<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PUGET POWER CONSERVATION GRANTOR TRUST 1995-1
(Issuer with respect to the Certificates)
PUGET SOUND POWER & LIGHT COMPANY
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
WASHINGTON 4911 91-0374630
(State of (Primary Standard Industrial (I.R.S. Employer
Organization) Classification Code Number) Identification Number)
</TABLE>
411 - 108TH AVENUE N.E.
BELLEVUE, WASHINGTON 98004-5515
(206) 454-6363
(Address and telephone number of registrant's principal executive offices)
DONALD E. GAINES, TREASURER
411 - 108TH AVENUE N.E.
BELLEVUE, WASHINGTON 98004-5515
(206) 454-6363
(Name, address, and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
STEPHEN A. MCKEON CHRISTOPHER J. KELL
Perkins Coie Skadden, Arps, Slate, Meagher & Flom
1201 Third Avenue, 40th Floor 919 Third Avenue
Seattle, Washington 98101-3099 New York, New York 10022
(206) 583-8888 (212) 735-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED CERTIFICATE (1) PRICE (1) FEE
<S> <C> <C> <C> <C>
Conservation of Pass-Through
Certificates................. $1,000,000 100% $1,000,000 $345
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PUGET POWER CONSERVATION GRANTOR TRUST 1995-1
CROSS-REFERENCE SHEET
PURSUANT TO
ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEMS OF FORM S-1 HEADING IN PROSPECTUS
- ----------------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
Item 1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........ Outside Front Cover Page
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front and Outside Back Cover Pages
Item 3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges..................... Prospectus Summary; Special Considerations
Item 4. Use of Proceeds................................ Use of Proceeds
Item 5. Determination of Offering Price................ Outside Front Cover Page; Underwriting
Item 6. Dilution....................................... Not Applicable
Item 7. Selling Security Holders....................... Not Applicable
Item 8. Plan of Distribution........................... Outside Front Cover Page; Underwriting
Item 9. Description of Securities to Be Registered..... Prospectus Summary; Description of the Certificates
Item 10. Interests of Named Experts and Counsel......... Not Applicable
Item 11. Information With Respect to the Registrant..... Inside Front and Outside Back Cover Pages;
Prospectus Summary; Special Considerations; The
Trust
Item 12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Subject to Completion, dated December 23, 1994
PROSPECTUS
$
PUGET POWER CONSERVATION GRANTOR TRUST 1995-1
% CONSERVATION PASS-THROUGH CERTIFICATES, SERIES 1995-1
PUGET SOUND POWER & LIGHT COMPANY
SELLER AND SERVICER
The % Conservation Pass-Through Certificates, Series 1995-1 (the
"Certificates") offered hereby evidence undivided fractional interests in Puget
Power Conservation Grantor Trust 1995-1 (the "Trust"). The Trust will be created
pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") to be entered into by Puget Sound Power & Light Company ("Puget"),
as Seller and Servicer, and Chemical Bank as Trustee (the "Trustee"). Puget will
sell and transfer to the Trust certain conservation investment assets (the
"Purchased Assets") arising from expenditures by Puget on customer conservation
measures (the "Bondable Conservation Investment Amount"). The Certificates will
be entitled to the benefits of the State of Washington Conservation Financing
Statute (the "Statute"). The Statute permits revenue allocations from a tariff
levied on all of Puget's retail customers (the "Tariff") and obligates the
Washington Utilities and Transportation Commission (the "Commission") to
maintain rates under the Tariff sufficient to fully amortize the Bondable
Conservation Investment Amount and the costs of capital associated therewith.
Principal and interest at the Certificate Rate of % per annum will be paid
quarterly with respect to the Certificates on or about the 11th day of January,
April, July and October of each year (each, a "Distribution Date"), commencing
July 11, 1995 and ending April 11, 2005. The Trust property consists of, among
other things, the right to receive revenues from Puget customers pursuant to the
Tariff and any Revised Tariff (as hereinafter defined) and the right under the
Statute to have rates under the Tariff and any Revised Tariff maintained at
levels sufficient for recovery of the Bondable Conservation Investment Amount
and interest on the Certificates, as well as for payment of the fees of the
Trustee and the Servicer. On September 30, 2004, the Tariff or any Revised
Tariff then in effect will terminate and no further billings will be made
thereunder. Puget as Servicer will be responsible for calculating the Tariff and
any Revised Tariff, billing and collecting revenues from customers and remitting
such collections to the Trustee and for applying to the Commission for any
necessary adjustments to the Tariff or any Revised Tariff.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "SPECIAL
CONSIDERATIONS."
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT INTERESTS
IN OR OBLIGATIONS OF PUGET SOUND POWER & LIGHT COMPANY OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT SELLER (1)(2)
<S> <C> <C> <C>
Per Certificate..................... % % %
Total............................... $ $ $
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<FN>
(1) Plus accrued interest, if any, at the Certificate Rate from ,
1995 to the date of delivery.
(2) Before deducting expenses payable by the Seller, estimated at $ .
</TABLE>
The Certificates are offered subject to prior sale and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
delivery of the Certificates will be made in book-entry form only through the
facilities of The Depositary Trust Company, on or about , 1995.
SALOMON BROTHERS INC CHEMICAL SECURITIES INC.
The date of this Prospectus is , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Puget, as originator of the Trust, has filed with the Securities and
Exchange Commission (the "S.E.C.") a Registration Statement on Form S-1 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Certificates offered hereby (the "Registration Statement"). This Prospectus,
which constitutes part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the S.E.C. pursuant to the Securities Act and the
rules and regulations of the S.E.C. thereunder. The Registration Statement,
including exhibits and schedules thereto, may be inspected and copied at the
public reference facilities maintained by the S.E.C. at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the S.E.C.'s Regional Offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies may be obtained
at the prescribed rates from the Public Reference Section of the S.E.C. at 450
Fifth Street, N.W., Washington, D.C. 20549.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as hereinafter defined) are
issued, the Trustee will provide Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and holder of record of the Certificates,
quarterly and annual unaudited reports containing information concerning the
Trust prepared by the Servicer pursuant to the Pooling and Servicing Agreement
described in this Prospectus. See "Description of the Certificates -- Reports to
Certificateholders." Such reports will be available to beneficial owners of the
Certificates (each, a "Certificate Owner") upon request to the Trustee or the
Servicer. The Servicer on behalf of the Trust, will file or cause to be filed
with the S.E.C. such periodic reports as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the S.E.C. thereunder.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCE IS MADE TO THE
INDEX OF TERMS FOR THE LOCATION HEREIN OF CERTAIN CAPITALIZED TERMS USED IN THIS
PROSPECTUS.
<TABLE>
<S> <C>
Issuer......................... Puget Power Conservation Grantor Trust 1995-1 (the
"Trust"), formed by the Seller pursuant to the Pooling and
Servicing Agreement between Puget, as Seller and Servicer,
and the Trustee.
Securities Offered............. $ principal amount of % Conservation Pass-Through
Certificates, Series 1995-1.
Certificate Rate............... % per annum, payable in arrears and calculated on the basis
of a 360-day year comprised of twelve 30-day months.
Seller and Servicer............ Puget Sound Power & Light Company is an investor-owned
utility providing electric service within a 4,500 square
mile territory in the State of Washington, principally in
the Puget Sound region of western Washington. During
September of 1994, Puget provided electric service to an
average of approximately 817,600 Customers (as hereinafter
defined). The Certificates do not represent interests in or
obligations of Puget or any of its affiliates.
Trustee........................ Chemical Bank, a New York banking corporation.
Statute........................ The Certificates will be entitled to the benefit of the
Statute. The Statute, among other things, (i) grants
utilities in the state of Washington, including Puget, the
right to include in rate base and thereby recover from
customers an amount (the "Conservation Asset Transaction
Amount") equal to the Bondable Conservation Investment
Amount plus related costs of capital, including principal
of and interest on securities issued to finance or
refinance such expenditures, the Trustee Fee (as
hereinafter defined) and the Servicing Fee (as hereinafter
defined) and (ii) expressly defines this statutory right as
an item of property that may be sold, pledged or otherwise
made the basis for the issuance of securities. The issu-
ance and sale of the Certificates is conditioned upon
receipt of the Initial Order (as hereinafter defined) from
the Commission. Under the Statute, once the issuance of the
Certificates has been authorized by the Commission, this
statutory right to repayment through rates cannot be
rescinded or adversely changed by the Commission.
Tariff......................... Puget has made application to the Commission for an order
(the "Initial Order") which, among other things, (i)
authorizes the sale of the Purchased Assets to the Trust by
Puget, including the right to recover in rates the Bondable
Conservation Investment Amount aggregating $ , plus
interest thereon at the Certificate Rate, (ii) finds that
the Certificates are securities entitled to the benefits of
the Statute, (iii) approves the Tariff, which allocates
revenues to the Trust in an aggregate amount equal to the
Conservation Asset Transaction Amount, (iv) approves the
methodology and mechanism for periodically revising the
Tariff if a shortfall or surplus in collections results in
a Variance (as hereinafter defined), and (v) approves the
transaction contemplated by the Pooling and Servicing
Agreement.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
The Tariff created by the Initial Order will establish
amounts intended to provide for the amortization of the
Conservation Asset Transaction Amount in accordance with a
pro forma amortization schedule (the "Pro Forma Schedule"),
based upon certain assumptions, including, but not limited
to, projected numbers of Customers (as hereinafter defined)
and expected delinquencies. The Tariff specifically
identifies, for each class of Puget's retail residential,
commercial, industrial and certain other energy customers
(the "Customers"), a dollar amount of each Customer's
regular electric bill that will be allocated to the Trust
from bills sent during each Regulatory Year (as hereinafter
defined). Such amounts will be collected by Puget as part
of its normal collection activities and will be deposited
into an account maintained with the Trustee for the benefit
of the Certificateholders (the "Collection Account")
monthly on each Remittance Date (as hereinafter defined).
On each September 30 beginning in 1995 and ending in 2003
and also on March 31, 2004 (each, a "Calculation Date"),
the Servicer is required to compare the unamortized
Bondable Conservation Investment Amount (the "Bondable
Conservation Investment Balance") to the amount set forth
in the Pro Forma Schedule as of such date (the "Projected
Bondable Conservation Investment Balance"). If the Bondable
Conservation Investment Balance at such Calculation Date
differs from the Projected Bondable Conservation Investment
Balance for such Calculation Date by more than 2% (a
"Variance"), Puget is required to apply for (and the
Initial Order provides that the Commission will be required
to approve within 30 days of the application) a revised
Tariff (a "Revised Tariff") that will allocate revenues to
the Trust in an amount (the "Revised Tariff Amount")
intended to be sufficient so that the Bondable Conserva-
tion Investment Balance on the next September 30 will equal
the Projected Bondable Conservation Investment Balance as
of such date and thereafter will provide for the
amortization of the remaining Bondable Conservation
Investment Balance in accordance with the Pro Forma
Schedule. The Revised Tariff will be based upon updated
assumptions by the Servicer including, but not limited to,
projected numbers of Customers and expected delinquencies.
Overcollateralization.......... The Statute gives the Servicer the right to recover from
Customers an amount equal to the Bondable Conservation
Investment Amount, which is $ , plus interest
thereon at the Certificate Rate. The aggregate Certificate
amount is $ and interest thereon is also calculated
at the Certificate Rate. The portion of the Bondable
Conservation Investment Amount in excess of the aggregate
Certificate amount represents overcollateralization (the
"Overcollateralization Amount").
Collections on the Purchased Assets will first be allocated
to interest on, and then allocated to reduce principal of,
the Bondable Conservation Investment Amount. On each
Distribution Date, the excess, if any, of interest on the
Bondable Conservation Investment Amount over interest on
the Certificate Amount will be paid to the Trustee in an
amount equal to the Trustee Fee (as hereinafter defined)
and to the Servicer as one component of the Servicing
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Fee (as hereinafter defined). Accordingly, each amount
allocated to reduce principal of the Bondable Conservation
Investment Amount will be equal to the amount used to
reduce the Certificate balance. As a result, the Bondable
Conservation Investment Balance should always exceed the
aggregate Certificate balance by the Overcollateralization
Amount.
However, while the Bondable Conservation Investment Balance
(including that portion attributable to the
Overcollateralization Amount) represents the statutory
right to recover those amounts, the amounts actually billed
may be less if, for example, the actual number of Customers
is less than the number of Customers projected by Puget for
the purpose of calculating rates under the Tariff or
Revised Tariff or the amounts actually collected may be
less if, for example, the actual rate of delinquencies is
greater than the rate of delinquencies projected.
The Tariff and any Revised Tariff will be periodically
revised, if Variances occur, through an adjustment to the
amount of revenues allocated to the Trust in respect of the
Conservation Asset Transaction Amount (a "Rate Adjustment")
to take into account factors including, but not limited to,
projected numbers of Customers and projected delinquencies.
However, after the final Rate Adjustment on March 31, 2004,
there exists no such mechanism for the remaining term of
the Certificates. Accordingly, the Overcollateralization
Amount is intended to provide for recoveries in excess of
amounts owing to Certificateholders (as hereinafter
defined) to cover billing or collection shortfalls which
may occur from March 31, 2004 through March 31, 2005 and
which will not be addressed through the Rate Adjustment
process.
Trust Assets................... The Purchased Assets will consist of (i) rights to receive
the revenues allocated to the Trust pursuant to the Tariff
and Revised Tariffs, as well as the right under the Statute
to have rates under the Tariff and Revised Tariffs
maintained at levels sufficient for recovery of the
Bondable Conservation Investment Amount, plus interest on
the Certificates and the Trustee Fee and the Servicing Fee,
subject to the September 30, 2004 termination date for
billing under the Tariff or any Revised Tariff, (ii) rights
to payments under contracts ("Conservation Repayment
Contracts") between Puget and certain Customers, which
obligate such Customers, if they change energy suppliers,
to pay Termination Fees (as hereinafter defined) generally
intended to reimburse Puget for the Bondable Conservation
Investment Balance arising from expenditures on
conservation measures for such Customer, and (iii) upon a
voluntary or involuntary sale of a portion of the property
used to serve Customers who cease to be Customers as a
result of the sale, a portion of the proceeds (the
"Purchased Sale Proceeds") of such sale equal to the
amount, if any, of the Bondable Conservation Investment
Balance that the Commission removes from Puget's rate base
pursuant to the Statute as a result of such sale.
The Certificates............... The Certificates will be issued in an initial aggregate
principal amount of $ . Each Certificate represents
an undivided fractional interest in the assets of the
Trust. The Certificates will be
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
available for purchase in minimum denominations of $1,000
and integral multiples thereof. The Certificates will
initially be represented by one or more Certificates
registered in the name of Cede & Co., as nominee of DTC (a
"Certificateholder"). Although Definitive Certificates will
be issued only under the limited circumstances described
herein, all references herein to Certificateholders also
refer to Certificate Owners, unless otherwise specified
herein. See "Description of the Certificates -- General,"
"-- Book-Entry Registration" and "-- Definitive
Certificates."
Servicing...................... The Servicer shall be responsible for billing, servicing,
managing and making collections on the Purchased Assets in
the same manner that it services similar assets for its own
account. In the event of a Variance as of any Calculation
Date, the Servicer will calculate the Revised Tariff Amount
and file an application with the Commission for a Revised
Tariff, as described under "Tariff" above. Under the
Statute, any successor to Puget pursuant to any bank-
ruptcy, reorganization or other insolvency proceeding must
assume the obligations of the Servicer under the Pooling
and Servicing Agreement.
The Servicer will also act as custodian of all documents
and instruments relating to the Purchased Assets.
Servicing Fee.................. The Servicing Fee for the period from the Closing Date
through June 30, 1995, and each three-month period
thereafter ending March 31, June 30, September 30 and
December 31 through March 31, 2005 (each a "Distribution
Period") will be an amount equal to the sum of (i)
$ in respect of the first Distribution Period and
$ in respect of all subsequent Distribution Periods
and (ii) the investment earnings on amounts deposited in
the Collection Account during such Distribution Period. The
Servicing Fee will be payable solely from such investment
earnings and from a portion of the interest in respect of
the Overcollateralization Amount.
Collections.................... The Servicer will deposit, on or before the tenth calendar
day succeeding the last day of each calendar month (a
"Remittance Date"), to the Collection Account, all amounts
received by the Servicer in respect of the Purchased Assets
during such calendar month.
Distribution Dates............. The Trustee will make quarterly distributions to
Certificateholders on the 11th day of January, April, July
and October of each year commencing July 11, 1995, or, if
such day is not a Business Day, the next succeeding
Business Day.
Final Distribution Date........ The Tariff or any Revised Tariff then in effect will expire
on September 30, 2004 and the Servicer will cease to
include amounts allocable to the Trust in Customers'
electric bills after September 30, 2004. The portion of
receivables outstanding on September 30, 2004 allocable to
the Trust under the Tariff on any Revised Tariff will
continue to be collected by the Servicer through March 31,
2005 and remitted to the Collection Account. The final
Distribution Date will be April 11, 2005.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Distributions and Cash Flow.... No amounts billed to Customers prior to the Closing Date
will be transferred to the Trust. The Trust will have the
statutory right to amounts payable pursuant to the Tariff
and any Revised Tariffs from bills mailed by the Servicer
the day following the Closing Date and, based upon
historical experience, such amounts would begin to be
received by the Servicer within 15 days after such date.
See "Puget Customers and Collections."
On each Distribution Date, all funds held in the Collection
Account will be distributed as follows: FIRST, to the
Trustee in the amount of the fee payable to the Trustee
pursuant to the Pooling and Servicing Agreement (the
"Trustee Fee"); SECOND, to the Servicer in the amount of
the Servicing Fee; THIRD, to the Certificateholders as
interest an amount equal to the product of the Certificate
Rate and the aggregate Certificate balance as of the first
day of the related Distribution Period (calculated on the
basis of a 360-day year comprised of twelve 30-day months);
and FOURTH, to the Certificateholders as principal, the
remainder of the funds in the Collection Account.
The Tariff and any Revised Tariff will expire on September
30, 2004 and the Servicer will cease to include amounts
allocable to the Trust in Customers' electric bills after
September 30, 2004. The portion of receivables outstanding
on September 30, 2004 allocable to the Trust under the
Tariff or any Revised Tariff then in effect will continue
to be collected by the Servicer through March 31, 2005 and
remitted to the Collection Account. Any collections through
March 31, 2005 by the Servicer in respect of the amounts
allocable to the Trust in excess of the aggregate
Certificate balance will be distributed to the
Certificateholders.
Customers...................... The source of payment on the Purchased Assets will be
amounts collected from Puget's Customers. During the month
of September 1994, Puget had approximately 817,600
Customers, including 726,400 residential Customers, 86,000
commercial Customers, 3,900 industrial Customers and 1,300
other Customers. For the year ended December 31, 1993, the
largest Customer represented approximately 3.1% of Puget's
revenues and the 10 largest Customers represented
approximately 9.3% of Puget's revenues.
Tax Status..................... In the opinion of Perkins Coie, counsel to the Seller, the
Trust will constitute a grantor trust for federal income
tax purposes and will not be subject to federal income tax.
Certificate Owners must report their respective allocable
shares of all income earned on the Trust assets, and,
subject to certain limitations on the deduction of
miscellaneous expenses by individuals, estates and trusts,
may deduct their respective allocable shares of the
Servicing Fee and the Trustee Fees. Individuals should
consult their own tax advisors to determine the federal,
state, local and other tax consequences of the purchase,
ownership and disposition of the Certificates. Prospective
investors should note that no rulings have been or will be
sought from the Internal Revenue Service (the "IRS") with
respect to any of the federal income tax consequences
discussed herein, and there can be no assurance that the
IRS will not take a contrary position. See "Federal Income
Tax Consequences."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
ERISA Considerations........... The acquisition of the Certificates by employee benefit
plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), may result in a
violation of the prohibited transaction rules under Section
406 of ERISA and Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"). See "ERISA
Considerations."
Rating......................... It is a condition of issuance of the Certificates that they
be rated by one or more of the nationally
recognized statistical rating agencies (the "Rating
Agencies"). There can be no assurance that a rating will
not be lowered or withdrawn by a Rating Agency if
circumstances so warrant. See "Special Considerations --
Ratings of the Certificates." In the event that the rating
initially assigned to the Certificates is subsequently
lowered for any reason, neither Puget nor any other person
or entity is obligated to provide any additional credit
enhancement.
</TABLE>
8
<PAGE>
SPECIAL CONSIDERATIONS
In evaluating an investment in the Certificates, prospective investors
should consider carefully the following factors in addition to the other
information presented in this Prospectus.
LIMITED LIQUIDITY. The Certificates represent a new issue of securities for
which there is currently no market. If a market for the Certificates were to
develop, the Certificates may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for other securities
and other factors. There can be no assurance that a Certificateholder will be
able to sell the Certificate in the future or that any such sale will be at a
price equal to or higher than the initial public offering price of such
Certificates. Each of the Underwriters of the Certificates, Salomon Brothers Inc
and Chemical Securities Inc., has informed the Trust that, subject to applicable
laws and regulations, it currently intends to make a market in the Certificates.
The Underwriters are not obligated to do so, however, and any market making may
be discontinued at any time without notice.
LIMITED ASSETS. The Trust does not have, nor is it permitted to have, any
significant assets or sources of funds other than the Purchased Assets. The
Certificates represent interests solely in the Trust and will not be insured or
guaranteed by Puget, the Trustee or any other person or entity. Consequently,
Certificateholders will rely solely on collections on the Purchased Assets from
the Closing Date through March 31, 2005 for payment. The Tariff and any Revised
Tariffs will expire on September 30, 2004, and no amounts will be billed under
the Tariff or any Revised Tariff in respect of the Purchased Assets after that
date. As a result, if collections through March 31, 2005 on amounts billed
through September 30, 2004 are, for any reason, insufficient to pay all
principal and interest on the Certificates, the Certificates will not have any
other source of payment.
