COMBINATION AGREEMENT
AMONG
DUKE ENERGY CORPORATION,
3058368 NOVA SCOTIA COMPANY,
3946509 CANADA INC.
AND
WESTCOAST ENERGY INC.
SEPTEMBER 20, 2001
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TABLE OF CONTENTS
ARTICLE 1 INTERPRETATION
1.1 Definitions..................................................1
1.2 Interpretation Not Affected by Headings, etc.................9
1.3 Rules of Construction........................................9
1.4 Date For Any Action..........................................9
1.5 Schedules....................................................9
ARTICLE 2 THE ARRANGEMENT
2.1 Implementation Steps by Westcoast...........................10
2.2 Implementation Steps by Duke Energy Parties.................10
2.3 Interim Order...............................................11
2.4 Articles of Arrangement.....................................11
2.5 Westcoast Circular..........................................11
2.6 Securities Compliance.......................................12
2.7 Preparation of Filings......................................13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES of Westcoast
3.1 Organization and Standing...................................14
3.2 Capitalization..............................................15
3.3 Authority and No Conflicts..................................17
3.4 Consents; Approvals.........................................18
3.5 No Defaults.................................................18
3.6 Absence of Certain Changes or Events........................19
3.7 Employment Matters..........................................19
3.8 Reports; Financial Statements...............................21
3.9 Contracts...................................................22
3.10 Litigation..................................................23
3.11 Environmental...............................................23
3.12 Tax Matters.................................................24
3.13 Pension and Employee Benefits...............................25
3.14 Affiliates..................................................28
3.15 Compliance with Laws; Permits...............................29
3.16 Restrictions on Business Activities.........................29
3.17 Intellectual Property.......................................30
3.18 Insurance...................................................31
3.19 Property....................................................31
3.20 Regulatory Proceedings......................................32
3.21 Regulation as a Utility.....................................32
3.22 Futures Trading and Fixed Price Exposure....................32
3.23 Opinion of Financial Advisor................................33
3.24 Brokerage and Finders' Fees.................................33
3.25 Westcoast Rights Plan.......................................33
3.26 Solvency of Westcoast.......................................33
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE DUKE ENERGY PARTIES
4.1 Organization and Standing.............................................33
4.2 Capitalization........................................................34
4.3 Authority and No Conflicts............................................35
4.4 Consents; Approvals...................................................36
4.5 No Defaults...........................................................36
4.6 Absence of Certain Changes or Events..................................37
4.7 Reports; Financial Statements.........................................37
4.8 Litigation............................................................37
4.9 Environmental.........................................................38
4.10 Nuclear Operations....................................................39
4.11 Compliance with Laws; Permits.........................................39
4.12 Regulatory Proceedings................................................40
4.13 Futures Trading and Fixed Price Exposure..............................40
4.14 Brokerage and Finders' Fees...........................................40
ARTICLE 5 COVENANTS AND AGREEMENTS
5.1 Covenants of Westcoast................................................40
5.2 Covenants of Duke Energy..............................................47
5.3 Access to Information.................................................49
5.4 Indemnification.......................................................50
5.5 Covenants Regarding Non-Solicitation..................................50
5.6 Right to Accept a Superior Proposal...................................52
5.7 Employee Benefits and Related Matters.................................53
5.8 Prohibition on Voluntary Liquidation..................................54
5.9 Conversion of Westcoast Preferred Shares..............................54
5.10 Closing Matters.......................................................55
ARTICLE 6 CONDITIONS
6.1 Mutual Conditions.....................................................55
6.2 Additional Conditions to the Obligations of the Duke Energy Parties...56
6.3 Additional Conditions to the Obligations of Westcoast.................58
6.4 Satisfaction of Conditions............................................59
ARTICLE 7 AMENDMENT AND TERMINATION
7.1 Amendment.............................................................59
7.2 Termination...........................................................59
7.3 Effect of Termination.................................................61
7.4 Effect of Termination Fee Payment.....................................63
ARTICLE 8 GENERAL
8.1 Investigation.........................................................64
8.2 Notices...............................................................64
8.3 Assignment............................................................65
8.4 Binding Effect........................................................65
8.5 Third-Party Beneficiaries.............................................65
8.6 Waiver and Modification...............................................65
8.7 No Personal Liability.................................................65
8.8 Further Assurances....................................................66
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8.9 Expenses..............................................................66
8.10 Public Announcements..................................................66
8.11 Governing Laws; Consent to Jurisdiction...............................66
8.12 Remedies..............................................................66
8.13 Time of Essence.......................................................67
8.14 Entire Agreement......................................................67
8.15 Severability..........................................................67
8.16 Counterparts..........................................................67
Schedules:
A - Form of Affiliate's Letter
B - Appropriate Regulatory Approvals
C - Form of Arrangement Resolution
D - Form of Westcoast Rights Plan Waiver Resolution
E - Form of Plan of Arrangement
F - Form of Support Agreement
G - Form of Voting and Exchange Trust Agreement
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COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT dated September 20, 2001 (this "Agreement"),
is entered into by and among Duke Energy Corporation, a North Carolina
corporation ("Duke Energy"), 3058368 Nova Scotia Company, an unlimited liability
company existing under the Laws of the Province of Nova Scotia and an indirect
wholly-owned subsidiary of Duke Energy Corporation ("Callco"), 3946509 Canada
Inc., a corporation existing under the Laws of Canada and a wholly-owned
subsidiary of Callco ("Exchangeco"), and Westcoast Energy Inc., a corporation
existing under the Laws of Canada ("Westcoast"). Duke Energy, Callco and
Exchangeco are collectively referred to herein as the "Duke Energy Parties."
RECITALS
The Board of Directors of Westcoast has determined that the business
combination to be effected by means of the Plan of Arrangement is advisable and
in the best interest of Westcoast and has approved the transactions contemplated
by this Agreement and determined to recommend approval of the Plan of
Arrangement and other transactions contemplated hereby to the Westcoast
Securityholders.
The Board of Directors of Duke Energy has determined that the business
combination to be effected by means of the Plan of Arrangement is advisable and
in the best interest of Duke Energy and has approved the transactions
contemplated by this Agreement.
In furtherance of such business combination, the Board of Directors of
Westcoast has agreed to submit the Plan of Arrangement and other transactions
contemplated hereby to the Westcoast Securityholders and the Supreme Court of
British Columbia for approval.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires, the following
terms shall have the following meanings respectively:
"1933 ACT" means the United States Securities Act of 1933, as amended;
"1935 ACT" means the United States Public Utility Holding Company Act
of 1935, as amended;
"ACQUISITION PROPOSAL" means any of the following (other than the
transactions contemplated by this Agreement or the Arrangement): (a)
any merger, amalgamation, arrangement, share exchange, take-over bid,
tender offer, recapitalization, consolidation
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or business combination directly or indirectly involving Westcoast or
any of its Material Subsidiaries (for this purpose, each reference to
5% in the definition of Material Subsidiary shall be deemed to be 10%),
(b) any acquisition of assets representing 20% or more of the book
value (on a consolidated basis) of the assets of Westcoast and its
subsidiaries, taken as a whole (or any lease, long-term supply
agreement, exchange, mortgage, pledge or other arrangement having a
similar economic effect) in a single transaction or a series of related
transactions, (c) any acquisition of beneficial ownership (as defined
under Section 13(d) of the Exchange Act) of 20% or more of the
Westcoast Common Shares in a single transaction or a series of related
transactions, (d) any acquisition by Westcoast of any assets or capital
stock of another person (other than acquisitions of capital stock or
assets of any other person that are not, individually or in the
aggregate, material to Westcoast and its subsidiaries, taken as a
whole), or (e) any bona fide proposal to, or public announcement of an
intention to, do any of the foregoing;
"AFFECTED EMPLOYEES" has the meaning ascribed thereto in Section 5.7;
"AFFILIATE" has the meaning ascribed thereto in the Securities Act,
unless otherwise expressly stated herein;
"AFFILIATE'S LETTER" means a letter, to be substantially in the form
and content of Schedule A annexed hereto;
"AGREEMENT" has the meaning ascribed thereto in the Preamble;
"APPROPRIATE REGULATORY APPROVALS" means those sanctions, rulings,
consents, orders, exemptions, permits and other approvals (including
the lapse, without objection, of a prescribed time under a statute or
regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an
objection being made) of Governmental Entities, or self-regulatory
organizations, as set out in Schedule B annexed hereto;
"ARRANGEMENT" means an arrangement under Section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with
Section 7.1 hereof or Article 6 of the Plan of Arrangement, or made at
the direction of the Court in the Final Order;
"ARRANGEMENT RESOLUTION" means the special resolution of the Westcoast
Securityholders, to be substantially in the form and content of
Schedule C annexed hereto;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of
Westcoast in respect of the Arrangement that are required by the CBCA
to be sent to the Director after the Final Order is made;
"BUSINESS DAY" means any day on which commercial banks are generally
open for business in New York, New York and Vancouver, British Columbia
other than a Saturday, a Sunday or a day observed as a holiday in New
York, New York under the Laws of the State of New York or the federal
Laws of the United States of America or in
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Vancouver, British Columbia under the Laws of the Province of British
Columbia or the federal Laws of Canada;
"CALLCO" has the meaning ascribed thereto in the Preamble;
"CBCA" means the Canada Business Corporations Act as now in effect and
as it may be amended from time to time prior to the Effective Date;
"CIRCULAR" means the notice of the Westcoast Meeting and accompanying
management proxy circular, including all schedules and exhibits
thereto, to be sent to the Westcoast Securityholders in connection with
the Westcoast Meeting;
"CODE" has the meaning ascribed thereto in Section 3.12(b);
"CONFIDENTIALITY AGREEMENT" means the confidentiality letter agreement
dated April 6, 2001 between Duke Energy and Westcoast;
"COURT" means the Supreme Court of British Columbia;
"CRMC" has the meaning ascribed thereto in Section 3.22;
"DIRECTOR" means the Director appointed pursuant to Section 260 of the
CBCA;
"DISSENT RIGHTS" means the rights of dissent in respect of the
Arrangement described in Section 3.1 of the Plan of Arrangement;
"DUKE ENERGY" has the meaning ascribed thereto in the Preamble;
"DUKE ENERGY COMMON SHARES" means the shares of common stock in the
capital of Duke Energy;
"DUKE ENERGY DISCLOSURE LETTER" means that certain letter of disclosure
dated as of the date hereof and signed by an authorized officer of Duke
Energy and delivered by Duke Energy to Westcoast on or prior to the
date hereof;
"DUKE ENERGY DOCUMENTS" has the meaning ascribed thereto in Section
4.7(a);
"DUKE ENERGY ENVIRONMENTAL PERMITS" has the meaning ascribed thereto in
Section 4.9(b);
"DUKE ENERGY PARTIES" has the meaning ascribed thereto in the Preamble;
"DUKE ENERGY PERMITS" has the meaning ascribed thereto in Section
4.11(b);
"DUKE ENERGY SEC DOCUMENTS" has the meaning ascribed thereto in Section
4.7(a); and
"DUKE ENERGY STOCK PLANS" means Duke Energy's existing benefit or stock
purchase plans which provide for the issuance, grant or sale of Duke
Energy Common Shares or options to purchase Duke Energy Common Shares.
