion ofthe Representative Reimbursement Amount, without any interest thereoq 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 ofany demands for fair value received by Company, withdrawals of such demands and any
other similar instruments sewed 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 ofParent, make
any payment with respect to any demands for fair value or offer to settle or settle 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.E 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 ofthe Company
as of immediately prior to the Closing, which shall be prepared in accordance with the Company's historica[ 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
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Shareholders' Representative its unaudited balance sheet ofthe 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 ofthe Final Closing Net Working Capital set forth in the Closing
Date Statement, the Shareholders' Representative shall noti! Parent in wdting (the " Dispute Notice") ofthe amount, nature and basis ofsuch dispute, within
forty-five (45) days after delivery ofthe Closing Date Statement. In the event ofsuch a dispute, Parent and the Shareholders'Representative shall first use
good faith efforts to resolve such dispute among themselves. IfParent and the Shareholders' Representative are unable to resolve the dispute within thirty
(30) days after delivery ofthe 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 fumish or cause to be fumished 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
writtcn 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 ofthe Audit Firm for such determination. The written decision ofthe 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 offraud 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 wriuen
decision of the Audit Firm), the Final Closing Net Working Capital (as determined in such dispute resolution) shall be determined fmal.
(e) Immediately upon the expiration ofthe forty-five (a5) day period for giving the Dispute Notice, ifno 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 ofdisputes, ifany, 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
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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 ofthe Escrow Fund by the release ofshares
of Parent Common Stock (vatued 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 Shareholden (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 ofParent, 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 ofCompany Common Stock or any other recipient ofany payment under
this Agreement, such amounts as Parent, the Surviving Corporation or tbe Paying Agent reasonably determines are required to be deducted and withheld from
such payment under the Code or other applicable Tax law. Not'rithstanding the foregoing, Parent, the Surviving Corporation and the Paying Agent, as the case
may be, shall noti! the Shareholders' Representative ofany 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 ofwhich 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 sball take all action that may be necessary to ensure that any such amounts so withheld are promptly and properly remitted to the appropriate
govemmental Tax authority.
Section 2.10 Pryment 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.
ft) Deposit the Representative Reimbursement Amount by wire kansfer of immediately available firnds with the Shareholders' Representative, in
accordance with Section 9.1@), 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 firnds) 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
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shares ofParent Common Stock payable in connection with the Closing Stock Consideration, to be disbursed in accordance with the terms ofthis Agreement
and the Paying Agent Agreement.
Section 2.ll 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 ofand to all rights and property ofMerger Sub and the Company, the officers and directors ofthe Surviving Corporation and Parent shall
take, and shall be fully authorized (il the name of Merger Sub, in the name of the Company and other,wise) to take, such action.
ARTICLE 3.
REPRESENTATIONS AI\D WARRANTIES OF THE COMPANY
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 ofthe State ofAlaska and has all necessary corporate power and authority to conduct its business in the manner in which its business is
cunently 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 ofthe current organizational documents ofthe 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 ofthis Agreement have been duly authorized
by all necessary corporate action on the part ofthe Company. This Agreement, assuming it constitutes the valid and binding obligation ofthe other parties
hereto, constitutes the valid and binding obligation ofthe Company, enforceable against the Company in accordance with its terms, subject to: (a) laws of
general application relating to bankruptcy, insolvency and the reliefofdebtors; and (b) rules oflaw goveming specific performance, injunctive reliefand 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 ofany provision ofthe Articles oflncorporation and bylaws ofthe Company, each as amendedi (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 ofany material provision ofany Significant Contract or the termination ofany Significant Contract; or (iii) result in a violation by the Company
or any Company Subsidiary ofany law or govemmental regulation applicable to the Company, except in each case where such violation or termination would
not have a Company Material Adverse Effect.
Section 33 Subsidiaries. Except as set forth on Section 3.3 ofthe Disclosure Schedule, the Company does not directly or inditectly own, or hold any
rights to acquire, any shares of capital stock or any other securities or interests in any other Person. Each Company
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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 ofall jurisdictions where the nature ofits business requires such qualification, except where the failure to be so qualified
would not have a Conrpany Material Adverse Effect.
Section 3.4 Capitalization, Etc.
(a) The authorized capital stock ofthe Company consists of600,000 shares ofCompany Common Stock, 200,000 shares ofVoting Preferred
Stock, no par value, and 200,000 shares ofPreferred Stock, no par value. As ofthe date ofthis Agreemen! I 14,504 shares ofCompany Common Stock, no
shares ofthe Company's Voting Preferred Stock and no shares ofthe Company's Preferred Stock are issued and outstanding. All ofthe 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 ofeach such holder as ofOctober 25, 2013.
(b) As ofthe date ofthis Agreement, there are no (i) outstanding options, warrants, stock options or rights to acquire fiom 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 ofthe Company.
(c) All ofthe issued and outstanding capital stock ofeach Company Subsidiary has been duly authorized and validly issued, are fully paid and
non-assessable. The Company owns directly all ofthe issued and outstanding capital stock ofeach Company Subsidiary. As ofthe date ofthis 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 ofDecember 3 l, 2012 and the related audited consolidated statements ofoperations, shareholders' equity and cash flows of
theCompanyfortheyearthenended;and(ii)theconsolidatedunauditedbalancesheetoftheCompanyasofSeptember30,20l3(the" CompanyBalance
Sheet") and the related consolidated unaudited statements of oporations ofthe Company for the nine months then ended (the financial statements referred to in
clauses (i) and (ii) ofthis sentence, the "Company Financial Statements"). Except as set forth on Section 3.5 ofthe Disclosure Schedule, the Company
Financial Statements fairly present, in all material respects and in accordance with GAAP, the financial condition ofthe Company as ofthe 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,
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Section 3.6 Undisclosed Liabilities. Except as set forth on Section 3.6 ofthe Disclosurc Schedule, as of the date ofthis 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 ag$egate, material to the Company, except for (i) liabilities shown on the
Company Balance Sheet; (ii) liabilities that have arisen in the ordinary course ofbusiness consistent with past practice since tbe date ofthe Company Balancq
Sheet; or (iii) fees and expenses to brokers, furancial advisors, accountants or legal advisors for services performed in connection with the negotiation,
execution and delivery ofthis Agreement and the consummation ofthe transactioDs contemplated hereby (and constituting either Transaction Expenses or Pre-
Closing Distributions).
Section 3.7 Legal Proceedings; Orders , As ofthe date of this Agreement, (i) there is no lawsuit or other legal proceeding pending (or, to the Knowledge
ofthe Company, being overtly threatened in writing) against the Company or any Company Subsidiary before any court ofcompetentjurisdiction or
arbitrator, and (ii) there are no orders, judgments or decrees of, or before, any governmental entity with respect to the Company or any Company Subsidiary.
Section 3.8 Intellectual Property.
(a) Section 3.8(a) ofthe Disclosure Schedule sets forth all ofthe following that are owned by the Company or any Company Subsidiary as ofthe
date of this Agreement (collectively, the "Company IP Rights"): (i) hademarks, service marlc, trade names, brand names, logos, trade dress, design rights
and other similar designations ofsource, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all
registrations, applications and renewals for, any ofthe foregoing (" Trademarks"); (ii) internet domain names, whether or not Trademarks, registered by any
authorized private registrar or govemmental 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 ofthe 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 govemmental authority-issued
indicia ofinvention 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 Righs. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of the bansactions contemplaled 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.
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(b) To the Knowledge of the Company, as of the date of this Agreement, no Company IP fughs are being materially infringed or misappropriated
by any third party.
(c) To the Knowledge ofthe Company, as ofthe date ofthis Agreement, no employee ofthe 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, ncither the
Company nor any Company Subsidiary is indebted to any director, offrcer or employee ofthe Company or ofany 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 ofthe Company Balance Sheet and the date ofthis 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 ofany shares ofits 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 ofbusiness, any material liability ofthe 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 ofthis Agreement and the consummation ofthe 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 ofbusiness; (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 oftheir respective current employees; and (g) neither the Company nor any Company
Subsidiary has entered into any material transaction or series ofrelated transactions outside the ordinary course ofbusiness.
Section 3.1I 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. I I ofthe 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 ofthe Company and all actions by wriffen consent without a meeting of the directors and the shareholders ofthe Company since January 1,
2009.
Section 3,12 Tangible Personal Property. The Company or its applicable Company Subsidiary has good title to all ofthe items oftangible personal
property reflected on the Company Balance Sheet as owned by the Company or such Company Subsidiary, except for assets disposed ofsince the date ofthe
Company Balance Sheet in the ordinary coune ofbusiness, and all tangible personal property owned by the Company or any Company Subsidiary is owned
free and clear ofall liens, except for: (a) liens set forth on Section 3.12 ofthe
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Disclosure Schedule, O) 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 property 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 ofthe 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 ofreal property owned or leased, as
applicable, by the Company or any Company Subsidiary, subject to any liens or exceptions (o0rer than liens arising pursuant to any mortgages, deeds oftnrst
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 ofany material condemnation, rezoning or taking actions pending, or to the Knowledge ofthe Company, threatened, with respect to any material
parcel ofowned real property.
Section 3.14 Receivables. All accounts, notes receivable and other receivables arising out ofor relating to the business ofthe 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.
Section 3.15 Contracts.
(a) Section 3. I 5(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 contmct to which the Company or a Company Subsidiary is a party: (i) for the
future purchase, exchange, transmission or sale ofelectric 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 iaterest in a partnership, joint venture or limited liability compary; (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 ofthis Agreement and the first anniversary ofsuch date
(other than pursuant to contracts with or for the benefit ofCompany Employees that can be terminated by the Company or any Company Subsidiary on notice
of60 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, sewice mark registuation, 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
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indebtedness for, borrowed money in the amount of $100,000 or morel (ix) containing covenants materially limiting the development, production or
distribution ofthe Company's or any Company Subsidiary's products or services; or (x) constihrting a collective bargaining contract or a written
employrnent, management, severance or change in control contract with any diiector or officer ofthe 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 ofeach Significant
Contact identified in Section 3.15(a) ofthe Disclosure Schedule.
O) Each Sipificant Contact identified in Section 3.15(a) of the Disclosure Schedule is valid and in full force and elIect as of the date of this
Agreement. To ttre Knowledge ofthe Company, no party is in material breach or in material default under any such Significant Contract as ofthe date ofthis
Agreement.
Section 3.16 Compliance with Laws. The Company and each Company Subsidiary is in compliance with all applicable laws and governmental
regulations with which compliance is necessary for the operation ofthe business ofthe 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 p€rmits, 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 govemmental autlrorities 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.I8 Tax Matters.
(a) Each of the Company and the Company Subsidiaries has filed all Tax Retums it was required to file with respect to any taxable period ending
after January l, 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
Retum) have been paid. All Taxes that the Company or any Company Subsidiary has been required to collect or withhold have been duly and timely oollected
or withheld and, if and when required under applicable law, timely paid to the proper govemmental 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 orjudicial 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 govemmental Tax authority that any such audit or
proceeding is contemplated or pending, and since January I , 2009 no notice of deficiency or proposed adjustrnent for any amount ofTax has been received by
the Company or any Company Subsidiary. No waiver or agreement by or with respect to the
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Company or any Company Subsidiary is in force as of the date of this Agreement for the waiver of any statute 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 ofany extension oftime u/ithin which to
file any Tax Retum. 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 Retums that the Company or any Company Subsidiary is or may be subject to taxation by
thatjurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) upon any ofthe assets ofthe Company or any Company Subsidiary.
Section 3.l8(b) of the Disclosure Schedule lists all income Tax Retums filed with respect to the Company or the Company Subsidiaries for taxable periods
ending after January L,2009 and indicates those Tax Retums that have been audited. The Company has delivered to Parent correct and complete copies of all
income Tax Retums of, and examination reports and statements ofdeficiencies assessed against or agreed to by, the Company or any Company Subsidiary
filed or received since January I, 2009.
(c) Neither the Company nor any Company Subsidiary is a party to any agreement, contract, .urangement 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 ofthe
Code (or any corresponding provision ofstate, local or foreign Tax law) without regard to Subsection (bX ) 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 ofthe Code.
(d) There is no application pending as of the date of this Agreement with any govemmental Tax authority requesting permission for any change in
any accounting method ofthe Company or any Company Subsidiary, and the IRS has not issued in writing any proposal pending as ofthe date ofthis
Agreement regarding any such adjusEnent or change in accounting method. Neither the Company nor any Company Subsidiary will be required to include
any item ofincome or gain in, or exclude any item ofdeduction or loss from, taxable income for any taxable period (or portion thereofl 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 7 I 2l 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 Rcgulations promulgated under Section 1502 ofthe Code (or any
corresponding provision ofstate, 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
businesst or (vi) election under Section I 08(i) ofthe Code made by the Company or any Conrpany 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 ofpersonal property Taxes, sales or use Taxes or value added Taxes with
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respect to personal property leased, used, owned or sold in the ordinary course ofbusiness (such Tax sharing or allocation agreement, a " Tax Sharing
Agreement").