INSOLVENCY-RELATED MATTERS. Puget believes that the transfer of the
Purchased Assets by the Seller to the Trust will constitute a "true sale" of the
Purchased Assets to the Trust, and has so treated and characterized such
transfer for all relevant purposes. In the event of an insolvency of the Seller
subsequent to the transfer of the Purchased Assets, Puget would be subject to
the United States Bankruptcy Code or other similar state laws ("Insolvency
Laws"). As a "true sale" to the Trust, the Purchased Assets sold by Puget to the
Trust would not be part of Puget's bankruptcy estate and would not be available
to creditors of Puget.
The Statute expressly provides that the transfer of the Purchased Assets to
the Trust, if made in the manner described herein, constitutes a "true sale" to
the Trust, and expressly contemplates the issuance of securities such as the
Certificates by legal entities such as the Trust. The Seller will receive an
opinion of counsel on the closing date of the issuance of the Certificates,
concluding on the basis of the Statute, as well as a reasoned analysis of
analogous case law (although there is no precedent based on directly similar
facts), that subject to certain facts, assumptions and qualifications specified
therein the transfer of the Purchased Assets to the Trust would be respected as
a "true sale," and, accordingly, the Purchased Assets would not be part of
Puget's bankruptcy estate.
However, in the event of Puget's insolvency, it is possible that the
bankruptcy trustee, a creditor of Puget or Puget as debtor in possession may
argue that the transaction between Puget and the Trust is a pledge of the
Purchased Assets made to secure a borrowing by Puget, rather than a "true sale,"
thereby resulting in the inclusion of the Purchased Assets within the bankruptcy
estate of Puget. The legal opinion described in the preceding paragraph is not
binding on any court and, notwithstanding the provisions of the Statute, there
can be no assurance that a court would not reach a contrary conclusion. If for
any reason the transaction is recharacterized as a pledge of the Purchased
Assets made to secure a borrowing by Puget rather than a "true sale," under the
Pooling and Servicing Agreement Puget grants a security interest in the
Purchased Assets and the proceeds thereof to the Trustee to secure any such
borrowing and Puget agrees to take the steps required by the Statute to perfect
that security interest. If a filing were made under any Insolvency Laws by or
against Puget, or if an attempt were made to litigate the foregoing issue, or if
a court were to recharacterize the transaction as a pledge rather than a "true
sale", delays in distributions to Certificateholders (and possible reductions of
such distributions) could occur.
9
<PAGE>
Pursuant to the Statute, the Trustee would also have the right to cause the
Commission to order the sequestration, and payment to the Trust, of revenues
arising in respect of the Purchased Assets, although there can be no assurance
that a court would not stay such actions pending the resolution of any related
dispute. The Statute also provides that any successor to Puget pursuant to any
Insolvency Laws will be required to perform the Servicer's obligations with
respect to the Certificates.
TRUST'S RELATIONSHIP TO THE SERVICER. The Servicer is not obligated to make
any payments in respect of the Certificates or the Purchased Assets. However,
the existence of receivables from Customers in respect of the Purchased Assets
is dependent upon the continued provision of electrical service to such
Customers by Puget or any successor to Puget. The Trust is also dependent on the
Servicer for the determination of the Tariff and any Revised Tariffs and for the
Customer billing and collection that is necessary to recover payments on the
Purchased Assets and, therefore, necessary to make payments on the Certificates.
If Puget were to cease servicing the Purchased Assets, it may be difficult to
find a substitute Servicer, and the risk exists that no additional payments
would be made on the Certificates. Puget may only be removed as Servicer if it
fails to make required remittances in accordance with the terms of the Pooling
and Servicing Agreement, a substitute Servicer is appointed and the
Certificateholders unanimously consent to such removal. Puget may only resign as
Servicer if a successor Servicer is appointed and each Rating Agency notifies
the Trustee that such resignation will not cause the rating then assigned to the
Certificates to be withdrawn or reduced.
FACTORS FACING THE ELECTRIC UTILITY INDUSTRY. The electric utility industry
is experiencing intensifying competitive pressures, particularly in the
wholesale generation and industrial customer markets. The National Energy Policy
Act of 1992 was designed to increase competition in the wholesale electrical
generation market by easing regulatory restrictions on producers of wholesale
power and by authorizing the Federal Energy Regulatory Commission ("FERC") to
mandate access to electric transmission systems by wholesale power generators.
The potential for increased competition at the retail level in the electric
utility industry through state-mandated retail wheeling has also been the
subject of legislative and administrative interest in a number of states,
including the State of Washington. Electric utilities, including Puget, now face
greater potential competition for resources and customers from a variety of
sources, including privately owned independent power producers, exempt wholesale
power generators, industrial customers developing their own generation
resources, suppliers of natural gas and other fuels, other investor-owned
electric utilities and municipal generators. Although Puget to date has not
experienced any significant adverse impact on its business from these industry
trends, there can be no assurances that such trends will not have such an impact
on Puget's business in the future.
DETERMINATION OF THE TARIFF. The Tariff levied on all of Puget's Customers
is based in part on calculations by the Servicer which reflect the Servicer's
forecasted number of Customers in each Customer class and anticipated rate of
delinquencies.
To the extent that the number of Customers in any Customer class is less
than the number forecasted by Puget in calculating the Tariff or any Revised
Tariff or the aggregate payment due from a Customer is less than the forecasted
amount payable in respect of the Tariff or Revised Tariff, the aggregate amount
actually billed under the Tariff or any Revised Tariff may be less than the
forecasted amount. While the Servicer will make all reasonable efforts to
predict such circumstances and incorporate assumptions related thereto into the
determination of the Tariff or any Revised Tariff, there can be no assurance
that such determination will not result in a shortfall in the amount billed
pursuant to the Tariff or any Revised Tariff. Through March 31, 2004, such
shortfalls may be recovered through the filing of a Revised Tariff. Thereafter,
any such shortfalls are expected to be recovered from the Overcollateralization
Amount.
COLLECTION OF AMOUNTS DUE UNDER THE TARIFF. While the amount billed
pursuant to the Tariff or any Revised Tariff may be sufficient to enable
interest on the Certificates to be paid on a timely basis and the principal of
the Certificates to be repaid in full by the final Distribution Date, Customers
may fail to remit such payments in whole or in part or may remit such payments
on a delayed basis. While the Servicer will make all reasonable efforts to
predict such circumstances and incorporate assumptions related
10
<PAGE>
thereto into the determination of the Tariff or any Revised Tariff, there can be
no assurance as to the rate of payment, the timing of the receipt of payments or
the rate of delinquencies by Customers that will actually occur in any future
period. If such shortfalls are sufficient to result in a Variance as of any
Calculation Date through March 31, 2004, they may be recovered in subsequent
periods through a Revised Tariff. Thereafter, any such shortfalls are expected
to be recovered from the Overcollateralization Amount.
COMMISSION APPROVAL OF REVISED TARIFFS. The Statute requires the Commission
to approve the Tariff at levels sufficient to recover the Conservation Asset
Transaction Amount. The Tariff is subject to a Rate Adjustment if a Variance
exists as of any Calculation Date. While the Initial Order requires the
Commission to implement a Revised Tariff within 30 days of the application
therefor by the Servicer, and the Statute requires the Commission to maintain
rates at levels sufficient to fully recover the Conservation Asset Transaction
Amount, there can be no assurance that such approval would not require a longer
period of time. To the extent that implementation of a Revised Tariff is
delayed, the previously existing Tariff would remain unchanged, and the amount
collectible thereunder may be lesser or greater than that which would have been
collected under the Revised Tariff and may be insufficient to enable interest on
the Certificates to be paid on a timely basis or the principal of the
Certificates to be repaid in full by the final Distribution Date on April 11,
2005.
ABILITY OF THE SERVICER TO CHANGE PAYMENT TERMS. In servicing the Purchased
Assets, the Servicer will be required to use all reasonable efforts, consistent
with its customary servicing procedures, to collect amounts due in respect of
the Purchased Assets. The Servicer has agreed not to make any change to the
amount or reschedule the due date of any scheduled payment of any billed amount
in respect of the Purchased Assets or change any material term of any Purchased
Asset unless such action would be in accordance with its customary practices or
those of any successor Servicer with respect to comparable assets that it
services for itself. There are no other limitations on the ability of the
Servicer to change the terms of the Purchased Assets. While Puget has no current
intention of taking actions that would change the payment or other terms of the
Purchased Assets, there can be no assurance that changes in Puget's customary
and usual practices for comparable assets it services for itself might not
result in a determination to do so or that a successor Servicer may not make
such determination.
RATINGS OF THE CERTIFICATES. It is a condition to the issuance of the
Certificates that they be rated " " by one or more of the Rating Agencies. The
rating of the Certificates addresses the likelihood of the ultimate payment of
principal and the timely payment of interest on the Certificates. A security
rating is not a recommendation to buy, sell or hold securities. There can be no
assurance that a rating will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances so warrant.
BOOK-ENTRY REGISTRATION. The Certificates will be initially represented by
one or more Certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Certificate Owners or their
nominees. Therefore, unless and until Definitive Certificates (as hereinafter
defined) are issued, Certificate Owners will not be recognized by the Trustee as
Certificateholders. Hence, until such time, Certificate Owners will only be able
to receive payments from, and exercise the rights of Certificateholders
indirectly through, DTC and participating organizations, and, unless a
Certificate Owner requests a copy of any such report from the Trustee or the
Servicer, will receive reports and other information provided for under the
Pooling and Servicing Agreement only if, when and to the extent provided to
Certificate Owners by DTC and its participating organizations. In addition, the
ability of Certificate Owners to pledge Certificates to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such Certificates, may be limited due to the lack of physical certificates for
such Certificates. See "Description of the Certificates -- Book-Entry
Registration" and "-- Definitive Certificates."
11
<PAGE>
THE STATUTE
The Washington State Legislature enacted the Statute, ch. 268 of Laws of
Washington 1994, to encourage utility investment in demand side management
conservation programs. Demand side management conservation programs comprise a
variety of conservation measures, such as installation of energy-efficient
lighting and building insulation, which help utility customers use electricity
more efficiently. These programs can allow utilities to meet projected increases
in energy load in a manner that can be less costly, in both economic and
environmental terms, than adding new energy generation facilities. However,
since conservation program expenditures often create customer-owned assets
installed in the customer's facilities, a utility typically cannot finance such
expenditures by the issuance of utility mortgage bonds secured by a lien on
utility-owned property.
The Statute creates a new property right that establishes the statutory
right of a utility to include in rate base all of its approved expenditures on
customer conservation measures and to receive through rates revenues sufficient
to recover such expenditures and the costs of capital associated with such
expenditures, including, without limitation, the payment of principal of and
interest on securities sold to finance or refinance them. The Statute provides
that the revenues to be received pursuant to this statutory right may be sold,
pledged or otherwise made the basis for the issuance of securities. Once an
order under the Statute has been obtained from the Commission authorizing the
issuance of securities to finance or refinance approved conservation
expenditures, an unconditional statutory right to repayment through utility
rates arises in favor of the security holders. Under the Statute, this right to
repayment through rates cannot be rescinded or adversely changed by the
Commission until the full amount of such expenditures and the related costs of
capital are fully amortized.
The Certificates will be securities entitled to the benefits of the Statute.
The Tariff and any Revised Tariffs will expire on September 30, 2004 and no
amounts will be billed under the Tariff or any Revised Tariff in respect of the
Purchased Assets after that date. As a result, if amounts billed through that
date and collected by March 31, 2005 are, for any reason, not sufficient to pay
all principal and interest on the Certificates, the Certificates will have no
other source of payment.
THE TARIFF AND THE TRUST ASSETS
Puget has made application to the Commission for the Initial Order that,
among other things, (i) authorizes the sale to the Trust by Puget of the
Purchased Assets, which include the right to recover in rates the Conservation
Asset Transaction Amount, (ii) finds that the Certificates are securities
entitled to the benefits of the Statute, (iii) approves the Tariff, which
allocates revenues to the Trust in an aggregate amount equal to the Conservation
Asset Transaction Amount, (iv) approves the methodology and mechanism for
periodically implementing a Revised Tariff if a shortfall or surplus in
collections results in a Variance as of any Calculation Date, and (v) approves
the Pooling and Servicing Agreement and the transaction contemplated thereby.
The Tariff will be collected from Puget's Customers. The Tariff will be
established for each class of Customers and will be the portion of the amount
charged to each Customer in its utility bill allocated to the Trust from bills
sent during the period from the Closing Date through September 30, 1995 and
during each subsequent period from October 1 through the following September 30
up to and including the period ended September 30, 2004 (each such period, a
"Regulatory Year"). The revenues collected under the Tariff will fluctuate with
collection delinquencies and the number of Customers, but not with levels of
electricity usage, unless the aggregate payment due from a Customer for the
provision of electrical service is less than the amount payable in respect of
the Tariff. Any such excess of the amount payable in respect of the Tariff over
the aggregate payment due from the Customer is not required to be carried
forward to subsequent periods.
On each Calculation Date, the Servicer is required to compare the Bondable
Conservation Investment Balance to the Projected Bondable Conservation
Investment Balance set forth in the Pro Forma Schedule. If the Bondable
Conservation Investment Balance differs from the Projected Bondable Conservation
Investment Balance for such Calculation Date by more than 2% on any such date,
Puget will be
12
<PAGE>
required to apply for (and the Initial Order provides that the Commission will
be required to approve within 30 days of the application) a Revised Tariff that
will allocate revenues to the Trust in an amount intended to be sufficient so
that (i) the Bondable Conservation Investment Balance on the next September 30
will equal the Projected Bondable Conservation Investment Balance as of such
date and (ii) thereafter, will provide for the amortization of the remaining
Bondable Conservation Investment Balance in accordance with the Pro Forma
Schedule. The Revised Tariff will be based on updated assumptions by the
Servicer including, but not limited to, the projected number of Customers and
the expected rate of delinquencies.
Certain Customers are required by Conservation Repayment Contracts to
reimburse Puget for certain amounts if the Customer should leave Puget's service
area or change energy suppliers (the "Termination Fees"). Pursuant to the
Pooling and Servicing Agreement, Puget will pay to the Trustee for the benefit
of the Certificate Owners any Termination Fees it receives from Customers in
respect of the Bondable Conservation Investment Balance that are being recovered
under the Tariff or any Revised Tariff. Any such amounts will be distributed
ratably to Certificateholders in the same manner as other revenues relating to
the Purchased Assets sold to the Trust.
The Statute provides that the Commission may remove from rate base the
Bondable Conservation Investment Balance made for the benefit of Customers that
cease to be Customers as a result of a sale by Puget of the property used to
serve those Customers. Pursuant to the Pooling and Servicing Agreement, Puget
will pay to the Trustee for the benefit of the Certificate Owners the Purchased
Sale Proceeds related to the price paid to Puget, or the governmental award or
payment to Puget, in connection with any voluntary or involuntary sale of Puget
property equal to the Bondable Conservation Investment Balance that the
Commission removes from Puget's rate base pursuant to the Statute as a result of
such sale.
The Purchased Assets to be owned by the Trust include (i) all of Puget's
right, title and interest in and to, and to receive, payments pursuant to the
Tariff or any Revised Tariff, (ii) all of Puget's rights to have the
Conservation Asset Transaction Amount recovered through rates pursuant to and in
accordance with the Statute, (iii) all of Puget's right, title and interest
under the Conservation Repayment Contracts in and to the Termination Fees to the
extent paid by Customers, and (iv) all of Puget's right, title and interest in
and to the Purchased Sale Proceeds.
The Statute gives the Servicer the right to recover from Customers an amount
equal to the Bondable Conservation Investment Amount, which is $ , plus
interest thereon at the Certificate Rate. The initial aggregate Certificate
balance is $ and interest thereon is calculated at the Certificate Rate. The
portion of the Bondable Conservation Investment Balance in excess of the
aggregate Certificate balance represents the Overcollateralization Amount.
Collections on the Purchased Assets will first be allocated to interest on,
and then allocated to reduce principal of, the Bondable Conservation Investment
Amount. On each Distribution Date, the excess, if any, of interest on the
Bondable Conservation Investment Amount over interest on the Certificate Amount
will be paid to the Trustee in an amount equal to the Trustee Fee and to the
Servicer as one component of the Servicing Fee. Accordingly, each amount
allocated to reduce the Bondable Conservation Investment Balance will be equal
to the amount used to reduce the aggregate Certificate balance. As a result, the
Bondable Conservation Investment Balance should always exceed the aggregate
Certificate balance by the Overcollateralization Amount.
However, while the Bondable Conservation Investment Balance (including that
portion attributable to the Overcollateralization Amount) represents the
statutory right to recover those amounts, the amounts actually billed may be
less if, for example, the actual number of Customers is less than the number of
Customers projected by Puget for the purpose of calculating rates under the
Tariff or any Revised Tariff or the amounts actually collected may be less if,
for example, the actual rate of delinquencies is greater than the rate of
delinquencies projected.
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<PAGE>
The Tariff and any Revised Tariffs will be periodically revised, if
Variances occur, through a Rate Adjustment to take into account factors
including, but not limited to, projected numbers of Customers and projected
delinquencies. However, after the final Rate Adjustment on March 31, 2004, there
exists no such mechanism for the remaining term of the Certificates.
Accordingly, the Overcollateralization Amount is intended to provide for
recoveries in excess of amounts owing to Certificateholders to cover billing or
collection shortfalls which may occur from March 31, 2004 through March 31, 2005
and which will not be addressed through the Rate Adjustment process.
Any collections through March 31, 2005 by the Servicer in respect of the
amounts allocable to the Trust in excess of the aggregate Certificate balance
will be distributed to the Certificateholders.
THE TRUST
Prior to this transaction, the Trust had no assets, obligations or operating
history. Upon formation, the Trust will not engage in any business activity
other than acquiring and holding the Purchased Assets, issuing the Certificates
and making payments thereon. The Servicer is required to pay all expenses
incurred in connection with its duties under the Pooling and Servicing
Agreement. See "Description of the Certificates -- Servicer Compensation" and"--
Payment of Expenses." The Trust will not acquire any assets other than the
Purchased Assets. As a consequence, the Trust is not expected to have any need
for, or source of, additional capital resources other than the assets of the
Trust.
USE OF PROCEEDS
The Trustee on behalf of the Trust will apply the entire proceeds to be
received from the sale of the Certificates to the purchase of the Purchased
Assets from Puget.
THE SELLER AND SERVICER
Puget is an investor-owned electric utility providing electric service
within a 4,500 square mile territory in the State of Washington, principally in
the Puget Sound region of western Washington. During the month of September
1994, Puget provided electric service to an average of approximately 817,600
Customers. Puget's executive office is located at 411 - 108th Avenue N.E.,
Bellevue, Washington 98004-5515 and its telephone number is (206) 454-6363.
PUGET CUSTOMERS AND COLLECTIONS
BONDABLE CONSERVATION INVESTMENT AMOUNTS
Puget has offered energy conservation programs to assist Customers in
conserving electricity since 1978. Puget has capitalized these expenditures and,
in accordance with general rate proceedings and periodic rate adjustment
mechanism proceedings, these amounts have generally been incorporated into rate
base on September 30 of each year. Pursuant to the Commission Order in Docket
No. U-78-45, Puget has amortized these expenditures over a 10-year period from
the time of their incorporation into rate base. The table below sets forth the
Projected Bondable Conservation Investment Balance as of September 30 of each
year through 2004.
<TABLE>
<CAPTION>
PROJECTED BONDABLE
CONSERVATION INVESTMENT
BALANCE AT SEPTEMBER 30,
------------------------
<S> <C>
1995.................................................. $ 191,721,002
1996.................................................. 161,106,486
1997.................................................. 133,905,961
1998.................................................. 106,705,436
1999.................................................. 79,504,911
2000.................................................. 56,039,465
2001.................................................. 34,441,554
2002.................................................. 17,528,547
2003.................................................. 5,692,310
2004.................................................. 0
</TABLE>
14
<PAGE>
Puget currently has conservation programs available for all Customers. Of
the $224,042,527 Bondable Conservation Investment Balance at September 30, 1994,
approximately 56% is attributable to residential Customers, 35% to commercial
Customers and 9% to industrial Customers.
CONSERVATION REPAYMENT CONTRACTS
Approximately 13% of the Bondable Conservation Investment Amount represents
conservation measures supplied by Puget to Customers who have entered into
Conservation Repayment Contracts, providing that the Customer must pay a
Termination Fee to Puget if it changes energy suppliers. The amount of the
Termination Fee varies based on Customer type, the conservation measures
supplied and the year the conservation measures were installed. Approximately
79% of the Conservation Repayment Contracts are with residential Customers and
21% are with commercial and industrial Customers.
PUGET CUSTOMER BASE
COMPOSITION. Puget's Customer base may be divided into four categories:
residential, commercial, industrial and other Customers. The table below sets
forth the number of Customers and operating revenues billed to each Customer
class.
CUSTOMERS AND OPERATING REVENUES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------- FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
1991 1992 1993 1994
--------------------- --------------------- ---------------------- ---------------------
% OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL
---------- ---------- ---------- ----------
--------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE NUMBER OF CUSTOMERS:
Residential................ 673,883 89.0% 692,100 89.0% 708,123 89.0% 721,411 88.9%
Commercial................. 78,691 10.4 80,963 10.4 82,875 10.4 84,884 10.4
Industrial................. 3,574 0.5 3,659 0.5 3,715 0.5 3,838 0.5
Other (a).................. 1,226 0.1 1,254 0.1 1,289 0.1 1,322 0.2
--------- ----- --------- ----- ---------- ----- --------- -----
757,374 100.0% 777,976 100.0% 796,002 100.0% 811,455 100.0%
--------- ----- --------- ----- ---------- ----- --------- -----
--------- ----- --------- ----- ---------- ----- --------- -----
OPERATING REVENUES ($000S):
Residential................ $ 480,356 50.8% $ 443,490 47.1% $ 502,037 48.4% $ 399,902 48.7%
Commercial................. 310,824 32.9 323,764 34.4 356,586 34.4 274,560 33.4
Industrial................. 127,164 13.5 138,416 14.7 150,063 14.5 118,785 14.5
Other (a).................. 26,897 2.8 35,779 3.8 28,189 2.7 27,582 3.4
--------- ----- --------- ----- ---------- ----- --------- -----
$ 945,241 100.0% $ 941,449 100.0% $1,036,875 100.0% $ 820,829 100.0%
--------- ----- --------- ----- ---------- ----- --------- -----
--------- ----- --------- ----- ---------- ----- --------- -----
<FN>
- ------------------------------
(a) Other includes primarily street lighting.