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"EASEMENTS" has the meaning ascribed thereto in Section 3.19(b);
"EFFECTIVE DATE" means the date shown on the certificate of arrangement
to be issued by the Director under the CBCA giving effect to the
Arrangement provided that such date occurs on or prior to the date that
is 365 days following the date hereof, or such later date as may be
mutually agreed upon by the parties hereto;
"EFFECTIVE TIME" has the meaning ascribed thereto in the Plan of
Arrangement;
"ENGAGE" has the meaning ascribed thereto in Section 3.22;
"ENVIRONMENTAL LAWS" means all applicable Laws, including applicable
common Law, relating to the protection of the environment (including,
without limitation, air, surface water, groundwater and soil) and
public health and safety;
"ERISA" has the meaning ascribed thereto in Section 3.13(a);
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934,
as amended;
"EXCHANGE RATIO" has the meaning ascribed thereto in the Plan of
Arrangement;
"EXCHANGEABLE SHARES" means the non-voting exchangeable shares in the
capital of Exchangeco, having substantially the rights, privileges,
restrictions and conditions set out in Appendix 1 to the Plan of
Arrangement;
"EXCHANGECO" has the meaning ascribed thereto in the Preamble;
"EXCLUDED ASSETS" means the assets identified as such in the Westcoast
Disclosure Letter, being assets that Westcoast is in the process of
disposing;
"EXPENSE FEE" means a payment in the amount of $30 million;
"FINAL ORDER" means the final order of the Court approving the
Arrangement, as such order may be amended by the Court at any time
prior to the Effective Date, or, if appealed, then, unless such appeal
is withdrawn or denied, as affirmed;
"FIRST PREFERRED SHARES" means the first preferred shares in the
capital of Westcoast, including each series thereof designated and
outstanding;
"FORCE MAJEURE" means (i) an act of God, act of war, civil disturbance
or other cause beyond such party's reasonable control and power to
remedy or (ii) a strike or other labor dispute, scarcity of supplies or
utilities or unavailability or disruption of transportation, which
such party is not capable of resolving by an investment or the payment
of a commercially reasonable amount of money;
"FORM S-3" has the meaning ascribed thereto in Section 2.6(b);
"FORM S-8" has the meaning ascribed thereto in Section 2.6(c);
"GOVERNING DOCUMENTS" means, with respect to any person, the
certificate or articles of incorporation, by-laws, articles of
organization, limited liability company agreement,
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partnership agreement, formation agreement, joint venture agreement,
unanimous shareholder agreement or declaration or other similar
governing documents of such person;
"GOVERNMENTAL ENTITY" means any (a) multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitral body, commission, board, bureau or agency, domestic or
foreign, (b) subdivision, agent, commission, board, or authority of any
of the foregoing, or (c) quasi-governmental or private body exercising
any regulatory, expropriation or taxing authority under, or for the
account of, any of the foregoing;
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste of any
nature, petroleum, hazardous substance, hazardous material, toxic
substance, dangerous substance or dangerous good, as defined or
identified in or regulated by any Environmental Law;
"HOLDERS" means, when used with reference to the Westcoast Common
Shares, the holders of Westcoast Common Shares shown from time to time
in the register maintained by or on behalf of Westcoast in respect of
the Westcoast Common Shares and, when used with reference to the
Exchangeable Shares, the holders of Exchangeable Shares shown from time
to time in the register maintained by or on behalf of Exchangeco in
respect of the Exchangeable Shares;
"INTELLECTUAL PROPERTY RIGHTS" has the meaning ascribed thereto in
Section 3.17(a);
"INTERIM ORDER" means the interim order of the Court, as the same may
be amended, in respect of the Arrangement, as contemplated by Section
2.3;
"KNOWLEDGE" means, with respect to either Duke Energy or Westcoast, the
knowledge of any officer of such party after reasonable inquiry;
provided that reasonable inquiry shall not require the inquiry of any
third party or any Partially Owned Entity;
"LAWS" means all statutes, regulations, statutory rules, orders,
judgments, decrees and terms and conditions of any grant of approval,
permission, authority, permit or license of any court, Governmental
Entity, statutory body (including The Toronto Stock Exchange and The
New York Stock Exchange) or self-regulatory authority;
"MATERIAL ADVERSE EFFECT," when used in connection with Duke Energy or
Westcoast, means any change, effect, event or occurrence with respect
to its condition (financial or otherwise), properties, assets,
liabilities, obligations (whether absolute, accrued, conditional or
otherwise), businesses, operations or results of operations or those of
its subsidiaries, or in the case of Westcoast, its Partially Owned
Entities, that is, or would be reasonably expected to be, material and
adverse to the current or future business, operations, regulatory
status, financial condition or results of operations of Duke Energy or
Westcoast, as the case may be, and its subsidiaries taken as a whole;
provided, however, that a Material Adverse Effect shall not include
with respect to any party, any change, effect, event or occurrence with
respect to its condition (financial or otherwise), properties, assets,
liabilities, obligations (whether absolute, accrued, conditional or
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otherwise), businesses, operations or results of operations of such
party or any of its subsidiaries directly or indirectly arising out of
or attributable to any decrease in the market price of Duke Energy
Common Shares in the case of Duke Energy or Westcoast Common Shares in
the case of Westcoast (but in either case not any change or effect
underlying such decrease to the extent such change or effect would
otherwise constitute a Material Adverse Effect on such party);
"MATERIAL SUBSIDIARY" means a subsidiary (i) the assets of which exceed
5% of the total assets of the ultimate parent corporation on a
consolidated basis as at the end of the last completed fiscal year of
the ultimate parent corporation or (ii) of which the ultimate parent
corporation's direct or indirect equity interest in the income (before
income taxes and extraordinary items) exceeds 5% of such income of the
ultimate parent corporation on a consolidated basis during the last
completed fiscal year of the ultimate parent corporation;
"NET ENGAGE POSITION" has the meaning ascribed thereto in Section 3.22;
"NUCLEAR STATIONS" has the meaning ascribed thereto in Section 4.10;
"OPEN DUKE ENERGY POSITION" has the meaning ascribed thereto in Section
4.13;
"OSC" means the Ontario Securities Commission;
"PARTIALLY OWNED ENTITY" means, with respect to a specified person, any
corporation, partnership, joint venture, limited liability company,
unlimited liability company, or other organization, incorporated or
unincorporated, which is not a subsidiary of such specified person but
in which such specified person, directly or indirectly, owns or
controls 15% or more of the outstanding securities or other interests
ordinarily entitled to vote in the election of the board of directors
or other governing body thereof (or if there are no such voting
securities or interests, 15% or more of the equity interest in such
entity); provided that Maritimes & Northeast Pipeline and P.T.