(f) Except with respect to the group ofwhich 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 I 5M of the Code or similar
provisions of state, local or foreigD Tax law) or has any liability for the Taxes of any Person under Treasury Regulations Section I . I 502-6 (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 ofan entity treated as a partnership for income Tax purposes.
(g) Since the date ofthe 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 ofbuiness consistent with past custom and practice.
(h) Neither the Company nor any Company Subsidiary has "participated" in any tansaction described in Treasury Regulations Section 1.601 l-
4(bX2), (3), (a), (s) 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 govemed in whole or in part by Section 355 or 361 ofthe Code.
() To the Knowledge ofthe Company, none ofthe Company or any Afliliate thereofhas taken, proposed to take, or agreed to take any action, not
contemplated by this Agreement, that would prevent the Merger from qualifuing 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(a)(2)(FXiii) and (iv) ofthe Code.
(l) The Company has not engaged in any one or more transactions that would cause the Suwiving Corporation to fail to hold "substantially all" of
the Company's properties after the Merger within the meaning of Section 368(aX2XE) 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 ofall 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 ofthe date ofthis Agreement, neither the Company nor any Company Subsidiary is delinquent in any material payments to any ofits employees for any
wages, salaries, commissions, bonuses or other direct
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cash compensation for any services performed for the Company or such Company Subsidiary and (ii) as of the date ofthis 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 ofthe date ofthis Agreement and except as set forth in Section 3.19(c) ofthe 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 " Uoion") 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 arbitr-ation proceeding pending or, to the Krowledge ofthe Company, threatened with respect to Company Employees.
(d) Except 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 ofwork, 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 ("WARIY) 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 aggegate, a Company
Material Adverse Effect, (i) no governmental entity has threatened (to the K:rowledge 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 goveming 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 goveming labor or employment.
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(f) AII material employee benefit plans maintained by the Company or any Company Subsidiary for their employees as of the date of this
Agreementare listed in Section 3.19(f) ofthe Disclosure Schedule (the"Benefit Plans"). Copies ofall Benefit Plans, orifno plan document is available, a
written description of each Benefit PIan, 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(Q ofthe Disclosure Schedule and
except for such matterc that would not reasonably be expected to have, individually or in the aggegate, a Company Material Adverse Effect:
(i) No Benefit Plan, no trustee or adminisbator 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 ENSA or Section 4975 of the Code applies and which would reasonably be expected to subject any such Benefit Plan or trustee or
administrator thereofto a material Tax or penalty on prohibited transactions imposed by Section 4975 of the Code;
(ii) neither the Company nor any ERISA Affrliate 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;
(iii) with respect to the Benefit Plans, each Benefrt Plan (and each related trust, insurance contract or fund) has been maintained, funded
and administered in all respects in accordance with its goveming instnrments 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 ofemployment (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
ofthe Benefit Plans or any fiduciary ofany ofthe Employee Benefit Plans or against the assets ofany ofthe Benefit Plans.;
(vi) except as may be required by applicable law, the consummation ofthe transactions contemplated hereby will not accelerate or increase
any liability under any Employee Benefit Plan because of an acceleration or increase ofany of the rights or benefits to which employees may be entitled
thereunder; and
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(vii) all required reports and descriptions ofeach Benefit Plan (including IRS Form 5500 annual reports, summary annual reports,
summary plan descriptions and summaries of material modificdtions) have been timely filed with the IRS, the Department of Labor or other governmental
body and have been distributed as required.
(g) Except as set forth on Section 3.19(g) ofthe Disclosure Schedule, neither the Company nor any ENSA 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 ofthe date ofthis Agreement have been made available to Parent or Parent's legal or financial advisor, and,
if such plan is subject to Section 40 I (a) of the Code, to tbe Knowledge of the Company, nothing has occurred since the issuance of such letter that would
reasonably be expected to cause the loss ofthe tax-qualified status ofsuch Benefit Plan.
(i) No Benefit Plan is a nonqualified deferred compensation plan within the meaning of Section 09A(d)(l) ofthe Code (each such Benefit Plan, a
"Deferred Compensation Plan'). Each Defened Compensation Plan satisfies the requirements ofSection 409A(dXl) ofthe Code to avoid the consequences
set forth in Section a09A(aXl) of the Code. At all times while subject to Section 4094, of the Code, the written terms of each Defened Compensation Plan have
been in compliance with, and each Deferred Compensation Plan has been operated in compliance with, Section 409A ofthe Code and all applicable guidance
thereunder.
Section 3.20 Environmental Matters .
(a) Except as set forth in Section 3.20(a) ofthe Disclosure Schedule or as would not reasonably be expected to have, individually or in the
aggregatq a company Material Adverse Effect:
(i) there are no pending or, to the Knowledge of the Company, threataned, claims, lawsuits, or administrative proceedings against the
Company or any Company Subsidiary, under or pursuant to any Environmental Law as ofthe date ofthis Agreement, and neither the Company nor any
Company Subsidiary has received written notice as of the date of this Ageement Aom any person, including any governmental entity, alleghg that the
Company or any Company Subsidiary has been or is in violation or potentially in violation ofany 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 I, 2009, have been in compliance with all applicable
Environmental Laws;
(iii) the Company and the Company Subsidiaries have and are in compliance with all material permits, licenses and approvals (each of
which is disclosed in
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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 oftheir facilities or assets, all such permits, licenses and approvals are in effect, and, to the Knowledge ofthe Company, there is no actual or
alleged proceeding as ofthe date ofthis Agreement to revoke, modiff or terminate such permits, licenses and approvals;
(iv) to the Knowledge ofthe Company, there has been no release ofHazardous Materials at any real property currently or formerly owned,
leased, or operated by the Company or any Company Subsidiary as ofthe date ofthis Agreement in concentratiotrs or under coDditions 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 ofthis Agreement to any order, judgment or decree that
imposes any obligations under any Environmental Law and, to the Krowledge ofthe Company, has not, either expressly or by operation oflaw, undertaken
any such obligations as ofthe date ofthis Agreement, including any obligation for corrective or remedial action, ofany 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 Agreenrent:
(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 govemmental entity relating to:
(A) the protection ofthe Environment, including pollution, contamination, cleanup, preservation, protection and reclamation ofthe Environment; (B) any
release or threatened release of any Hazardous Materials, including investigation, assessment, testiDg, monitoring, containment, removal, remediation and
cleanup ofany 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,
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industrial or solid waste, and any toxic, radioactive, infectious or hazardous substance, material or agent.
(c) The representations and warranties set forth herein are the Company's sole representations and warranties rclating to Environmental Law, the
Environment and Hazardous Materials.
Section 3.21 Insurance. Section 3.21 ofthe Disclosure Schedule is a list ofall material policies ofinsurance 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 ofthe 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 ofthis Agreement, there is no pending or, to the Knowledge ofthe Company, threatened enforcement action against the Company
or any Company Subsidiary by any other governmental authority which hasjurisdiction over the operations ofthe 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 govemnental authority is threatening such action.
(b) There is no arrangement relating to the Company or any Company Subsidiary as ofthe date ofthis Agreement providing for any rebates,
kickbacks or other forms ofcompensation that are unlawful to be paid to any Person in rehm for the referral ofbusiness 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 ofthe foregoing, nor, to the Klowledge of
the Company, any other employee or agent ofthe Company or any Company Subsidiary has as ofthe date ofthis 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 ofan 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) ofthe Disclosure Schedule, neither the Company nor any Company Subsidiaries, all or part ofwhose
rates or services are regulated by a govemmental authority (i) is a party to any rate proceeding before a govemmental 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 govemmental authority or on appeal to a cout, except in the case of
clauses (i) and (ii) that would not, individually or in the aggegate, reasonably be expected to have a Company Material Adverse Effect.
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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 behalfofthe Company.
Section 3.24 No Consent; Required Filings. Except as set fortb on Section 3.24 of the Disclosure Schedule or as may be required under or in
relation to (a) the ACC, @) 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), refened to herein as the " Company Required
Governmental Approvals"), no consent, approval, authorization order, filing, registration or qualification ofor 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, ifnot obtained or made, would not reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
Section 4.1 Due Organization. Each ofParent and 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
cunently being conducted. Each of Parent and Merger Sub is qualified to do business as a foreign corporation under the laws of all jurisdiotions where the
nature ofits business requires such qualification, except where the failure to be so qualified would not have a material adverse effect. Each ofParent and
Merger Sub has made available to the Company or the Company's legal or financial advisor copies ofthe organizational documents ofsuch entity, including
all amendments thereto.
Section 4.2 Authority; Binding Nature of Agreement; Non{ontravention . 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 authorized by 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 ofParent and Merger Sub, enforceable against them in accordance with its terms,
subject to: (a) laws ofgeneral application relating to bankruptcy, insolvcncy and the reliefofdebtors; and (b) rules of law governing specific performance,
injunctive relief and other equitabl€ remedies. Neither the execution and delivery ofthis Agreement by Parent or Merger Sub nor the consummation of the
Merger will: (i) result in a violation by Parent or Merger Sub ofany provision ofthe Articles oflncorporation or bylaws or other equivalent organizational
documents ofParent or Merger Sub, any material provision of
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any material contract by which Parent or Merger Sub is bound or any law or govemmental 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) WIJTC, IPUC, OPUC and MPSC (collectively, the "Parent Required Governmental Approvals"), no consent, approval, authorization order, filing,
registration or qualification ofor with any govemmental authority or any other Person is necessary for the consummation by Parent or Merger Sub ofthe
transactions contemplated by this Agreement, except for such authorizations, consents, approvals or filings that, ifnot 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.
Section 4.5 Capitalization.
(a) As ofthe date hereof, the authorized capital stock ofParent consists of200,000,000 common shares and 10,000,000 prefened 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 ofParent; or (ii) outstanding securities ofParent that are convertible into any shares ofcapital stock or other equity securities of
Parent.
(b) As of the date hereof, the authorized capital stock of Merger Sub consists of I 00 common shares, no par value. Parent is the sole shareholder
ofMerger Sub and is the legal and beneficial owner ofall 100 issued and outstanding shares, free and clear ofall liens, All such shares were duly authorized,
validly issued, fully paid and nonassessable. There are no (i) outstanding options, warrarts, stock options or rights to acquire from Merger Sub any shares
ofthe capital stock or other equity securities ofMerger Sub; or (ii) outstanding securities ofMerger Sub that are convertible into any shares ofcapital stock or
other equity securities ofMerger 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 ofparticipation, right ofmaintenance, any similar right or any encumbrances ofany kind (other than as sct 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 ofthe securities
exchange applicable to such capital stock and (ii) all requirements set forth in any applicable agreements, (c) ranking pari passu in all respects
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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 fumished by
it with the SEC during the period of time between January l , 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 oftheir 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 ofthe SEC thereunder applicable to such Parent SEC Documents. None ofthe Parent SEC Documents,
including any financial statements, schedules or exhibits included or incorporated by reference therein at the time they were filed (or, ifamended 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 ofthe circumstances under which they
were made, not misleading. None ofthe Parent SEC Documents are the subject ofany unresolved, pending comment letters or proceeding ofthe SEC.
Section 4.E Adequacy of Funds . Parent has, and at the Closing will have, adequate financial resources to satisfu its monetary and other obligations
under this Agreement without requiring tho prior consent, approval or other discretionary action ofany 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 oflicers and other representatives ofthe 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 ofthe Company regarding the process undertaken by the Company in connection with the Company's solicitation ofpotential
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 behalfofthe 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 forccasts
and certain business plan information. Parent acknowlcdges that there are uncertainties inherent
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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 ofthe adequacy and the accuracy ofall estimates, projections and other forecasts and plans so fumished 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.ll Litigation. As ofthe date ofthis Agreement, there is no lawsuit or other legal proceeding pending before any court ofcompetentjurisdiction
(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 ofthe shareholders ofParent is required by applicable law, the articles ofincorporation
of Parent, the bylaws of Parent or otherwise in order for Parent and Merger Sub to consummate the Merger and the transactions contemplated hereby.
Sectlon 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
ofParent, Merger Sub or any alfiliated Person,
Section 4.14 Tax Matters.
(a) To the Knowledge of Parent, none ofParent, Merger Sub nor any Affrliate 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 ofParent stock that may be acquired by Parent on the open nrarket as part ofParent'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 ofTreasury Regulations Section 1.368-l(eXa) 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(aX2XFXiii) and (iv) ofthe Code.
(d) Parent has no plan or intention to liquidate the Surviving Corporation following the Merger or cause the Suwiving 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 hansfers described in
Section 368(a)(2)(C) ofthe Code and the Treasury Regulations issued thereunder, including Treasury Regulations Section 1.368-2ft).