</TABLE>
CONCENTRATIONS. For the year ended December 31, 1993, the largest Customer
represented approximately 3.1% of Puget's revenues, and the 10 largest Customers
represented approximately 9.3% of Puget's revenues. There can be no assurance
that current Customers will remain Customers or that the levels of Customer
concentration in the future will be similar to that set forth above.
GROWTH. The total average number of Customers each calendar year has grown
every year for more than 40 years. The compounded annual growth rate in the
average number of Customers from 1983 through 1993 was 3.2%. Due to migration
from other states, the state of Washington has experienced significant
population growth in recent years. From 1988 through 1993, the Washington
population increased by 624,000, while population in the Puget service area grew
by 275,300. There can be no assurance that future Customer growth rates for
Puget will be similar to historical experience.
FORECASTING CUSTOMERS
Accurate projections of the number of Customers is essential in setting and
maintaining rates under the Tariff or any Revised Tariff at levels sufficient to
recover the Bondable Conservation Investment
15
<PAGE>
Amount, interest on the Certificates, the Trustee Fee and the Servicing Fee.
Customer projections are determined by Puget, based on demographic and economic
information, including, but not limited to, population forecasts and employment
projections, and are reviewed by the Commission.
A shortfall or surplus in collections may result if the actual number of
Customers in any class differs from the number forecasted. A summary of the
total annual forecasted and actual number of Puget Customers is shown below.
There can be no assurance that the future variance between actual and projected
Customers in the aggregate or by class will be similar to the historical
experience of the aggregate Customer base set forth below.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF CUSTOMERS
--------------------------------------------------------
FOR THE YEAR ENDED FOR THE NINE
DECEMBER 31, MONTHS ENDED
---------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Forecasted.............................................. 755,182 780,685 798,918 809,491
Actual.................................................. 757,374 777,976 796,002 811,455
Variance................................................ 0.3% (0.3%) (0.4%) 0.2%
</TABLE>
CREDIT POLICY AND PROCEDURES
Puget is obligated to provide service to new Customers under Washington law.
No outside credit investigations are performed on new Customers. Puget relies on
the information provided by the Customer and its customer information system
audits to indicate whether or not the Customer has had previous service with
Puget.
Based upon previous payment history, each new Customer is assigned one of
three credit codes. A new Customer is automatically assigned the middle credit
code and can be moved to the higher (i.e., signifying a Customer deemed more
creditworthy) or lower (i.e., signifying a Customer deemed less creditworthy)
credit code based upon ongoing payment experience. If a Customer leaves the
Puget territory and later returns, they will be assigned the middle credit code,
unless they had a low credit code upon leaving the territory, in which case they
would be re-assigned that lower credit code. This Customer credit code is used
to, among other things, determine the need for a deposit and the timing of the
collection process. A Customer with a poor payment history or no previous
history is deemed a credit risk and a deposit may be required. Deposit requests
are governed by Washington Administrative Code rules and amounts are determined
by previous consumption at the service location.
Puget uses in-house collection attempts for all delinquent accounts. All
Customer bills are due 15 days from the date on which the bill is sent. The
timing of the collection process depends upon the credit code assigned to that
Customer. The first step of the process is a reminder notice sent between 25
days (in the case of Customers with the lowest credit code) and 40 days (in the
case of Customers with the highest credit code) after billing. The reminder
notice is followed between 10 and 25 (assuming the lowest and highest credit
codes, respectively) days later by a notice warning of a termination of service
unless payment is received. Thirteen days after the reminder notice, Puget
places a phone call to the customer, and if full payment is not received in 4
days, power is disconnected. Power is not disconnected only if the delinquent
Customer is subject to the Washington state winter moratorium (the "Winter
Moratorium"), which prohibits the disconnection of electricity to low-income
Customers (defined as those whose income is below 125% of the "poverty line")
from November 15 through March 15 of each year. In 1993, 27 Customers were
subject to the Winter Moratorium. The bills of these Customers accumulate during
the Winter Moratorium and payment plans are established for each Customer.
Customers subject to the Winter Moratorium are required to pay 7% of their
income toward their electric bills during the Moratorium period. Electric
service is subject to disconnection if satisfactory payment arrangements are not
established.
If a Customer account is closed, either because a Customer has moved or the
Customer has failed to remedy a delinquent account, a reminder notice is sent 23
days after the date that the account is closed. Assuming the uncollected amounts
are not received, a final request for payment is sent 36 days
16
<PAGE>
after the account closing date, and a third party collection letter is sent 50
days after such date. After 80 days without receipt of payment, a closed account
collector attempts to contact the Customer by telephone. If these telephone
attempts are unsuccessful, at 120 days Puget's customer information system will
automatically code the account as a bad debt and send the account to a
collection agency. In 1993, $3,452,000 was referred to the collection agency, of
which 29.1% was recovered by the collection agency and 19.6% was remitted to
Puget after deduction of the credit agency's fee. Collection recovery rates are
monitored monthly. Once written off, the uncollected amount remains monitored
for six years and may be collected at any point during that time.
Puget may change its credit policies and procedures from time to time.
BILLING PROCESS
Puget operates a continuous billing cycle, with an approximately equal
number of bills being distributed each day. During the nine-month period ending
September 30, 1994, the Company mailed out an average of 23,340 bills daily to
its various Customer classes. Puget bills the majority of its residential
Customers bi-monthly, while all commercial and industrial Customers are billed
monthly. Of the 817,574 Customers of record billed by Puget as of September 30,
1994, approximately 21% were billed monthly, while approximately 79% were billed
bi-monthly.
Accounts with potential billing errors are held by the computer system for
review. This review examines accounts which have abnormally high or low bills,
potential meter-reading errors, safety problems as identified by the
meter-reading staff and possible meter malfunctions.
Puget may change its billing policies and procedures from time to time.
COLLECTION PROCESS
In 1993, approximately 82% of total bill payments were received by Puget via
U.S. mail. During the same period, approximately 16% of total payments were paid
in person at one of Puget's 30 local business offices.
Puget also receives payments at 38 pay stations (which are located in
unaffiliated businesses or organizations) throughout the service territory. In
addition, since May 1994, Washington Natural Gas Company ("WNG") offices
accepted Puget payments at selected sites. Customer receipts from these two
types of locations represented approximately 1% of bill payments in 1993. Since
both WNG and the pay stations are strictly bill payment sites, it is not their
responsibility to comply with any policy regarding delinquencies or collections.
Other payment methods include pay-by-phone and direct debits of customer
accounts through a local bank, which accounted for approximately 1% of payments
collected in 1993.
Puget may change its collection policies and procedures from time to time.
DELINQUENCY AND LOSS EXPERIENCE
The following table sets forth the loss and aging experience with respect to
payments to Puget for each of the periods indicated below. There can be no
assurance that the future loss and aging experience for Puget will be similar to
the historical experience set forth below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE
DECEMBER 31, MONTHS ENDED
------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Net Charge-Offs as % of Billed Revenues......................... 0.31% 0.19% 0.25% 0.29%
Delinquencies (30 days+) as a % of Billed Revenues.............. 17.99% 16.45% 16.21% 16.25%
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement to be entered into by Puget, as originator of the Trust, Seller and
Servicer, and Chemical Bank, as Trustee, substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Trustee
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will provide a copy of the final form of the Pooling and Servicing Agreement to
Certificateholders without charge on written request addressed to the Trustee at
its principal corporate trust office, located at 450 West 33rd Street, 15th
Floor, New York, New York 1001, Attention: Structured Finance Services (ABS).
The following summary describes certain terms of the Pooling and Servicing
Agreement and is qualified in its entirety by reference to the Pooling and
Servicing Agreement.
GENERAL
The Certificates will be available for purchase in book-entry form in
minimum denominations representing $1,000 of aggregate Certificate amount and in
integral multiples thereof (except that one Certificate may be issued in an
amount equal to the excess of the aggregate Certificate amount over the next
lower integral multiple of $1,000) and will evidence an undivided fractional
interest in the Trust equal to the percentage obtained by dividing the
denomination of the Certificate by the aggregate Certificate amount.
BOOK-ENTRY REGISTRATION
The Certificates will initially be represented by one or more certificates
registered in the name of the nominee of DTC, except as set forth below. Puget
has been informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is
expected to be the holder of record of the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
herein, no Certificate Owner will be entitled to receive a certificate
representing such person's interest in the Trust. All references herein to
action by Certificateholders shall refer to actions taken by DTC upon
instructions from its participating organizations (the "Participants") and all
references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and statements
of DTC or Cede, as the registered holder of the Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
DTC is a limited-purpose trust company organized under the laws of the state
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its Participants and to facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations (including the Underwriters).
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee, as paying agent, or its
successor in such capacity (the "Paying Agent"), through the Participants who in
turn will receive them from DTC. Under a book-entry format, Certificate Owners
may experience some delay in their receipt of payments, because such payments
will be forwarded by the Paying Agent to Cede by wire transfer of immediately
available funds, as nominee for DTC. DTC will forward such payments to its
Participants which thereafter will forward them to Indirect Participants or
Certificate Owners. It is anticipated that the only "Certificateholder" will be
Cede, as nominee of DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Pooling and Servicing
Agreement, and the Certificate Owners will only be permitted to exercise the
rights of Certificateholders indirectly through the Participants who in turn
will exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
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<PAGE>
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate.
DTC will take any action permitted to be taken by a Certificateholder under
the Pooling and Servicing Agreement only at the direction of one or more
Participants to whose account with DTC the Certificates are credited.
Additionally, DTC will take such actions with respect to specified Fractional
Interests of the Trust only at the direction of and on behalf of Participants
whose holdings include undivided interests that satisfy such specified
Fractional Interest. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form to
Certificate Owners or their nominees ("Definitive Certificates"), rather than to
DTC or its nominee, only if (i) the Trustee advises the Servicer in writing that
DTC is no longer willing or able to discharge properly its responsibilities as
Depository with respect to the Certificates, and the Trustee is unable to locate
a qualified successor, (ii) the Trustee, at its option, elects to terminate the
book-entry system through DTC and Certificate Owners with aggregate fractional
interests representing more than 50% of the Trust advise the Trustee and the
clearing agency through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Certificate Owners, or (iii) after the Servicer becomes subject
to insolvency proceedings, Certificate Owners with aggregate fractional
interests representing more than 50% of the Trust advise the Trustee and the
clearing agency through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the physical certificates representing the Certificates and instructions for
reregistration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement (the "Holders").
If Definitive Certificates are issued, distributions of principal and
interest on the Definitive Certificates will be made by the Paying Agent
(initially the Trustee) directly to Holders of Definitive Certificates in
accordance with the procedures set forth herein and in the Pooling and Servicing
Agreement. Interest payments and principal payments on each Payment Date will be
made to holders in whose names the Definitive Certificates were registered at
the close of business on the last business day of the calendar month immediately
preceding the Payment Date. Distributions will be made by check mailed to the
address of such Holder as it appears on the Certificate register. The final
payment on any Certificate (whether Definitive Certificates or the certificates
registered in the name of Cede representing the Certificates), however, will be
made only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to Certificateholders. The
Paying Agent will provide such notice to registered Certificateholders not later
than the fifth day of the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee in New York, New York. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
19
<PAGE>
SALE AND ASSIGNMENT OF PURCHASED ASSETS
On the Closing Date, Puget will sell and assign to the Trustee on behalf of
the Trust, without recourse or reversion, its entire interest in the Purchased
Assets. Puget and the Trustee believe such sale will constitute a sale for
commercial law purposes, so that the Purchased Assets will not be property of
the estate created in the event Puget becomes the subject of any Insolvency
Laws. If for any reason the transaction were to be recharacterized as a pledge
of the Purchased Assets to secure a borrowing by Puget rather than a "true
sale," the Pooling and Servicing Agreement grants to the Trustee a security
interest in the Purchased Assets and all proceeds therefrom, and Puget will take
the steps required by the Statute to perfect that security interest.
In the event of proceedings by or against Puget under any Insolvency Laws,
the Trustee would have the right pursuant to the Statute to cause the Commission
to order the sequestration, and payment to the Trust, of the revenues arising
from the Purchase Assets, although there can be no assurance that the Commission
would issue such an order in light of the automatic stay provisions of Section
362 of the Bankruptcy Code or, alternatively, that a bankruptcy court would lift
the automatic stay to permit such action by the Commission. In that event the
Trustee is required under the Pooling and Servicing Agreement to seek an order
from the bankruptcy court lifting the automatic stay with respect to such action
by the Commission and an order requiring an accounting and segregation of the
revenues arising from the Purchase Assets, although there can be no assurance
that the court would grant either order. If the transaction were recharacterized
as a secured borrowing in any such proceedings, under Section 363 of the
Bankruptcy Code the bankruptcy court could substitute other collateral for the
Purchased Assets and the proceeds therefrom if the court were to conclude that
the revenues arising from the Purchase Assets were required for the continuing
operations of Puget and that the Certificateholders would be "adequately
protected" by a lien on such substitute collateral, in which case delays and
possible reductions in distributions to Certificateholders could occur.
The Trustee has designated the Servicer as custodian to maintain possession,
as the Trustee's agent, of all documents and instruments relating exclusively to
the Purchased Assets.
ADMINISTRATION AND SERVICING OF PURCHASED ASSETS
The Trustee shall irrevocably appoint the Servicer as agent to calculate the
Tariff and any Revised Tariff and to bill, manage, service, administer and make
collections of amounts due from Customers under the Tariff or Revised Tariff,
the Conservation Repayment Contracts and the Purchased Sale Proceeds. The
Servicer shall use all reasonable efforts, consistent with its customary
procedures, to make collections from Customers of amounts due under the Tariff
or Revised Tariff, the Conservation Repayment Contracts and the Purchased Sale
Proceeds, in each case to the same extent that it makes collection efforts for
its own account. The Servicer will maintain records of all revenues collected
under the Tariff or Revised Tariff. The amounts collected will be deposited with
the Trustee for the benefit of Certificateholders not later than the related
Remittance Date.
SERVICER COMPENSATION
The Servicing Fee for each quarterly Distribution Period will be an amount
equal to the sum of (i) $ in respect of the first Distribution period
and $ in respect of all subsequent Distribution Periods and (ii) the
investment earnings on amounts deposited in the Collection Account during such
Distribution Period. The Servicing Fee will be payable solely from such
investment earnings and from the interest in respect of the
Overcollateralization Amount.
TARIFF
The Tariff specifically identifies, for each class of Puget's Customers, a
dollar amount of each Customer's regular electric bill that will be allocated to
the Trust from bills sent during each Regulatory Year. Such amounts will be
collected by Puget daily as part of its normal collection activities and will be
deposited to the Collection Account monthly on each Remittance Date.
20
<PAGE>
AMORTIZATION
Set forth below is the Pro Forma Schedule showing the Projected Bondable
Conservation Investment Balances.
<TABLE>
<CAPTION>
PROJECTED BONDABLE
CONSERVATION INVESTMENT
DATE BALANCE
- ---------------------------------------------------------- ------------------------
<S> <C>
Initial................................................... $ 224,042,527
September 30, 1995........................................ 191,721,002
September 30, 1996........................................ 161,106,486
September 30, 1997........................................ 133,905,961
September 30, 1998........................................ 106,705,436
September 30, 1999........................................ 79,504,911
September 30, 2000........................................ 56,039,465
September 30, 2001........................................ 34,441,554
September 30, 2002........................................ 17,528,547
September 30, 2003........................................ 5,692,310
March 31, 2004............................................ 2,846,155
September 30, 2004........................................ 0
</TABLE>
All amounts received by the Trust from amounts collected from Customers in
respect of interest on the Bondable Conservation Investment Amount will be used
to pay the Trustee Fee, the Servicer Fee and interest on the Certificates. As a
result, amortization of the aggregate principal amount of Certificates in any
period will equal the reduction of the Bondable Conservation Investment Amount
during such period. Assuming reductions of the Bondable Conservation Investment
Amount in accordance with the Pro Forma Schedule set forth above and assuming
straight-line amortization within each yearly period, the weighted average life
of the Certificates would be years. However, the Servicer does not anticipate
straight-line amortization within each yearly period and deviations from the Pro
Forma Schedule are expected to occur subject to subsequent adjustment through
Revised Tariffs, both of which factors could affect the weighted average life of
the Certificates. No representation can be made as to the actual amortization of
the Certificates.
PERIODIC RATE ADJUSTMENTS
On each Calculation Date, the Servicer is required to compare the Bondable
Conservation Investment Balance to the Projected Bondable Conservation
Investment Balance set forth in the Pro Forma Schedule as of such date. If the
Bondable Conservation Investment Balance at such Calculation Date differs from
the Projected Bondable Conservation Investment Balance for such Calculation Date
by more than 2% on any such date, the Servicer is required to apply for (and the
Commission, pursuant to the Initial Order, will be required to approve within 30
days of the application) a Revised Tariff that will establish new amounts
intended to (i) be sufficient so that the Bondable Conservation Investment
Balance on the next September 30 will equal the Projected Bondable Conservation
Investment Balance for such Collection Date in the Pro Forma Schedule and (ii)
thereafter provide for the amortization of the remaining Bondable Conservation
Investment Amount in accordance with the Pro Forma Schedule.
COLLECTION ACCOUNT
The Servicer will establish and maintain an account in the name of the
Trustee for the benefit of the Certificateholders. The Collection Account shall
be a segregated identifiable trust account established in the trust department
of a Qualified Trust Institution (as hereinafter defined). The Collection
Account will be established and maintained with the Trustee. The Servicer will
remit to the Collection Account, prior to 1:00 p.m., New York City time, on each
Remittance Date the amounts received by the Servicer from or on behalf of
Customers pursuant to the Tariff and any Revised Tariffs, the Conservation
Repayment Contracts and the Purchased Sale Proceeds during the preceding
calendar month. "Qualified Trust Institution" is defined as an institution
organized under the laws of the United States of America or one of the states
thereof or incorporated under the laws of a foreign jurisdiction with a branch
or agency located in the United States of America and subject to supervision and
examination by federal or state banking
21
<PAGE>
authorities which at all times (i) is authorized under such laws to act as a
trustee or in any other fiduciary capacity, (ii) has not less than
$1,000,000,000 in assets under fiduciary management, (iii) has a minimum net
worth of at least $50,000,000, and (iv) has a long-term deposits rating in one
of the four highest rating categories by each of the Rating Agencies.
Funds in the Collection Account may be invested in any of the following: (i)
obligations of the United States of America or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States of
America; (ii) general obligations of or obligations guaranteed as to the timely
payment of interest and principal by any state of the United States of America
or the District of Columbia then rated in the highest long-term rating category
by the Rating Agencies or such lower ratings (as approved in writing by the
Rating Agencies) as will not result in the qualification, downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agencies; (iii) commercial paper that is then rated in the highest short-term
rating category by the Rating Agencies or such lower rating categories (as
approved in writing by the Rating Agencies) as will not result in the
qualification, downgrading or withdrawal of the ratings then assigned to the
Certificates by the Rating Agencies; (iv) certificates of deposit, demand or
time deposits, federal funds or banker's acceptances issued by any depository
institution or trust company (including the Trustee acting in its commercial
banking capacity) incorporated under the laws of the United States or of any
state thereof or incorporated under the laws of a foreign jurisdiction with a
branch or agency located in the United States of America and subject to
supervision and examination by federal or state banking authorities, provided
that the short-term unsecured deposit obligations of such depository institution
or trust company are then rated in the highest short-term rating category by the
Rating Agencies or such lower rating categories (as approved in writing by the
Rating Agencies) as will not result in the qualification, downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agencies; (v) demand or time deposits of, or certificates of deposit issued by,
any bank, trust company, savings bank or other savings institution, provided
that such deposits or certificates of deposit are fully insured by the FDIC;
(vi) guaranteed reinvestment agreements issued by any bank, insurance company or
other corporation (A) the short-term unsecured debt or deposits of which are
rated in the highest short-term rating category by the Rating Agencies or the
long-term unsecured debt of which is rated in the highest long-term rating
category by the Rating Agencies or (B) that are otherwise approved in writing by
the Rating Agencies as investments that will not result in the qualification,
downgrading or withdrawal of the ratings then assigned to the Certificates by
the Rating Agencies; (vii) repurchase obligations with respect to any security
described in clause (i), (ii) or (ix) herein or any other security issued or
guaranteed by the FHLMC, the FNMA or any other agency or instrumentality of the
United States of America that is backed by the full faith and credit of the
United States of America, in either case entered into with a federal agency or a
depository institution or trust company (acting as principal) described in
clause (iv) above or a corporation (acting as principal) described in clause
(vi) above; (viii) investments in money market funds, which funds are (A) not
subject to any sales, load or other similar charge; (B) rated in the highest
rating category by the Rating Agencies; and (C) invested solely in obligations
described in clauses (i) through (vii) above; (ix) interests in any open-end or
closed-end management-type investment company or investment trust (A) registered
under the Investment Company Act of 1940, as from time to time amended, the
portfolio of which is limited to obligations of the United States or obligations
guaranteed by the United States and to agreements to repurchase such
obligations, which agreements, with respect to principal and interest, are at
least 100% collateralized by such obligations marked to market on a daily basis
and pursuant to which the investment company or investment trust is required to
take delivery of such obligations either directly or through an independent
custodian designated in accordance with the Investment Company Act of 1940, as
from time to time amended, and (B) acceptable to the Rating Agencies (as
approved in writing by the Rating Agencies) as collateral for securities having
ratings equivalent to the ratings of the Certificates on the Closing Date; and
(x) such other investments where either (A) the short-term unsecured debt or
deposits of the obligor on such investments are rated in the highest short-term
rating category by the Rating Agencies or (B) such
22
<PAGE>
investments are acceptable to, and approved in writing by, the Rating Agencies
and will not result in the qualification, downgrading or withdrawal of the
ratings then assigned to the Certificates by the Rating Agencies.