Puncakjaya Power are not Partially Owned Entities;
"PERSON" includes any individual, firm, partnership, joint venture,
venture capital fund, limited liability company, unlimited liability
company, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity,
syndicate or other entity, whether or not having legal status;
"PLAN OF ARRANGEMENT" means the plan of arrangement substantially in
the form and content of Schedule E annexed hereto and any amendments or
variations thereto made in accordance with Section 7.1 hereof or
Article 6 of the Plan of Arrangement or made at the direction of the
Court in the Final Order;
"PRE-EFFECTIVE DATE PERIOD" shall mean the period from and including
the date hereof to and including the Effective Time on the Effective
Date;
"RATE CHANGE" has the meaning ascribed thereto in Section 5.1(a)(ix);
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"REPLACEMENT OPTIONS" has the meaning ascribed thereto in the Plan of
Arrangement;
"REPRESENTATIVES" has the meaning ascribed thereto in Section 5.3(a);
"SEC" means the United States Securities and Exchange Commission;
"SECOND PREFERRED SHARES" means the second preferred shares in the
capital of Westcoast;
"SECURITIES ACT" means the Securities Act (Ontario) and the rules,
regulations and policies made thereunder, as now in effect and as they
may be amended from time to time prior to the Effective Date;
"SUBSIDIARY" means with respect to a specified person, (a) any
corporation, partnership, joint venture, limited liability company,
unlimited liability company or other organization, incorporated or
unincorporated, which is a subsidiary as defined in the Securities Act
of such specified person or (b) a partnership of which such specified
person or another of its subsidiaries is a general partner or owns
beneficially more than 50% of the ownership interests;
"SUPERIOR PROPOSAL" means any bona fide written proposal by a third
party, directly or indirectly, to acquire assets representing more than
50% of the book value (on a consolidated basis) of Westcoast's total
assets or more than 50% of the Westcoast Common Shares, whether by way
of merger, amalgamation, arrangement, share exchange, take-over bid,
recapitalization, sale of assets or otherwise, and that in the good
faith determination of the Board of Directors of Westcoast (based upon
advice from its financial advisors and outside legal counsel) (a) is
reasonably capable of being completed without undue delay, taking into
account all legal, financial, regulatory and other aspects of such
proposal and the party making such proposal, and (b) would, if
consummated in accordance with its terms, result in a transaction more
favourable to Westcoast's Securityholders from a financial point of
view than the transaction contemplated by this Agreement (including any
adjustment to the terms and conditions proposed by Duke Energy as
contemplated by Section 5.6(b));
"SUPPORT AGREEMENT" means an agreement to be made between Westcoast,
Duke Energy, Callco and Exchangeco substantially in the form and
content of Schedule F annexed hereto, with such changes thereto as the
parties hereto, acting reasonably, may agree;
"TAX" and "TAXES" have the respective meanings ascribed thereto in
Section 3.12(c);
"TAX RETURNS" means all returns, declarations, reports, information
returns and statements filed or required to be filed with any taxing
authority relating to Taxes;
"TERMINATION FEE" means a fee equal to $120 million;
"TRUSTEE" means the trustee to be chosen by Duke Energy and Westcoast,
acting reasonably, to act as trustee under the Voting and Exchange
Trust Agreement, being a
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corporation organized and existing under the Laws of the State of New
York or Delaware and authorized to carry on the business of a trust
company, and any successor trustee appointed under the Voting and
Exchange Trust Agreement;
"UEI CONVERSION NOTICE" has the meaning ascribed thereto in Section
5.9(b);
"VOTING AND EXCHANGE TRUST AGREEMENT" means an agreement to be made
between Duke Energy, Exchangeco and the Trustee in connection with the
Plan of Arrangement substantially in the form and content of Schedule G
annexed hereto, with such changes thereto as the parties hereto, acting
reasonably, may agree;
"WESTCOAST" has the meaning ascribed thereto in the Preamble;
"WESTCOAST COMMON SHARES" means the issued and outstanding common
shares in the capital of Westcoast, including the associated rights
under the Westcoast Rights Plan;
"WESTCOAST DISCLOSURE LETTER" means that certain letter of disclosure
dated as of the date hereof and signed by an authorized officer of
Westcoast and delivered by Westcoast to Duke Energy on or prior to the
date hereof;
"WESTCOAST DIVIDEND REINVESTMENT PLAN" means the plan of Westcoast
existing on the date hereof pursuant to which holders of Westcoast
Common Shares may elect to receive dividends in equivalent value of
Westcoast Common Shares in lieu of cash and may make purchases of
Westcoast Common Shares;
"WESTCOAST DOCUMENTS" has the meaning ascribed thereto in Section
3.8(a);
"WESTCOAST EMPLOYEE SHARE PURCHASE PLANS" means the share purchase
plans for Westcoast employees in Canada (whether registered or
unregistered) and the share purchase plans, if any, for Westcoast
employees in the United States, in each case, as amended;
"WESTCOAST ENVIRONMENTAL PERMITS" has the meaning ascribed thereto in
Section 3.11(b);
"WESTCOAST MEETING" means the special meeting of Westcoast
Securityholders, including any adjournment, adjournments, postponement
or postponements thereof, to be called and held in accordance with the
Interim Order to consider the Arrangement and the Westcoast Rights Plan
Waiver Resolution;
"WESTCOAST OPTIONS" means the Westcoast Common Share purchase options
granted under the Westcoast Stock Option Plans;
"WESTCOAST PERMITS" has the meaning ascribed thereto in Section
3.15(b);
"WESTCOAST PIPELINE ASSETS" has the meaning ascribed thereto in Section
3.19(a);
"WESTCOAST PLANS" has the meaning ascribed thereto in Section 3.13(a);
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"WESTCOAST RIGHTS PLAN" means the shareholder rights plan of Westcoast
established pursuant to the Shareholders Rights Plan Agreement dated as
of April 26, 2000 between Westcoast and Computershare Trust Company of
Canada (previously called Montreal Trust Company of Canada);
"WESTCOAST RIGHTS PLAN WAIVER RESOLUTION" means the ordinary resolution
of the holders of Westcoast Common Shares to be substantially in the
form and content of Schedule D annexed hereto;
"WESTCOAST SEC REPORTS" has the meaning ascribed thereto in Section
3.8(a);
"WESTCOAST SECURITYHOLDERS" means the holders of Westcoast Common
Shares and the holders of Westcoast Options, collectively;
"WESTCOAST SRA REPORTS" has the meaning ascribed thereto in Section
3.8(a);
"WESTCOAST STOCK OPTION PLANS" means Westcoast's Long-Term Incentive
Share Option Plan 1989, as amended effective April 26, 2000 and
Westcoast's 1999 Key Employee Plan;
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into articles, sections and other
portions and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number or a
letter refer to the specified Article or Section of this Agreement. The terms
"this Agreement," "hereof," "herein" and "hereunder" and similar expressions
refer to this Agreement (including the Schedules hereto) and not to any
particular Article, Section or other portion hereof.
1.3 RULES OF CONSTRUCTION
Unless otherwise specifically indicated or the context otherwise
requires, (a) all references to "dollars" or "$" mean United States dollars, (b)
words importing the singular shall include the plural and vice versa and words
importing any gender shall include all genders, and (c) "include," "includes"
and "including" shall be deemed to be followed by the words "without
limitation."
1.4 DATE FOR ANY ACTION
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day that is a Business Day.
1.5 SCHEDULES
The following Schedules are annexed to this Agreement and are hereby
incorporated by reference into this Agreement and form part hereof:
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Schedule A -- Form of Affiliate's Letter
Schedule B -- Appropriate Regulatory Approvals
Schedule C -- Form of Arrangement Resolution
Schedule D -- Form of Westcoast Rights Plan Waiver Resolution
Schedule E -- Form of Plan of Arrangement
Schedule F -- Form of Support Agreement
Schedule G -- Form of Voting and Exchange Trust Agreement
ARTICLE 2
THE ARRANGEMENT
2.1 IMPLEMENTATION STEPS BY WESTCOAST
Westcoast covenants in favour of the Duke Energy Parties that Westcoast
shall:
(a) as soon as reasonably practicable, apply in a manner acceptable to
the Duke Energy Parties, acting reasonably, under Section 192 of
the CBCA for an order approving the Arrangement and for the Interim
Order, and thereafter proceed with and diligently seek the Interim
Order;
(b) lawfully convene and hold the Westcoast Meeting for the purpose of
considering the Arrangement Resolution and the Westcoast Rights
Plan Waiver Resolution (and for no other purpose unless agreed to
by Duke Energy) as soon as reasonably practicable and use its
reasonable efforts to convene and hold the Westcoast Meeting on or
before December 15, 2001, subject to adjournments or postponements
which may be required pursuant to Section 5.6(a);
(c) subject to obtaining the approvals as are required by the Interim
Order, proceed with and diligently pursue the application to the
Court for the Final Order; and
(d) subject to obtaining the Final Order and the satisfaction or waiver
of the other conditions herein contained in favour of each party,
send to the Director, for endorsement and filing by the Director,
the Articles of Arrangement and such other documents as may be
required in connection therewith under the CBCA to give effect to
the Arrangement.
2.2 IMPLEMENTATION STEPS BY DUKE ENERGY PARTIES
The Duke Energy Parties covenant in favour of Westcoast that, on or
prior to the Effective Date and subject to the satisfaction or waiver of the
conditions herein contained in favour of each such party:
(a) Duke Energy, Callco and Exchangeco shall execute and deliver the
Support Agreement;
(b) Duke Energy and Exchangeco shall execute and deliver the Voting and
Exchange Trust Agreement; and
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(c) Duke Energy shall issue to the Trustee such number of Duke Energy
Common Shares as required by the Voting and Exchange Trust
Agreement.
2.3 INTERIM ORDER
The notice of motion for the application referred to in Section 2.1(a)
shall request that the Interim Order provide, among other things:
(a) for the class of persons to whom notice is to be provided in
respect of the Arrangement and the Westcoast Meeting and for the
manner in which such notice is to be provided;
(b) that the requisite approval for the Arrangement Resolution shall be
66 2/3% of the votes cast on the Arrangement Resolution by
Westcoast Securityholders, voting together as a single class,
present in person or by proxy at the Westcoast Meeting (such that
each holder of Westcoast Common Shares is entitled to one vote for
each Westcoast Common Share held and each holder of Westcoast
Options is entitled to one vote for each Westcoast Common Share
such holder of Westcoast Options would have received on a valid
exercise of Westcoast Options);
(c) that, in all other respects, the terms, restrictions and conditions
of the governing documents of Westcoast, including quorum
requirements and all other matters, shall apply in respect of the
Westcoast Meeting; and
(d) for the grant of the Dissent Rights.
2.4 ARTICLES OF ARRANGEMENT
The Articles of Arrangement shall, together with such other matters as
are necessary to effect the Arrangement, implement the Plan of Arrangement, as a
result of which, among other things, each holder of Westcoast Common Shares will
be entitled to receive (a) the number of Exchangeable Shares per Westcoast
Common Share equal to the Exchange Ratio, (b) the number of Duke Energy Common
Shares per Westcoast Common Share equal to the Exchange Ratio, (c) Cdn$43.80 in
cash, without interest, per Westcoast Common Share, or (d) a combination
thereof, at the option of the holder, subject, in each case to proration in a
manner as may be determined by Duke Energy to provide that approximately 50% of
the aggregate consideration to be received by holders of Westcoast Common Shares
will consist of cash and approximately 50% will consist of Exchangeable Shares
and Duke Energy Common Stock.
2.5 WESTCOAST CIRCULAR
As promptly as reasonably practicable, Westcoast shall prepare the
Circular together with any other documents required by the Securities Act, the
CBCA or other applicable Laws in connection with the approval of the Arrangement
by the Westcoast Securityholders and Westcoast shall give Duke Energy timely
opportunity to review and comment on all such documentation and all such
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documentation shall be reasonably satisfactory to Duke Energy before it is filed
or distributed to Westcoast Securityholders; provided, that Duke Energy will
provide Westcoast with its comments and any proposed additions and deletions
within five Business Days after each receipt of a draft Circular from Westcoast.
If Duke Energy shall have advised Westcoast in writing of matters required
pursuant to Section 5.2(b)(ii) prior to the Westcoast Meeting, Westcoast shall
disclose such matters in the Circular (including by amendment or supplement to
the Circular if the Circular shall have been previously filed or distributed)
and such disclosure shall be reasonably satisfactory to Duke Energy before it is
filed or distributed to Westcoast Securityholders. As promptly as practicable
after obtaining the Interim Order, Westcoast shall cause the Circular and other
documentation required in connection with the Westcoast Meeting to be sent to
each Westcoast Securityholder and filed as required by the Interim Order and
applicable Laws, and Westcoast will use its reasonable efforts to cause the
Circular to be sent to each Westcoast Securityholder and filed as required by
the Interim Order and applicable Laws on or before November 15, 2001.