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(e) Following the Merger, Parent intends to cause the Suwiving 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) ofthe 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
conhol ofthe Surviving Corporation within the meaning of Section 368(c) ofthe Code.
ARTICLE 5.
COVENANTS AND 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 " PreClosing 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 marcrial govemmental permits, franchises and authorizations; and
(v) re tain the services of its current oflicers 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 ofthe 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 ofCompany Common Stock, Voting Preferred Stock, Prefened Stock or securities convertible into, or rights,
warrants or options to acquire, any shares ofCompany 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 reclassiff 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;
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(f) make any capital expenditures, except in the ordinary course ofbusiness, or ifoutside the ordinary course ofbusiness, 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 dircctors or employees or enter into, establish
or amend any material employmeut, bonus, incentive compensatioq pension, retiremeDt, 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 govemmental regulation or the terms of
contracts in effect as ofthe date of this Agreement; and (ii) increases in salaries, wages and benefits effected in the ordinary course ofbusiness;
(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 ofthis Agreement or any related agreement or document;
O make or change any material election conceming Taxes, file or amend any income Tax Return, fail to provide a copy to Parent ofeach other
filed or amended Tax Retum within fifteen (15) days after such filing or amendment, settle any material claim or assessmeDt in respect ofTaxes, surrender
any right to claim a refund of Taxes, 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 govemmental 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 ofthe actions described in clauses (a) tfuough (n) ofthis 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
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(b)holdaspecialmeetingoftheCompanyShareholderstosolicittheapprovaloftheMergerbytheCompanyShareholders(the" ShareholderMeeting").
Section 5.3 Access to Information. Except as required by applicable law or govemmental 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 conceming the business ofthe 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 urueasonably with the conduct ofthe business ofthe Company,
(b) such access shall be conducted at Parent's expenset under the supervision ofappropriate personnel ofthe Company and in such a manner as to maintain
the confidentiality ofthis Agreement and the transactions contemplated hereby in accordance with the terms hereofand (c) nothing herein shall require the
Company to disclose any information to Parent ifsuch disclosure would, in its sole and absolute discretion (i) jeopardize any attomey client or other legal
privilege or (ii) contravcne any applicable law, fiduciary duty or binding agreement entered into prior to the date ofthis 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 purpose ofperforming 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 "Conlidentiality Agreement").
Section 5.4 Pubtic Disclosure. Except as may be required by applicable law or pusuant to the rules and regulations of any national securities exchange
on which a pary'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 Agreement. 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 C'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
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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 ofthe other transactions contemplated by this Agreement, including consents, permits,
approvals, and waivers required by the FERC, RCA, WIJTC, 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 restain! 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 ofthe Merger or rescind, vacate, or
otherwise challenge any approvals granted by any govemmental entity. Each of Parent and the Company shall promptly deliver to the otber a copy ofeach
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 govemmental authorities
in connection with the execution and delivery ofthis Agreement and the consummation ofthe 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 tbe generality of anything contained in Section 5.5(a), each party hereto shall use commercially reasonable efforts to file, as
promptly as practicable aftsr the date ofthis Agreement, all notices, reports and other documents required to be filed by such party with any govemmental
authority with respect to the Merger and the other hansactions 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 regisfations, 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 Governmental Approvals, and under any other Regulatory Laws, the HSR Act and any other Antitrust Laws with respect
to the transactions contemplated by this Agreement as promptly as reasonably practicable and advisable after the date ofthis 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 A$eement); (ii) furnish to the other party as promptly as
reasonably practicable all information required for any application or other filing to be made by the other party pusuant 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, WIJTC, IPUC, OPUC, MPSC,
the DOJ, the FTC or by any other govemmental authority in respect of such registrations, declarations and filings or such Eansactions; (iv) to the extent not
prohibited by a governmental authority, promptly notiff the other party of any material communication between that party and the FERC, RCA, WUTC,
IPUC, OPUC, MPSC, the FTC, the DOI or any other govemmental
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authority and ofany material communication received or given in connection with any Action by a private party, in each case regarding any ofthe 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 ofany
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 govemmental authority shall
be jointly made (unless such party received prior written consent ofthe other party to communicate on its own with such governmental authority); (v) subject
to applicable law, and all applicable privileges (including attomey 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, WI/TC, IPUC, OPUC, MPSC, the FTC, the DOJ or any other govemmental authority or, in connection with any Action
by a private party or any other Person, relating to any Antitrust Law, Regulatory Law or any Action pursuant to any Antitrust Law or Regulatory Law in
oonnection with the Merger and the other fansactions 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, telcphone call or discussion relating to the antitrust merits, any potential remedies,
commitments or undertakings, the timing ofany 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 govemmental authority
in respect ofany 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 contemplatcd 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 fumish the other party promptly with copies of all material
conespondence, filings and communications relating to any Antitrust Law, Rcgulatory 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 govemmental 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 atry voluntary delay ofthe Closing at the behest ofany governmental entity without the consent ofthe
other party, which consent shall not be unreasonably withheld, delayed or conditioned, (ix) not, directly or indirectly through one or more of their respective
Afliliates, 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 ofthe conditions contained in
Article 6, and (x) act in good faith and reasonably cooperate with the other party in connection with any ofthe foregoing.
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(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 lo be made, any and all undertakings necessary to avoid or eliminate each and every impediment asserted by any govemmcntal entity in
connection with obtaining the required regulatory approvals applicable to Parent, Merger Sub, the Surviving Corporation, tle Company or any Company
Subsidiary so as to enable the Closing to occur as promptly as practicable. Notwithstanding the foregoing sentence ofSection 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 comection with obtaining any
conseDts or approvals hereunder, or in connection with otherwise complying with any provisions ofthis 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 ofParent, 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 eam the authorized rate ofretum, as applicable) or (2) the ability ofParent to continue to
operate the business ofthe 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 ofthis Agreement, consent to the imposition ofany
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 oftheir Subsidiaries or Affiliates or any oftheir 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 eflorts 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 ofthis Agreement, Parent, in consultation with the Company, shall prepare and file with
the SEC a registration statement on Form 54 (together with all amendments thereto, the " Registration Statement") relating to the Merger. The Registration
Statement shall contain a document that will constihrte (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 docrunent
being herein called the "Information Statement"). The Regis[ation Statement, including the Information Statement, and any other related filings shall
comply in all material respects with all applicable requirements ofthe 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 Paren! shall
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initially prepare the portions ofthe Information Statemont 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 fumish 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 ofthe 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 lnformation 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 fumish the Company copies of, all
amendments to the Registration Statement, all supplements to the Information Statement and all other filings with and transmittals to the SEC to the extent not
publicly available on EDCAR Parent shall advise the Company promptly after it receives notice tbereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, ofthe issuance ofany stop order, the suspension ofthe qualification ofthe 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 reiponses 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 I 3 or Section I 5(d) ofthe 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 144(c)(2) 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 lnfomration 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
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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 Ollicers 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 ofthe
Company and any Company Subsidiary pursuant to any agreement ofthe Company or any Company Subsidiary providing for the indemnification ofits
officers or directors (the current and former officers and directors of the Company or any C-ompany 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
Incorporation ofthe 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 ofthis Agreement, and Parent shall not permit any ofsuch provisions, or any provisions ofthe
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 ofany 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 ofthe Indemnified Parties, the current level and scope ofdirectors' and officers' liability insurance coverage as set forth in the
Company's current directors' and officers' liability insurance policy in effect as ofthe date ofthis Agreement; provided, however, that in no event shall
Parent or the Surviving Corporation be required pursuant to this Section 5.8(b) to expend in erny one year an amount in excess of2507o ofthe annual premium
currently payable by the Company with respoct to such current policy, it being understood that ifthe annual premiums payable for such insurance coverage
exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost equal !o 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 ofsuch 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 ofParent or the Surviving
Corporation (as the case may be) shall assume all ofthe obligations set forth in this Section 5.8.
(d) This Section 5.8: (i) shall survive the consummation of the Merger and the Eflective Time; (ii) is intended for the benefit of each Indemnified
Party, and will be enforceable by, each Indemnified Party and his or her heirs and representatives; (iii) shall be binding on all successors and assigns ofParent
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 Party, 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 employnrent 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
ofCompany Employees who are not subject to a collecfive 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 ofdoubt, nothing in this Section 5.9 shall limit the negotiating positions that may be taken in connection
with any renegotiation of any collective bargaining ageement following the Closing Date.
(a) For a period oftwo 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 frushate the foregoing compensation and benefits obligations dwing 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 disabiliry
payments or benefits (which shall be deemed to include medical benefits) or retirce 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 ENSA, 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-offand severance plans) to recognize each Company Employee's service with the Company or any
ofthe Company Subsidiaries (as well as service with any predecessor ofthe 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 zubsidies; provided,
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however, that such service need not be recogrized to the extent that such recoglition would result in any duplication ofbenefits.
(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 beuefit 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 ofall
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 satisrying such year's deductible and co-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 ofthis 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
ofthe 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 Ageement), 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 rcspective Subsidiary or Affiliate thereof. No
Company Employee (including any beneficiary or dependent thereof) shall be regarded for any purpose as a third-party beneficiary ofthis Agreement pursuant
to this Section 5.9 and this Section 5.9 shall not create such rights in any such person.
(0 Parent shall, for at least the frst two years following the Closing, maintain the Compary'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 Agrecment 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,ll Tar Matters.
(a) Parent shall prepare, or cause to be prepared, and timely file, or cause to be timely filed, all Tax Retums relating to the Company and its
Subsidiaries that are required to be filed after the Closing Date. All such Tax Retums for any taxable period ending at the end ofor 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 ofthe Company to the extent such
past practices comply with applicable Tax law. Parent shall provide the Shareholders' Representative with a copy ofa completed draft ofeach Pre-Closing Tax
Retum for Taxes based on or measured by income (and any other material Pre-Closing Tax Retum) at least thirty (30) days prior to the due date for filing
thereof, along with supporting work papeni, for the Shareholders' Representative's review and comment, and shall make any reasonable changes requested by
the Shareholders' Representative on such Pre-Closing Tax Retums. Parent shall timely pay any Taxes of the Company and its Subsidiaries due after the
Closing Date but, for the avoidance ofdoubt, without prejudice to any indemnification rights Parent otherwise is entitled to hereunder (other than, for the
avoidance ofdoubt, with respect to penalties and interest incurred as a result ofParent's failure to timely pay such Taxes).
O) 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 Contesf'): (i) Parent will notifi the Shareholders' Representative in writing ofsuch
Pre-Closing Tax Contest and will keep the Shareholders' Representative reasonably informed with respect to the defense thereof; (ii) the Shareholders'
Representative, on behalfofthe Escrow Participants, will have the right to participate in the defense ofsuch Pre4losing Tax Contest at the sole expense ofthe
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 ofsuch Pre-Closing Tax Contest, such approval not to be
unreasonably delayed, conditioned or withheld. To the extent ofany conflict between the provisions ofthis Section 5.1 l(b) and Article 8, this Section 5.1 lO)
shall contol.
(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 ofthe close ofthe Closing Date. In the case ofany Straddle Period: (i) the amount ofany 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 ofthe books as ofthe close ofbusiness on the Closing
Date (and for such purpose, the taxable period ofany partnership or other pass-through entity in
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which the Company or any Company Subsidiary hotds a beneficial interest shall be deemed to terminate at such time); and (ii) the amount ofany other Taxos
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 ofdays in the Straddle Period ending on the Closing Date and thc denominator ofwhich is the number ofdays in such Straddle Period.
(d) Any Tax refunds that are received by Parent or any ofits Affiliates (or credits for overpayments for Tax to which any ofthe 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 Participans, other than refunds (or credits) that were included as an asset in determining Final Closing
Net Working Capital or are attributable to any loss incuned 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 ofsuch refund (or fifteen (15) days after the due date of
the Tax Return claiming such credit). Except in connection with the preparation ofTax Returns pursuant to Section 5. I I (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. I I (d).
(e) Without the conseot 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 modiry any Tax Return of the Company or its Subsidiaries, or waive any limitations period with respect
to such Tax Returns, if such amendment, refiling, modification or waiver would reasonably be expected to result in Damages for which indemnification of
Parent would be required hereunder.