DISTRIBUTIONS
On each Distribution Date, the Trustee shall cause to be made the following
distributions, to the extent of funds available in the Collection Account, in
the following priority and in the amounts set forth in the applicable Trustee's
Certificate:
(i) to the Trustee, the Trustee Fee for such Distribution Period and
any unpaid Trustee Fee for any prior Distribution Periods;
(ii) to the Servicer, the Servicing Fee for such Distribution Period and
any unpaid Servicing Fee for any prior Distribution Periods;
(iii) to the Certificateholders, an amount equal to the product of the
quarterly Certificate Rate and the aggregate Certificate balance as of the
first day of the Distribution Period plus any such amounts due to
Certificateholders with respect to any prior Distribution Period (plus an
amount equal to the product of the quarterly Certificate Rate and such
previously due amounts); and
(iv) to the Certificateholders, the balance remaining in the Collection
Account after payment of the amounts described in clauses (i)-(iii) above.
REPORTS TO CERTIFICATEHOLDERS AND EVIDENCE OF COMPLIANCE
On each Calculation Date, the Servicer will provide to the Trustee, and the
Trustee will provide to each Certificateholder a certificate indicating (i) the
Bondable Conservation Investment Balance as of such Calculation Date and (ii) a
comparison of the Bondable Conservation Investment Balance and the Projected
Bondable Conservation Investment Balance, together with a statement as to
whether a Variance exists. In addition, within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a Certificateholder, a statement of the
aggregate amounts distributed during the year.
On or before each Remittance Date, the Servicer shall prepare and furnish to
the Trustee a certificate for the related Collection Period setting forth the
aggregate amount remitted and the components thereof. The Servicer shall deliver
to the Trustee on or before April 30 of each year, a certificate signed by an
appropriate officer of the Servicer stating that to the best of such officer's
knowledge, after a review of the Servicer's activities during the prior year,
the Servicer has fulfilled all of its material obligations in all material
respects under the Pooling and Servicing Agreement. The Servicer shall also
cause a firm of independent public accountants to prepare a report for the use
of the Trustee on or before May 31 of each year to the effect that such firm has
performed certain review procedures with respect to the Servicer's performance
and records relating to servicing the Purchased Assets and has found them to be
in compliance with the Pooling and Servicing Agreement.
The Trustee shall provide a copy of any Servicer's certificate described in
the immediately preceding paragraph to any Certificateholder who so requests in
writing at the Trustee's offices at 450 West 33rd Street, 15th Floor, New York,
New York 1001, Attention: Structured Finance Services (ABS).
REPRESENTATIONS AND WARRANTIES
As of the Closing Date, the Seller will make representations and warranties
to the Trust relating to the Purchased Assets to the effect, among other things,
that as of such Closing Date (i) the Purchased Assets have been conveyed to the
Trust free and clear of any liens, claims or encumbrances arising through the
Seller; (ii) no authorization or approval or other action by, and no notice to
or filing with, and no consent by, any governmental authority, regulatory body
or third party is required for the due execution and delivery by the Seller of
the Pooling and Servicing Agreement and the performance by the Seller of its
obligations thereunder, except for (a) the Initial Order and (b) such other
authorizations, approvals, notices, consents and filings as have been duly
received or made; (iii) it is a corporation duly organized and in good standing
under the laws of the state of Washington with power and authority to
23
<PAGE>
own its properties and to conduct its business as currently owned or conducted,
and to execute, deliver and perform its obligations under the Pooling and
Servicing Agreement; (iv) the execution, delivery and performance of the Pooling
and Servicing Agreement by the Seller have been duly authorized by the Seller by
all necessary corporate action; (v) the Pooling and Servicing Agreement
constitutes a legal, valid and binding agreement of the Seller enforceable
against the Seller in accordance with its terms, subject to bankruptcy and
equity exceptions; and (vi) the consummation of the transactions contemplated by
the Pooling and Servicing Agreement do not (a) conflict with Seller's charter or
bylaws or the material terms of any agreements of Seller, (b) result in the
creation or imposition of any lien upon Seller's properties, or (c) violate any
law or, to the best of Seller's knowledge, any order, rule or regulation
applicable to Seller. As of the Closing Date, the Servicer will make
representations and warranties to the Trust similar in form and substance to
those described in clauses (ii) through (vi) above.
In the event of a material breach by the Seller or the Servicer of any of
its representations and warranties described in the preceding paragraph, the
Seller or the Servicer. as the case may be, will indemnify, defend and hold
harmless the Trustee, the Trust and the Certificateholders against any loss,
liability or expense that is the sole and direct result thereof.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has covenanted that, in
servicing the Purchased Assets: (i) it will manage, service, administer and make
collections on the Purchased Assets with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to assets that the
Servicer services for itself; (ii) it will follow its customary standards,
policies and procedures in performing its duties as Servicer; (iii) it will use
all reasonable efforts, consistent with its customary servicing procedures, (a)
to enforce and maintain rights in respect of the Purchased Assets and (b) to
maintain the aggregate amount of revenues allocated to the Trust pursuant to the
Tariff or any Revised Tariff by making necessary filings with the Commission;
and (iv) it will comply with all laws applicable to and binding upon it relating
to the Purchased Assets, the noncompliance with which would have a material
adverse effect on the value of the Purchased Assets; PROVIDED, HOWEVER, that the
foregoing is not intended to, and shall not, impose any liability on the
Servicer for noncompliance with any law that the Servicer is contesting in good
faith in accordance with its customary standards and procedures.
In the event of a material breach by the Servicer of any of these covenants,
the Servicer is required to indemnify, defend and hold harmless the Trustee, the
Trust and the Certificateholders from any costs, expenses, losses, claims,
damages and liabilities incurred as a sole and direct result thereof.
LIMITATION ON LIABILITY OF SERVICER AND SELLER
The Pooling and Servicing Agreement provides that none of the Seller, the
Servicer or any of their directors, officers, employees or agents, in their
capacities as such, will be under any other liability to the Trust, the Trustee
or the Certificateholders for any action taken, or refrained from being taken
pursuant to the Pooling and Servicing Agreement, provided that the Seller and
Servicer are not so protected against any liability that would otherwise be
imposed by reason of the breach of their respective obligations and duties under
the Pooling and Servicing Agreement.
SUCCESSOR SERVICER; EVENTS OF SERVICING TERMINATION
The Pooling and Servicing Agreement and the Statute provide that any
successor to Puget pursuant to any bankruptcy, reorganization or other
insolvency proceeding shall perform and satisfy all obligations of Puget as
Servicer under the Pooling and Servicing Agreement.
Any person into which the Servicer may be merged or consolidated or any
person resulting from any merger or consolidation to which the Servicer is a
party, or any person succeeding to the business of the Servicer, will be the
successor to the Servicer under the Pooling and Servicing Agreement.
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon (i) appointment of a successor
Servicer and (ii) receipt by the Trustee of notice from each of the Rating
Agencies to the effect that the rating then assigned to the Certificates will
not be withdrawn or reduced as a result of such resignation and the appointment
of a successor.
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<PAGE>
The Servicer may be removed by the Certificateholders upon an Event of
Servicing Termination. "Event of Servicing Termination" shall mean the failure
by the Servicer to make remittances required under the Pooling and Servicing
Agreement, which failure continues unremedied for five days after notice from
the Trustee and which is followed by notice of termination from the holders of
Certificates representing 100% of the aggregate Certificate balance and
appointment of a successor Servicer.
AMENDMENTS
The Pooling and Servicing Agreement may be amended from time to time by
agreement of the Trustee, the Servicer and the Seller without the consent of any
Certificateholders to cure any ambiguity, to correct or supplement any provision
that may be inconsistent with any other provision therein, to evidence a
succession to the Servicer or the Seller pursuant thereto or to add any other
provisions with respect to matters or questions arising thereunder that are not
inconsistent with the provisions thereof; PROVIDED, HOWEVER, that such action
may not, as evidenced by an officer's certificate or an opinion of counsel
delivered to the Trustee, adversely and materially affect the interests of the
Trust or any of the Certificateholders.
The Pooling and Servicing Agreement may also be amended from time to time by
the Seller, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing not less than 51% of the aggregate Certificate balance
for the purpose of adding any provision or changing any of the provisions
thereof, or modifying in any manner the rights of the Certificateholders,
provided that no such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments with
respect to the Purchased Assets or distributions to be made to
Certificateholders, (ii) modify the provisions of the Pooling and Servicing
Agreement relating to Events of Servicing Termination or waiver of past
defaults, or (iii) reduce the percentage of the aggregate Certificate balance
referenced above for approval of an amendment, without the consent of all
Certificateholders.
Promptly following the execution of any such amendment (other than any
amendment described in the first paragraph of this section), the Trustee will
furnish written notice of the substance of such amendment to each
Certificateholder.
THE TRUSTEE
Chemical Bank is the initial Trustee under the Pooling and Servicing
Agreement. The Corporate Trust Department of Chemical Bank is located at 450
West 33rd Street, 15th Floor, New York, New York 10001. The Servicer and its
affiliates may from time to time enter into normal banking and trustee
relationships with the Trustee and its affiliates. An affiliate of the Trustee,
Chemical Securities Inc., will be one of the Underwriters of the Certificates.
The Trustee and the Servicer and any of their respective affiliates may hold
Certificates in their own names; however, any Certificates held by the Servicer
or any of its affiliates shall not be entitled to participate in any decisions
made or instructions given to the Trustee by Certificateholders as a group. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee acting jointly with the Servicer shall have the power
to appoint a co-trustee or separate trustee of all or any part of the Trust. In
the event of such appointment, all rights, powers, duties and obligations shall
be conferred or imposed upon the Trustee and such separate trustee or co-trustee
jointly or, in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee, who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee. Such appointment shall not
absolve the Trustee of its obligations under the Pooling and Servicing
Agreement.
The Trustee may resign at any time, in which event the holders of
Certificates aggregating not less than 51% of the Aggregate Certificate Balance
(the "Majority Holders") may appoint a successor Trustee. The Majority Holders
may also remove the Trustee if the Trustee ceases to be eligible to continue as
such under the Pooling and Servicing Agreement or if the Trustee becomes
insolvent. In such circumstances, the Majority Holders will be obligated to
appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee.
25
<PAGE>
TERMINATION OF THE TRUST
The respective responsibilities of the Seller, the Servicer and the Trustee
created by the Pooling and Servicing Agreement will terminate upon distribution
to the Certificateholders of all amounts required to be distributed to them
under the Pooling and Servicing Agreement. The Tariff and any Revised Tariffs
are scheduled to expire on September 30, 2004, which will be the final date on
which rates under the Tariff or any Revised Tariff may be billed to Customers.
Amounts received prior to March 31, 2005 with respect to bills sent on or prior
to September 30, 2004 will be distributed on subsequent Distribution Dates. The
final Distribution Date will be April 11, 2005.
LIST OF CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder of record holding Certificates
evidencing not less than 10% of the Aggregate Certificate Balance, the Trustee
will afford such Certificateholder access during business hours to the current
list of Certificateholders, for purposes of communicating with other
Certificateholders with respect to their rights under the Pooling and Servicing
Agreement. See "-- Book-Entry Registration" and "-- Definitive Certificates."
The Pooling and Servicing Agreement will not provide for any annual or other
meetings of Certificateholders.
26
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Perkins Coie, counsel to Puget ("Tax Counsel"), has prepared the following
summary of the material U.S. federal income tax consequences resulting from the
purchase, ownership and disposition of Certificates. This summary neither
purports to consider all the possible tax consequences of the purchase,
ownership or disposition of the Certificates nor reflects issues that may be
material to an investor based on its particular tax situation. It deals only
with Certificates held as capital assets and, except as expressly indicated, it
is addressed only to initial purchasers of Certificates. It does not deal with
holders with a special tax status or special tax situations, such as dealers in
securities. Except to the extent discussed under "-- Taxation of Non-U.S.
Certificateholders," this discussion may not apply to non-U.S. persons that are
not subject to U.S. federal income tax on a net income basis.
This summary is based on the U.S. federal income tax laws and regulations
now in effect and as currently interpreted, and does not take into account
possible changes in such tax laws or such interpretations, all of which may be
applied retroactively. It does not include any description of the tax laws of
any state or local governments within the United States, or of any foreign
government, that may be applicable to the Certificates or the
Certificateholders. Persons considering the purchase of Certificates should
consult their own tax advisors concerning the application of the U.S. federal
income tax laws to their particular situations, as well as any consequences
arising under the laws of any other taxing jurisdiction.
No rulings have been or will be sought from the IRS with respect to any U.S.
federal income tax consequences discussed below. Thus, no assurances can be
given that the IRS will not take contrary positions. Accordingly, each
prospective investor is urged to consult its own tax advisor with respect to the
U.S. federal income tax consequences of holding an interest in a Certificate.
For purposes of the discussion below, (i) "U.S. Person" means a citizen or
resident of the United States, a corporation, partnership or other specified
entity created or organized in or under the laws of the United States, or any
political subdivision thereof, or an estate or trust the income of which is
includible in gross income for U.S. federal income tax purposes regardless of
its source and (ii) "non-U.S. person" means a person other than a U.S. Person.
TAX STATUS OF THE TRUST
Under the Trust Agreement, the Certificateholders agree to treat the Trust
as a grantor trust within the meaning of Section 671 ET SEQ. of the Code. As
such, the Trust itself should not be subject to tax unless it is recharacterized
as an association taxable as a corporation. Characterization of the Trust as an
association taxable as a corporation could cause the Trust to incur federal
income taxes and cause payments received by Certificateholders to constitute
taxable dividends. Tax Counsel has reviewed the Pooling and Servicing Agreement
and is of the opinion that the Trust will not be taxable as a corporation.
TAXATION OF U.S. CERTIFICATEHOLDERS
Each Certificateholder that is a U.S. person will be required to include in
income, in accordance with its usual method of accounting, the portion of the
stated interest attributable to the Certificates held by such holder. For
federal income tax purposes, the Trust will be treated as owning a debt
obligation in which each Certificateholder will own an undivided interest;
accordingly each Certificateholder will be required to report as interest income
its share of the income of the Trust, which will equal in amount the stated
interest attributable to the Certificates held by such holder. Tax Counsel is of
the opinion that the Certificateholders will not be required to include in
taxable income from the Trust any original issue discount ("OID") income.
However, any Overcollateralization Amount received by a Certificateholder will
be ordinary income if and when received. In addition, under current proposed
regulations, any distribution by the Trust to a Certificateholder in excess of
the amount equal to the Bondable Conservation Investment Amount allocable to
such holder plus interest at the Certificate Rate is contingent interest
required to be included in gross income of the Certificateholder in the year in
which the amount of such payment become fixed, which is expected to be the year
in which any such amount will be distributed.
A Certificateholder that is a U.S. person will recognize gain or loss upon
the sale or exchange of a Certificate equal to the difference between the amount
realized from such sale or exchange (exclusive of
27
<PAGE>
any portion thereof reflecting accrued but unpaid interest) and its tax basis in
the Certificate. A Certificateholder that is a U.S. person will have a tax basis
in a Certificate equal to the Certificateholder's purchase price for such
Certificate, decreased by any principal repayments and any amortization of bond
premium and increased by the amount of any OID previously taken into income.
TAXATION OF NON-U.S. CERTIFICATEHOLDERS
Interest paid to a Certificateholder that is a non-U.S. person will be
subject to U.S. withholding tax of 30% or such lower amount as may apply by
income tax treaty between the United States and the country in which the
Certificateholder is resident except that no withholding tax will apply if the
portfolio interest exemption under Section 881(c) or 871(g) of the Code applies.
The portfolio interest exemption should apply if the Certificateholder is not a
bank and it provides to the Trustee a form W-8 or the equivalent thereof. See
"Information Reporting and Backup Withholding" below for requirements for
exemption of non-U.S. persons from information reporting and backup withholding.
Notwithstanding the foregoing, if interest or other income received with
respect to the Certificates is effectively connected with a U.S. trade or
business conducted by a Certificateholder that is a non-U.S. person, such
Certificateholder, although exempt from the withholding tax described in the
preceding paragraph, may be subject to U.S. federal income tax on such interest
in the same manner as if it were a U.S. person. In addition, if such
Certificateholder is a corporation, it may be subject to a branch profits tax
equal to 30% (or lower treaty rate) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, certain information, including the
Certificateholder's name, address and taxpayer identification number (either the
Certificateholder's social security number or its employer identification
number, as the case may be), the aggregate amount of principal and interest paid
and the amount of tax withheld, if any. This obligation, however, does not apply
with respect to certain U.S. persons, including corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts and individual
retirement accounts.
In the event a U.S. person subject to the reporting requirements described
above fails to supply its correct taxpayer identification number in the manner
required by applicable law or under reports its tax liability, the Trust, its
agents or paying agents may be required to "backup" withhold a tax equal to 31%
of each payment of principal and interest on the Certificates. This backup
withholding is not an additional tax and may be credited against the
Certificateholder's U.S. federal tax liability, provided that the required
information is furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made by the Trust or any agent thereof to
a Certificateholder that is a non-U.S. person if (i) the beneficial owner of the
Certificate certifies under penalties of perjury that it is not a U.S. Person
and provides its name, address and taxpayer identification number (if any) or
(ii) a securities clearing organization, bank or other financial institution
that holds customer's securities in the ordinary course of its trade or business
(a "financial institution") and holds the Certificate certifies to the Trust or
its agent, under penalties of perjury, that such statement has been received
from the beneficial owner by it or another financial institution and furnishes
the payor with a copy thereof. In order to take advantage of any treaty
exemption from U.S. withholding tax on interest, a Certficateholder must provide
an IRS form 1001. In order to take advantage of the portfolio interest
exemption, Certificateholders must provide a form W-8 or the equivalent thereof.
Payment of the proceeds from the sale of a Certificate to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except to the extent that the broker is (x) a U.S. person,
(y) a controlled foreign corporation for U.S. federal income tax purposes of (z)
a foreign person 50 percent of more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding the
payment was effectively connected with a U.S. trade or business, information
reporting may apply to such payments. Payment of the proceeds from the sale of a
Certificate to or through the U.S. office of a broker is subject to information
reporting and backup withholding unless the Certificateholder or beneficial
owner certifies as to its taxpayer identification number or otherwise
establishes an exemption from information reporting and backup withholding.
28
<PAGE>
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on employee benefit plans
("Plans") subject to ERISA or the Code and persons who have certain specified
relationships to such Plans ("Parties-in-Interest" under ERISA and "Disqualified
Persons" under the Code). ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA and prohibits certain transactions between
a Plan and Parties-in-Interest or Disqualified Persons with respect to such
Plans.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R.
Section2510.3-101) concerning the definition of what constitutes the assets of a
Plan (the "Plan Asset Regulation"). The Plan Asset Regulation provides that, as
a general rule, the underlying assets and properties of corporations,
partnerships, trusts and certain other entities in which a Plan purchases an
"equity interest" will be deemed for purposes of ERISA to be assets of the
investing Plan, unless certain exceptions apply.
The Plan Asset Regulation defines an "equity interest" as any interest in an
entity other than an instrument that is treated as indebtedness under applicable
local law and that has no substantial equity features. Although it is not free
from doubt, the Certificates offered hereby should be treated as "equity
interests" for purposes of the Plan Asset Regulation. In addition, there can be
no assurance that any of the exceptions set forth in the Plan Asset Regulation
will apply to the purchase of the Certificates offered hereby.
One exception under the Plan Asset Regulation provides that an investing
Plan's assets will not include any of the underlying assets of an entity if the
class of "equity" interests in question are (i) held by 100 or more investors
who are independent of the issuer and each other, (ii) freely transferable, and
(iii) sold as part of an offering pursuant to (a) an effective registration
statement under the Securities Act or (b) an effective registration statement
under Section 12(b) or 12(g) of the Exchange Act (the "Publicly Offered
Securities Exception"). There can be no assurance that the Publicly Offered
Securities Exception or any other exception set forth in the Plan Asset
Regulation will be applicable to the Certificates offered hereby.
Under the terms of the Plan Asset Regulation, if the issuer were deemed to
hold Plan assets by reason of a Plan's investment in a Certificate, such Plan
assets would include an undivided interest in the Purchased Assets held by the
issuer. In such event, the persons providing services with respect to the
Purchased Assets may be subject to the fiduciary responsibility provisions of
Title 1 of ERISA and to the prohibited transaction provisions of ERISA and
Section 4975 of the Code with respect to transactions involving such assets. In
addition, if any of the obligors on the Purchased Assets is a Party-in-Interest
or a Disqualified Person with respect to an investing Plan, such Plan's
investment could be deemed to constitute a transaction prohibited under Title 1
of ERISA or Section 4975 of the Code (E.G., the extension of credit between a
Plan and a Party-in-Interest or Disqualified Person). Such transactions may,
however, be subject to a statutory or administrative exemptions such as
Prohibited Transaction Class Exemption ("PTCE") 90-1, which exempts certain
transactions involving insurance company pooled separate account; PTCE 91-38,
which exempts certain transactions involving bank collective investment funds;
and PTCE 84-14, which exempts certain transactions effected on behalf of a Plan
by a "qualified professional asset manager" or pursuant to any other available
exemption. Such exemptions may not, however, apply to all of the transactions
that could be deemed prohibited transactions in connection with its investment.
Any Plan fiduciary that proposes to cause a Plan to purchase Certificates
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to such investment and whether any exemption would be
applicable and determine on its own whether all conditions of such exemption or
exemptions have been satisfied. Moreover each Plan fiduciary should determine
whether, under the general fiduciary standards of investment prudence and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the Plan's overall investment policy and the composition of
the Plan's investment portfolio.
29
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among Puget, as originator of the Trust, and
Salomon Brothers Inc and Chemical Securities Inc., as underwriters (the
"Underwriters"), the Seller has agreed to cause the Trust to sell to each of the
Underwriters, and the Underwriters have severally agreed to purchase, the
principal amount of Certificates set forth opposite each Underwriter's name
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CERTIFICATES TO BE PURCHASED
- -------------------------------------------------------------------------- ----------------------------
<S> <C>
Salomon Brothers Inc...................................................... $
Chemical Securities Inc................................................... $
---------------
Total................................................................. $
---------------
---------------
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby if any Certificates are purchased. Puget has been
advised that the Underwriters propose initially to offer the Certificates to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of % of the principal amount of the Certificates. The Underwriters may allow
and such dealers may reallow a concession not in excess of % of the principal
amount of the Certificates. After the initial public offering, the public
offering price and such concessions may be changed.