2.6 SECURITIES COMPLIANCE
(a) Duke Energy and Westcoast shall use reasonable best efforts to
obtain all orders required from the applicable Canadian
Governmental Entities to permit the issuance and first resale of
(i) the Exchangeable Shares and Duke Energy Common Shares issuable
pursuant to the Arrangement, (ii) the Duke Energy Common Shares
issuable upon exchange of the Exchangeable Shares from time to
time, and (iii) the Duke Energy Common Shares issuable from time to
time upon the exercise of the Replacement Options, in each case
without qualification with, or approval of, or the filing of any
prospectus or similar document, or the taking of any proceeding
with, or the obtaining of any further order, ruling or consent
from, any Canadian Governmental Entity under any Canadian federal,
provincial or territorial securities or other Laws or pursuant to
the rules and regulations of any Governmental Entity administering
such Laws, or the fulfillment of any other legal requirement in any
such jurisdiction (other than, with respect to such first resales,
any restrictions on transfer by reason of, among other things, a
holder being a "control person" for purposes of Canadian federal,
provincial or territorial securities Laws).
(b) Duke Energy shall file a registration statement on Form S-3 (or
other applicable form) (the "Form S-3") in order to register under
the 1933 Act the Duke Energy Common Shares issuable from time to
time after the Effective Time upon exchange of the Exchangeable
Shares and shall use its reasonable best efforts to cause the Form
S-3 to become effective and to maintain the effectiveness of such
registration until the date on which no Exchangeable Shares remain
outstanding (other than those Exchangeable Shares held by Duke
Energy or any of its affiliates).
(c) As promptly as practicable after the Effective Date, Duke Energy
shall file a registration statement on Form S-8 (or other
applicable form) (the "Form S-8") in order to register under the
1933 Act those Duke Energy Common Shares issuable from time to time
after the Effective Time upon the exercise of the Replacement
Options.
(d) Duke Energy and Westcoast shall take all such steps as may be
required to cause the transactions contemplated by this Article 2
and any other dispositions of Westcoast
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equity securities or acquisitions of Duke Energy equity securities
(including, in each case derivative securities) in connection with
this Agreement or the transactions contemplated hereby by any
individual who is a director or officer of Westcoast, to be exempt
under Rule 16b-3 promulgated under the Exchange Act.
2.7 PREPARATION OF FILINGS
(a) Duke Energy and Westcoast shall cooperate in:
(i) the preparation of any application for the orders and the
preparation of any required registration statements and any
other documents reasonably deemed by Duke Energy or Westcoast
to be necessary to discharge their respective obligations
under United States and Canadian federal, provincial,
territorial or state securities Laws in connection with the
Arrangement and the other transactions contemplated hereby;
(ii) the taking of all such action as may be required under any
applicable United States and Canadian federal, provincial,
territorial or state securities Laws (including "blue sky
laws") in connection with the issuance of the Exchangeable
Shares and the Duke Energy Common Shares in connection with
the Arrangement or the exercise of the Replacement Options;
provided, however, that with respect to the United States
"blue sky" and Canadian provincial qualifications neither
Duke Energy nor Westcoast shall be required to register or
qualify as a foreign corporation or to take any action that
would subject it to service of process in any jurisdiction
where such entity is not now so subject, except as to matters
and transactions arising solely from the offer and sale of
the Exchangeable Shares and the Duke Energy Common Shares;
and
(iii) the taking of all such action as may be required under the
CBCA in connection with the transactions contemplated by this
Agreement and the Plan of Arrangement.
(b) Each of Duke Energy and Westcoast shall promptly furnish to the
other all information concerning it and its security holders as may
be required for the effectuation of the actions described in
Sections 2.5 and 2.6 and the foregoing provisions of this Section
2.7, and each covenants that no information furnished by it (to its
knowledge in the case of information concerning its shareholders)
in connection with such actions or otherwise in connection with the
consummation of the Arrangement and the other transactions
contemplated by this Agreement will contain any misrepresentation
(as defined in the Securities Act) or any untrue statement of a
material fact or omit to state a material fact required to be
stated in any such document or necessary in order to make any
information so furnished for use in any such document not
misleading in the light of the circumstances in which it is
furnished.
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<PAGE> 18
(c) Each of Duke Energy and Westcoast shall promptly notify the other
if at any time before or after the Effective Time it becomes aware
that the Circular or an application for an order or a registration
statement described in Section 2.6 contains any misrepresentation
(as defined in the Securities Act) or any untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances in which they
are made, or that otherwise requires an amendment or supplement to
the Circular or such application or registration statement. In any
such event, Duke Energy and Westcoast shall cooperate in the
preparation of a supplement or amendment to the Circular or such
other document, as required and as the case may be, and, if
required, shall cause the same to be distributed to the Westcoast
Securityholders or filed with the relevant securities regulatory
authorities.
(d) Westcoast shall ensure that the Circular complies with all
applicable Laws and, without limiting the generality of the
foregoing, that the Circular does not contain any misrepresentation
(as defined in the Securities Act) or any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances in which they
are made (other than with respect to any information relating to
and provided by the Duke Energy Parties). Without limiting the
generality of the foregoing, Westcoast shall ensure that the
Circular complies with OSC Rule 54-501 and provides Westcoast
Securityholders with information in sufficient detail to permit
them to form a reasoned judgment concerning the matters to be
placed before them at the Westcoast Meeting.
(e) Duke Energy shall ensure that the Form S-3 and Form S-8 comply with
all applicable Laws and, without limiting the generality of the
foregoing, that such documents do not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances in which they
are made (other than with respect to any information relating to
and provided by Westcoast).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WESTCOAST
Westcoast represents and warrants to the Duke Energy Parties as follows
in each case except as set forth in the Westcoast Disclosure Letter (each of
which exceptions shall specifically identify the relevant section hereof to
which it relates):
3.1 ORGANIZATION AND STANDING
(a) Each of Westcoast and its subsidiaries has been duly organized or
formed and is validly existing under the Laws of its jurisdiction
of organization or formation with full corporate or legal power and
authority to own, lease and operate its properties and to conduct
its businesses as currently owned and conducted except where,
individually or in the aggregate, the failure of a subsidiary other
than a Material
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Subsidiary to be so organized, formed or existing or to have such
power or authority would not have a Material Adverse Effect on
Westcoast. Each of Westcoast and its subsidiaries is duly qualified
to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its
properties requires it to so qualify, except where, individually or
in the aggregate, the failure to be so qualified would not have a
Material Adverse Effect on Westcoast.
(b) Section 3.1 of the Westcoast Disclosure Letter sets forth, as of
the date hereof, a true and complete list of each of Westcoast's
subsidiaries and Partially Owned Entities, together with (i) the
nature of the legal organization of such person, (ii) the
jurisdiction of organization or formation of such person, (iii) the
name of each Westcoast related person that owns beneficially or of
record any equity or similar interest in such person, and (iv) the
percentage interest owned by Westcoast or any of its subsidiaries
in such person. Neither Westcoast nor any of its subsidiaries is
subject to any obligation in excess of $10 million to provide funds
to or make any investment in (in the form of a loan, capital
contribution or otherwise) any subsidiary, Partially Owned Entity
or other person other than Westcoast or a wholly owned subsidiary
of Westcoast.
(c) Westcoast has heretofore made available to Duke Energy complete and
correct copies of its governing documents as well as the governing
documents of each of its subsidiaries and Partially Owned Entities,
in each case as in effect on the date hereof.
3.2 CAPITALIZATION
(a) The authorized capital of Westcoast consists of (i) an unlimited
number of First Preferred Shares and Second Preferred Shares, each
issuable in series, and (ii) an unlimited number of Westcoast
Common Shares and there were 4,588,687 First Preferred Shares,
Series 2, 8,000,000 First Preferred Shares, Series 5, 5,000,000
First Preferred Shares, Series 6, 6,000,000 First Preferred Shares,
Series 7, 6,000,000 First Preferred Shares, Series 8, and 5,000,000
First Preferred Shares, Series 9, issued and outstanding and no
Second Preferred Shares issued and outstanding as of September 15,
2001. As of September 15, 2001, there were 123,400,430 Westcoast
Common Shares issued and outstanding and no Westcoast Common Shares
held in its treasury or by any subsidiary of Westcoast. As of
August 31, 2001, there were outstanding Westcoast Options
permitting the holders thereof to purchase 5,092,893 Westcoast
Common Shares in the aggregate. As of August 31, 2001, there were
1,984,469 Westcoast Common Shares reserved for issuance under the
Westcoast Stock Option Plans. As of July 31, 2001, there were
5,900,587 Westcoast Common Shares reserved for issuance under the
Westcoast Dividend Reinvestment Plan. From September 15, 2001 to
the date hereof, no First Preferred Shares, Second Preferred Shares
or Westcoast Common Shares have been issued by Westcoast or
purchased by Westcoast or any of its subsidiaries; from July 31,
2001 to the date hereof, no First Preferred Shares, Second
Preferred Shares or Westcoast Common Shares have been reserved by
Westcoast; and from August 31, 2001 to the date hereof no Westcoast
Options have been granted.
(b) All of the Westcoast Common Shares and First Preferred Shares have
been duly authorized and are validly issued and fully paid and
non-assessable, were not issued in violation of pre-emptive or
similar rights or any other agreement or understanding
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<PAGE> 20
binding upon Westcoast and were issued in compliance with the CBCA,
all applicable securities Laws and the governing documents of
Westcoast. All of the outstanding shares and other ownership
interests of the subsidiaries, the Partially Owned Entities of
Westcoast, Maritimes & Northeast Pipeline and P.T. Puncakjaya Power
which are held, directly or indirectly, by Westcoast have been (to
the knowledge of Westcoast in the case of Partially Owned Entities,
Maritimes & Northeast Pipeline and P.T. Puncakjaya Power) duly
authorized and are validly issued, fully paid and non-assessable,
were not issued in violation of pre-emptive or similar rights and
all such shares and other ownership interests are owned directly or
indirectly by Westcoast, free and clear of all liens, claims or
encumbrances, except for restrictions on transfers contained in
governing documents and except where, individually or in the
aggregate, the failure of the shares or ownership interest in a
subsidiary other than a Material Subsidiary to be so authorized or
issued or owned free and clear would not have a Material Adverse
Effect on Westcoast.