(0 Parent shall not make, or cause to be made, any election under Section 338 ofthe 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 oftbe 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 Agreemen! in connection with any
Tax mafters relating to the Company or its Subsidiaries (including by the provision ofreasonably relevant records or information (including information
required by Code Sections 6043 and 6043A, ifapplicable)), including the filing ofTax Retums pursuant to Section 5.1 l(a) and any audit, litigation or other
proceeding with respect to Taxes ofthe Company or any Company Subsidiary. Such cooperation shall include the retention and (upon another party's request)
the provision of
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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 ofthe other parties. Parent shall cause the Company and the Company Subsidiaries to retain all books and records with respect to Tax
matters ofthe Company and the Company Subsidiaries relating to any taxable period beginning before the Closing Date until the expiration ofthe statute of
limitations ofthe 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 frrm 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 l3 l3 of the
Code (or corresponding or similar provision ofstate 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 ofthe Merger as a "reorganization" under Section 368(a) ofthe Code, including the
timely filing ofthe statements required by Treasury Regulations Sections 1.368-3. For the avoidance ofdoubt: (i) except with respect to the representations and
warranties ofParent and Merger Sub contained in Article 4 and the covenant contained in this Section 5.1 lO, Parent makes no representations or warranties to
the Company or any Company Shareholder regarding whether the Merger will qualifr as a "reorganization" within ttre meaning ofSection 368(a) ofthe 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 ths transactions contemplated hereby (such dividends and./or other payments or
distributions, the "PreClosing 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 ofclarity,
indebtedness for borrowed money shall not include any amounts owing by the Company or any Company Subsidiary pursuaDt to the Snettisham Agreements
(as defined in the Disclosure Schedules).
ARTICLE 6.
CONDITIONS TO TIIE 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:
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(a) the representations and warranties ofthe Company contained in this Agreement shall be accurate in all respects as ofthe Closing, with the
same force and effect as ifmade as ofthe Closing (except to the extent any such representation or warranty speaks as ofthe date ofthis 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. I (a) ifsuch inaccuracies (considered collectively) do not have a Company
Material Adverse Effect as ofthe Closing, it being understood that, for purposes ofdetennining the accuracy of such representations and warranties, all
"Company Material Adverse Effect" and other qualificatioos using the terms "in any material respect" or "in all material respects" in such representations and
warranties will be disregarded;
(b) the Company shall have performed in all material respocts 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 govemmental 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 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 Parent;
(e) the Shareholders' Representative and the Escrow Agent shall have executed the Escrow Agreement;
($ since the date ofthis Agreement, there shall have been no occurences that, individually or in the aggregate, have had a Company Material
Adverse Effect;
(g) there shall not be pending any action by a govemmental authority seeking to restrain, prohibit or enjoin the consummation ofthe 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 ofcomp€tent 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 waranties ofParent and Merger Sub contained in this Agreement shall be accurate in all respects as ofthe Closing,
with the same force and effect as ifmade as ofthe Closing (except to the extent any such representation or warranty speaks as ofthe date ofthis Agreement or
any other specific date, in which case such representation or warranty shall have been accwate in all respects as ofsuch date), except that any inaccuracies in
such representations and warranties will be disregarded for purposes ofthis Section 6.2(a) ifsuch 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 ofdetermining the
accuracy ofsuch representations and wananties, 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 regishations with govemmental 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 Governmental Approvals and the Parent Required Governmental Approvals shall have been obtained, and no such
Company Required Govemmental Approval or Parent Required Governmental 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;
(f) 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 ofthe 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 official notice of issuance;
(i) since the date ofthis Agreement, there shall have been no occurrences that, individually or in the aggre9ate, have had a material adverse effect
on the business of Parent taken as a whole or the Parent Common Stock;
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() there shall not be pending any action by a govemmental authority seeking to resfain, 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 ofthis 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 ttrat makes the Merger illegal shall have been enacted since
the date of this Agrcement and shall remain in effect.
Section 6,3 Frustration of Closing Conditions . None ofthe Company, Parent or Merger Sub may rely on the failure ofany 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
periorm 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 at any 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 tbe Company or Parent if the Merger shall not have been consummated on or before December 3 l, 2014; provided, however, that
the right to terminate this Agreement under this Section 7.1@) shall not be available to a party 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
Agreernent, (ii) such breach has not been cured within thirty (30) days following a written notification thereof; provided, however, that i(, 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 ofParent taken as a whole, (y) material adverse effect on the ability ofParent 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 ofthe 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 ifParent has breached is obligation to pay any amounts required to be paid
pursuant to Article 2, or (ii) ifParent breached in any fraterial rbspect 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 if, 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 auy injunction or other order having the effect set forth in Section 6. I (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. I (e) shall not be available to a party ifthe
imposition of such injunction or other order was caused by the failure of such party or any Afliliate 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 Ageement by the Company or Parent as provided in Section 7.1, written
notice thereofshall be given to the other pa(ies, specifing the provision hereofpursuant 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 dreir respective dhectors, offrcers and Afliliates, except that nothing shall relieve any party hereto from
liability for any breach ofthis Agreement.
ARTICLE 8.
INDEMNIFICATION, ETC.
Section 8,I Expiration of Representations, Etc. All 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
irrther 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 oflndernnification Claim
(satisfoing the requirements set forth in Section 8.8(a) with respect to the applicable representations and warranties or covenants ofthe 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.
Nonvithstanding 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. I , 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 tbe representations and warranties ofthe Company set for0r in Article 3 ofthis Agreement, (b) any Damages actually incurred by Parent as a direct result of
any breach ofany ofthe covenants ofthe Company, (c) the excess, ifany, ofthe aggregate amount ultimately required to be paid to holders ofDissenting
Shares with respect thereto by the
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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 ofany demands for such dissenters' rights and
(d) all Indemnified 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 E.3 Certain Limitations. Notwithstanding any other provision of this Article 8:
(a) Parent's indemnification rights under this Agreement shall be limited to dle 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 ofany Damages more than once under
this Agreement in respect ofsuch 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-fordollar basis for such Damages pursuant to either of the
Closing Net Working Capital adjustments set forth in Section 2.8.
(c) Notwithstanding 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 ofthe date hereof.
Section 8,4 Limitations on Liability.
(a) No current or former shareholder, optionholder, director, oflicer, employee, Affrliate or advisor ofthe Company shall have any personal or
individual liability ofany natue to Parent, the Surviving Corporation or any Affiliate ofParent or the Suwiving 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 Adicle 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 ag$egate amount ofthe Damages against which
Parent would othenvise be entitled to be indemnified exceeds $850,000. Ifthe aggegate amount ofsuch Damages exceeds $850,000, then Parent shall, subject
to the other limitations set forth in this Agreement, be entitled to be indemnificd only against the portion of such Damages in excess of $850,000.
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(c) Parent acknowledges that it has conducted, to its satisfaction, an independent investigation and verification ofthe financial condition, results
ofoperarions, assets, liabilities, properties, products, prospects, employees and projected operations ofthe 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 ofthe 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 fte subject matter of this
Agreement, express or implied. The representations and warranties ofthe 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 ofany kind or nature, express or implied (including any representations or warranties relating to the future or historical
financial condition, results ofoperations, assets or liabilities ofthe Company or the quality, quantity or condition ofthe assets ofthe Company) are
specifically disclaimed by the Company. Parent acknowledges and aglees 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 Suwiving 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 morc than five Business Days) after Parent, the Surviving Corporation or any
Afliliate ofParent or the Surviving Corporation receives notice or otherwise obtains knowledge ofany actual or possible claim, demand, suit, action,
arbitration, investigation, inquiry or proceeding that has been or may be brough! 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 Indemnification 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-Parfy Claim"), Parent shall
deliver to the Shareholders' Representative a written notice stating in reasonable detail the nature and basis ofsuch Third-Party Claim and the dollar amount of
such Third-Party Clainr, to the extent known. The timely delivery ofsuch written notice by Parent to the Shareholders' Representative shall be a condition
precedent to Parent's right to receive indernnification payments from the Escrow Fund with respect to such Third-Party Claim or with respect to any ofthe
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 (l 5) Business
Days ofreceipt ofParent's written notice to assume the defense ofany such Third-Party Claim with its own counsel. Ifthe 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 ensrlre 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
ofsuch Third-Party Claim following the Shareholders' Representative's election to assume the defense ofsuch 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 ofthe 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 confol 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-Party Claim, and shall otherwise cooperate as
reasonably requested by the Shareholders' Reprcsentative in the defense ofsuch 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).
Ifthe Shareholders' Representative elects not to assume the defense ofsuch Third-Party Claim, then Parent shall proceed diligently to defend zuch Third-Party
ClaimwiththeassistanceofcounselreasonablysatisfactorytotheShareholders'Representative; provided,however,thatneitherParentnortheSurviving
Corporation shall senle, adjust or compromise such Third-Party Claim, or admit any liability wilh respect to such Third-Parly Claim, without the prior
written consent ofthe Shareholders' Representative (which consent shall not be unreasonably wittrheld, delayed or conditioned).
Section 8.6 Mitigation; Insurance.
(a) Promptly after Parent or the Suwiving Corporation becomes aware of any event or circumstance that could reasonably be expected to constitute
any breach ofany 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.
O) The arnount ofany Damages that are subject to indemnification out ofthe 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 ofthe 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 Retums 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 ofTax savings, described in this Section 8.6O).
Section 8.? Exclusivity, Other than Damages that result from fraud by the Company or any Company Subsidiary, the right of Parent to receive
indemnification payments pusuant to this Article 8 shall be the sole and exclusive right and remedy exercisable by Parent, the Suwiving Corporation or any
ofParent's Affiliates with respect to any inaccuracy in or breach ofany representation or warranty contained in, or any other breach of, this Agreement.
Section E.E Indemnificatlon Claims; Escrow Arrangements .
(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 " Indemnilication Claim"), setting forth: (i) the specific representation and warranty of the
Company alleged to have been inaccurate or specific covenant ofthe 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 entitliag 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 fur such Dotice (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 ofa Notice oflndemnification 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) Ifthe Shareholders' Representative delivers a Response Notice to Parent agreeing that all or any part ofthe Claimed Amount is owed to Parent,
then, within three days following the receipt of such Response Notice by Parent, Parent and the Shareholden' 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 ofshares ofParent Common Stock (valued at the Parent Closing Price) held in
the Escrow Fund to Parent. Ifthe Shareholders' Representative fails to deliver a Response Notice within 60 days after its receipt ofa Notice oflndemnification
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 ofParent Common Stock (valued at the Parent Closing Price) held in the Escrow
Fund to Parent.
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(d) Ifthe Shareholders' Representative and Parent are unable to resolve any dispute relating to any Contested Amount during the 30-day period
commencing upon the receipt ofthe Response Notice by Parent, 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 eamed thereon (other than
Shareholder Distributions), as ofthe Expiration Date (the " Aggregate Escrow Balance") exceeds the ag$egate dollar amount, as ofthe Expiration Date, ofthe
Contested Amounts associated with all lndemnification 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 olsuch Contested Amounts as ofthe 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 6y 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.
(f) Following the Expiration Date, ifan Unresolved Escrow Claim is finally resolved, Parent and the Shareholden' Representative shalljointly
execute and deliver to the Escrow Agent, within three days after the final resolution of such Unresolved Escrow Claim, a wriften notice instructing the Escrow
Agent to release from the Escrow Fund to each Escrow Participant an aggregate amount of Stock Consideration determined by multiplying such Escrow
Participant's Escrow Participation Percentage by the amount (ifany) by which the aggregate amount remaining in the Escrow Fund, including any interest
accrued or income otherwise earned thereon, as ofthe date of resolution ofsuch Unresolved Escrow Claim exceeds the aggregate amount ofthe Contestod
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 heated 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 conesponding provisions of state, local and foreign Tax law).
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ARTICLE 9.
MISCELLANEOUS PROVISIONS
Section 9.1 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 ofthe right to: (i) give and receive
notices and communications under Article 8 or the Escrow Agreement; (ii) authorize delivery to Parent ofParent Common Stock from the Escrow Fund in
satisfaction ofclaims 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 ofThird-Parfy Claims; (vi) amend or waive the Escrow Agreement and (vii) take all actions necessary or appropriate in the good
faith judgment ofthe Shareholders' Representative for the accomplishment ofthe foregoing. The identity ofthe Shareholders' Representative may be changed,
and a successor Shareholders' Representative may be appointed, from time to time (including in the event ofthe resignation or the death, disability or other
incapacity ofthe Shareholders' Representative) by Escrow Participants whose aggregate Escrow Participation Percentages exceed sixty percent (60Yo), and any
such successor shall succeed the Shareholders' Representative as Shareholders' Representative hereunder. No bond shall be required ofthe Shareholders'
Representative, and the Shareholders' Reprcsentative shall be reimbursed for costs and expenses (including overhead expenses) incuned in such capacity from
the Representative Reimbursement Amount. From and after the Effective Time, a decision, act, consent or instruction ofthe Shareholders'Representative shall
be final, binding and conclusive upon each Escrow Participant.