Puget, as the Seller, will be responsible for payment of the underwriting
compensation and fees to the Underwriters. The Trust and the Certificateholders
will not pay any underwriting discounts, commissions or other compensation to
the Underwriters.
Chemical Securities Inc. is an affiliate of Chemical Bank which is a lender
to Puget. In addition, Chemical Bank, or its affiliates, participates on a
regular basis in various general financing and banking transactions for Puget.
The Underwriting Agreement provides that Puget will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Seller and Servicer by Perkins Coie, Seattle, Washington,
and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York, New
York. Certain federal income tax matters will be passed upon for the Seller by
Perkins Coie.
30
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Bondable Conservation Investment Amount.................................................................. cover
Bondable Conservation Investment Balance................................................................. 4
Calculation Date......................................................................................... 4
Cede..................................................................................................... 2
Certificateholder........................................................................................ 6
Certificate Owner........................................................................................ 2
Certificates............................................................................................. cover
Certificate Rate......................................................................................... 3
Collection Account....................................................................................... 4
Commission............................................................................................... cover
Code..................................................................................................... 8
Conservation Asset Transaction Amount.................................................................... 3
Conservation Repayment Contracts......................................................................... 5
Customers................................................................................................ 4
Definitive Certificates.................................................................................. 22
Disqualified Persons..................................................................................... 37
Distribution Date........................................................................................ cover
Distribution Period...................................................................................... 8
DTC...................................................................................................... 2
ERISA.................................................................................................... 8
Event of Servicing Termination........................................................................... 29
Exchange Act............................................................................................. 2
FERC..................................................................................................... 10
Holders.................................................................................................. 22
Indirect Participants.................................................................................... 21
Initial Order............................................................................................ 3
Insolvency Laws.......................................................................................... 9
IRS...................................................................................................... 8
Issuer................................................................................................... 3
Majority Holders......................................................................................... 30
OID...................................................................................................... 31
Overcollateralization Amount............................................................................. 4
Participants............................................................................................. 20
Parties-in-Interest...................................................................................... 33
Paying Agent............................................................................................. 21
Plan Asset Regulation.................................................................................... 33
Projected Bondable Conservation Investment Balance....................................................... 4
Pooling and Servicing Agreement.......................................................................... cover
Pro Forma Schedule....................................................................................... 4
PTCE..................................................................................................... 34
Publicly Offered Securities Exemption.................................................................... 34
Puget.................................................................................................... cover
Purchased Assets......................................................................................... cover
Purchased Sale Proceeds.................................................................................. 5
Qualified Trust Institution.............................................................................. 25
Rating Agencies.......................................................................................... 8
Registration Statement................................................................................... cover
Regulatory Year.......................................................................................... 13
Revised Tariff........................................................................................... 4
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Revised Tariff Amount.................................................................................... 4
Remittance Date.......................................................................................... 6
S.E.C.................................................................................................... 2
Securities Act........................................................................................... 2
Seller and Servicer...................................................................................... 3
Servicing Fee............................................................................................ 6
Statute.................................................................................................. cover
Tariff................................................................................................... cover
Tax Counsel.............................................................................................. 30
Termination Fees......................................................................................... 14
Trust.................................................................................................... cover
Trustee.................................................................................................. cover
Trustee Fee.............................................................................................. 7
Underwriters............................................................................................. 34
Underwriting Agreement................................................................................... 34
U.S. Person.............................................................................................. 31
Variance................................................................................................. 4
Winter Moratorium........................................................................................ 18
WNG...................................................................................................... 19
</TABLE>
32
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PUGET,
THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Reports to Certificateholders.................. 2
Prospectus Summary............................. 3
Special Considerations......................... 9
The Statute.................................... 12
The Tariff and the Trust Assets................ 12
The Trust...................................... 14
Use of Proceeds................................ 14
The Seller and Servicer........................ 14
Puget Customers and Collections................ 14
Description of the Certificates................ 17
Federal Income Tax Consequences................ 27
ERISA Considerations........................... 29
Underwriting................................... 30
Legal Matters.................................. 30
Index of Terms................................. 31
</TABLE>
------------------------
UNTIL , 1995 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$
PUGET POWER
CONSERVATION GRANTOR
TRUST 1995-1
% CONSERVATION PASS-THROUGH CERTIFICATES, SERIES 1995-1
PUGET SOUND POWER & LIGHT COMPANY
SELLER AND SERVICER
SALOMON BROTHERS INC
CHEMICAL SECURITIES INC.
PROSPECTUS
DATED , 1995
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale of the Certificates being registered
hereby. All amounts shown are estimated, except the Securities and Exchange
Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................. $ 345
Blue Sky fees and expenses........................................... *
Printing and engraving expenses...................................... *
Legal fees and expenses.............................................. *
Accounting fees and expenses......................................... *
Trustee fees and expenses............................................ *
Rating agencies' fees................................................ *
Miscellaneous expenses............................................... *
---------
Total............................................................ $ *
---------
---------
<FN>
- ------------------------
*To be completed by amendment.
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended. Article VIII
of the registrant's Bylaws provides for indemnification of the registrant's
directors, officers, employees and agents to the maximum extent permitted by
Washington law.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, self dealing or illegal
corporate loans or distributions, or any transactions from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article X of the registrant's Restated
Articles of Incorporation contains provisions implementing, to the fullest
extent permitted by Washington law, such limitations on a director's liability
to the Registrant and its shareholders.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Articles of Incorporation of Puget Sound Power & Light Company.
3.2 Bylaws of Puget Sound Power & Light Company.
4.1 Form of Pooling and Servicing Agreement between Puget Sound Power & Light
Company and Chemical Bank, including Form of Certificate.
*5.1 Opinion of Perkins Coie with respect to legality.
*8.1 Opinion of Perkins Coie with respect to tax matters.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
*23.1 Consent of Perkins Coie (included as part of Exhibit 5.1).
24.1 Power of Attorney of Officers and Directors (contained on signature page).
<FN>
- ------------------------
*To be filed by amendment.
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Bellevue, State of
Washington, on the 21st day of December, 1994.
By: /s/ R.R. SONSTELIE
-----------------------------------
R.R. Sonstelie
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints William S. Weaver, Donald E. Gaines, and each of them, with full power
of substitution and full power to act without the other, as his or her true and
lawful attorney-in-fact and agent to act in his or her name, place and stead and
to execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
below on the 21st day of December, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- ----------------------------
<C> <S>
/s/ R.R. SONSTELIE President and Chief
-------------------------------------------- Executive Officer and
R.R. Sonstelie Director
/s/ WILLIAM S. WEAVER Executive Vice President and
-------------------------------------------- Chief Financial Officer and
William S. Weaver Director
/s/ JAMES W. ELDREDGE Secretary and Controller
-------------------------------------------- (Principal Accounting
James W. Eldredge Officer)
/s/ DOUGLAS P. BEIGHLE
-------------------------------------------- Director
Douglas P. Beighle
/s/ CHARLES W. BINGHAM
-------------------------------------------- Director
Charles W. Bingham
/s/ PHYLLIS J. CAMPBELL
-------------------------------------------- Director
Phyllis J. Campbell
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- ----------------------------
<C> <S>
/s/ JOHN D. DURBIN
-------------------------------------------- Director
John D. Durbin
/s/ JOHN W. ELLIS
-------------------------------------------- Director
John W. Ellis
/s/ DANIEL J. EVANS
-------------------------------------------- Director
Daniel J. Evans
-------------------------------------------- Director
Nancy L. Jacob
/s/ R. KIRK WILSON
-------------------------------------------- Director
R. Kirk Wilson
</TABLE>
II-4
<PAGE>
EXHIBIT 1.1
<PAGE>
PUGET POWER CONSERVATION GRANTOR TRUST, 1995-1
__% CONSERVATION PASS-THROUGH CERTIFICATES, SERIES 1995-1
PUGET SOUND POWER & LIGHT COMPANY
(SELLER AND SERVICER)
UNDERWRITING AGREEMENT
__________, 1995
Salomon Brothers Inc
Chemical Securities Inc.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
1. INTRODUCTION. PUGET SOUND POWER & LIGHT COMPANY, a Washington
corporation (the "Seller"), proposes to cause Puget Power Conservation Grantor
Trust 1995-1 (the "Trust") to issue and sell $_______ principal amount of its
__% Conservation Pass-Through Certificates, Series 1995-1 (the "Certificates")
to Salomon Brothers Inc and Chemical Securities Inc. (collectively, the
"Underwriters"). Each Certificate will represent a fractional undivided
interest in the Trust. The property of the Trust will consist of (i) the
Purchased Conservation Investment Assets, (ii) the Purchased Contract Rights,
(iii) the Purchased Sale Proceeds, and (iv) all proceeds of the foregoing
(collectively, the "Purchased Assets"). The Trust will be formed, the Purchased
Assets will be serviced by Puget Sound Power & Light Company (in such capacity,
the "Servicer") and the Certificates will be issued pursuant to a pooling and
servicing agreement, dated as of ______, 1995 (as amended and supplemented from
time to time (the "Pooling and Servicing Agreement"), among the Seller, the
Servicer and Chemical Bank, as trustee (the "Trustee"). Pursuant to the Pooling
and Servicing Agreement, the Servicer will act as custodian of the Purchased
Asset Documentation. Capitalized terms
<PAGE>
used and not otherwise defined herein shall have the meanings given to them in
the Pooling and Servicing Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to, and agrees with the Underwriters that:
(a) The Seller has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (No. 33-________) on Form S-1,
including a related preliminary prospectus, for the registration under the
Securities Act of 1933, as amended (the "Act"), of the offering and sale of
the Certificates. The Seller may have filed one or more amendments
thereto, including the related preliminary prospectus, each of which has
previously been furnished to you. The Seller will next file with the
Commission either (i) prior to effectiveness of such registration
statement, a further amendment to such registration statement (including
the form of final prospectus) or (ii) after effectiveness of such
registration statement, a final prospectus in accordance with Rules 430A
and 424(b)(l) or (4). In the case of clause (ii), the Seller has included
in such registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and the
rules thereunder to be included in the Prospectus with respect to the
Certificates and the offering thereof. As filed, such amendment and form
of final prospectus, or such final prospectus, shall contain all Rule 430A
Information, together with all other such required information, with
respect to the Certificates and the offering thereof and, except to the
extent the Representatives shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus) as the Seller has
advised you, prior to the Execution Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is
2
<PAGE>
first filed (if required) in accordance with Rule 424(b) and on the Closing
Date, the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act and the rules
thereunder; on the Effective Date, the Registration Statement did not or
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein not misleading; and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and
on the date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the Seller makes no representations or warranties as to the
information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity
with information relating to either Underwriter furnished in writing to the
Seller by or on behalf of such Underwriter specifically for inclusion in
the Registration Statement or the Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean
the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in paragraph (a) above and any preliminary
prospectus included in the Registration Statement at the Effective Date
that omits Rule 430A Information. "Prospectus" shall mean the prospectus
relating to the Certificates that is first filed pursuant to Rule 424(b)
after the Execution Time or, if no filing pursuant to Rule 424(b) is
required, shall mean the form of final prospectus relating to the
Certificates included in the Registration Statement at the
3
<PAGE>
Effective Date. "Registration Statement" shall mean the registration
statement referred to in paragraph (a) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended. Such term shall include
any Rule 430A Information deemed to be included therein at the Effective
Date as provided by Rule 430A. "Rule 424" and "Rule 430A" refer to such
rules under the Act. "Rule 430A Information" means information with
respect to the Certificates and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant
to Rule 430A.
(d) The Seller has been duly organized and is in good standing under
the laws of the State of Washington, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted.
(e) As of the Closing Date, the Certificates will be duly and validly
authorized, and, when duly and validly executed by the Trustee on behalf of
the Trust in accordance with the Pooling and Servicing Agreement, and
following delivery to and payment therefor by the Underwriters, will be
validly issued and outstanding and entitled to the benefits of the Pooling
and Servicing Agreement.
(f) The Seller has the power and authority to execute and deliver
this Agreement and the Pooling and Servicing Agreement and to carry out
their respective terms; the Seller has the power and authority to sell and
assign the Purchased Assets to be sold and assigned to the Trustee pursuant
to the Pooling and Servicing Agreement as part of the Trust; and the
execution, delivery and performance of this Agreement and the Pooling and
Servicing Agreement have been duly authorized by the Seller by all
necessary corporate action.
4
<PAGE>
(g) This Agreement and the Pooling and Servicing Agreement each
constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(h) Neither the execution and delivery of the Pooling and Servicing
Agreement, the issue and sale of the Certificates, nor the consummation of
the transactions contemplated by this Agreement and the Pooling and
Servicing Agreement and the fulfillment of the terms hereof and thereof (A)
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under the
charter or bylaws of the Seller, or conflict with or breach any of the
material terms of provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement or other
instrument to which the Seller is a party or by which it is bound, (B)
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument,
or (C) violate any law or, to the best of the Seller's knowledge, any
order, rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
(i) There are no proceedings or investigations pending or, to the
best of the Seller's knowledge, threatened before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties (A) asserting the invalidity
of this Agreement, the Pooling and Servicing Agreement or the Certificates
and (B) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement or
the Pooling and Servicing Agreement.
5
<PAGE>
(j) No authorization or approval or other action by, and no notice to
or filing with, and no consent by, any governmental authority, regulatory
body or third party is required for the due execution and delivery by the
Seller of this Agreement or the Pooling and Servicing Agreement and the
performance by the Seller of its obligations under this Agreement and the
Pooling and Servicing Agreement except for (i) the Initial Commission Order
and (ii) such authorizations, approvals, notices, consents and filings that
have been duly received or made, as the case may be, as of the date of this
Agreement.
(k) There are no liens, claims or encumbrances on any of the
Purchased Assets arising by, through or under the Seller.
(l) The Trust is not an "investment company" or under the "control"
of an "investment company" as such terms are defined under the Investment
Company Act of 1940, as amended.
(m) The statements in the Prospectus under the headings "The
Statute," "The Tariff and the Trust Assets," "Federal Income Tax
Consequences" and "ERISA Considerations" fairly summarize the matters
described therein.
(n) Since the dates as of which information is given in the
Prospectus, excluding any amendment or supplement thereto, there has been
no material adverse change or any development involving a material adverse
change, in or affecting the condition (financial or other), earnings,
business or properties of the Seller and its subsidiaries, whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus, excluding any amendment or
supplement thereto.
3. PURCHASE, SALE AND DELIVERY OF CERTIFICATES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Seller agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Seller, the entire aggregate principal amounts of Certificates
6
<PAGE>
set forth opposite the names of the Underwriters in Schedule I hereto. The
Certificates are to be purchased at the purchase price of _____% of the
aggregate initial Certificate Balance (as defined in the Pooling and Servicing
Agreement), plus accrued interest, if any, at the Certificate Rate (as defined
in the Prospectus) from (and including) ____________, 1995 to (but excluding)
the Closing Date. The Seller shall deliver the Certificates to the Underwriters
against payment by the Underwriters of the purchase price thereof, to or upon
the order of the Seller by certified or official bank check or checks drawn on
or by a New York Clearing House bank and payable in next day funds, at the
office of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New
York at 10:00 a.m. (New York City time), or at such other date and time not
later than seven full business days thereafter as the Underwriters and the
Seller determine, such times being herein referred to as the "Closing Date."
The Certificates so to be delivered will be initially represented by
Certificates registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of the Certificates
will be represented by book entries on the records of DTC and participating
members thereof. Definitive Certificates will be available only under limited
circumstances.
4. OFFERING BY UNDERWRITERS. It is understood that the Underwriters
propose to offer the Certificates for sale to the public (which may include
selected dealers) as set forth in the Prospectus and the Underwriters agree that
all such offers and sales by the Underwriters shall be made in compliance with
all applicable laws and regulations.
5. COVENANTS OF THE SELLER. The Seller covenants and agrees with the
Underwriters as follows:
(a) The Seller shall use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Certificates, the Seller shall not file any amendment of the
Registration Statement or supplement to the Prospectus without your prior
consent. Subject to the foregoing sentence, if the Registration Statement
has become or becomes effec-
7
<PAGE>
tive pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Seller shall cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and shall provide evidence satisfactory to the Underwriters of
such timely filing. The Seller shall promptly advise the Underwriters (i)
when the Registration Statement, if not effective at the Execution Time,
and any amendment thereto, shall have become effective, (ii) when the
Prospectus, and any supplement thereto, shall have been filed (if required)
with the Commission pursuant to Rule 424(b), (iii) when, prior to
termination of the offering of the Certificates, any amendment to the
Registration Statement shall have been filed or become effective, (iv) of
any request by the Commission for any amendment of the Registration
Statement or supplement to the Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (vi) of
the receipt by the Seller of any notification with respect to the
suspension of the qualification of the Certificates for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Seller shall use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when in the opinion of counsel for the
Underwriters a prospectus relating to the Certificates is required to be
delivered under the Act, any event occurs as a result of which the
Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or if it shall be necessary to amend the Registration
Statement or supplement the Prospectus to comply with the Act or the rules
thereunder, the Seller promptly shall (i) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of
8
<PAGE>
this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance and (ii) supply any
supplemented Prospectus to you in such quantities as you may reasonably
request.
(c) The Seller shall furnish to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and, so long as delivery
of a prospectus by an Underwriter or dealer may be required by the Act, as
many copies of each Preliminary Prospectus and the Prospectus and any
supplement thereto as the Underwriters may reasonably request. The Seller
shall furnish or cause to be furnished to the Underwriters copies of all
reports on Form SR required by Rule 463 under the Act. The Seller shall
pay the expenses of printing or other production of all documents relating
to the offering.
(d) The Seller shall take such action for the qualification or
exemption of the Certificates for offer and sale under the securities or
Blue Sky laws of such jurisdictions as the Underwriters shall reasonably
request and to pay all reasonable expenses (including reasonable fees and
disbursements of counsel) in connection with such qualification or
exemption and in connection with the determination of the eligibility of
the Certificates for investment under the laws of such jurisdictions as the
Underwriters shall designate. Thereafter, until all of the Certificates
have been retired, the Seller shall arrange for the filing and making of,
and shall pay all fees applicable to, such statements and reports and
renewals of registration necessary in order to continue to qualify or
exempt the Certificate for secondary market transactions in the various
jurisdictions in which the Certificates were originally registered or
exempted for sale.
(e) The Seller shall arrange for the determination of the legality of
the Certificates for purchase by institutional investors and shall pay the
fee of the National Association of Securities Deal-
9
<PAGE>
ers, Inc., in connection with its review of the offering.
(f) For a period from the date of this Agreement until the retirement
of the Certificates, or until such time as no Underwriter shall maintain a
secondary market in the Certificates, whichever first occurs, the Seller
shall deliver to the Underwriters the annual statement of compliance
delivered to the Trustee pursuant to Section 6.10 of the Pooling and
Servicing Agreement and the annual independent auditor's servicing report
furnished to the Trustee pursuant to Section 6.11 of the Pooling and
Servicing Agreement, as soon as such statements are furnished to the
Trustee.
(g) So long as any of the Certificates are outstanding, the Seller
shall furnish to the Underwriters (i) as soon as available, a copy of each
report of the Trust filed with the Commission under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or mailed to
Certificateholders, and (ii) from time to time, such other information
concerning the Seller or the Trust as the Underwriters may reasonably
request.
(h) If the transactions contemplated by this Agreement are
consummated or this Agreement is terminated pursuant to Section 10 below,
the Seller shall pay or cause to be paid all expenses incident to the
performance of the Seller's obligations under this Agreement, and shall pay
or cause to be paid or shall reimburse the Underwriters for any reasonable
expenses (including reasonable fees and disbursements of counsel) incurred
by them in connection with qualification of the Certificates for sale and
determination of their eligibility for investment under the laws of such
jurisdictions as the Underwriters have reasonably requested pursuant to
paragraph (e) above and the printing of memoranda relating thereto, for any
fees charged by investment rating agencies for the rating of the
Certificates, and for expenses incurred in printing and distributing each
Preliminary Prospectus and the Prospectus (including any amendments and
supplements thereto) to the Underwriters.
10
<PAGE>
(i) To the extent, if any, that, any rating necessary to satisfy the
condition set forth in Section 6(i) of this Agreement is conditioned upon
the furnishing of documents or the taking of other actions by the Seller on
or after the Closing Date, the Seller shall furnish such documents and take
such other actions.
(j) If, during the period after the Closing Date in which a
prospectus relating to the Certificates is required to be delivered under
the Act, the Seller receives notice that a stop order suspending the
effectiveness of the Registration Statement or preventing the offer and
sale of the Certificates is in effect, the Seller shall advise the
Underwriters of the issuance of such stop order.