(c) Except as described in Section 3.2(a) above, as of the date hereof,
there are no outstanding options, warrants, subscriptions, puts,
calls or other rights, agreements, arrangements or commitments
(pre-emptive, contingent or otherwise) obligating Westcoast or any
of its subsidiaries to offer, issue, sell, redeem, repurchase,
otherwise acquire or transfer, pledge or encumber any capital stock
of Westcoast, any of its subsidiaries, Partially Owned Entities,
Maritimes & Northeast Pipeline or P.T. Puncakjaya Power nor are
there outstanding any securities or obligations of any kind of
Westcoast or any of its subsidiaries which are convertible into or
exerciseable or exchangeable for any capital stock of Westcoast,
any of its subsidiaries or any other person and neither Westcoast
nor any of its subsidiaries or, to the knowledge of Westcoast, any
of its Partially Owned Entities has any obligation of any kind to
issue any additional securities or to pay for or repurchase any
securities. There are not outstanding as of the date hereof any
stock appreciation rights, phantom equity or similar rights,
agreements, arrangements or commitments based upon the book value,
income or any other attribute of Westcoast or any of its
subsidiaries. There are no outstanding bonds, debentures or other
evidences of indebtedness of Westcoast or any of its subsidiaries
having the right to vote (or that are exchangeable or convertible
for or exercisable into securities having the right to vote) with
the holders of the Westcoast Common Shares on any matter. As of the
date hereof, there are no stockholder agreements, proxies, voting
trusts, rights to require registration under securities Laws or
other arrangements or commitments to which Westcoast or any of its
subsidiaries is a party or bound with respect to the voting,
disposition or registration of any outstanding securities of
Westcoast, any of its subsidiaries or any of its Partially Owned
Entities.
(d) Since June 30, 2001, except for issuances of Westcoast Common
Shares pursuant to Westcoast Options granted prior to the date
hereof, pursuant to the Westcoast Dividend Reinvestment Plan and
upon conversion of First Preferred Shares pursuant to their terms,
there have been no Westcoast capital stock, voting securities or
securities convertible or exchangeable therefor issued or purchased
for cancellation.
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3.3 AUTHORITY AND NO CONFLICTS
(a) Westcoast has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, subject to the
approval of Westcoast's Securityholders and the Court as provided
in this Agreement with respect to the Plan of Arrangement. The
execution and delivery of this Agreement by Westcoast and the
consummation by Westcoast of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of
Westcoast are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby other than, with
respect to the Westcoast Rights Plan Waiver Resolution, approval of
the holders of Westcoast Common Shares and with respect to the
completion of the Arrangement, the approval of the Westcoast
Securityholders and the Court and the filing of such corporate
documents under the CBCA as are provided for in this Agreement.
(b) This Agreement has been duly executed and delivered by Westcoast
and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency and other applicable
Laws affecting creditors' rights generally, and by general
principles of equity.
(c) The Board of Directors of Westcoast at a meeting duly called and
held has determined by the unanimous approval of all directors
voting (A) that this Agreement and the transactions contemplated
hereby, including the Arrangement and the Westcoast Rights Plan
Waiver Resolution, are fair to the Westcoast Securityholders and
are in the best interests of Westcoast and (B) to recommend that
the Westcoast Securityholders vote in favour of the Arrangement and
the Westcoast Rights Plan Waiver Resolution.
(d) Neither the execution and delivery of this Agreement by Westcoast
nor the performance by it of its obligations hereunder and the
completion of the transactions contemplated hereby, will:
(i) conflict with, or violate any provision of, the governing
documents of Westcoast or any of its subsidiaries or
Partially Owned Entities;
(ii) subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
3.4 being made or obtained, violate or breach any Laws
applicable to Westcoast, any of its subsidiaries or, to the
knowledge of Westcoast, any of its Partially Owned Entities;
(iii) subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
3.4 being made or obtained, violate or conflict with or
result in the breach of, or constitute a default (or an event
that with the giving of notice, the passage of time, or both
would constitute a default) under, or entitle any party (with
the giving of notice, the
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passage of time or both) to terminate, accelerate, modify or
call any obligations or rights under any credit agreement,
note, bond, mortgage, indenture, deed of trust, contract,
agreement, lease, license, franchise, permit, concession,
easement or other instrument to which Westcoast or any of
its subsidiaries or, to the knowledge of Westcoast, any of
its Partially Owned Entities is a party or by which
Westcoast or any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities or its or
their property is bound or subject; or
(iv) result in the imposition of any encumbrance, charge or lien
upon or require the sale or give any person the right to
acquire any of Westcoast's assets or the assets of any of its
subsidiaries or, to the knowledge of Westcoast, any of its
Partially Owned Entities, or restrict, hinder, impair or
limit the ability of Westcoast, or any of its subsidiaries
or, to the knowledge of Westcoast, any of its Partially Owned
Entities to carry on the business of Westcoast, any of its
subsidiaries or any of its Partially Owned Entities as and
where it is now being carried on;
except in the case of clauses (ii) through (iv) for any of the
foregoing that would not, individually or in the aggregate, have a
Material Adverse Effect on Westcoast or materially impair the ability
of Westcoast to perform its obligations hereunder or prevent or
materially delay the consummation of any of the transactions
contemplated hereby.
3.4 CONSENTS; APPROVALS
No consent, approval, order or authorization of, or registration,
declaration or filing with, any third party or Governmental Entity is required
by or with respect to Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities in connection with the execution
and delivery of this Agreement by Westcoast, the performance of its obligations
hereunder or the consummation by Westcoast of the transactions contemplated
hereby other than (a) any approvals required by the Interim Order, (b) the Final
Order, (c) the approval of the Arrangement by the Westcoast Securityholders, (d)
such registrations and other actions required under federal, state, provincial,
and territorial securities Laws as are contemplated by this Agreement, (e) any
filings with the Director under the CBCA, (f) the Appropriate Regulatory
Approvals relating to Westcoast and to the extent required, the New York Public
Services Commission, and (g) any other consents, approvals, orders,
authorizations, registrations, declarations or filings which, if not obtained or
made, would not, individually or in the aggregate, have a Material Adverse
Effect on Westcoast or prevent or materially delay the consummation of any of
the transactions contemplated hereby or materially impair Westcoast's ability to
perform its obligations hereunder.
3.5 NO DEFAULTS
None of Westcoast or any of its Material Subsidiaries or, to the
knowledge of Westcoast, any of its Partially Owned Entities or any other party
thereto, is in default under or violation of, and there has been no event,
condition or occurrence which, after notice or lapse of time or both, would
constitute such a default or violation of, or permit the termination of, any
term, condition
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or provision of (a) their respective governing documents, (b) any credit
agreement, note, bond, mortgage, indenture, contract, agreement, lease, license,
franchise, permit, concession, easement or other instrument to which Westcoast
or any of its subsidiaries or, to the knowledge of Westcoast, any of its
Partially Owned Entities, is a party or by which Westcoast, any of its
subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned
Entities, or any of its or their property is bound or subject, except, in the
case of clause (b), defaults, violations and terminations which, individually or
in the aggregate, would not have a Material Adverse Effect on Westcoast.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
(a) Except as disclosed in the Westcoast SRA Reports or Westcoast SEC
Reports filed prior to the date hereof, since December 31, 2000,
Westcoast, its subsidiaries and, to the knowledge of Westcoast, its
Partially Owned Entities, have conducted their respective
businesses only in the ordinary course in a manner consistent with
past practice and there has been no Material Adverse Effect with
respect to Westcoast or any event, occurrence or development which
would be reasonably expected to have a Material Adverse Effect on
Westcoast or which materially and adversely affects the ability of
Westcoast to consummate the transactions contemplated hereby.
(b) Except as disclosed in the Westcoast SRA Reports or Westcoast SEC
Reports filed prior to the date hereof, since December 31, 2000,
none of Westcoast or any of its subsidiaries, or, to the knowledge
of Westcoast, its Partially Owned Entities, has engaged in any
conduct that is proscribed during the Pre-Effective Date Period by
Section 5.1.
3.7 EMPLOYMENT MATTERS
(a) Except as set forth in the management proxy circular prepared in
connection with the Annual Meeting of Westcoast held on April 25,
2001 or Section 3.7 of the Westcoast Disclosure Letter, neither
Westcoast nor any of its subsidiaries is a party to any written or
oral policy, agreement, obligation or understanding providing for
severance or termination payments to, or any employment agreement
with, any former or current director, officer or employee other
than any agreement which applies to only one individual and which
does not provide for payment to such individual in excess of
$150,000 in any one calendar year and other than as required by
applicable Law for employees without agreements as to notice or
severance or pursuant to collective bargaining agreements.
(b) Neither Westcoast nor any of its subsidiaries is a party to any
consulting contract, written or oral, providing for compensation of
any individual in excess of $350,000 per calendar year.
(c) Neither Westcoast nor any of its subsidiaries has agreed to
recognize any union or other collective bargaining representative,
nor has any union or other collective bargaining representative
been certified as the exclusive bargaining representative of any of
Westcoast's or any of its subsidiaries' employees. No labor union
or
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representative of the employees of Westcoast or any of its
subsidiaries claims to be seeking to represent employees of
Westcoast or any of its subsidiaries other than those that are
parties to executed collective bargaining agreements identified in
Section 3.7 of the Westcoast Disclosure Letter. To the knowledge of
Westcoast, no union organizational campaign or representation
petitions are currently pending with respect to any of the
employees of Westcoast or any of its subsidiaries or Partially
Owned Entities. Neither Westcoast nor any of its subsidiaries is a
party to, or bound by, any collective bargaining agreement or any
other labor contract applicable to any employees of Westcoast or
its subsidiaries. All collective bargaining agreements to which
Westcoast is a party have been duly ratified and there are no
written or oral agreements which modify the terms of any such
collective bargaining agreement. No collective bargaining
agreements or other labor contracts relating to employees of
Westcoast or its subsidiaries are being negotiated. To the
knowledge of Westcoast, neither Westcoast nor any of its
subsidiaries have breached any of their obligations under any
collective bargaining agreements that would have a Material Adverse
Effect on Westcoast. There is no labor strike or labor dispute,
slowdown, lockout or stoppage actually pending or threatened
against or affecting Westcoast or its subsidiaries, individually or
in the aggregate, that would be reasonably expected to have a
Material Adverse Effect on Westcoast, and Westcoast and its
subsidiaries have not experienced any labor strikes or labor
disputes, slowdowns, lockouts or stoppages since December 31, 1998,
that had a Material Adverse Effect on Westcoast. To the knowledge
of Westcoast, no union or collective bargaining representative has
applied to have Westcoast or any of its subsidiaries declared a
related or successor employer pursuant to applicable labor Laws.