@) 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 Amoutrt shall be held by the Shareholders' Representative for reimbursement payable to the Shareholders'
Representative under this Section 9. I (the " Representative Reimbursemetrt Fund "). Parent and Merger Sub shall have no firther obligation or liability
with respect to the Representative Reimbursement Amount other than payment ofthe same to the Shareholders' Representative pursuant to this Section 9.1(b),
Any portion ofthe Representative Reimbursement Fund that has not been utilized by the Shareholders' Representative pursuant to the terms ofthis 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 ofsuch 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 ofthis Agreement or the Escrow Agreement (including the hiring oflegal counsel and the incurring oflegal
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 rcasonable
access to the books, records (including accountants' work papers) and employees ofParent 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 ofthe Escrow Participants under this Agreement or the Escrow Agreement, or (ii) the rights or obligations (under any law or otherwise) ofthe
Escrow Participants with respect to any period ending on or before the date ofthis Agreement. Unless otherwise consented to in writing by the Shareholders'
Representative, neither Parent nor the Suwiving Corporation shall, for a period of four years after the date of this Agreement, deshoy, alter or otherwise dispose
ofany ofthe books and records ofthe Surviving Corporation relating in whole or in part to any period prior to the date ofthis Agreement without first offering
to surrender to the Shareholders' Representative such books and records or any portion thereofwhich Parent or the Surviving Corporation may intend to
deshoy, 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 fumished 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 fumished 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 bansactions 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 ofthis Agreement and the other agreements contemplated by this Agreement, the performance of its obligations hereunder and thereunder
and the consummation ofthe transactions contemplated hereby and thereby, except
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that filing fees pursuant to any Antitrust Laws (including the HSR Act) shall be paid by Parent. All fees and expenses ofthe 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 ofany party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver ofsuch
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
thereofor ofany other power, right, privilege or remedy.
O) No parry shall be deemed to have waived any claim arising out of this Agreemant, or any power, right, 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
behalfofsuch party; 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 Agreernent, the Confidentiality Agreement, the Escrow Agreement and
the other agreements referred to in this Agteement constitute the entire agreement and supersede all prior agreements and undentandings, both written and oral,
among or between any of the parties with respect to the subject inatter hereof and thereof. This Agreement may be executed in several counterparts, each of
which shall be deemed an original and all ofwhich shall constitute one and the same instrument. The exchange ofa fully executed Agreement (in counterparts
or otherwise) by facsimile or by electronic delivery in .pdf format shall be sulficient to bind the parties to the terms and provisions of this Agreement.
Section 9,5 Governing Law; Consent to Jurisdictlon. 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 oontract, tort or othenyise, shall be governed by, and
construed in accordance with, the laws ofthe State ofNew York applicable to contracts executed in and to be performed entirely within such State, without
regard to conllict oflaw principles that would result in the application ofany law other than the law ofthe State ofNew York; provided, however, all disputes
between the parties under or related to Article 2 ofthis Agreement, shall be govemed by, and construed in accordance with, the laws ofthe State ofAlaska
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 ofany law other than the law ofthe State ofAlaska. Each ofthe parties to this Agreement hereby irrevocably and unconditionally submits, for
itselfand its assets and properties, to the exclusivejurisdiction ofany state court, or Federal court ofthe United States ofAmerica located within San
Francisco, Califomia, and any appellate court from any thereoi, in any action or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, or for recognition or enforcement ofanyjudgment relating thereto, and each ofthe 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 effecfively
do so, any objection which it may now or hereafter have to the laying
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ofvenue ofany such action or proceeding in any such court; and (c) waives, to the fullest extent permitted by law, the defense ofan inconvenient forum to the
maintenance of such action or proceeding in any such court. Each ofthe parties to this Agreement hereby agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in otherjurisdictions by suit on thejudgment or in any other manner provided by law. Each ofthe parties
to this A$eement hereby irrevocably consents to service ofprocess in the manner provided for notices in Section 9.7. Nothing in this Agreement shall affect
the right ofany party to this Agreement to serve process in any other manner permitted by applicable law.
Section 9.6 Assignabilify; 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
heretoandtheirrespectivesuccessorsandassigns; provided,however,lhatneitherthisAgreementnoranyoftherightsorobligationsofanypartyhereunder
may be assigned or delegated by such party without the prior written consent ofthe other parties, and any attempted assignment or delegation ofthis Agreement
or any of such righs or obligations by any party without the other parties' prior written consent shall be void and ofno effect.
(b) Except as set forth in the final sentence ofthis 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 ofany nature whatsoever under or by reason of this Agreement. Notwithstanding anything to the contrary
contained in this Agreement @ut without limiting any of the rights of the Shareholders' Represeatative 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 ofthe provisions set forth in Section 5.8; and (iii) all cunent and former shareholders, directors,
offrcers, employees, Affiliates and advisors ofthe Company shall be third party beneficiaries ofthe last sentence ofSection 8.4(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 retum receipt requested, upon receipt; (b) if sent designated
for ovemight delivery by an internationally 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) ifotherwise 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:
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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: 907 461 -6332
with a copy to (which shall not constitute notice):
Morrison & Foerster LLP
12531 High BluffDrive, Suite 100
San Diego, CA 92130
Attention: Steven G. Rowles
Facsimile: [phone]
if to Parent, Merger Sub or the Surviving Corporation:
Avista Corporation
14l I East Mission Avenue
Spokane, WA99202
Attention: General Counsel
Facsimile: (509) 4954361
With a copy to (which shall not constitute notice):
Davis Wright Tremaine LLP
l20l Third Avenue, #2200
Seattle, WA 98101
Attention: Scott W. MacCormack
Facsimile : 206-7 57 -7 26t
ifto the Shareholders' Representative (after the Closing):
William A. Corbus
209 S Franklin St, Suite 209
Juneau, AK 99801
Facsimile: 90'l 463-6332
with a copy to (which shall not constitute notice):
Morrison & Foerster LLP
12531 High BluffDrive, Suite 100
San Diego, CA 92130
Attention: Steven G. Rowles
Facsimile: [phone]
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Section 9.8 Severability, Any term or provision ofthis Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability ofthe remaining terms and provisions ofthis Agreement or the validity or enforceability ofthe offending term or provision in any
other situation or in any otherjurisdiction. Ifa final judgment ofa court ofcompetentjurisdiction declares that any term or provision ofthis 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 uneuforceable term or provision, and this Agreement shall be valid and enforceable as so modified, In the event such court does not
exercisc 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 ofthis 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 ofreference only, shall not be deemed to be a part ofthis Agreement
and shall not be referred to in connection with the consruction or interpretation ofthis Agreement.
Section 9.10 Attorney-Client Privilege . The attorney-client privilege ofthe Company related to the Merger shall be deemed to be the right of the Escrow
Participants, and not that ofthe Surviving Corporation, following the Closing, and may be waived only by the Shareholders' Representative. Absent the
consent of the Shareholders' Representative, neithor Parent nor the Suwiving Corporation shall have a right to access attorney-client privileged material of the
Company related to the Merger following the Closing.
Section 9.1 I 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 ofthe Disclosure Schedule corresponding to the particular Section ofArticle 3 in which such representation and
warranty appears; (b) any exceptions or disclosures explicitly cross-referenced in such Section ofthe Disclosure Schedule by reference to another Section ofthe
Disclosure Schedule; and (c) any exception or disclosure set forth in any other Section ofthe
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Disclosure Schedule to the extent it is reasonably apparent that such exception or disclosure is intended to qualiS 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 estabtish a standard ofmateriality 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 party of any matter whatsoever, including of any violation of
law or breach ofany agreement. The Disclosure Schedule and the information and disclosures contained therein are intended only to qualify and limit the
representations, warranties and covenants ofthe Company contained in this Agreement. Nothing in the Disclosure Schedule is intended to broaden th€ 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, eveDt, 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. I (c) (subject to the Company's right to cure) aDd 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. I 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 ofthe Disclosure Schedule as ofthe date ofthis Agreement, to have qualificd the representations and warranties contained in Article 3 as ofthe date of
this Agreement, and to have timely cured any misrepresentation or breach of wan-anty that otherwise might have existed hereunder by reason of the existence of
such matter. IfParent 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 ofdetermining 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 accuacy of any representation or warranty made by the Company in this Agreement or the
indemnification provisions ofArticle 8. For the avoidance ofdoubt, Parent shall not be permitted to terminate this Agreement and it shall not otherwise be
deemed a breach of this Agrcement as a result of any Schedule Updates that relate to any actions permitted by or taken pursuant to this Section 9. I L
Section 9.12 Specific Performance. Each ofthe parties acknowledgcs 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
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or violated. Accordingly, each ofthe 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 ofthis Agreement and to enforce specifically this Agreement and the terms and provisions hereof
in any action or proceeding instituted in any court ofthe United States or any state thereofhaving 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 frrther 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 party's obligations under this agreemen! ifspecific performance or other equitable reliefis granted, the party obtaining such
remedy or relief shall be entitled to be reimbursed for its reasonable expenses incuned in connection with such action, including its attomey's fees and
expenses.
[Remainder ofpage intentionally left blankJ
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.
ALASKA ENERGY AND RESOURCES COMPANY
By: /V Wllliam A. Cg:bus
Name: William A. Corbus
Title: President
ALASKA MERGER SUB, INc.
By: /s/ Scoft L. Morris
Name: Scott L. Morris
Title: Chief Executive Oflicer
AvrsrA Conronluon
By: /s/ Scott L. Morris
Name: Scott L. Morris
Title: Chief Executive Officer
And with respect to Article 8 and Section 9.1 only:
WILLIAM A. CORBUS,
as the Shareholders' Representative
By: /s/ William A. Corbus
Name: William A. Corbus
Table of Contants
ANNEX C
SELECT PROYISIONS OF THE ALASKA CORPORATIONS CODE
REGARDING DISSENTERS' RIGHTS
Sec. 10.06.574. Right ofshareholders to dissent.
(a) A shareholder may dissent from the following corporate actions:
(l ) a plan of merger, consolidation, or exchange to which the corporation is a party; or
(2) a sale or exchange ofall or substantially all ofthe property and assets of the corporation not made in the usual and regular course of its
business, including a sale in dissolution, but not including a sale under a court order or a sale for cash on terms requiring that all or substantially all ofthe net
proceeds of the sale be disributed to the shareholders in accordance with their respective interests within one year after the date of sale.
(b) The rights of a shareholder who dissents as to less than all of the shares registered in the name ofthe shareholder shall be determined as ifthe shares
as to which the shareholder dissents and the other shares of the shareholder are registered in the names ofdifferent shareholders.
(c) This section does not apply to the shareholders of the surviving corporation in a merger if a vote of shareholders of the surviving corporation is not
necessary to authorize the merger.
(d) This section does not apply to the holders ofshares ofa class or series ifthe shares ofthe class or series were registered on a national securities
exchange on the date fixed to determine the shareholders entitled to vote at the meeting ofshareholders at which the plan ofmerger, consolidation, or exchange or
the proposed sale or exchange ofproperfy and assets is to be acted upon unless the articles ofthe corporation provide otherwise.
Sec. 10.06.576, Procedures relating to the exercise of a shareholder's right to dissent; completion of corporate action; notice of election; trestment of
shares.
(a) A shareholder electing to exercise a right to dissent shall file with the corporation, before or at the meeting of shareholders at which the proposed
corporate action is submitted to a vote, a written objection to the proposed corporate action. The objection must include a notice ofelection to dissent, the
shareholder's name and residence ad&ess, the number and classes ofshares as to which the shareholder dissents, and a demand for payment ofthe fair value
of the shares if the action is taken. A sharebolder to whom the corporation did not give notice ofthe meeting in accordance with this chapter is not required to
make the objection provided in this section.
(b) Within l0 days after the shareholders' vote authorizing the action, the corporation shall give written notice ofthe authorization to each shareholder
who filed written objection or from whom written objection was not required. The corporation may consider that a shareholder who voted for the proposed
action has elected not to enforce a right of dissent under this chapter, and need not give notice to the shareholder.
(c) Within 20 days after notice has been given under (b) ofthis section, a shareholder fiom whom written objection was not required under (a) ofthis
section and who elects to dissent shall file with the corporation a written notice ofthe election, stating the shareholder's name and residence address, the
number aud classes of shares as to which the shareholder dissents, and a demand for payment of the fair value of the shares. A shareholder who elects to
dissent from a merger under AS I 0.06.532, a consolidation under AS 10.06.534, a share exchange under AS 10.06.540, a transaction authorized under AS
10.06.562, or a sale ofassets under AS 10.06.568 shall file a written notice ofthe election to dissent within 20 days afler the merger plan, consolidation plan,
share exchange plan, or sale of assets resolution has been mailed to the shareholder.
(d) A merger, consolidation, or exchange is considered completed within the meaning ofthis chapter on the effective date determined in accordance with
AS 10.06.560; a transaction under AS 10.06.568 is completed
c-l
]:@Lco!!ce
within the meaning ofthis chapter when the corporation has received the consideration specified in the board resolution that was submitted to the shareholders
in accordance with that section.