(k) The Seller confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the
Seller further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Securities and Exchange Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Seller's
business with Cuba or with any person or affiliate located in Cuba changes
in any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
(l) Upon any request of the Underwriters, the Seller shall deliver to
the Underwriters a copy of the most recent Monthly Servicer's Certificate
and Trustee's Certificate required by Sections 7.6(a) and (b),
respectively, of the Pooling and Servicing Agreement.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Certificates shall be subject to
the accuracy of the representations and warranties on the part of the Seller
11
<PAGE>
contained herein and in Section 9.1 of the Pooling and Servicing Agreement as of
the Execution Time and the Closing Date, to the accuracy of the representations
and warranties of the Servicer in Section 10.1 of the Pooling and Servicing
Agreement as of the Execution Time and as of the Closing Date, to the accuracy
of the statements of the Seller made in any certificates pursuant to the
provisions hereof, to the performance by the Seller of its obligations hereunder
and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Underwriters agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 p.m. New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 p.m. New
York City time on such date or (ii) 12:00 Noon on the business day
following the day on which the public offering price was determined, if
such determination occurred after 3:00 p.m. New York City time on such
date; if filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Prospectus, and any such supplement, will be
filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Seller shall have furnished to the Underwriters the opinion
of [_________], general counsel of the Seller, dated the Closing Date, to
the effect that:
(i) the Seller has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full
corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification
12
<PAGE>
wherein it owns or leases material properties or conducts material
business;
(ii) the Pooling and Servicing Agreement has been duly
authorized, executed and delivered, and constitutes a legal, valid and
binding instrument enforceable against the Seller in accordance with
its terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect);
and the Certificates have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Pooling and
Servicing Agreement and delivered to and paid for by the Underwriters
pursuant to this Agreement, will constitute legal, valid and binding
obligations of the Seller entitled to the benefits of the Pooling and
Servicing Agreement;
(iii) to the best knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Seller or any of its subsidiaries of a character required to be
disclosed in the Registration Statement which is not adequately
disclosed in the Prospectus, and there is no franchise, contract or
other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit,
which is not described or filed as required; and the statements in the
Prospectus under the headings "The Statute," "The Tariff and the Trust
Assets," "Federal Income Tax Consequences" and "ERISA Considerations"
fairly summarize the matters described therein;
(iv) the Registration Statement has become effective under
the Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best knowledge
of such counsel, no stop order suspending the
13
<PAGE>
effectiveness of the Registration Statement has been issued, no
proceedings for that purpose have been instituted or threatened and
the Registration Statement and the Prospectus (other than the
financial statements and other financial and statistical information
contained therein as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder; and such counsel has
no reason to believe that at the Effective Date the Registration
Statement contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that at the Closing
Date the Prospectus includes any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(v) this Agreement has been duly authorized, executed and
delivered by the Seller;
(vi) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Statute and the Act and such as may be required
under the blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Certificates by the Underwriters and
such other approvals (specified in such opinion) as have been
obtained;
(vii) neither the execution and delivery of the Pooling and
Servicing Agreement, the issue and sale of the Certificates, nor the
consummation of the transactions contemplated by this Agreement or the
Pooling and Servicing Agreement and the fulfillment of the terms
hereof and thereof (A) conflict with, result in any breach of any of
the terms and provisions of, or constitute (with or without notice or
14
<PAGE>
lapse of time) a default under the charter or bylaws of the Seller, or
conflict with or breach any of the material terms of provisions of, or
constitute (with or without notice or lapse of time) a default under,
any indenture, agreement or other instrument known to such counsel and
to which the Seller or any of its subsidiaries is a party or by which
the Seller or any of its subsidiaries is bound, (B) result in the
creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument, or
(C) violate any law or, to the best of the Seller's knowledge, any
order, rule or regulation applicable to the Seller of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or
its properties.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of Washington or the United States, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to
counsel for the Underwriters and (B) as to matters of fact, to the extent
they deem proper, on certificates of responsible officers of the Seller and
public officials. References to the Prospectus in this paragraph (b)
include any supplements thereto at the Closing Date.
(c) The Underwriters shall have received from Skadden, Arps, Slate,
Meagher & Flom, counsel for the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the
Certificates, the Registration Statement, the Prospectus (together with any
supplement thereto) and other related matters as the Representatives may
reasonably require, and the Seller shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass
upon such matters.
15
<PAGE>
(d) The Seller shall have furnished to the Underwriters a certificate
of the Seller, signed by the Chairman of the Board or the President and the
principal financial or accounting officer of the Seller, dated the Closing
Date, to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Seller in this
Agreement and in the Section 9.1 of the Pooling and Servicing
Agreement, and the representations and warranties of the Servicer in
Section 10.1 of the Pooling and Servicing Agreement are true and
correct in all material respects on and as of the Closing Date with
the same effect as if made on the Closing Date and the Seller has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Seller's knowledge,
threatened; and
(iii) since the dates as of which information is given in the
Prospectus, excluding any amendment or supplement thereto, there has
been no material adverse change or any development involving a
material adverse change, in or affecting the condition (financial or
other), earnings, business or properties of the Seller and its
subsidiaries, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the
Prospectus, excluding any amendment or supplement thereto.
(e) At the Execution Time and at the Closing Date, Coopers & Lybrand
shall have furnished to the Underwriters letters, dated respectively as of
the Execution Time and as of the Closing Date, in form and substance
satisfactory to the Underwriters,
16
<PAGE>
confirming that they are independent accountants within the meaning of the
Act and the applicable published rules and regulations thereunder and
stating that they have performed certain specified procedures as a result
of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Seller and its subsidiaries) set forth in the Registration Statement
and the Prospectus, including information specified by the Underwriters and
set forth under the captions "Prospectus Summary," "The Tariff and the
Trust Assets," "Puget Customers and Collections, and "Description of the
Certificates" in the Prospectus, agrees with the accounting records of the
Seller and its subsidiaries, excluding any questions of legal
interpretation.
References to the Prospectus in this paragraph (e) include any
supplement thereto at the date of such letter.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been any change, or any development
involving a prospective change, in or affecting the business or properties
of the Seller and its subsidiaries or the Purchased Assets the effect of
which, is, in the judgment of the Underwriters, so material and adverse as
to make it impractical or inadvisable to proceed with the offering or
delivery of the Certificates as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto).
(g) On or prior to the Closing Date, the Seller shall not offer,
sell, contract to sell or otherwise dispose of any additional similar
asset-backed securities in a grantor trust or other special purpose vehicle
without the Underwriters' prior written consent.
17
<PAGE>
(h) The Underwriters shall have received on the Closing date an
opinion letter or letters of Perkins Coie, counsel to the Seller, dated the
Closing Date, in form and substance reasonably satisfactory to the
Underwriters, (i) to the same effect with respect to the matters enumerated
in Section 6(b); (ii) with respect to the characterization of the transfer
of the Purchased Assets by the Seller to the Trust as a "true sale" for
bankruptcy purposes; and (iii) to the effect that the Trust is a grantor
trust and the Certificateholders own undivided interests in debt.
(i) The Certificates shall have been rated in the highest long-term
rating category by each of the Rating Agencies.
(j) Prior to the Closing Date, the Seller shall have furnished to the
Underwriters such further information, certificates and documents as the
Underwriters may reasonably request.
(k) No Rating Agency shall have reduced or withdrawn its rating, if
any, of any debt securities issued by the Seller.
(l) On or prior to the Closing Date, the Seller shall have delivered
to the Underwriters evidence, in form and substance satisfactory to the
Underwriters, of the Washington Utilities and Transportation Commission's
approval of the Initial Commission Order.
The Seller shall furnish the Underwriters with conformed copies of
such opinions, certificates, letters and documents as the Underwriters
reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriters and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Underwriters. Notice of such
can-
18
<PAGE>
cellation shall be given to the Seller in writing or by telephone or telegraph
confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York, on the Closing Date.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Certificates provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Seller to perform any agreement
herein or comply with any provision hereof other than by reason of a default by
either of the Underwriters, the Seller shall reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Certificates.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Seller agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed or in
any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
19
<PAGE>
that the Seller shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information relating to
any Underwriter furnished to the Seller by or on behalf of such Underwriter
specifically for inclusion therein. This indemnity agreement shall be in
addition to any liability which the Seller may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Seller, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Seller within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Seller to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to
the Seller by or on behalf of such Underwriter specifically for inclusion
in the documents referred to in the foregoing indemnity. The Seller
acknowledges that the statements set forth in the last paragraph of the
cover page and under the heading "Underwriting" in any Preliminary
Prospectus and the Prospectus constitute the only information furnished in
writing by or on behalf of the several Underwriters for inclusion in any
Preliminary Prospectus or the Prospectus, and you, as the Underwriters,
confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) shall not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) shall not, in any event relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification
20
<PAGE>
obligation provided in paragraph (a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at
the indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except as set
forth below); PROVIDED, HOWEVER, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election
to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party
shall not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
21
<PAGE>
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Seller and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Seller and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by
the Seller and by the Underwriters from the offering of the Certificates;
PROVIDED, HOWEVER, that in no case shall any Underwriter (except as may be
provided in any agreement among underwriters relating to the offering of
the Certificates) be responsible for any amount in excess of the
underwriting discount or commission applicable to the Certificates
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Seller
and the Underwriters shall contribute in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of
the Seller and of the Underwriters in connection with the statements or
omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Seller shall be deemed
to be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Seller or the Underwriters. The
Seller and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method
of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d),
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of
22
<PAGE>
such fraudulent misrepresentation. For purposes of this Section 8, each
person who controls an Underwriter within the meaning of either the Act or
the Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such Underwriter,
and each person who controls the Seller within the meaning of either the
Act or the Exchange Act, each officer of the Seller who shall have signed
the Registration Statement and each director of the Seller shall have the
same rights to contribution as the Seller, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. DEFAULT BY AN UNDERWRITER. If either of the Underwriters shall
fail to purchase and pay for any of the Certificates agreed to be purchased by
such Underwriter hereunder and such failure to purchase shall constitute a
default in the performance of its obligations under this Agreement, the
nondefaulting Underwriter shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the Certificates, and if such
nondefaulting Underwriter does not purchase all the Certificates, this
Agreement shall terminate without liability to such nondefaulting Underwriter,
the Trust or the Seller. In the event of a default by either Underwriter as set
forth in this Section 9, the Closing Date shall be postponed for such period,
not exceeding seven days, as the nondefaulting Underwriter shall determine in
order that the required changes in the Registration Statement and the Prospectus
or in any other documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting Underwriter of its liability, if
any, to the Seller and any nondefaulting Underwriter for damages occasioned by
its default hereunder.
10. TERMINATION. This Agreement shall be subject to termination in
the absolute discretion of the Underwriters, by notice given to the Seller prior
to delivery of and payment for the Certificates, if prior to such time (i)
trading in the Seller's Common Stock shall have been suspended by the Commission
or the New York Stock Exchange or trading in securities generally on the New
York Stock Exchange shall have been suspended or limited or minimum prices shall
have been established on such Exchange, (ii) a banking moratorium shall have
been
23
<PAGE>
declared either by Federal, New York State or Washington State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the judgment of the Underwriters, impracticable or inadvisable to proceed
with the offering or delivery of the Certificates as contemplated by the
Prospectus (exclusive of any supplement thereto).
11. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The
respective indemnities, agreements, representations, warranties and other
statements of the Seller or its officers and of the Underwriters set forth in or
made pursuant to this Agreement shall remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of the Underwriters or the Seller or any of their officers or
directors or any controlling persons, and shall survive delivery of and payment
for the Certificates. The provisions of Sections 7 and 8 hereof shall survive
the termination and cancellation of this Agreement.
12. NOTICES. All communications hereunder shall be in writing, and,
if sent to the Underwriters shall be mailed, delivered or sent by facsimile
transmission and confirmed to Salomon Brothers Inc, Seven World Trade Center,
New York, New York 10048; Attention: Curtis S. Probst, facsimile (212) 738-3848
with a copy to Paul B. Young, facsimile (212) 783-4120, or if sent to the Seller
shall be mailed, delivered or sent by facsimile transmission and confirmed to it
at 411 108th Avenue N.E., Bellevue, Washington 98004, Attention: Chief
Financial Officer, facsimile (206) 462-3300.
13. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling person referred to in Section 8, and no other
person shall have any right or obligation hereunder.
14. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
24
<PAGE>
15. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
**************************
25
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon
it shall become a binding agreement between the Seller and you in accordance
with its terms.
Very truly yours,
PUGET SOUND POWER & LIGHT COMPANY,
as Seller and Servicer
By:________________________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
SALOMON BROTHERS INC
CHEMICAL SECURITIES INC.
By: SALOMON BROTHERS INC
By:_______________________
26
<PAGE>
SCHEDULE I
Principal Amount
of Certificates
Underwriters to Be Purchased
------------ ---------------
Salomon Brothers Inc . . . . . . . . . . . . . . . .
Chemical Securities Inc. . . . . . . . . . . . . . .
-------------------
Total . . . . . . . . . . . . . . . . . . .
-------------------
-------------------
<PAGE>
EXHIBIT 3.1
<PAGE>
[Seal of the State of Washington]
- --------------------------------------------------------------------------------
STATE OF WASHINGTON SECRETARY OF STATE
- --------------------------------------------------------------------------------
I, Ralph Munro, Secretary of State of the State of Washington and custodian of
its seal,
hereby certify that the attached is a true and correct copy of
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES
(SERIES B, $100 PAR VALUE PREFERRED STOCK)
(THE FLEXIBLE DUTCH AUCTION RATE TRANSFERABLE SECURITIES)
of
PUGET SOUND POWER & LIGHT COMPANY
as filed in this office on January 15, 1988
Date: 1/15/1988
Given under my hand and the seal of the State
of Washington, at Olympia, the State Capitol.
/s/ RALPH MUNRO
---------------------------------------------
RALPH MUNRO, SECRETARY OF STATE
dlh
<PAGE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR
THE FLEXIBLE DUTCH AUCTION RATE TRANSFERABLE SECURITIES(SM)
$100 PAR VALUE PREFERRED STOCK, SERIES B
-----------------------------------
Pursuant to Section 23A.08.130 of the Washington Business Corporation
Act, Puget Sound Power & Light Company (the "Corporation"), a Washington
corporation, hereby states that at a meeting of the Board of Directors of the
Corporation duly convened and held on January 14, 1988, the following
resolution was duly adopted:
RESOLVED, that pursuant to the authority expressly vested in it by the
Corporation's Restated Articles of Incorporation (the "Articles") and subject
to the preferences, limitations, relative rights and other terms and
provisions set forth in the Articles, the Board of Directors of the
Corporation hereby establishes an additional series of the Corporation's $100
par value Preferred Stock, sets forth the designation of the series, and
fixes and determines the relative rights and preferences thereof, including
the methods and procedures for determining the rate(s) of dividends, the
price, terms and conditions of redemption, and the amount payable upon shares
in the event of voluntary or involuntary liquidation, as follows:
1. DESIGNATION. The shares of such series shall be designated
"Flexible Dutch Auction Rate Transferable Securities(SM) $100 Par Value
Preferred Stock, Series B" (the "Series B FLEX DARTS") and the number of shares
constituting such series shall be 500,000. The Series B FLEX DARTS shall be
issued in units (the "Units"), with each Unit consisting of 1,000 shares of
Series B FLEX DARTS. The Series B FLEX DARTS may be purchased or transferred
only in whole Units and the Series B FLEX DARTS included in the Units may
not be separately purchased or transferred.
<PAGE>
2. DEFINITIONS. Unless the context or use indicates another or
different meaning or intent, the following terms shall have the following
meanings, whether used in the singular or plural:
(a) "Additional Dividend Payment Date," during a Designated
Dividend Period of 26 or 52 weeks, means the thirteenth, twenty-sixth and
thirty-ninth Monday (provided that any such Monday is not otherwise a Normal
Dividend Payment Date), as applicable, after the first day of such Designated
Dividend Period; PROVIDED, HOWEVER, that (i) if any such Monday or the
Tuesday following such Monday is not a Business Day, the "Additional Dividend
Payment Date" that would otherwise be such Monday shall be the first Business
Day after such Monday that is immediately followed by a Business Day or (ii)
if the Securities Depository shall make available to its participants and
members the amounts due as dividends on Units in immediately available funds
in The City of New York on the dates on which such dividends are payable (and
the Securities Depository shall have so advised the Trust Company) and if any
such Monday is not a Business Day, the "Additional Dividend Payment Date"
that would otherwise be such Monday shall be the first Business Day after
such Monday.
(b) "Applicable Rate" means the rate per annum at which
dividends are payable on the shares of the Series B FLEX DARTS for any
Dividend Period.
(c) "Auction" means each periodic operation of the Auction
Procedures.
(d) "Auction Date" means the first Business Day preceding the
first day of a Dividend Period.
(e) "Auction Procedures" means the procedures for conducting
Auctions set forth in paragraph 6 below.
(f) "Business Day" means a day on which the New York Stock
Exchange is open for trading and which is not a Saturday, Sunday or other day
on which banks in The City of New York are authorized by law to close.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Common Stock" means all shares now or hereafter issued of the
class of common stock, without par value, of the Corporation now or hereafter
authorized and any other shares into which such shares may hereafter be
changed from time to time.
-2-
<PAGE>
(i) "Corporation" means Puget Sound Power & Light Company, a
Washington corporation.
(j) "Date of Original Issue" means the date on which the
Corporation originally issues Series B FLEX DARTS.
(k) "Designated Dividend Period" has the meaning set forth in
paragraph 3(b)(i) below.
(l) "Dividend Payment Date" has the meaning set forth in paragraph
3(b)(i) below.
(m) "Dividend Period" has the meaning set forth in paragraph
3(c)(i) below.
(n) "Holder" means the holder of Units as its name appears on the
Stock Books of the Corporation.
(o) "Initial Dividend Payment Date" has the meaning set forth in
paragraph 3(b)(i) below.
(p) "Initial Dividend Period" has the meaning set forth in
paragraph 3(c)(i) below.
(q) "Initial Dividend Rate" has the meaning set forth in paragraph
3(c)(i) below.
(r) "Minimum Holding Period" has the meaning set forth in
paragraph 3(b)(i) below.
(s) "Normal Designated Dividend Period" has the meaning set forth
in paragraph 3(b)(i) below.
(t) "Normal Dividend Payment Date" has the meaning set forth in
paragraph 3(b)(i) below.
(u) "Notice of Redemption" has the meaning set forth in paragraph
5(a) below.
(v) "Preferred Stock" means the $100 par value preferred stock and
the $25 par value preferred stock of the Corporation, as such preferred stock
may be issued from time to time.
(w) "Securities Depository" means The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Corporation which agrees to follow the procedures required to be followed
by such securities depository in connection with the Series B FLEX DARTS.
-3-
<PAGE>
(x) "Series B FLEX DARTS" means the 500,000 shares Of Preferred
Stock, $100 par value per share, of the Corporation designated as its
"Flexible Dutch Auction Rate Transferable Securities(SM) $100 Par Value
Preferred Stock, Series B."
(y) "Stock Books" means the stock transfer books of the
Corporation maintained by the Trust Company.
(z) "Subsequent Dividend Period" has the meaning specified in
paragraph 3(c)(i) below.
(aa) "Trust Company" means Manufacturers Hanover Trust Company
unless and until another bank, trust company or other entity appointed by a
resolution of the Board of Directors of the Corporation, enters into an
agreement(s) with the Company to follow the Auction Procedures for the
purpose of determining the Applicable Rate for the Series B FLEX DARTS.
(bb) "Units" means units of shares of Series B FLEX DARTS, with
each Unit consisting of 1,000 shares of Series B FLEX DARTS.
3. DIVIDENDS.
(a) The Holders shall be entitled to annual preferential
dividends, in accordance with Article VI, Section 3 of the Articles, at the
Applicable Rate per annum, determined as set forth below, and no more,
payable on the respective dates set forth below.
(b) (i) Dividends on Series B FLEX DARTS, at the Applicable
Rate per annum, shall accrue from the Date of Original Issue and shall
be payable commencing on April 11, 1988, on each Monday that is the last
day of each successive Designated Dividend Period thereafter (each
such date on which dividends could be payable but for the following
proviso being herein referred to as a "Normal Dividend Payment Date")
and, in addition, during any Designated Dividend Period of 26 or 52
weeks, on each Additional Dividend Payment Date; PROVIDED, HOWEVER, that
if any Normal Dividend Payment Date, the Friday preceding such Normal
Dividend Payment Date or the Tuesday following such Normal Dividend
Payment Date is not a Business Day, then (A) dividends on Series B FLEX
DARTS that would - otherwise be payable on such Normal Dividend Payment
Date shall be payable on the first Business Day after such Normal
Dividend Payment Date that is immediately followed by a Business Day and
is preceded by a Business Day that is the preceding Friday or a day
after such Friday or (B) if the Securities Depository shall make
available to its participants and members the amounts due as dividends
on
-4-
<PAGE>
Series B FLEX DARTS, in immediately available funds in The City of
New York on the dates on which such dividends are payable (and the
Securities Depository shall have so advised the Trust Company), then
dividends on Series a FLEX DARTS that would otherwise be payable on such
Normal Dividend Payment Date shall be payable on the first Business Day
on or after such Normal Dividend Payment Date that is preceded by a
Business Day that is the preceding Friday or a day after such Friday
(each such date of payment of dividends, other than an additional
Dividend Payment Date, being herein referred to as a "Dividend Payment
Date" and the first Dividend Payment Date being herein referred to as
the "Initial Dividend Payment Date"). Although any particular Dividend
Payment Date may not occur on the originally scheduled Normal Dividend
Payment Date because of the above-mentioned proviso, the next succeeding
Dividend Payment Date shall, subject to such proviso, be the Monday that
is the last day of the next succeeding Designated Dividend Period.
"Designated Dividend Period" shall mean a period of 7, 13, 26 or 52
weeks (or, in the case of a Designated Dividend Period immediately
following a Designated Dividend Period of 13 weeks or longer, 8, 9, 10,
11 or 12 weeks), as designated or deemed to be designated by the
Corporation as provided in the following sentence, commencing on the
Initial Dividend Payment Date or a Normal Dividend Payment Date, as the
case may be (a Designated Dividend Period of seven weeks, as may be
adjusted pursuant to the third succeeding sentence, being herein
referred to as a "Normal Designated Dividend Period"). Prior to 12:30
p.m., New York City time, on the third Business Day prior to the related
Auction Date, the Corporation may, by written notice to the Trust
Company and each Holder at such Holder's address as the same appears on
the Stock Books of the Corporation, designate the length of the next
succeeding Designated Dividend Period; PROVIDED, HOWEVER, that (A) if
any such notice shall not have been received by the Trust Company prior
to 12:30 -p.m., New York City time, on the third Business Day prior to
the related Auction Date or (B) in the event that Sufficient Clearing
Bids (as defined in paragraph 6(d)(i) below) do not result from the
related Auction, the Corporation shall be deemed to have designated such
next Designated Dividend Period as a Normal Designated Dividend Period.
Any designation of a Designated Dividend Period by the Corporation
pursuant to the preceding sentence shall be irrevocable.