(d) All employees and former employees of Westcoast and its
subsidiaries have been, or will have been on or before the
Effective Date, paid or amounts in respect thereof shall have been
accrued for wages, salaries, commissions, bonuses, vacation pay,
severance and termination pay, sick pay, and other compensation for
all services performed by them or that was accrued by them up to
the Effective Date, in accordance with the obligations of Westcoast
and its subsidiaries under any employment or labor practices and
policies or any collective bargaining agreement or individual
agreement to which Westcoast or its subsidiaries is a party, or by
which Westcoast or its subsidiaries may be bound, except for, in
the case of severance and termination pay, statutory and common law
requirements for payment in lieu of reasonable notice of
termination.
(e) There are no current, pending or, to the knowledge of Westcoast,
threatened proceedings before any board or tribunal or claims with
respect to employment and labor Laws, including, but not limited
to, employment and labor standards, unfair labor practices,
employment discrimination, occupational health and safety,
employment equity, pay equity, workers' compensation, human rights
and labor relations, other than such proceedings and claims which,
individually or in the aggregate, would not have a Material Adverse
Effect on Westcoast. Westcoast and its subsidiaries are not subject
to any settlement agreement, conciliation agreement, letter of
commitment, deficiency letter or consent decree with any present or
former employee or applicant for employment, labor union or other
employee representative,
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or any Government Entity or arbitrator relating to claims of unfair
labor practices, employment discrimination, or other claims with
respect to employment and labor practices and policies that would
have a Material Adverse Effect on Westcoast, and no Government
Entity or arbitrator has issued a judgment, order, decree,
injunction, decision, award or finding with respect to the
employment and labor practices or policies of Westcoast or its
subsidiaries which currently has or would be reasonably expected to
have a Material Adverse Effect on Westcoast. There are no
outstanding assessments, penalties, fines, liens, charges,
surcharges, or other amounts due and owing pursuant to any
workplace safety and insurance legislation by Westcoast or any of
its subsidiaries and they have not been reassessed in any material
respect under such legislation during the past three years and, to
the knowledge of Westcoast, no audit is currently being performed
pursuant to any applicable workplace safety and insurance
legislation. There are no claims or, to the knowledge of Westcoast,
potential claims which may materially and adversely affect accident
cost experience.
3.8 REPORTS; FINANCIAL STATEMENTS
(a) Since January 1, 1998, Westcoast and its subsidiaries have timely
filed all forms, reports, schedules, statements and other documents
required to be filed with (i) Canadian securities regulatory
authorities (collectively the "Westcoast SRA Reports"), (ii) the
SEC under the Exchange Act or the 1933 Act (collectively the
"Westcoast SEC Reports"), (iii) any other applicable state,
provincial or territorial securities authority, and (iv) any other
Governmental Entity, except in each case where the failure to file
any such forms, reports, schedules, statements or other documents
would not have a Material Adverse Effect on Westcoast (all such
forms, reports, schedules, statements and other documents are
collectively referred to as the "Westcoast Documents"). The
Westcoast Documents at the time filed (x) did not contain any
misrepresentation (as defined in the Securities Act), (y) did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements contained therein not misleading in light of
the circumstances under which they were made and (z) complied in
all material respects with the requirements of applicable Laws
(including, with respect to the Westcoast SEC Reports, the 1933
Act, the Exchange Act and the rules and regulations thereunder).
Westcoast has not filed any confidential material change report
with the OSC or any other securities authority or regulator or any
stock exchange or other self-regulatory authority that at the date
hereof remains confidential.
(b) The consolidated financial statements (including, in each case, any
related notes thereto) contained in any Westcoast SRA Reports or
Westcoast SEC Reports (i) have been prepared in accordance with
Canadian generally accepted accounting principles applied on a
consistent basis during the periods involved (subject, in the case
of unaudited financial statements, to the absence of notes in the
case of Westcoast SRA Reports filed prior to the implementation of
OSC Rule 51-501), (ii) complied in all material respects with the
requirements of applicable securities Laws, and (iii) fairly
present, in all material respects, the consolidated financial
position, results of operations and cash flows of Westcoast and its
subsidiaries as of the respective dates
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thereof and for the respective periods covered thereby, subject, in
the case of unaudited financial statements, to normal, recurring
audit adjustments none of which will be material.
(c) From January 1, 1998 to the date of this Agreement, there has been
no change by Westcoast or its subsidiaries in their accounting
policies, methods, practices or principles that are material to
Westcoast's consolidated financial statements, except as described
in the notes thereto with respect to periods ending prior to the
date hereof.
3.9 CONTRACTS
Section 3.9 of the Westcoast Disclosure Letter lists (without
specifically identifying the subsection of this Section 3.9 to which they
relate) as of the date hereof all written or oral contracts, agreements,
guarantees, leases and executory commitments other than Westcoast Plans to which
Westcoast or any of its subsidiaries is a party and which fall within any of the
following categories: (a) contracts not entered into in the ordinary course of
Westcoast's and its subsidiaries' business other than those that are not
material to the business of Westcoast and its subsidiaries, (b) contracts
containing covenants purporting to limit the freedom of Westcoast or any of its
subsidiaries to compete in any line of business in any geographic area or to
hire any individual or group of individuals, (c) contracts which after the
Effective Time would have the effect of limiting the freedom of Duke Energy or
its subsidiaries (other than Westcoast and its subsidiaries) to compete in any
line of business in any geographic area or to hire any individual or group of
individuals, (d) purchase contracts involving in excess of $25 million per year
which restrict or limit the purchasing relationships of Westcoast or its
subsidiaries, (e) contracts relating to any outstanding commitment for capital
expenditures in excess of $100 million other than capital expenditures included
in the 2001 capital expenditures budget that was previously approved by the
Board of Directors of Westcoast and which was provided to Duke Energy or which
were reported to the Board of Directors of Westcoast in the Second Quarter 2001
Outlook previously provided to Duke Energy, (f) contracts with any labor
organization or union, (g) except as reflected in the Westcoast financial
statements included in the Westcoast SRA Reports for the period ended June 30,
2001, indentures, mortgages, liens, promissory notes, loan agreements,
guarantees or other arrangements relating to the borrowing of money by Westcoast
or its subsidiaries in excess of $100 million, (h) contracts providing for
"earn-outs", "savings guarantees", "performance guarantees", or other contingent
payments by Westcoast or any of its subsidiaries involving more than $100
million per year or $250 million over the term of the contract, (i)
confidentiality or standstill agreements with any person (the effectiveness of
which extends beyond the date that is six months following the date hereof) that
restrict Westcoast or any of its subsidiaries in the use of any information or
the taking of any actions by Westcoast or its subsidiaries entered into in
connection with the consideration by Westcoast or any of its subsidiaries of any
acquisition of equity interests or assets, (j) contracts containing provisions
triggered by a change of control of Westcoast or other similar provisions, (k)
contracts in favour of directors or officers that provide rights to
indemnification and (l) contracts that are material to Westcoast and its
subsidiaries taken as a whole other than those that are covered by (a) through
(k) of this Section 3.9 or filed in the Westcoast SRA Reports or Westcoast SEC
Reports filed prior to the date hereof. All such contracts and all other
contracts that are individually material to the business or operations of
Westcoast and its subsidiaries are valid and binding obligations
COMBINATION AGREEMENT
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of Westcoast or such subsidiaries that are parties thereto and, to the knowledge
of Westcoast, the valid and binding obligation of each other party thereto
except such contracts which if not so valid and binding would not, individually
or in the aggregate, have a Material Adverse Effect on Westcoast.
3.10 LITIGATION
There are no claims, actions, proceedings or investigations pending or,
to the knowledge of Westcoast, threatened against Westcoast or any of its
subsidiaries or Partially Owned Entities before any Governmental Entity (and
Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially
Owned Entities, have no knowledge of any facts that are likely to give rise to
any such claim, action, proceeding or investigation) that would be reasonably
expected to have a Material Adverse Effect on Westcoast, or prevent or
materially delay consummation of the transactions contemplated by this
Agreement. Neither Westcoast nor any of its subsidiaries, nor their respective
assets and properties, is subject to any outstanding judgment, order, writ,
injunction or decree that has had or would be reasonably expected to have a
Material Adverse Effect on Westcoast or that would prevent or materially delay
consummation of the transactions contemplated by this Agreement.
3.11 ENVIRONMENTAL
Except for any matters which individually or in the aggregate are not
reasonably likely to result in an expenditure or liability in excess of $20
million:
(a) all operations of Westcoast and its subsidiaries and, to the
knowledge of Westcoast, any of its Partially Owned Entities have
been conducted, and are now, in compliance with all Environmental
Laws;
(b) Westcoast and its subsidiaries and, to the knowledge of Westcoast,
its Partially Owned Entities are in possession of, and in
compliance with, all permits, authorizations, certificates,
registrations, approvals and consents necessary under Environmental
Laws to own, lease and operate their properties and to conduct
their respective businesses as they are now being conducted or as
proposed to be conducted (collectively the "Westcoast Environmental
Permits"); and
(c) neither Westcoast nor any of its subsidiaries or, to the knowledge
of Westcoast, any of its Partially Owned Entities is subject to:
(i) any Environmental Laws that require any work, repairs,
construction, change in business practices or operations, or
expenditures, including capital expenditures for facility
upgrades, environmental investigation and remediation
expenditures, or any other such expenditures;
(ii) any written demand or written notice alleging breach of or
with respect to liability under any Environmental Laws
applicable to Westcoast, any subsidiary of Westcoast or any
of its Partially Owned Entities, including any regulations
respecting the use, storage, treatment, transportation or
disposition (including disposal or arranging for disposal) of
Hazardous Substances;
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(iii) any written demand or written notice with respect to
liability, by contract or operation of Environmental Laws
applicable to Westcoast or any current or former subsidiary
of Westcoast or any of its Partially Owned Entities or any of
their respective predecessor entities, divisions or any
formerly owned, leased or operated properties or assets of
the foregoing, including liability with respect to the
presence, release, threatened release or discharge of
Hazardous Substances; or
(iv) any changes in the terms or conditions of any Westcoast
Environmental Permits or any renewal (other than renewals in
the ordinary course on the expiry of permits), modification,
revocation, reissuance, alteration or amendment of such
Westcoast Environmental Permits that are required in
connection with the execution or delivery of this Agreement,
the consummation of the transactions contemplated hereby or
the continuation of business of Westcoast or any subsidiaries
of Westcoast or, to the knowledge of Westcoast, any of its
Partially Owned Entities following such consummation.