(e) Upon completion of the corporation action, the shareholder shall cease to have the rights of a shareholder except the right to be paid the fair value of
the shares as to which the dissenter's rights were perfected under this chapter. A notice ofelection may be withdrawn by the shareholder at any time before an
acceptance under AS 10.06.578(f), but in no case later than 60 days from the date ofcompletion ofthe corporate action, except that the time for withdrawing a
notice of election shall be extended for 60 days from the date an offer is made, if the corporation fails to make a timely offer under AS 10.06.578. After the
time for withdrawal has expired, withdrawal ofa notice ofelection requires the written consent ofthe corporation. In order to be effective, withdrawal ofa
notice ofelection must be accompanied by the return to the corporation ofan advance payment made to the shareholder as provided in AS 10.06.578. Ifa
notice ofelection is withdrawn, ifthe corporate action is rescinded, ifa court determines that the shareholder is not entitled to the right to dissent, or ifthe
shareholder otherwise loses the right to dissent, the shareholder shall not have the right to receive payment for the shares and shall be reinstated to all rights as
a shareholder that were effective on the date ofthe completion ofthe corporate action, The rights to which the shareholder is reinstated include intervening
preemptive rights and the right to payment ofan intervening dividend or other distribution. Ifan intervening right has expired or ifa dividend or distribution
that is not in cash has been completed, the corporation may elect to pay the shareholder the fair value of the shares in cash at the value, as determined by the
board, at the time of the expiration or completion. The election to pay the value in cash shall be without prejudice to a corporate proceeding that has occurred in
the interim.
(f) At the time offiling the notice ofelection to dissent, or within 30 days after the shareholder has filed the notice, the shareholder shall submit to the
corporation, or to its transfer agent, the certificates representing the shares for which payment is claimed, ifcertificates have been issued. The corporation or
its hansfer agent shall note conspicuously on the certificates, or on a separate document if certificates have not been issued for the shares, that a notice of
election has been filed, and shall retum the certificates or the separate document to the shareholder or to the person who submitted them on the shareholder's
behalf. Unless a court, for good cause shown, otherwise directs, a shareholder who fails to comply with this subsection loses the right to dissent ganted by
this chapter, ifthe corporation gives written notice that the right to dissent will be lost to the shareholder within 45 days from the date that the shareholder filed
the notice of election to dissent. Ifthe corporation fails to exercise this notice option in a timely manner, the shareholder retaios the right to dissent granted by
this chapter.
(g) When a share of a dissenting shareholder under (0 ofthis section is transferred, the new certificate must bear a notation similar to that made under
(f) of this section and state the name of the original dissenting holder ofthe shares, or, ifthe share is an uncertificated share, the corporation must give the
transferee a written notice stating that a notice ofelection to dissent has been filed and giving the name of the original dissenting holder. A transferee acquires
only the rights in the corporation that the original dissenting shareholder had at the time of hansfer.
Sec. 10.06.578. Offer and payment to dissenting shareholders; circumstanc€s where prohibited.
(a) Within l5 days after the expiration of the period within which shareholders may file their notice of election to dissent under AS 10.06.576, or within
I 5 days afrer the proposed corporate action is completed, whichever is later, the corporation or, in the case of a merger or consolidation, the surviving or new
corporation, shall make a written offer by certified mail to each shareholder who has filed the notice ofelection, to pay the amount the corporation estimates to
be the fair value of the shares. The offer shall be made at the same price for each share to all dissenting shareholders of the same class, or if divided into
series, ofthe same series,
(b) The offer required by (a) ofthis section must be accompanied by a
(l) balance sheet ofthe corporation whose shares the dissenting shareholder holds; the date ofthe balance sheet shall be ttrat ofthe most recent
balance sheet produced in the 12 months before the offer;
(2) profit and loss statement or statements for at least 12 months preceding the date ofthe balance shee! ifthe corporation was not in existence
during the entire I 2-month period preceding the balance sheet
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required by (l) ofthis subsection, then a profit and loss statement for that portion of the I 2-month period preceding the balance sheet during which the
corporation was in existence;
(3) statement of the total number of shares with respect to which notices ofelection to dissent have been received and the total number ofholders of
these shares; and
(4) copy of this section and AS 10.06.580
(c) Ifthe corporate action has been completed the offer required by (a) ofthis section must also be accompanied by
( I ) advance payment to each shareholder who submitted thc share certificates to the corporation, or to whom notice was sent ifthe shares were
uncertificated, as provided in AS 10.06.576(l), ofthe amount offered under (a) ofthis section; or
(2) a statement to a shareholder who has not submitted the share certificates, ifcertificates were issued for the shares, that advance payment ofthe
amount offered under (a) ofthis section will be made by the corpofirtion promptly upon submission ofthe certificates.
(d) Ifthe corporate action has not been completed when the offer required by (a) of this section is made, the advance payment or statement about the
advance payment shall be sent to each shareholder entitled to the payment or notice, after completion ofthe corporate action.
(e) The advance payment or statement about the advance payment shall include advice to the shareholder that acceptance ofthe payment does not
constitute a waiver of the shareholder's right to dissent.
(f) The corporation may consider that a shareholder who fails to make written objection !o the amount tendered under (c)(l ) ofthis section or to submit
shares in response to the statement sent under (c)(2) of this section within 30 days of the date the statement was mailed has agreed that the amount offered
represents the fair value ofthe shares. The shareholder shall have no interest in the shares or the outcome oflitigation begun under AS 10.06.580.
(g) Notwithstanding the other provisions of this section, if the payments othcrwise required by (c) and (d) ofthis section or determined in accordance
with AS 10.06.580 would be distributions in violation of AS 10.06.358-10.06.365, or 10.06.375, the corporation may not make a distribution to a
dissenting shareholder. In that event, a corporation that would otherwise have the payment obligation under (c) and (d) ofthis section or AS 10.06.580 shall,
in addition to complying with (a) and (b) of this section, give written notice within the time limits of (a) and (b) of this section to dissenting shareholders of its
inability to make payment. The notice must include
(l) an explanation why the corporation is unable to make the payments otherwise required by this section;
(2) a statement that a dissenting shareholder has an option to
(A) withdraw the shareholder's notice ofelection to dissen! and that the corporation will consider that the withdrawal was made with the
written consent ofthe corporation; or
(B) retain the status ofa dissenter, and, ifthe corporation is liquidated, be subordinated to the rights ofthe creditors ofthe corporation,
but have rights superior to the nondissenting shareholders, but ifthe corporation is not liquidated, retain the right to be paid under (c) and (d) ofthis section or
AS 10.06.580 and the corporation must satis$ the obligation when the restrictions on distibutions do not apply; and
(3) a statement that if the corporation does not receive the written election provided under (2) of this subsection within 60 days after notice given as
required by this section, the corporation will consider that the shareholder has withdrawn the notice of election under (2)(A) of this subsection.
c-3
Table of Conlents
Sec. 10.06.5E0. Action to determine value of shares.
(a) Ifthe corporation fails to make the offer required by AS 10.06.578(a) or the shareholder rejects the offer within the 30-day period specified in AS
r 0.06.s78(0,
(l) the corporation shall, within 20 days after the expiration ofthe 30day period specified in AS 10.06.578(f), file a petition in the court ofthe
judicial district where the registered offrce ofthe corporation is located, requesting that the fair value of the shares be determined; if, in the case of a merger or
consolidation, the surviving or new corporation is a foreign corporation without a registered office in the state, the petition shall be filed in the judicial district
where the registered office of the domestic corporation was last locatedl or
(2) if the corporation fails to institute a proceeding as provided in this section, a dissenting shareholder may institute a proceeding in the name of
the corporation; if a dissenting shareholder does not institute a proceeding within 30 days after the expiration ofthe 20day period granted the colporation under
( I ) of this subsection, the dissenter loses the dissenter's rights unless the superior cour! for good cause shown, otherwise directs.
(b) All dissenting shareholders who have rejected the corporate offer extended under AS 10.06.578(a), wherever residing, shall be made parties to the
proceeding as an action against their shares quasi in rem. The corporation shall serve a copy ofthe complaint in the proceeding on each dissenting shareholder
who is a resident ofthis state in the manner provided by the Alaska Rules ofCivil Procedure, and on each nonresident dissenting shareholder either by
certified mail and publication, or in another manner permifted by law. Thejurisdiction ofthe court shall be plenary and exclusive. A dissenting shareholder
who is a party to the proCeeding is entitled to judgment against the corporation for the amount determined under (c) ofthis section to be the fair value of the
shares of that shareholder.
(c) The court shall determine whether a dissenting shareholder who is a party to the court action is entitled to receive payment for the shareholder's
shares. Ifthe corporation does not request a determination, or ifthe court finds that a dissenting shareholder is entitled to a determination, the court shall
establish the value ofthe shares; for the purposes ofthis section, the value shall be the fair value al the close ofbusiness on the day before the date on which
the vote was taken approving the proposed corporate action. In fixing the fair value of the shares, the cout shall consider the natue of the transaction giving
rise to the right to dissent under AS 10.06.576, its effects on the corporation and its shareholders, the concepts and methods customary in the relevant
securities and financial markets for determining the fair value of shares of a corporation engaging in a similar transaction under comparable circumstances,
and other relevant factors. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value
of the shares. The appraisers have the power and authority specified in the order ofappointment or as amended.
(d) The judgment must include an allowance for interest at the rate the court finds to be fair and equitable, from the date on which the proposed corporate
action vote was taken to the date of payment. In determining the rate of interest, the court shall consider all relevant factors, including the rate of interest that
the corporation would have had to pay to borrow money during the pendency of the proceeding. If the court finds that the refusal of a shareholder to accept the
corporate offer of payment for the shares is arbitrary, vexatious, or otherwise in bad faitlU the court shall deny interest to the shareholder.
(e) A party to the proceeding shall bear its own costs and expenses, including the fees and expenses of its counsel and of any experts employed by it.
Norwithstanding the foregoing, the court may, in its discretion, apportion and assess all or part ofthe costs, expenses, and fees incurred by the corporation
against one or more of the dissenting shareholders who are parties to the proceeding, ifthe court finds that a refusal to accept the corporate offer was arbitrary,
vexatious, or otherwise in bad faith. The court may, in its discretion, apportion and assess all or a part ofthe costs, expenses, and fees incurred by one or
more of the dissenting shareholders who are parties to the proceeding against the corporation if the court finds that
( I ) the fair value of the shares materially exceeds the amount that the corporation offered to pay;
c-4
Tablq,of Conlonts
(2) an offer or required advance payment was not made by the corporation as provided in AS 10.06.578;
(3) the corporation failed to institute the special proceeding within the period specified under (a) ofthis section; or
(4) the action ofthe corporation in complying with its obligations as provided in this chapter was arbitrary, vexatious, or otberwise in bad faith.
(f) Unless prohibited by AS 10.06.578(9), within 60 days after the final determination ofthe proceeding, the corporation shall pay to each dissenting
shareholder who is a party the amount determined under (e) ofthis section in exchange for the surrender ofthe certificate representing the dissenter's shares or
the dissenter's shares if the shares are uncertificated. Upon payment of the judgment, the dissenting shareholder ceases to have an interest in the sharcs.
Sec. 10.06.582. Status ofshares acquired from dissenting shareholders.
Shares acquired by a corporation under AS I 0.06.578 and 10.06.580 shall be held and disposed of by the corporation as other shares reacquired under
AS 10.06.388, except that, in the case ofa merger or consolidation, they shall be held and disposed ofas the plan ofmerger or consolidation may otherwise
provide.
c-5
Table ot Contents
TNFORMATION NOT REQUIRED IN PROSPECTUS
Item 21. Exhibits.
(a) Exhibits
Reference is made to the Exhibit Index filed herewith at page II-3 such Exhibit Index being incorporated in this Item 2l by reference.
(b) FinancialStatementSchedules
Not applicable.
(c) Ophtion or Report pursuant to ltem 4(b)
Not applicable
Tablo of Contents
SIGNATURES
Pursuant to the requirements ofthe Secuities Act of 1933, the Registrant has duly caused this amendment to the Registration Statement to be signed on
its behalfby the undersigned, thereunto duly authorized, in the City ofSpokane and State ofWashington on the 8 th day ofMay, 2014.
AYISTA CORPORATION
By: /s/ Mark T. Thies
Mark T. Thies
Senior Yice President,
Chief Financial Olficer and Treasurer
Pursuant to the requirements of the Securities Act of I 933, this amendment to the Registration Statement has been sigrred by the following persons in the
capacities and on the date indicated.