Notwithstanding the foregoing, (I) in the event of a change in law
lengthening the minimum holding period (currently found in Section
246(c) of the Code) (the "Minimum Holding Period") required for
taxpayers to be entitled to the dividends received deduction on
preferred stock held by nonaffiliated
-5-
<PAGE>
corporations (currently found in Section 243(a) of the Code), the Board of
Directors of the Corporation or a duly designated committee thereof shall
adjust the number of weeks in each Normal Designated Dividend Period
commencing after the date of such change in law to equal or exceed the
then-current Minimum Holding Period; PROVIDED, that the Normal Designated
Dividend Period, as adjusted, shall (x) consist of a whole number of weeks,
(y) not exceed by more than nine days the length of such then-current
Minimum Holding Period, and (z) in no event exceed 14 weeks, and (II) the
Corporation shall not designate any Designated Dividend Period to be
shorter than a Normal Designated Dividend Period. Upon any such change in
the number of weeks in a Normal Designated Dividend Period as a result of a
change in law, the Corporation shall mail notice of such change by
first-class mail, postage prepaid, to the Trust Company and to each Holder
at such Holder's address as the same appears on the Stock Books of the
Corporation.
(ii) Each dividend shall be paid to the Holder of Units as
its name appears on the Stock Books of the Corporation at the opening of
business on the Business Day next preceding the Dividend Payment Date or
Additional Dividend Payment Date therefor. Dividends in arrears that
were payable on any past Dividend Payment Date or Additional Dividend
Payment Date may be declared and paid at any time, without reference to
any regular Dividend Payment Date or Additional Dividend Payment Date.
The persons entitled to such dividend payments shall be the Holders
whose names appear on the Stock Books of the Corporation on a date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by
the Board of Directors of the Corporation or a duly designated committee
thereof.
(c) (i) The dividend rate (the "Initial Dividend Rate") on
Series B FLEX DARTS during the period from and after the Date of
Original Issue to the Initial Dividend Payment Date (the "Initial
Dividend Period") shall be 6.10% per annum. Commencing on the Initial
Dividend Payment Date, the dividend rate on Series B FLEX DARTS for each
subsequent dividend period (hereinafter referred to as a "Subsequent
Dividend Period," and the Initial Dividend Period or any Subsequent
Dividend Period being hereinafter referred to as a "Dividend Period"),
which Subsequent Dividend Period shall commence on the last day of the
preceding Dividend Period and shall end on the next Dividend Payment
Date, shall be equal to the rate per annum that results from
implementation of the Auction Procedures.
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(ii) The amount of dividends per share of the Series B FLEX
DARTS payable for any Dividend Period or part of thereof (including,
during a Designated Dividend Period of 6 or 52 weeks, each period
commencing an a Dividend Payment Date or Additional Dividend Payment
Date and ending on the immediately succeeding Additional Dividend
Payment Date or Dividend Payment Date, as the case may be) shall be
computed by multiplying the Applicable Rate for such Dividend Period by
a fraction, the numerator of which shall be the number of days in the
period commencing on the immediately preceding Dividend Payment Date or
Additional Dividend Payment Date, as the case may be, and ending on the
applicable dividend Payment Date or Additional Dividend Payment, as the
case may be (calculated by counting the first day thereof but excluding
the last day thereof), and the denominator of which shall be 360 and
multiplying the rate so obtained by $100. The amount of dividends per
Unit of Series B FLEX DARTS payable for any Dividend Period or part
thereof shall be computed by multiplying the amount of dividends per
share of Series B FLEX DARTS determined as aforesaid by 1,000.
(d) Holders of Units shall not be entitled to any dividends,
whether payable in cash, property or stock, in \ excess of full
cumulative dividends, as herein provided, on the Units. No interest, or
sum of money in lieu of interest, shall be payable in respect of any
dividend payment on Units that may be in arrears.
4. LIQUIDATION PREFERENCES. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series B FLEX DARTS shall be entitled to
receive, for each share thereof, the sum of $100, together with accrued
dividends, before any distribution of the assets shall be made to the holders
of the Preference Stock, the Common Stock or stock of any other class ranking
junior as to assets in liquidation to the Series B FLEX DARTS but the holders
of the Series B FLEX DARTS shall be entitled to no further participation in
such distribution.
5. REDEMPTION. The Series B FLEX DARTS shall be redeemable by the
Corporation only in whole Units as provided below:
(a) At its option, the Corporation, by resolution of its Board of
Directors or a duly designated committee thereof may, out of funds legally
available therefor, redeem the Units as a whole or from time to time in part
(but in whole Units only) on any Dividend Payment Date at $100 per share
($100,000 per Unit), plus an amount equal to accrued and unpaid dividends
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<PAGE>
on such shares (whether or not earned or declared) to the redemption date.
In addition to the requirements of Article VI, Section 5 of the Articles,
whenever Units are to be redeemed, at least 30 and not more than 45 days
prior to the date fixed for redemption the Corporation shall mail a notice
("Notice of Redemption") by first class mail, postage prepaid, to each Holder
of record of Units to be redeemed and to the Trust Company. A Notice of
Redemption shall be addressed to the Holder at the address of the Holder
appearing on the Stock Books of the Corporation maintained by the Trust
Company. The Notice of Redemption shall also be published in The Wall Street
Journal at least 15 days and not more than 45 days prior to the date fixed
for redemption. The Notice of Redemption shall include a statement of (i)
the redemption date, (ii) the redemption price, (iii) the number of Series B
FLEX DARTS and number of Units to be redeemed, (iv) the place or places where
Units are to be surrendered for payment of the redemption price, (v) that
dividends on the shares to be redeemed will cease on such redemption date,
and (vi) the CUSIP number for the Series B .FLEX DARTS. No defect in the
Notice of Redemption or in the mailing or publication thereof shall affect
the validity of the redemption proceedings, except as required by law.
(b) If Notice of Redemption shall have been given as aforesaid and
the Corporation shall have deposited a sum sufficient to redeem the Series B
FLEX DARTS as to which Notice of Redemption has been given with the Trust
Company, with irrevocable instructions and authority to pay the redemption
price to the Holders thereof, or if no such deposit is made, then upon such
date fixed for redemption (unless the Corporation shall default in making
payment of the redemption price), all rights of the Holders thereof as
shareholders of the Corporation by reason of the ownership of such shares
(except their right to receive the redemption price thereof, but without
interest), shall terminate, and such shares shall no longer be deemed
outstanding. The Corporation shall be entitled to receive, from time to
time, from the Trust Company the interest, if any, on such monies deposited
with it and the Holders of any shares so redeemed shall have no claim to any
such interest.
6. AUCTION PROCEDURES.
(a) CERTAIN DEFINITIONS
Capitalized terms not defined in this paragraph 6 shall have the
respective meanings specified in paragraphs I through 5 above. As used in
this paragraph 6, the following terms shall have the following meanings,
unless the context otherwise requires:
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(i) "Affiliate" shall mean any Person known to the Trust
Company to be controlled by, in control of, or under common control with
the Corporation.
(ii) "Agent Member" shall mean the member of the Securities
Depository that will act on behalf of a Bidder and is identified as such
in such Bidder's Master Purchaser's Letter.
(iii) "Applicable 'AA' Composite Commercial Paper Rate," on any
Auction Date, shall mean (i) if the next succeeding Designated Dividend
Period does not exceed nine weeks, (A) the interest equivalent of the 60-
day rate on commercial paper placed on behalf of issuers whose corporate
bonds are rated "AA" by Standard & Poor's Corporation or its successor
("S&P") or the equivalent of such rating by S&P or another rating
agency, as such 60-day rate is made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date, or (B) in the event that the Federal
Reserve Bank of New York does not make available such a rate, then the
interest equivalent of the 60-day rate on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by
Commercial Paper Dealer to the Trust Company for the close of business
on the Business Day immediately preceding such date, (ii) if the next
succeeding Designated Dividend Period is a period of 10, 11 or 12 weeks,
the arithmetic average of the interest equivalent of the 60-day and 90-
day rates on such commercial paper as so determined, (iii) if the next
succeeding Designated Dividend Period is a period of 13 weeks, or 14
weeks as a result of a change in the Minimum Holding Period, the
interest equivalent of the 90-day rate on such commercial paper as so
determined, or (iv) if the next succeeding Designated Dividend Period is
a period of 26 weeks, the interest equivalent of the 180-day rate on
such commercial paper as so determined. For purposes of this
definition, the "interest equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given maturity shall
be equal to the quotient of (A) the discount rate divided by (B) the
difference between (x) 1.00 and (y) a fraction, the numerator of which
shall be the product of the discount rate times the number of days in
which such commercial paper matures and the denominator of which shall
be 360. If the rate obtained by the Trust Company is quoted on a basis
other than a discount rate, the Trust Company shall convert the quoted
rate to its interest equivalent after consultation with the Corporation
as to the method of such conversion. If the Commercial Paper Dealer
does not quote a rate required to determine the Applicable "AA"
Composite
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<PAGE>
Commercial Paper Rate, the Applicable "AA" Composite Commercial Paper Rate
shall be determined on the basis of the quotation furnished by any
Substitute Commercial Paper Dealer selected by the Corporation to provide
such rate.
(iv) "Auction" shall mean the periodic operation of the procedures
set forth in this paragraph 6.
(v) "Auction Date" shall mean the Business Day next preceding a
Dividend Payment Date.
(vi) "Available Units" shall have the meaning specified in
paragraph 6(d)(i) below.
(vii) "Bid" shall have the meaning specified in paragraph 6(b)(i)
below.
(viii) "Bidder" shall have the meaning specified in paragraph
6(b)(i) below.
(ix) "Board of Directors" shall mean the Board of Directors of
the Corporation, or any duly authorized committee of the Board of
Directors acting on behalf thereof.
(x) "Broker-Dealer" shall mean any broker-dealer, or other
entity permitted by law to perform the functions required of a Broker-
Dealer in this paragraph 6, that has been selected by the Corporation
and has entered into a Broker-Dealer Agreement with the Trust Company
that remains effective.
(xi) "Broker-Dealer Agreement" shall mean an agreement between
the Trust Company and a Broker-Dealer pursuant to which such Broker-
Dealer agrees to follow the procedures specified in this paragraph 6.
(xii) "Commercial Paper Dealer" shall mean Shearson Lehman
Commercial Paper Incorporated.
(xiii) "Existing Holder," when used with respect to Units, shall
mean a Person who has signed a Master Purchaser's Letter and is listed
as the beneficial owner of such Units in the records of the Trust
Company.
(xiv) "FLEX DARTS" shall mean the 500,000 shares of the
Corporation's $100 par value preferred stock designated "Flexible Dutch
Auction Rate Transferable Securities $100 Par Value Preferred Stock,
Series B."
(xv) "Hold Order" shall have the meaning specified in paragraph
6(b)(i) below.
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(xvi) "Master Purchaser's Letter" shall mean a Master Purchaser's
Letter in which a Person agrees, among other things, to offer to
purchase, purchase, offer to sell and/or sell Units as set forth in this
paragraph 6.
(xvii) "Maximum Applicable Rate" on any Auction Date shall mean
the percentage of the Reference Rate in effect on such Auction Date,
determined as set forth below, based on the prevailing rating of FLEX
DARTS in effect at the close of business on the Business Day preceding
such Auction Date and the length of the next succeeding Designated
Dividend Period:
<TABLE>
<CAPTION>
Prevailing Rating/Percentage
-------------------------------------------
Designated AA/aa Below
Dividend Period or Above A/a BBB/baa BB/ba BB/ba
--------------- -------- --- ------- ----- -----
<S> <C> <C> <C> <C> <C>
7 to 10 weeks 110% 120% 130% 200% 205%
11 to 13 weeks* 115% 125% 140% 200% 215%
26 weeks 120% 130% 150% 215% 225%
52 weeks 130% 150% 175% 225% 260%
</TABLE>
For purposes of this definition, (x) the "prevailing rating" of
FLEX DARTS shall be (i) AA/aa or above if FLEX DARTS have ratings of AA-
or better by S&P and aa3 or better by Moody's Investors Service, Inc. or
its successor ("Moody's"), or the equivalent of both such ratings by
such agencies or a substitute rating agency(s) selected as provided
below, (ii) if not AA/aa or above, then A/a if FLEX DARTS have ratings
of A- or better by S&P and a3 or better by Moody's or the equivalent of
both such ratings by such agencies or a substitute rating agency(s)
selected as provided below, (iii) if not AA/aa or above or A/a, then
BBB/baa, if FLEX DARTS have ratings of BBB- or better by S&P and baa3 or
better by Moody's or the equivalent of both such ratings by such
agencies or a substitute rating agency(s) selected as provided below,
(iv) if not AA/aa or
---------------
* If the Company adjusts the Normal Designated Dividend Period to 14
weeks as a result of a change in the Minimum Holding Period, then the
Maximum Applicable Rate will be determined in the same manner as
determined for a Designated Dividend Period of 13 weeks.
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<PAGE>
above, A/a or BBB/baa, then BB/ba FLEX DARTS have ratings of BB- or better
by S&P and ba3 or better Moody's, or the equivalent of both such ratings by
such agencies or a substitute rating agency(s) selected as provided below,
and (v) if not AA/aa or above, A/a, BBB/baa or BB/ba, then below BB/ba, and
(y) the Designated Dividend Period shall be determined as provided in
paragraph 3(b)(i) above without giving effect to subclause (B) thereof.
The Corporation shall take all reasonable action necessary to enable S&P
and Moody's to provide ratings for FLEX DARTS. If either S&P or Moody's
shall not make such a rating available, or neither S&P nor Moody's shall
make such a rating available, Salomon Brothers Inc and Shearson Lehman
Brothers Inc. or their successors shall select a nationally recognized
securities rating agency or two nationally recognized securities rating
agencies to act as substitute rating agency(s), as the case may be.
(xviii) "Minimum Applicable Rate," on any Auction Date, shall mean
59% of the Reference Rate in effect on such Auction Date.
(xix) "One-Year Treasury Rate," on any Auction Date, the interest
equivalent of (i) the rate for the most recent date set forth in
H.15(519) for such Auction Date under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market/1-Year" or (ii) if by the
close of business on the Business Day immediately preceding such
Auction Date such H.15(519) is not yet published or is otherwise not
available to the Trust Company, the arithmetic mean of the secondary
market bid rates of the reference dealers as of the close of business on
the Business Day immediately preceding such Auction Date quoted by such
reference dealers to the Trust Company for the issue of United States
Treasury bills with a remaining maturity closest to one year. For
purposes of this definition, the "interest equivalent" of a rate stated
on a discount basis (a "discount rate") shall be equal to the quotient
of (A) the discount rate divided by (B) the difference between 1.00 and
the discount rate; "H.15(5l9), for any Auction Date, shall mean the
weekly statistical release designated as such, or any successor
publication, published by the Board of Governors of the Federal Reserve
System on the Monday immediately preceding such Auction Date; and
"reference dealers" shall mean three primary United States Government
securities dealers in The City of New York. If the bid rates obtained
by the Trust Company are quoted on a basis other than a discount rate,
the Trust Company shall convert the quoted rates to their interest
equivalent after consultation with the Corporation as to the method of
such conversion.
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<PAGE>
(x) "Order" shall have the meaning specified in paragraph
6(b)(i) below.
(xxi) "Outstanding" shall mean, as of any date, FLEX DARTS
theretofore issued by the Corporation except, without duplication, (A)
any FLEX DARTS theretofore cancelled or delivered to the Trust Company -
for cancellation, or redeemed by the Corporation or as to which a notice
of redemption shall have been given by the Corporation, (B) any FLEX
DARTS as to which the Corporation or any Affiliate thereof shall be an
Existing Holder and (C) any FLEX DARTS represented by any certificate in
lieu of which a new certificate has been executed and delivered by the
Corporation.
(xxii) "Person" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a
joint venture or other entity or a government or any agency or political
subdivision thereof.
(xxiii) "Potential Holder" shall mean any Person, including any
Existing Holder, (A) who shall have executed a Master Purchaser's Letter
and (B) who may be interested in acquiring Units (or, in the case of an
Existing Holder, additional Units).
(xxiv) "Reference Rate," on any Auction Date, shall mean (A) if
the next succeeding Designated Dividend Period is a period not exceeding
26 weeks, the Applicable "AA" Composite Commercial Paper Rate on such
Auction Date and (B) if such Designated Dividend Period is a period of
52 weeks, the One-Year Treasury Rate on such Auction Date. For purposes
of this definition, the Designated Dividend Period succeeding each
Auction Date shall be determined as provided in paragraph 3(b)(i) but
without giving effect to subclause (B) thereof.
(xxv) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns or any other securities
depository selected by the Corporation which agrees to follow the
procedures required to be followed by such securities depository in
connection with FLEX DARTS.
(xxvi) "Sell Order" shall have the meaning specified in paragraph
6(b)(i) below.
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(xxvii) "Submission Deadline" shall mean 12:30 p.m., New York City
time, on any auction Date or such other time on any Auction Date by
which Broker-Dealers are required to submit Orders to the Trust Company,
as specified by the Trust Company from time to time.
(xxviii) "Submitted Bid" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxix) "Submitted Hold Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxx) "Submitted Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxxi) "Submitted Sell Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxxii) "Substitute Commercial Paper Dealer" shall mean any
commercial paper dealer that is a leading dealer in the commercial paper
markets, provided that neither such dealer nor any of its affiliates is
a Commercial Paper Dealer.
(xxxiii) "Sufficient Clearing Bids" shall have the meaning specified
in paragraph 6(d)(i) below.
(xxxiv) "Trust Company" shall mean Manufacturers Hanover Trust
Company and its successors and assigns or any other bank, trust company
or other entity selected by the Corporation which agrees to follow the
Auction Procedures for the purposes of determining the Applicable Rate
for FLEX DARTS.
(xxxv) "Units" shall mean units consisting of 1,000 shares of FLEX
DARTS.
(xxxvi) "Winning Bid Rate" shall have the meaning specified in
paragraph 6(d)(i) below.
(b) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS
(i) On or prior to each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer
information as to:
(1) the number of Outstanding Units, if any,
held by such Existing Holder which such Existing Holder desires to
continue to hold without regard to the Applicable Rate for the next
succeeding Dividend Period;
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<PAGE>
(2) the number of outstanding Units if any, held
by such Existing Holder which such existing Holder desires to continue
to hold, provided that such Applicable Rate for the next succeeding
Dividend Period shall not be less than the rate per annum specified by
such Existing Holder; and/or
(3) the number of Outstanding Units, if any, held
by such Existing Holder which such Existing Holder offers to sell
without regard to the Applicable Rate for the next succeeding Dividend
Period; and
(B) each Broker-Dealer, using a list of Potential Holders
that shall be maintained in good faith for the purpose of conducting a
competitive Auction shall contact Potential Holders, including Persons
that are not Existing Holders, on such list to determine the number of
Outstanding Units, if any which each such Potential Holder offers to
purchase, provided that the Applicable Rate for the next succeeding
Dividend Period shall not be less than the rate per annum specified by
such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 6(b)(i)
is hereinafter referred to as an "Order" and each Existing Holder and
each Potential Holder placing an Order is hereinafter referred to as a
"Bidder"; an Order containing the information referred to in clause
(A)(1) of this paragraph 6(b)(i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (A)(2)
or (B) of this paragraph 6(b)(i) is hereinafter referred to as a "Bid";
and an Order containing the information referred to in clause (A)(3) of
this paragraph 6(b)(i) is hereinafter referred to as a "Sell Order."
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Units specified in
such Bid if the Applicable Rate determined on such Auction Date shall be
less than the rate specified in such Bid; or
(2) such number or a lesser number of Outstanding
FLEX DARTS to be determined as set forth in paragraph 6(e)(i)(D) if the
Applicable Rate determined on such Auction Date shall be equal to the
rate specified therein; or
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<PAGE>
(3) such number or a lesser number of Outstanding
Units to be determined as set forth in paragraph 6(e)(ii)(C) if such
specified rate shall be higher than the Maximum Applicable Rate and
Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute
an irrevocable offer to sell:
(1) the number of Outstanding Units specified in
such Sell Order; or
(2) such number or a lesser number of Outstanding
Units to be determined as set forth in paragraph 6(e)(ii)(C) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding Units specified in
such Bid if the Applicable Rate determined on such Auction Date shall be
higher than the rate specified therein; or
(2) such number or a lesser number of Outstanding
Units to be determined as set forth in paragraph 6(e)(i)(E) if the
Applicable Rate determined on such Auction Date shall be equal to the
rate specified therein.
(c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO TRUST COMPANY
(i) Each Broker-Dealer shall submit in writing to the Trust
Company prior to the Submission Deadline on each Auction Date all Orders
obtained by such Broker-Dealer, specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding Units that are
the subject of such Order;
(C) "to the extent that such Bidder is an Existing
Holder:
(1) the number of Outstanding Units, if any,
subject to any Hold Order placed by such Existing Holder;
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(2) the number of Outstanding Units, if any,
subject to any Bid placed by such Existing Holder and the rate specified
in such Bid; and
(3) the number of Outstanding Units, if any,
subject to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the
rate specified in such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Trust Company shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an order or Orders covering all of the Outstanding Units
held by an Existing Holder is not submitted to the Trust Company prior
to the Submission Deadline, the Trust Company shall deem a Hold Order to
have been submitted on behalf of such Existing Holder covering the
number of Outstanding Units held by such Existing Holder and not subject
to Orders submitted to the Trust Company.
(iv) If one or more Orders covering in the aggregate more than
the number of Outstanding Units held by an Existing Holder are submitted
to the Trust Company, such Orders shall be considered valid as follows
and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and including the number of
Outstanding Units held by such Existing Holder; provided that if more
than one Hold Order is submitted on behalf of such Existing Holder and
the number of Units subject to such Hold Orders exceeds the number of
Outstanding Units held by such Existing Holder, the number of Units
subject to such Hold Orders shall be reduced pro rata so that such Hold
Orders shall cover the number of Outstanding Units held by such Existing
Holder;
(B) (1) any Bid shall be considered valid up to and
including the excess of the number of Outstanding Units held by such
Existing Holder over the number of Units subject to Hold Orders referred
to in clause (A) of this paragraph 6(c)(iv);
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(2) subject to clause (1) above, if more than one
Bid with the same rate is submitted on behalf of such existing Holder
and the number of Outstanding Units subject to such Bids is greater than
such excess, the number of Outstanding Unit subject to such Bids shall
be reduced pro rata so that such Bids shall cover the number of
Outstanding Units equal to such excess; and
(3) subject to clause (1) above, if more than one
Bid with different rates is submitted on behalf of such Existing Holder,
such Bids shall be considered valid in the ascending order of their
respective rates and in any such event the number, if any, of such
Outstanding Units subject to Bids not valid under this clause (B) shall
be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding Units held by such
Existing Holder over the number of Outstanding Units subject to Hold
Orders referred to in clause (A) of this paragraph 6(c)(iv) and Bids
referred to in clause (B) of this paragraph 6(c)(iv).