3.12 TAX MATTERS
(a) Westcoast and each of its subsidiaries have timely filed, or caused
to be filed, all material Tax Returns required to be filed by them
(all of which returns were correct and complete in all material
respects), have timely paid, or caused to be paid, Taxes shown to
be due and payable thereon, and have satisfied in full in all
respects all Tax withholding, deposit and remittance requirements
imposed on or with respect to any of Westcoast and its
subsidiaries, and Westcoast's most recently published financial
statements contain an adequate provision in accordance with
Canadian generally accepted accounting principles for all material
amounts of Taxes payable in respect of each period covered by such
financial statements and all prior periods to the extent such Taxes
have not been paid, whether or not due and whether or not shown as
being due on any Tax Returns. Westcoast and each of its
subsidiaries have made adequate provision in accordance with
Canadian generally accepted accounting principles in their books
and records for any amount of Taxes material to Westcoast on a
consolidated basis and accruing in respect of any accounting period
ending subsequent to the period covered by such financial
statements.
(b) Neither Westcoast nor any subsidiary of Westcoast has received any
written notification that any issue involving an amount of Taxes
material to Westcoast on a consolidated basis has been raised (and
is currently pending) by the Canada Customs and Revenue Agency, the
United States Internal Revenue Service or any other taxing
authority, including, without limitation, any sales tax authority,
in connection with any of the Tax Returns filed or required to be
filed, and no waivers of statutes of limitations or objections to
any assessments or reassessments involving an amount of Taxes
material to Westcoast on a consolidated basis have been given,
filed or requested with respect to Westcoast or any subsidiary of
Westcoast. All liability of Westcoast and its subsidiaries for
Canadian federal and provincial income and capital taxes has been
assessed by the Canada Customs and Revenue Agency and, where
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applicable, Canadian provincial tax authorities for all fiscal
years up to and including the fiscal year ended December 31, 1999.
Neither Westcoast nor any of its subsidiaries has received any
notice from any taxing authority to the effect that any Tax Return
is being examined, and Westcoast has no knowledge of any Tax audit
or issue that would be reasonably expected to have a Material
Adverse Effect on Westcoast. There are no proposed (but unassessed)
additional Taxes applicable to Westcoast or any of its subsidiaries
or, to the knowledge of Westcoast, any of its Partially Owned
Entities, involving an amount of Taxes material to Westcoast on a
consolidated basis and none has been asserted against Westcoast or
any of its subsidiaries or, to the knowledge of Westcoast, any of
its Partially Owned Entities. There are no Tax liens on any assets
of Westcoast or any of its subsidiaries except for Taxes not yet
due and payable and those which would not be reasonably expected to
result in a Material Adverse Effect on Westcoast. Neither Westcoast
nor any of its subsidiaries has received a refund of any Taxes to
which it was not entitled. Neither Westcoast nor any of its
subsidiaries (i) has made an election to be treated as a
"consenting corporation" under Section 341(f) of the United States
Internal Revenue Code of 1986 (the "Code") or (ii) is a party to
any Tax sharing or other similar agreement or arrangement or any
Tax indemnification agreement of any nature with any other person
(other than in agreements with Westcoast or any of its
subsidiaries) pursuant to which Westcoast or any of its
subsidiaries has or could have any material liabilities in respect
of Taxes. Westcoast has not made an election under Section 897(i)
of the Code to be treated as a domestic corporation for purposes of
Sections 897, 1445 and 6039C of the Code.
(c) "Tax" and "Taxes" means, with respect to any person, all income
taxes (including any tax on or based upon net income, gross income,
income as specially defined, earnings, profits or selected items of
income, earnings or profits) and all capital taxes, gross receipts
taxes, environmental taxes, sales taxes, use taxes, ad valorem
taxes, value added taxes, transfer taxes, franchise taxes, license
taxes, withholding taxes, payroll taxes, employment taxes, pension
plan premiums, excise, severance, social security premiums,
workers' compensation premiums, unemployment insurance or
compensation premiums, stamp taxes, occupation taxes, premium
taxes, property taxes, windfall profits taxes, alternative or
add-on minimum taxes, goods and services tax, customs duties or
other taxes, fees, imports, assessments or charges of any kind
whatsoever, together with any interest and any penalties or
additional amounts imposed by any taxing authority (domestic or
foreign) on such entity, and any interest, penalties, additional
taxes and additions to tax imposed with respect to the foregoing.
3.13 PENSION AND EMPLOYEE BENEFITS
(a) Section 3.13 of the Westcoast Disclosure Letter sets forth a list
of all employee benefit, health, welfare, supplemental unemployment
benefit, bonus, incentive, pension, profit sharing, deferred
compensation, stock compensation, stock option, stock purchase,
retirement, hospitalization insurance, medical, dental, legal,
disability and similar plans or arrangements or practices, whether
written or oral, which are sponsored, maintained or contributed to
by Westcoast or any of its subsidiaries
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(collectively referred to as the "Westcoast Plans"). The Westcoast
Disclosure Letter states which of the Westcoast Plans are subject
to the provisions of the United States Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). For purposes of this
Section 3.13, a subsidiary of Westcoast shall be deemed to also
include each corporation, trade, business, or entity that would be
considered to be a single employer or under common control with
Westcoast pursuant to Section 414 of the Code or Section 4001 of
ERISA.
(b) No step has been taken, no event has occurred and no condition or
circumstance exists that has resulted in or could be reasonably
expected to result in any Westcoast Plan being ordered or required
to be terminated or wound up in whole or in part or having its
registration under applicable Laws refused or revoked, or being
placed under the administration of any trustee or receiver or
regulatory authority or being required to pay any material amount
of Taxes, fees, penalties or levies under applicable Laws. There
are no actions, suits, claims (other than routine claims for
payment of benefits in the ordinary course), trials, demands,
investigations, arbitrations or other proceedings which are pending
or threatened in respect of any of the Westcoast Plans or their
assets which individually or in the aggregate would have a Material
Adverse Effect on Westcoast.
(c) Westcoast has provided to Duke Energy true, correct and complete
copies of all of the Westcoast Plans as amended (or, in the case of
any unwritten Westcoast Plan, a description thereof) together with
all related actuarial reports, and Westcoast has made available to
Duke Energy all other related documentation including, without
limitation, funding agreements, trust agreements, funding and
financial information returns and statements with respect to each
Westcoast Plan, and current plan summaries, booklets and personnel
manuals. Westcoast has provided to Duke Energy a true and complete
copy of (i) the most recent annual report on Form 5500 filed with
the United States Internal Revenue Service with respect to each
Westcoast Plan in respect of which such a report was required and
(ii) the most recent annual information return filed with the
Canada Customs and Revenue Agency with respect to each Westcoast
Plan in respect of which such a return was required.
(d) All of the Westcoast Plans are and have been established,
registered, qualified, invested and administered, in all material
respects, in accordance with all applicable Laws, and in accordance
with their terms and the terms of agreements between Westcoast or a
subsidiary of Westcoast, as the case may be, and their respective
employees. No fact or circumstance exists that could adversely
affect the existing tax status of a Westcoast Plan.
(e) All obligations of Westcoast or a subsidiary of Westcoast regarding
the Westcoast Plans have been satisfied in all material respects.
All contributions or premiums required to be made by Westcoast or a
subsidiary of Westcoast, as the case may be, under the terms of
each Westcoast Plan or by applicable Laws have been made in a
timely fashion in accordance with applicable Laws and the terms of
the Westcoast Plans.
COMBINATION AGREEMENT
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(f) Each Westcoast Plan is fully insured or fully funded (both on a
going-concern and solvency basis) and in good standing with such
regulatory authorities as may be applicable and, as of the date
hereof, no notice of underfunding, noncompliance, failure to be in
good standing or otherwise has been received by Westcoast or its
subsidiaries from any such regulatory authority.
(g) There have been no improper withdrawals, applications or transfers
of assets from any Westcoast Plan or the trusts or other funding
media relating thereto that remain outstanding and unremedied, and
neither Westcoast, nor any subsidiary of Westcoast, nor, to the
knowledge of Westcoast, any of their respective agents has been in
breach of any fiduciary obligation with respect to the
administration of the Westcoast Plans or the trusts or other
funding media relating thereto.
(h) Westcoast or its subsidiaries may unilaterally amend or terminate,
in whole or in part, each Westcoast Plan and take contribution
holidays under or withdraw surplus from each Westcoast Plan,
subject only to approvals required by Law and, with respect to
amendment or termination, the collective agreements disclosed in
Section 3.7 of the Westcoast Disclosure Letter.
(i) No commitments to improve or otherwise amend any Westcoast Plan
have been made except as required by applicable Laws.
(j) None of the Westcoast Plans (other than pension plans) provide
benefits to retired or former employees or to the beneficiaries or
dependants of retired or former employees.
(k) No insurance policy or any other contract or agreement affecting
any Westcoast Plan requires or permits a retroactive increase in
premiums or payments due thereunder.
(l) All Westcoast Plans intended to be tax-qualified in the United
States have been the subject of determination letters from the
United States Internal Revenue Service to the effect that such
Westcoast Plans and their related trusts are qualified and exempt
from United States Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter
has been revoked nor, to the knowledge of Westcoast, has revocation
been threatened, nor has any such Westcoast Plan been amended since
the date of its most recent determination letter or application
therefor in any respect that would adversely affect its
qualification or materially increase its costs and nothing has
occurred since the date of such letter that could adversely affect
the qualified status of such plan. As to any such Westcoast Plan,
there has been no termination or partial termination of such
Westcoast Plan within the meaning of Section 411(d)(3) of the Code.