Signrture
/s/ Scott L. Morris
Scott L. Morris
Chairman ofthe Board, President and ChiefExecutive
Officer
/V Mark T. Thies
Mark T. Thies
Senior Vice President, Chief Financial Offrcer and
Treasurer
/s/ Christv M. Burmeister-Smith
Christy M. Burmeister-Smith
Vice President, Controller and Principal Accounting
Officer
*
Principal Accounting Oflicer
Erik J. Anderson
Kristianne Blake May 8,2014
Donald C. Burke
John F. Kelly
{t
Rebecca A. Klein
Marc F. Racicot
*
Hcidi B. Stanley
R. John Taylor
* By: /s/ Marian M. Durkin
Marian M. Durkin
Attorney-in-Fact
Principal Executive Officer
Principal Financial Officer
Table of Contonts
Exhibit
2l
4(a)
4(b)
5(a)*
50)*
8(a)
8(b)
l5*
EXHIBIT INDEX
Dscrlptlon
Agreement and Plan of Merger, dated as of November 4, 2013, by and among Avista Corp., Alaska Merger Sub, Inc. an Alaska corporation
and a wholly-owned subsidiary of Avista Corp., Alaska Energy and Resources Company and William A. Corbus, solely as the Shareholders'
Representative (frled with Form 8-K filed November 4,2013 as Exhibit 2.1 and incorporated herein by reference).
Restated Articles of Incorporation of Avista Corporation as amended June 6,2012 (filed with Form l0-Q for the quarter ended June 30,2012 as
Exhibit 3. I and incorporated herein by reference).
Bylaws of Avista Corporation, as amended February 7, 2014 (frled with Form 8-K filed February 12,2014 as Exhibit 3.2 and incorporated
herein by reference).
Opinion and Consent of Marian M. Durkin, Esq.
Opinion and Consent of Pillsbury Winthrop Shaw Pit&nan LLP.
Opinion and Consent of Davis Wright Tremaine LLP.
Opinion and Consent of Morrison & Foerster LLP.
Letter ofDeloitte & Touche LLP regarding Unaudited Interim Financial Information (filed with Form I0-Q for the quarter ended March 31,2014
as Exhibit l5 and incorporated herein by reference).
Consent of Marian M. Durkin, Esq. (contained in Exhibit 5(a)).
Consent of Pillsbury Winthrop Shaw Pittrnan LLP (contained in Exhibit 5(b)).
Consent of Davis Wright Tremaine LLP (contained in Exhibil 8(a)).
Consent ofMorrison & Foerster LLP (contained in Exhibit (8(b)).
Consent ofDeloitte & Touche LLP.
Power of Atlorney.
Form ofProxy for Alaska Energy and Resources Company.
23(a)*
230)
23(c)
23(d)
23(e)
24*
99.1
t Schedules have been omitted pursuant to Item 60 I (b)(2) ofRegulation S-K. A copy of any omitted schedule will be furnished supplementally to the
Securities and Exchange Commission upon request.
Previously filed.
Exhibit E(a)
[DWT Letterhead]
May 8,2014
Avista Corporation
l4l I East Mission Avenue
Spokane, Washington 99202
Ladies and Gentlemen:
We have acted as counsel to Avista Corporation, a Washington corporation ('7uisld'), in connection with the preparation and filing on March 4,2014,
with the U.S. Securities and Exchange Commission (the " Commissiaa') under the Securities Act of 1933, as amended (the " Securities Aa"), of rhe
Registration Statement on Form S-4, as may be subsequently amended (the" Registrstion Staternent"), The Registration Statement relates to the proposed
merger of Avista Merger Sub, Inc., an Alaska corporation and wholly-owned subsidiary of Avista ("Merger Sa6"), with and into Alaska Energy and
Resources Company, an Alaska corporation ("AERC'),(the"Merger"lpursuant to the terms of the Agreement and Plan of Merger among Avista, Merger
Sub, AERC and William A. Corbus, dated as of November 4, 2013 (the "Merger Agreement"), as firther set forth in the information statement/prospectus
contained in the Registration Statement (the " Prospectus"). Capitalized terms not expressly defined herein shall have the meanings ascribed to them in the
Merger Agreement, a copy of which is filed as Exhibit 2 to the Registration Statement.
In connection with rendering the opinions expressed below, we have examined copies ofthe following documents:
The Merger Agreement;
The Escrow Agreement, dated as of May 8,2014;
The Exchange Agent Agreement between Avista and Computershare Trust Company, N.A. and Computershare Inc., dated as of May 8, 2014;
and
The Regisration Statement.
In addition, in rendering the opinions expressed in this letter, with your consent, we have relied upon the representations, warranties and covenants
contained in the Merger Agreement and the representations contained in the Avista Officer's Certificate and the AERC Officer's Certificate, both dated as of the
date hereofand delivered to us for purposes ofthis opinion (together, the" Otficerc' Certificttes'). We have not independently verified any ofthe
representations contained in the Merger Agreement or the Officers' Certificates.
l.
2.
3.
Avista Corporation
May 8,2014
Page2
We have also reviewed the corresponding opinion ofcounsel dated as ofthe date hereofand to be received by AERC from Morrison & Foerster LLP in
connection with the Registration Statement (the" Morrison & Foerster Opinion").
Ia rendering ow opinions, we have assumed that (i) the Merger will be consummated in accordance with the provisions of the Merger Agreement, without
waiver or modification ofthe material terms and conditions thereofand in the manner described in the Regisration Statement, (ii) the representations and
statements contained in the Merger Agreement were when made and will at all times remain true, accurate and complete, (iii) the parties have complied with,
and if applicable will continue to comply with, the covenants contained in the Merger Agreement in all material respects, (iv) the statements as to factual
matters contained in the Registration Statement are and will remain at all times true, accurate and complete, (v) each ofthe representations in the Oflicers'
Certificates is and will at all times remain true, accurate and complete, (vi) each of the representations in the Officers' Certificates made "to the knowledge of'
or similarly qualified is correct without such qualification, and (vii) the Morrison & Foerster Opinion has been concurrently delivered and not withdrawn. In
addition, we have assumed that, ifany AERC shareholders dissent from the Merger under the corporate laws ofAlaska, the aggregate number ofDissenting
Shares they hold and the aggregate amount ofcash paid to them will not equal or exceed such number and amount as would cause the Merger to fail to
constitute a "reorganization" within the meaning ofSection 368(a) ofthe Intemal Revenue Code of 1986, as amended (the" Code"),
We have also assumed the genuineness of all signatures, the authenticity of documents and records submitted to us as originals, the conformity to the
originals of all documents and records submined to us as certified or reproduction copies, the legal capacity ofall natural persons executing documents and
records, and the completeness and accuracy as ofthe date ofthis letter ofthe information contained in such documents and records.
Based upon,
L
2.
and subject to, the foregoing and the qualifications set forth herein:
we are of the opinion that the Merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code and Avista and
A-ERC will each be a party to such reorganization within the meaning of Section 368(b) of the Code; and
the discussion set forth in the Prospectus under the heading "Material U.S, Federal Income Tax Considerations," to the extent such
discussion expresses conclusions as to the application ofU,S. federal income tax law, and subject to the limitations and conditions set
forth therein, consti$tes our opinion as to the material U.S. federal income tax consequences of the Merger to U.S. persons.
Avista Corporation
May 8,2014
Page 3
The foregoing opinions are based on the provisions ofthe Code, Treasury Regulations promulgated under the Code, published revenue rulings and
revenue procedures ofthe Intemal Revenue Service (" Ii.9') currently in effect, existing court decisions, and other authorities available, as ofthe date ofthis
letter, and the application of those authorities to the facts disclosed in the Registration Statement, the Merger Agreernent and the Officers' Certificates. Fuhre
legislative or administrative changes or court decisions, which may or may not be rekoactive in application, or any change in facts from those upon which our
opinions are based, may significantly modiff the opinions set forth in this letter. It should be noted that no ruling has been sought from the IRS with respect to
the U.S. federal income tax consequences ofthe Merger, and this letter is not binding on the IRS or any court.
This letter relates solely to the trax consequences ofthe Merger under the federal income tax laws ofthe United States, and we express no opinion (and no
opinion should be infened) regarding the tax consequences of the Merger under the laws ofany otherjurisdiction. This lbtter addresses only the specific issues
set forth above, and does not address any other tax consequences that may result from the Merger or any other transaction (including any transaction
undertaken in connection with the Merger or otherwise described in the Merger Agreement or the Registration Statement).
This lefter is delivered as of its date and we do not undertake to advise you or anyone else of any changes in the opinions expressed herein resulting from
changes in law, changes in facts or any other matters that hereafter might occur or be brought to our attention that did not exist on the date hereof or of which
we had no knowledge.
We acknowledge that we are referred to in the Registration Statement under the headings "Material U.S. Federal Income Tax Considerations" and "Legal
Matters," and, without admitting that our consent is required under Section 7 of the Securities Act, we consent to that use of our name and to the hling of this
letter as Exhibit 8(a) to the Registration Statement.
Very truly yours,
/s/ Davis Wright Tremaine LLP
Exhibit 8(b)
[Morrison Foerster Letterhead]
May 8,2014
Alaska Encrgy and Resources Company
5601 Tonsgard Court
Juneau, Alaska 99801
Ladies and Gentlemen:
This opinion is being delivered to you as ofthe date hereofin connection with the effectiveness ofthe Registration Statement on Form S-4 (as amended,
the"Registralion Statcment") as filed by Avista Corporation ("Avista") with the U.S. Securities and Exchange Commission (the'SEC) under the
Securities Act of 1933, as amended (the"Securities z{cf'). The Regisfration Statement relates to the proposed merger (the" Merger") of Alaska Merger Sub,
Inc. ("Merger 8u6"), a wholly-owned subsidiary of Avista, with and into Alaska Energy and Resources Company (* AERC'), pursuant to the Agreement
and Plan of Merger (the nAgreement"), dated as of November 4, 2013, by and among Avista, AERC, Merger Sub and William A. Corbus. Unless otherwise
indicated, capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement.
In connection with the preparation and delivery ofthis opinion, we have examined and relied upon the following, with your consent: (i) the Agreement;
(ii) the Registration Statemen! (iii) the certificates, executed by duly appointed officers ofAERC and Avista and delivered to us for purposes ofthis opinion,
setting forth certain factual representations and dated as ofthe date hereof (lhe" Offtcer's Certiftcates"\; (iv) the Escrow Agreement (as defined in the
Agreement); and (v) such other presently existing documents, records and matters of law as we have deemed necessary or appropriate to review for purposes of
our opinion. We have also reviewed the corresponding opinion ofcounsel dated as ofthe date hereofand to be received by Avista from Davis Wright Tremaine
LLP in connection with the Registration Statement (the "Davis Wright Tremaine Opinion").
ln examining such documents, we have assumed the authenticity oforiginal documents, the accuracy ofcopies, the genuineness ofsignatures and the
legal capacity of signatories. In rendering this opinion, we have also made certain other assumptions, including: (i) the Merger will be consummated in
accordance with the Agreement, without waiver or modification of the material terms and conditions thereof, and in the manner described by the Registration
Statement; (ii) the truth and accuracy, as ofthe date ofthe Agreement, as ofthe date hereofand as ofthe effective time ofthe Merger, ofthe representations and
warranties made by Avista, Merger Sub and AERC in the Agreement; (iii) the truth and accuracy, as of the date hereof and as of the effective time of the
Merger, ofthe reprcsentations set forth in the Officer's Certificates; (iv) any representation in an Officer's Certificate made "to the knowledge of' or similarly
qualified is correct without
Alaska Energy and Resources Company
May 8,2014
Page Two
such qualification; and (v) the Davis Wright Tremaine Opinion has been concurrently delivered and not withdrawn. In addition, we have assumed that, if
any AERC shareholders dissent from the Merger under the corporate laws of Alaska, the aggregate number of Dissenting Shares they hold and the aggregate
amount ofcash paid to them will not equal or exceed such number and amount as would cause the Merger to fail to constitute a "reorganization" within the
meaning ofSection 368(a) ofthe lnternal Revenue Code of 1986, as amended (the" Code").
We have not undertaken an independent inquiry into or verification ofthe facts set forth in the documents we have reviewed for this opinion, either in the
course of our representation of AERC or for the purpose of rendering this opinion. While we have reviewed all representations made to us to determine their
reasonableness, and nothing has come to our attention that would cause us to question the accuracy of such representations, we have no assurance that they
are or will ultimately prove to be accurate.
The conclusion expressed herein represents our judgment ofthe proper treafinent ofcertain aspects ofthe Merger under the federal income tax laws ofthe
United States based upon the Code, Treasury Regulations, rulings and other pronouncements of the Intemal Revenue Service (the " IR.f') currently in effect,
and judicial decisions, all ofwhich are subject to change, prospectively or retroactively. No assurance can be given that any subsequent changes to such
authorities would not aflect the conclusions expressed herein. Furthermore, our opinion represents only our bestjudgment ofhow a court would conclude if
presented with the issues addressed herein and is not binding upon either the IRS or any court. Thus, no assurance can be given that a position taken by you
in reliance on our opinion will not be challenged by the IRS or rejected by a court.