(m) No amount or benefit that could be received (whether in cash or
property, the vesting of property or the acceleration of the
exerciseability of stock options) as a result of or in connection
with the transactions contemplated by this Agreement or the
Arrangement (whether or not some other subsequent action or event
would be required to cause the receipt of such amount or benefit to
occur) by any employee,
COMBINATION AGREEMENT
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officer or director of Westcoast or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed
United States Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Westcoast Plan currently in effect will fail to be
deductible for United States federal income tax purposes by virtue
of Section 280G of the Code.
(n) None of the Westcoast Plans is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA or any other applicable Law,
nor has Westcoast or any subsidiary of Westcoast been obligated to
contribute to any such multiemployer plan at any time within the
past six years.
(o) No employment, severance or termination agreement, other
compensation arrangement or Westcoast Plan provides for payment of
a benefit, the increase of a benefit amount, the acceleration of
contributions or funding, the payment of a contingent benefit or
the acceleration of the payment or vesting of a benefit by reason
of the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement or the Arrangement
(whether or not some other subsequent action or event would be
required to cause such payment, increase, acceleration, or vesting
to be triggered).
(p) As to any Westcoast Plan that is subject to Title IV of ERISA, no
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of
ERISA has occurred, no notice of intent to terminate the plan has
been given under Section 4041 of ERISA, no proceeding has been
instituted under Section 4042 of ERISA to terminate the plan, and
no liability to the United States Pension Benefit Guaranty
Corporation has been incurred.
(q) As to any Westcoast Plan which is subject to ERISA or the Code, no
act, omission or transaction has occurred which would result in
imposition on Westcoast or any subsidiary of Westcoast of (i)
breach of fiduciary duty liability damages under Section 409 of
ERISA, (ii) a civil penalty assessed pursuant to subsections (c),
(i) or (l) of Section 502 of ERISA, or (iii) a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code.
(r) Each trust funding a Westcoast Plan, which trust is intended to be
exempt from United States federal income taxation pursuant to
Section 501(c)(9) of the Code, satisfies the requirements of such
section and has received a favourable determination letter from the
United States Internal Revenue Service regarding such exempt status
and has not, since receipt of the most recent favourable
determination letter, been amended or operated in a way which would
adversely affect such exempt status.
3.14 AFFILIATES
Section 3.14 of the Westcoast Disclosure Letter identifies all persons
who, to the knowledge of Westcoast, may be deemed to be affiliates of Westcoast
under Rule 145 of the 1933 Act, including all directors and executive officers
of Westcoast.
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3.15 COMPLIANCE WITH LAWS; PERMITS
(a) Westcoast, its subsidiaries and, to the knowledge of Westcoast, its
Partially Owned Entities are in compliance, and at all times since
January 1, 1998 have complied, with all applicable Laws other than
non-compliance which would not, individually or in the aggregate,
have a Material Adverse Effect on Westcoast. No investigation or
review by any Governmental Entity with respect to Westcoast, any of
its subsidiaries, or the knowledge of Westcoast, its Partially
Owned Entities, is pending or, to the knowledge of Westcoast, is
threatened, nor has any Governmental Entity indicated in writing an
intention to conduct the same, other than those the outcome of
which would not have a Material Adverse Effect on Westcoast.
(b) Westcoast and its subsidiaries and, to the knowledge of Westcoast,
its Partially Owned Entities are in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate their properties and to lawfully carry on
their businesses as they are now being conducted (collectively, the
"Westcoast Permits"), except where the failure to be in possession
of such Westcoast Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Westcoast, and there
is no action, proceeding or investigation pending or, to the
knowledge of Westcoast, threatened regarding any of the Westcoast
Permits which would have a Material Adverse Effect on Westcoast.
None of Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities is in conflict with,
or in default or violation of any of the Westcoast Permits, except
for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect on
Westcoast.
(c) None of Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any directors, officers, agents or employees of
Westcoast or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, or (ii) made any unlawful
payment to any government officials or employees or to political
parties or campaigns or violated any provision of the United States
Foreign Corrupt Practices Act of 1977, as amended in each case
which could reasonably be expected to have a material and adverse
effect on Westcoast.
3.16 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement, judgment, injunction, order or decree binding
upon Westcoast or any of its subsidiaries that has or could be reasonably
expected to have the effect of prohibiting, restricting or materially impairing
any business practice of Westcoast or any of its subsidiaries, any acquisition
of property by Westcoast or any of its subsidiaries or the conduct of business
by Westcoast or any of its subsidiaries as currently conducted other than such
agreements, judgments, injunctions, orders or decrees which would not,
individually or in the aggregate, have a Material Adverse Effect on Westcoast.
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3.17 INTELLECTUAL PROPERTY
(a) Westcoast and its subsidiaries, directly or indirectly, own,
license or otherwise have legally enforceable rights to use, or can
acquire on reasonable terms and without material expense, all
patents, patent rights, trademarks, trade names, service marks,
copyrights and any applications therefore, technology, know-how,
computer software and applications and tangible or intangible
proprietary information or materials, that are material to and used
in the business of Westcoast and its subsidiaries as presently
conducted (the "Intellectual Property Rights").
(b) In the case of Intellectual Property Rights owned by Westcoast or
one of its subsidiaries, either Westcoast or one of its
subsidiaries owns such Intellectual Property Rights free and clear
of any material liens, charges or encumbrances. Westcoast or one of
its subsidiaries has an adequate right to the use of the
Intellectual Property Rights or the material covered thereby in
connection with the services or products in respect of which such
Intellectual Property Rights are being used. Westcoast has not
received any written notice or claim, nor has it received any other
information, stating that the manufacture, sale, licensing, or use
of any of the services or products of Westcoast or any of its
subsidiaries as now manufactured, sold, licensed or used or
proposed for manufacture, sale, licensing or use by Westcoast or
any of its subsidiaries in the ordinary course of Westcoast's
business as presently conducted infringes on any copyright, patent,
trade mark, service mark or trade secret of a third party where
such infringement would have a Material Adverse Effect on
Westcoast. Westcoast has not received any written notice or claim,
nor has it received any other information, stating that the use by
Westcoast or any of its subsidiaries of any trademarks, service
marks, trade names, trade secrets, copyrights, patents, technology
or know-how and applications used in the business of Westcoast and
any of its subsidiaries as presently conducted infringes on any
other person's trademarks, service marks, trade names, trade
secrets, copyrights, patents, technology or know-how and
applications where such infringement would have a Material Adverse
Effect on Westcoast. Westcoast has not received any written notice
or claim, nor has it received any other information, challenging
the ownership by Westcoast or any of its subsidiaries or the
validity of any of the Intellectual Property Rights. All registered
patents, trademarks, service marks and copyright held by Westcoast
and its subsidiaries are subsisting, except to the extent any
failure to be subsisting would not have a Material Adverse Effect
on Westcoast. To the knowledge of Westcoast, there is no material
unauthorized use, infringement or misappropriation of any of the
Intellectual Property Rights by any third party, including any
employee or former employee of Westcoast or any of its subsidiaries
No Intellectual Property Right is subject to any known outstanding
decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by Westcoast or any of its subsidiaries,
except to the extent any such restriction would not have a Material
Adverse Effect on Westcoast.
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3.18 INSURANCE
Each of Westcoast and its subsidiaries is, and has been continuously
since September 1, 1996, insured by reputable and financially responsible
insurers in amounts and against risks and losses as are customary for companies
conducting their respective businesses. Westcoast's and its subsidiaries'
insurance policies are in all material respects in full force and effect in
accordance with their terms, no notice of cancellation or termination has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both would constitute a default thereunder.
3.19 PROPERTY
(a) Westcoast, its subsidiaries and, to the knowledge of Westcoast, its
Partially Owned Entities have defensible title (or, with respect to
pipelines, equipment and other tangible personal property used in
connection with Westcoast's pipeline operations (collectively,
"Westcoast Pipeline Assets") title to or interest in the applicable
Westcoast Pipeline Assets sufficient to enable Westcoast, its
subsidiaries and, to the knowledge of Westcoast, its Partially
Owned Entities to conduct their businesses with respect thereto
without material interference as it is currently being conducted)
to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, free and clear of all liens,
except for liens disclosed in the Westcoast Documents and liens the
existence of which would not have a Material Adverse Effect on
Westcoast.
(b) The businesses of Westcoast and each of its subsidiaries have been
and are being operated in a manner which does not violate (in any
manner which would, or which would be reasonably expected to, have
a Material Adverse Effect on Westcoast) the terms of any easements,
rights of way, permits, servitudes, licenses, leasehold estates and
similar rights relating to real property (collectively,
"Easements") used by Westcoast and each of its subsidiaries in such
businesses. All Easements are valid and enforceable, except as the
enforceability thereof may be affected by bankruptcy, insolvency or
other Laws of general applicability affecting the rights of
creditors generally or principles of equity, and grant the rights
purported to be granted thereby and all rights necessary thereunder
for the current operation of such businesses where the failure of
any such Easement to be valid and enforceable or to grant the
rights purported to be granted thereby or necessary thereunder
would have a Material Adverse Effect on Westcoast. There are no
special gaps in the Easements which would impair the conduct of
such businesses in a manner that would, or that would be reasonably
expected to, have a Material Adverse Effect on Westcoast, and no
part of the Westcoast Pipeline Assets is located on property which
is not owned in fee by Westcoast or a subsidiary of Westcoast or
subject to an Easement in favour of Westcoast or a subsidiary of
Westcoast, where the failure of such Westcoast Pipeline Assets to
be so located would have a Material Adverse Effect on Westcoast.
COMBINATION AGREEMENT
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3.20 REGULATORY PROCEEDINGS
None of Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities, all or part of whose rates or
services are regulated by a Governmental Entity, is a party to any proceeding
before a Governmental Entity which is reasonably likely to result in orders
having a material burden on the future operations or business of Westcoast or
any Material Subsidiary of Westcoast nor has written notice of any such
proceeding been received by Westcoast, any of its subsidiaries or, to the
knowledge of Westcoast, any of its Partially Owned Entities.
3.21 REGULATION AS A UTILITY
(a) Westcoast and all of its "subsidiary companies" and "affiliates",
as such terms are defined