Our opinion relates solely to the tax consequences ofthe Merger under the federal income tax laws ofthe United States, and we express no opinion (and
no opinion should be inferred) regarding the tax consequences ofthe Merger under the laws ofany otherjurisdiction. This opinion addresses only the specific
issues set forth below, and does not address any other tax consequences that may result from the Merger or any otber transaction (including any transaction
undertaken in connection with the Merger or otherwise described in the Agreement or Registration Statement). Ifany change occurs in relation to the facts and
circumstances surrounding the Merger or with respect to applicable law or the application or interpretation thereoq or if any one ofthe statements,
representations, wzuranties or assumptions upon which we have relied later proves inaccurate, our opinion may be adversely affected and may not be relied
upon.
We undertakc no obligation to update this opinion, or to ascertain after the date hereofwhether circumstances occurring after such date may affect the
conclusions set forlh
Alaska Energy and Resources Company
May 8,2014
Page Three
herein, and we assume no continuing responsibility to inform you or any other penon of any information tbat may later come to our attention and that may
affect our opinion.
Based upon and subject to the foregoiug:
l. we are of the opinion that the Merger will constitute a "reorganization" within the meaning of Section 368(a) of the Code, with each of
Avista and AERC being "a party to a reorganization" within the meaning of Section 368(b) of the Code; and
2. the discussion set forth in the Registration Statement under the heading "Material U.S. Federal Income Tax Considerations," insofar as
such discussion expresses conclusions as to the application ofU.S. federal income tax law, and subject to the applicable qualifications
and limitations placed upon such discussion, constitutes our opinion as to the material U.S. federal income tax consequences of the
Merger to "U.S. persons" (as defined in the Registration Statement).
This opinion is being delivered to you for use in connection with the Registration Statement and may not be relied upon for any other purpose. Although
you (and each ofyour employees, representatives, or other agents) may disclose to any and all persons, witbout limitation ofany kind, the U.S. federal tax
treatment and U.S. federal tax structure of the Merger and all materials of any kind that were provided to you by us relating to such tax teatment and tax
structure, this opinion is intendcd solely for your benefit and the benefit ofyour shareholders. You may not authorize any other person or entity to rely on this
opinion, or otherwise make this opinion available for tbe benefit ofany other person or entity, without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the reference to our firm name wherever
appearing in the Registration Statement. However, in giving our consent, we do not admit that we come within the category of persons whose consent is
reguired under Section 7 ofthe Securities Act or tbe rules and regulations ofthe SEC thereunder, nor do we thereby admit that we are experts with respect to
any part ofthe Registration Statement as the term "experts" is used for purposes ofthe Securities Act or the rules and regulations of the SEC promulgated
thereunder.
Very truly yours,
/V Morrison & Foerster LLP
EXHIBIT 23(e)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOTJNTING FIRM
We consent to the incorporation by reference in this Amendment No. I to Registration Statement No. 333-194310 on Form S4/A of our reports dated
February 26, 2014, relating to the consolidated financial statem€Dts ofAvista Corporation, and the effectiveness ofAvista Corporation's internal control over
financial reporting, appearing in thc Annual Report on Form l0-K ofAvista Corporation for the year ended December 31, 2013, and to the reference to us under
the heading "Experts" in the Prospectus, which is part ofthis Registration Statement.
/s/ Deloitte & Touche LLP
Seattle, Washington
May 8, 2014
Exhibit 99.1
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Shareholders: Additional copies of the Information
Statement/Prospectus that accompanies this prory card are available by request to Connie Hulbert at [e-mail].
PROXY CARD FORTHE
SPECIAL MEETING OF THE SHAREHOLDERS
OF ALASKA ENERGY AND RESOURCES CORPORATION
TO BE HELD ON JUNE IO,2OI4
The undersigned, a shareholder ofrecord ofAlaska Energy and Resources Company ("AERC"), hereby revoking any appointment ofproxy previously given,
does hereby appoint William A. Corbus and Debbie R. Driscoll, and each or any ofthem, as proxies and attorneys-in-fact for the undersigned, each with
power to act without the other and with full power ofsubstitution in each ofthem, and hereby authorizes them to represent and vote as directed or specified
herein all the shares of common stock, no par value per share, ofAERC registered in the name of the undersigaed, or which the undersigned has the power to
vote, with all powers which the undenigned would possess ifpresent at the special meeting ofshareholders ofAERC to be held on June 10, 2014 at I l:00
a.m., Alaska Daylight Savings Time, and at any adjoumment or postponement thereof.
WHEN PROPERLY EXECUTED AND RETI RNED, TIIIS PROXY WILL BE VOTED AS DIRECTED OR SPECIFIED BELOW.IF NO
CHOICE IS SPECIFIED, TIIIS PROXY WILL BE VOTED (FOR' TIfi' MERGER PROPOSAL AI\D "FOR" THE ADJOTJRNMENT
PROPOSAL.
INSTRUCTIONS: PLEASE MARK YOUR VOTE N BLUE OR BLACK INK AS SHOIYN HERE: B
To ensure that your shares are represented at the AERC special meeting, we ask that you appoint the proxies to vote your shares for you, whether or not you
plan to attend the AERC special meeting, by marking this proxy card as indicated below and retuming it to us before the AERC special meeting.
THE AERC BOARD OFDIRECTORS UNANTMOUSLY RECOMMENDS TIIATAERC STIAREHOLDERS VOTE (FOB" THE MERGER
PROPOSAL AI\D're&" TIM, ADJOI'RNMENT PROPOSAL.
TTEMI: THEMERGERPROPOSAL
To approve the plan ofmerger contained in the Agreement and Plan ofMerger, dated as ofNovember 4, 2013, by and among Avista Corporation ("Avista"),
Alaska Merger Sub, Inc., a wholly-owned subsidiary of Avista, AERC, and William A. Corbus, solely as the shareholders' representative, as such agreement
may be amended from time to time, and the merger described therein.
tr FOR tr AGAINST tr ABSTAIN
ITEM2: THEADJOURNMENTPROPOSAL
To adjoum the AERC special meeting, ifnecessary, ifa quorum is present, to solicit additional proxies ifthere are not suffrcient votes to approve the merger
proposal.
tr FoR E] AGAINST D ABSTAIN
The undersigned acknowledges receipt of the Information Statement/?rospectus dated May 8, 2014 relating to the special meeting of shareholders of AERC.
When shares are held jointly, each holder should sign. When signing as executor, administrator, attomey, trustee or guardian, please give full title as such. If
the signer is an entity, please print the full entity name as well as the name and title ofthe duly authorized signatory hereofon behalfofthe entity.
(Print Name of Stockholder and/or Joint Tenant)
(Signature of Stockholder)
(Second Signature, if held jointly)
Dated:
PLEASE COMPLETE. DATE. SIGN AITID R.ETI'RN PROMPTLY AS FOLLOWS:
Fax to: 907-463-3304; or
Email to: [e-mail]
Then mail the originally completed and signed Proxy Card to:
A.laska Energy and Resources Company
Attn: Connie Hulbert
5601 Tonsgard Court
Juneau, AK 99801
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lirril:r . Ouoiqs > /x,VA l l.l,utalricerl l):rr:&$
Avista Gorporation Historical Stock Prices
AVA $30.76. 0.54 1.73s/o
'{',*lny{rl "rJala as of Aug 4. :l{)1.[ 13 54 El Fird a kohrrr to hegn tradurt; AV"A rrow
Get up to 10 years of daily historical stock prlces & volumes.
Select the Timeframe: 3 Months '
ftesults for:3 Morrtlr" From 01"MAY-2014 TO 01-AUG-2014
Date
08/01n014
a7t31ftAU
0780/2014
t)7t29t2014
a7fla^au
a7i25nu4
a7n4ftau
07t2u2014
a7{?212014
47i21t2014
07il$nu4
01fi7nffi4
07/16nfi4
0711512014
07fi4n914
07t11p"A14
07napo14
07/0$12014
07to8.t2014
07fi7EA14
Open
31.01
31.46
32.19
&2.28
31.8
32.0S
32.25
3?,35
32.41
32.32
31.93
32"38
32.37
32.34
32,81
33.S3
3a.39
32.71
3?..24
3?.42
High
31.445
31"72
32.28
3?".42
32.3q
32.2599
3?.405
33.3S5
32.e6
3?.43
32.4
32.38
32.S
32.39
32.81
33,'15
33
32.73
3A.68
32.59
Low
31.01
31.m
31.47
32.0688
31.8
31.83
32.1201
a.23
3e.25
32.0S79
31.76
3't.95
32,03S
32.O7
32.24
32.61
32.39
32.25
33.24
32.235
Close I L*st Volurno
31.3 293,931
31.03 265,213
31.7 330.130
32.14 263J72
32.28 232,817
31,U 239.601
32.22 244j00
32.27 189.931
32.35 230i348
32.33 3oA,4U
32.38 286,1"11
31.97 25S,996
32"38 17132A
32.37 235,162
32.26 272,675
32.62 315,100
32.95 313,3M
32.52 33S,629
32fi7 350.734
32,26 ?59,853
http/Avww. nasdaq. com/syrnbo l/ava/hi storical
-
08-04-2014
Avista Corporation (AVA) I{istorical Prices & Data - NASDAQ.com
Volume
168,059
43e_.j-54
_
377,660
513,09s
526,657
487,7S?
390,482
506t854
286,058
679,284
313,071
282,3&
350,790
458,162
227,385
285,626
228,263
212,519
265,2$8
132,477
455,173
365,399
528,579
3S1,284
1,025,025
225,424
318,043
343,542
2?8,049
Page 2 of3
Date
07t03t2au
07n2n:14
07nlt2014
06/3012014
CI6n7nO14
a6t2612014
o6RSnO$
o$z4tao14
o6tzu2aM
06t20nu4
06/1S/2014
06/18/2014
0at17nu4
0011el2014
06/1312014
06t12t2b14
ow11t2014
06/10/2014
06/0si2014
06/0s/2014
06/05n014
0610412014
06/0312014
06/0212014
093012014
05129/2014
oy28f2014
05t27nu4
05{2312014
Qpen
32.51
33.19
33.55
33.11
32.87
33,23
32.4
3?.57
32.58
32,03
32.09
31.52
31.44
31.05
30.93
30.86
31.21
31.4?
31.65
31.97
31.38
31.11
3126
31.35
32
32.36
32.18
31.88
3'1.62
High Low Close / Last
32.51 32,0S 32.33
33.25 32.41 32.48,fi33.6 33.2 !, {1,r5e.as
33.58 32.99 33,52
33.3 32.82 33.11
33.29 32.92 33,08
93.27 32.775 s3.22
33,09 32.545 32.81
32.8 32.41 32,61
32.72 32"5 3?.55
32,52 32 32.48
32.02 31.52 32.01
31.s35 31.21 31.4
31.S2 31 31.33
30.99 3A.47 30.8S
30.9999 30.38 30.8
31,35 30.85 30.86
31 .47 31 .135 31.3'l
31.77 31.37 31,45
32.11 31.55 31,6S
31.945 31.CI0 31.8
31.27 30.S5 31.26
31.43 31.03 31.1
31.5 31.16 31.32
32.A7 30.9 31.31
32^36 31.99 32.15
32.35 31.98 32.24
3?.11 31.78 32.08
31.77 31.4501 31.68
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Avista Corporation (AVA) l'listorical Pricc.s & Data - NASDAQ.com
Date
owznafi
a5i21nA14
05/20/2014
05/19r:2014
05/16t2014
o$t15ft414
0s14n014
05/1snfi4
ail12n414
0&osr2014
awa8,nau
g5m7/2014
0506/20f4
05/05/2014
oil0wa14
05/018014
High
31,75
31.49
31.71
3:2.27
3?.32
32.168
32,26
32.45
32.49
32.77
32,M
32.S,4
31.823
31.7S
32.1
3?.3309
Low
31"36
3{.15
3{.13
31.8545
31.83
3,t,84
31.83
31.91
3?.19
3t.25
32.2S
3?'1
31.5
31.1'4
31,4
31.84
Cloee I Last
31.56
31,35
31,4
31.88
32.3'l
31,9
32.02
31.94
32.23
32.3
32.78
32.89
31.64
31.78
51.52
32.',r4
Volumc
240,893
300,754
498,744
308,$S0
266,014
?;97,149
2S8,867
404,273
438.S42
330,S67
s37,e61
471,803
287,973
214,78A
2233e1
331,602
Page 3 of3
Open
31.36
31.43
31.6S
32.27
s1.91
32.0e
3?
32.25
32.45
32.63
32 56
32.47
31.75
31.41
32.1
32.1$
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