(v) If more than one Bid is submitted on behalf of any
Potential Holder, each Bid submitted shall be a separate Bid with the
rate and Units therein specified.
(vi) If any rate specified in any Bid is lower than the Minimum
Applicable Rate for the Dividend Period to which such Bid relates, such
Bid shall be determined to be a Bid specifying a rate equal to such
Minimum Applicable Rate.
(vii) Orders by Existing Holders and Potential Holders must
specify the numbers of Units in whole Units. Any Order that specifies a
number of Units other than in whole Units will be invalid and will not
be considered a Submitted Order for purposes of an Auction.
(d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE
(i) Not earlier than the Submission Deadline on each Auction
Date, the Trust Company shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a
"Submitted Sell Order," as the case may be, or as a "Submitted Order")
and shall determine:
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(A) The excess of the total number of Outstanding Units
over the number of Outstanding Units that are the subject of Submitted
Hold Orders (such excess being hereinafter referred to as the "Available
Units");
(B) from the Submitted Orders, whether:
(1) the number of Outstanding Units that are the
subject of Submitted Bids by Potential Holders specifying one or more
rates equal to or lower than the Maximum Applicable Rate exceeds or is
equal to the sum of:
(2) [a] the number of Outstanding Units that are
the subject of Submitted Bids by Existing Holders specifying one or more
rates higher than the Maximum Applicable Rate and
[b] the number of Outstanding Units that are
subject -to Submitted Sell Orders if such excess or such equality exists
(other than because the number of Outstanding Units in clauses [a] and
[b] above are each zero because all the Outstanding Units are the
subject of Submitted Hold Orders), such Submitted Bids in clause (1)
above being hereinafter referred to collectively as "Sufficient Clearing
Bids" and
(C) Sufficient Clearing Bids exist, the lowest rate
specified in the Submitted Bids (the "Winning Bid Rate"), which if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids from
Existing Holders specifying lower rates were rejected, thus entitling
such Existing Holders to continue to hold the Units that are the
subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids from
Potential Holders specifying lower rates were accepted, thus entitling
the Potential Holders to purchase the Units that are the subject of such
Submitted Bids, would result in the number of shares subject to all
Submitted Bids specifying the Winning Bid Rate or a lower rate being at
least equal to the Available Units.
(ii) Promptly after the Trust Company has made the
determinations pursuant to paragraph 6(d)(i), the Trust Company shall
advise the Corporation of the Maximum Applicable Rate and the Minimum
Applicable Rate and, based on such determinations, the Applicable Rate
for the next succeeding Dividend Period shall be as follows:
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(A) if Sufficient Clearing Bids exist, then the
Applicable Rate for the next succeeding Dividend Period shall be equal
to the Winning Bid Rate so determined:
(B) if Sufficient clearing Bids do not exist (other than
because all of the Outstanding Units are the subject of Submitted Hold
Orders), then the Applicable Rate for the next succeeding Dividend
Period shall be equal to (1) the Maximum Applicable Rate, if the next
succeeding Designated Dividend Period is a Normal Designated Dividend
Period, or (2) if the next succeeding Designated Dividend Period as
designated by the Corporation is not a Normal Designated Dividend
Period, the higher of (x) the Maximum Applicable Rate as determined for
such next succeeding Designated Dividend Period and (y) the Maximum
Applicable Rate as determined pursuant to paragraph 6(a)(xiv) above,
assuming that such next succeeding Designated Dividend Period is a
Normal Designated Dividend Period; or
(C) if all of the Outstanding Units are the subject of
Submitted Hold Orders, then the Applicable Rate for the next succeeding
Dividend Period shall be equal to the Minimum Applicable Rate.
(e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF UNITS
Based on the determinations made pursuant to paragraph 6(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and
the Trust Company shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraphs 6(e)(iii) and 6(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall
be accepted and the Submitted Bid of each of the Existing Holders
specifying any rate that is higher than the Winning Bid Rate shall be
rejected, thus requiring each such Existing Holder to sell the
Outstanding Units that are the subject of such Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate that is lower than the Winning Bid Rate shall be
accepted, thus entitling each such Existing Holder to continue to hold
the Outstanding Units that are the subject of such Submitted Bid;
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<PAGE>
(C) the Submitted Bid of each of the Potential Holders
specifying any rate that is lower than the Winning Bid Rate shall be
accepted, thus requiring the Potential Holder to purchase the Units that
are the subject of such Submitted Bid;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate that is equal to the Winning Bid Rate shall be
accepted, thus entitling each such Existing Holder to continue to hold
the Outstanding Units that are the subject of such Submitted Bid, unless
the number of Outstanding Units subject to all such Submitted Bids shall
be greater than the number of Outstanding Units ("remaining Units")
equal to the excess of the Available Units over the number of
Outstanding Units subject to Submitted Bids described in clauses (B) and
(C) of this paragraph 6(e)(i), in which event the Submitted Bids of each
such Existing Holder shall be rejected, and each such Existing Holder
shall be required to sell Outstanding Units, but only in an amount equal
to the difference between (1) the number of Outstanding Units then held
by such Existing Holder subject to such Submitted Bid and (2) the number
of Units obtained by multiplying (x) the number of remaining Units by
(y) a fraction, the numerator of which shall be the number of
Outstanding Units held by such Existing Holder subject to such Submitted
Bid and the denominator of which shall be the sum of the number of
Outstanding Units subject to such Submitted Bids made by all such
Existing Holders that specified a rate equal to the Winning Bid Rate;
and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate that is equal to the Winning Bid Rate shall be
accepted but only in an amount equal to the number of Outstanding Units
obtained by multiplying (x) the difference between the Available Units
and the number of Outstanding Units subject to Submitted Bids described
in clauses (B), (C) and (D) of this paragraph 6(e)(i) by (y) a fraction,
the numerator of which shall be the number of Outstanding Units subject
to such Submitted Bid and the denominator of which shall be the sum of
the number of Outstanding Units subject to such Submitted Bids made by
all such Potential Holders that specified rates equal to the Winning Bid
Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the outstanding Units are subject to Submitted Hold
Orders), subject to the provisions of paragraphs 6(e)(iii) and 6(e)(iv),
Submitted orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be
rejected:
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(A) the Submitted Bid of each Existing Holder specifying
any rate that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus entitling such Existing Holder to continue to
hold the Outstanding Units that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder
specifying any rate that is equal to or lower than the Maximum
Applicable Rate shall be accepted, thus requiring such Potential Holder
to purchase the Outstanding Units that are the subject of such Submitted
Bid; and
(C) the Submitted Bids of each Existing Holder
specifying any rate that is higher than the Maximum Applicable Rate
shall be rejected and the Submitted Sell Orders of each Existing Holder
shall be accepted, in both cases only in an amount equal to the
difference between (1) the number of Outstanding Units then held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order
and (2) the number of Units obtained by multiplying (x) the difference
between the Available Units and the aggregate number of Outstanding
Units subject to Submitted Bids described in clauses (A) and (B) of this
paragraph 6(e)(ii) by (y) a fraction, the numerator of which shall be
the number of Outstanding Units held by such Existing Holder subject to
such Submitted Bid or Submitted Sell Order and the denominator of which
shall be the number of Outstanding Units subject to all such Submitted
Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph
6(e)(i) or 6(e)(ii), any Existing Holder would be entitled or required
to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a Unit on any Auction Date, the Trust Company
shall, in such manner as, in its sole discretion, it shall determine,
round up or down the number of Units to be purchased or sold by any
Existing Holder or Potential Holder on such Auction Date so that the
number of Outstanding Units purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be whole Units.
(iv) If, as a result of the procedures described in paragraph
6(e)(i), any Potential Holder would be entitled to purchase less than a
whole Unit on any Auction Date, the Trust Company shall, in such manner
as, in its sole discretion, it shall determine, allocate Units for
purchase among Potential Holders so that only whole Units are purchased
on such Auction Date by any Potential Holder, even if such allocation
results in one or more of such Potential Holders not purchasing Units on
such Auction Date.
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(v) Based on the results of each Auction, the Trust Company
shall determine the aggregate number of Outstanding Units to be
purchased and the aggregate number of Outstanding Units to be sold by
Potential Holders and Existing Holders on whose behalf each Broker-
Dealer submitted Bids or Sell Orders, and, with respect to each Broker-
Dealer, to the extent that such aggregate number of Outstanding Units to
be purchased and such aggregate number of Outstanding Units to be sold
differ, determine to which other Broker-Dealer(s) acting for one or more
purchasers such Broker-Dealer shall deliver, or from which other Broker-
Dealer(s) acting for one or more sellers such Broker-Dealer shall
receive, as the case may be, Outstanding Units.
(f) MISCELLANEOUS
The Board of Directors may interpret the provisions of this paragraph 6
to resolve any inconsistency or ambiguity, remedy any formal defect or make
any other change or modification which does not adversely affect the rights
of Existing Holders of Units. An Existing Holder (A) may sell, transfer or
otherwise dispose of Units only pursuant to a Bid or Sell Order in accordance
with the procedures described in this paragraph 6 or to or through a Broker-
Dealer or to a Person that has delivered a signed copy of a Master
Purchaser's Letter to the Trust Company, provided that in the case of all
transfers other than pursuant to Auctions such Existing Holder, its Broker-
Dealer or its Agent Member advises the Trust Company of such transfer and (B)
shall have the ownership of the Units held by it maintained in book entry
form by the Securities Depository in the account of its Agent Member, which
in turn will maintain records of such Existing Holder's beneficial ownership.
Neither the Corporation nor any Affiliate shall submit an Order, either
directly or indirectly, in any Auction. Except as otherwise provided by law,
all of the Outstanding Units shall be represented by a certificate registered
in the name of the nominee of the Securities Depository and no Person
acquiring Units shall be entitled to receive a certificate representing such
Units. If any entity acting as Trust Company should resign as such at any
time, the Corporation will use its best efforts to enter into an agreement(s)
with a successor Trust Company containing substantially the same terms and
conditions as the agreement with the Trust Company.
(g) HEADINGS OF SUBDIVISIONS
The headings of the various subdivisions of this paragraph 6 are for
convenience of reference only and shall not affect the interpretation of any
of the provisions hereof.
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<PAGE>
7. VOTING RIGHTS. Holders of the Series B FLEX DARTS shall have no
voting rights, either general or special, except as expressly required by
applicable law and the Articles.
8. SINKING FUND. The Series B., FLEX DARTS shall not be entitled to
the benefits of a sinking fund.
9. CONVERSION. The Units shall not be convertible into shares of stock
of the Corporation of any other class, into any shares of $100 par value
Preferred Stock of the Corporation or any other series, or into any other
type of securities.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed in duplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this fourteenth day of
January, 1988.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ R. R. Sonstelie
-------------------------------
R. R. Sonstelie,
President
By /s/ W. E. Watson
-------------------------------
W. E. Watson,
Secretary
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<PAGE>
[Seal of the State of Washington]
- --------------------------------------------------------------------------------
STATE OF WASHINGTON SECRETARY OF STATE
- --------------------------------------------------------------------------------
I, RALPH MUNRO, Secretary of State of the State of Washington and custodian of
its seal, hereby certify that the attached is a true and correct copy of
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES
(SERIES A, $100 PAR VALUE PREFERRED STOCK)
(THE FLEXIBLE DUTCH AUCTION RATE TRANSFERABLE SECURITIES)
of
PUGET SOUND POWER & LIGHT COMPANY
as filed in this office on January 15, 1988
Date: 1/15/1988
Given under my hand and the seal of the State
of Washington, at Olympia, the State Capitol.
/s/ Ralph Munro
---------------------------------------------
RALPH MUNRO, SECRETARY OF STATE
dlh
<PAGE>
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR
THE FLEXIBLE DUTCH AUCTION RATE TRANSFERABLE SECURITIES
$100 PAR VALUE PREFERRED STOCK, SERIES A
____________________________
Pursuant to Section 23A.08.130 of the Washington Business Corporation
Act, Puget Sound Power & Light Company (the "Corporation"), a Washington
corporation, hereby states that at a meeting of the Board of Directors of the
Corporation duly convened and held on January 14, 1988, the following
resolution was duly adopted:
RESOLVED, that pursuant to the authority expressly vested in it by the
Corporation's Restated Articles of Incorporation (the "Articles") and subject
to the preferences, limitations, relative rights and other terms and
provisions set forth in the Articles, the Board of Directors of the
Corporation hereby establishes an additional series of the Corporation's $100
par value Preferred Stock, sets forth the designation of the series, and
fixes and determines the relative rights and determining the rate(s) of
dividends, the price, terms preferences thereof, including the methods
and procedures for determining the rate(s) of dividends, the price, terms
and conditions of redemption, and the amount payable upon shares in the event
of voluntary or involuntary liquidation, as follows:
1. DESIGNATION. The shares of such series shall be designated
"Flexible Dutch Auction Rate Transferable Securities(SM) $100 Par Value
Preferred Stock, Series A" (the "Series A FLEX DARTS") and the number of
shares constituting such series shall be 500,000. The Series A FLEX DARTS
shall be issued in units (the "Units"), with each Unit consisting of 1,000
shares of Series A FLEX DARTS. The Series A FLEX DARTS may be purchased or
transferred only in whole Units and the Series A FLEX DARTS included in the
Units may not be separately purchased or transferred.
<PAGE>
2. DEFINITIONS. Unless the context or use indicates another or
different meaning or intent, the following terms shall have the following
meanings, whether used in the singular or plural:
(a) "Additional Dividend Payment Date," during a Designated
Dividend Period of 26 or 52 weeks, means the thirteenth, twenty-sixth and
thirty-ninth Monday (provided that any such Monday is not otherwise a Normal
Dividend Payment Date), as applicable, after the first day of such Designated
Dividend Period; PROVIDED, HOWEVER, that (i) if any such Monday or the
Tuesday following following such Monday is not a Business Day, the
"Additional Dividend Payment Date" that would otherwise be such Monday shall
be the first Business Day after such Monday that is immediately followed by a
Business Day or (ii) if the Securities Depository shall make available to its
participants and members the amounts due as dividends on Units in immediately
available funds in The City of New York on the dates on which such dividends
are payable (and the Securities Depository shall have so advised the Trust
Company) and if any such Monday is not a Business Day, the "Additional
Dividend Payment Date" that would otherwise be such Monday shall be the first
Business Day after such Monday.
(b) "Applicable Rate" means the rate per annum at which dividends
are payable on the shares of the Series A FLEX DARTS for any Dividend Period.
(c) "Auction" means each periodic operation of the Auction
Procedures.
(d) "Auction Date" means the first Business Day preceding the
first day of a Dividend Period.
(e) "Auction Procedures" means the procedures for conducting
reductions set forth in paragraph 6 below.
(f) "Business Day" means a day on which the New York Stock
Exchange is open for trading and which is not a Saturday, Sunday or other day
on which banks in The City of New York are authorized by law to close.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Common Stock" means all shares now or hereafter issued of the
class of common stock, without par value, of the Corporation now or hereafter
authorized and any other shares into which such shares may hereafter be
changed from time to time.
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<PAGE>
(i) "Corporation" means Puget Sound Power & Light Company, a
Washington Corporation.
(j) "Date of original issue" means the date on which the
Corporation originally issues Series A FLEX DARTS.
(k) "Designated Dividend Period" has the meaning set forth in
paragraph 3(b)(i) below.
(1) "Dividend Payment Date" has the meaning set forth in Paragraph
3(b)(i) below.
(m) "Dividend Period" has the meaning set forth in paragraph
3(c)(i) below.
(n) "Holder" means the holder of Units as its name appears on the
Stock Books of the Corporation.
(o) "Initial Dividend Payment Date" has the meaning set forth in
paragraph 3(b)(i) below.
(p) "Initial Dividend Period" has the meaning set forth in
paragraph 3(c)(i) below.
(q) "Initial Dividend Rate" has the meaning set forth in paragraph
3(c)(i) below.
(r) "Minimum Holding Period" has the meaning set north in
paragraph 3(b)(i) below.
(s) "Normal Designated Dividend Period" has the meaning set forth
in paragraph 3(b)(i) below.
(t) "Normal Dividend Payment Date" has the meaning set forth in
paragraph 3(b)(i) below.
(u) "Notice of Redemption" has the meaning set forth in paragraph
5(a) below.
(v) "Preferred Stock" means the $100 par value preferred stock and
the $25 par value preferred stock of the Corporation, as such preferred stock
may be issued from time to time.
(w) "Securities Depository" means The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Corporation which agrees to follow the procedures required to be followed by
such securities depository in connection with the Series A FLEX DARTS.
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<PAGE>
(x) "Series A FLEX DARTS" means the 500,000 shares of Preferred
Stock, $100 par value per share, of the Corporation designated as its
"Flexible Dutch Auction Rate Transferable Securities $100(SM) Par Value
Preferred Stock, Series A."
(y) "Stock Books" means the stock transfer books of the
Corporation maintained by the Trust Company.
(z) "Subsequent Dividend Period" has the meaning specified in
paragraph 3(c)(i) below.
(aa) "Trust Company" means Manufacturers Hanover Trust Company
unless and until another bank, trust company or other entity appointed by a
resolution of the Board of Directors of the Corporation, enters into an
agreement(s) with the Company to follow the Auction Procedures for the
purpose of determining the Applicable Rate for the Series A FLEX DARTS.
(bb) "Units" means units of shares of Series A FLEX DARTS, with
each Unit consisting of 1,000 shares of Series A FLEX DARTS.
3. DIVIDENDS.
(a) The Holders shall be entitled to annual preferential
dividends, in accordance with Article VI, Section 3 of the Articles, at the
Applicable Rate per annum, determined as set forth below, and no more,
payable on the respective dates set forth below.
(b) (i) Dividends on Series A FLEX DARTS, at the Applicable
Rate per annum, shall accrue from the Date of Original Issue and shall
be payable commencing on March 14, 1988, on each Monday that is the last
day of each successive Designated Dividend Period thereafter (each such
date on which dividends would be payable but for the following proviso
being herein referred to as a "Normal Dividend Payment Date") and, in
addition, during any Designated Dividend Period of 26 or 52 weeks, on
each Additional Dividend Payment Date; PROVIDED, HOWEVER, that if any
Normal Dividend Payment Date, the Friday preceding such Normal Dividend
Payment Date or the Tuesday following such Normal Dividend Payment Date
is not a Business Day, then (A) dividends on Series A FLEX DARTS that
would otherwise be payable on such Normal Dividend Payment Date shall
be payable on the first Business Day after such Normal Dividend Payment
Date that is immediately followed by a Business Day and is preceded by a
Business Day that is the preceding Friday or a day after such Friday or
(B) if the Securities Depository shall make available to its
participants and members the amounts due as dividends on
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<PAGE>
Series A FLEX DARTS, in immediately available funds in The City of New York
on the dates on which such dividends are payable (and the Securities
Depository shall have so advised the Trust Company), then dividends on
Series A FLEX DARTS that would otherwise be payable on such Normal
Dividend Payment Date shall be payable on the first Business Day on or
after such Normal Dividend Payment Date that is preceded by a Business Day
that is the preceding Friday or a day after such Friday (each such date of
payment of dividends, other than an Additional Dividend Payment Date, being
herein referred to as a "Dividend Payment Date" and the first Dividend
Payment Date being herein referred to as the "Initial Dividend Payment
Date"). Although any particular Dividend Payment Date may not occur on
the originally scheduled Normal Dividend Payment Date because of the above
mentioned proviso, the next succeeding Dividend Payment Date shall, subject
to such proviso, be the Monday that is the last day of the next succeeding
Designated Dividend Period. "Designated Dividend Period" shall mean a
period of 7, 13, 26 or 52 weeks (or, in the case of a Designated Dividend
Period immediately following a Designated Dividend Period of 13 weeks or
longer, 8, 9, 10, 11 or 12 weeks), as designated or deemed to be designated
by the Corporation as provided in the following sentence, commencing on the
Initial Dividend Payment Date or a Normal Dividend Payment Date, as the
case may be (a Designated Dividend Period of seven weeks, as may be
adjusted pursuant to the third succeeding sentence, being herein referred
to as a "Normal Designated Dividend Period"). Prior to 12,30 p.m., New
York City time, on the third Business Day prior to the related Auction
Date, the Corporation may, by written notice to the Trust Company and each
Holder at such Holder's address as the same appears on the Stock Books of
the Corporation, designate the length of the next succeeding Designated
Dividend Period; PROVIDED, HOWEVER, that (A) if any such notice shall not
have been received by the Trust Company prior to 12:30 p.m., New York City
time, on the third Business Day prior to the related Auction Date or (B) in
the event that Sufficient Clearing Bids (as defined in paragraph 6(d)(i)
below) do not result from the related Auction, the Corporation shall be
deemed to have designated such next Designated Dividend Period as a Normal
Designated Dividend Period. Any designation of a Designated Dividend
Period by the Corporation pursuant to the preceding sentence shall be
irrevocable. Notwithstanding the foregoing, (I) in the event of a change in
law lengthening the minimum holding period (currently found in Section
246(c) of the Code) (the "Minimum Holding Period") required for taxpayers
to be entitled to the dividends received deduction on preferred stock held
by nonaffiliated
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<PAGE>
corporations (currently found in Section 243(a of the Code), the Board of
Directors of the Corporation or a duly designated committee thereof shall
adjust the number of weeks in each Normal Designated Dividend Period
commencing after the date of such change in law to equal or exceed the then
current Minimum Holding Period; PROVIDED, that the Normal Designated
Dividend Period, as adjusted, shall (x) consist of a whole number of weeks,
(y) not exceed by more than nine days the length of such then current
Minimum Holding Period, and (z) in no event exceed 14 weeks, and (II) the
Corporation shall not designate any Designated Dividend Period to be
shorter than a Normal Designated Dividend Period. Upon any such change in
the number of weeks in a Normal Designated Dividend Period as a result of a
change in law, the Corporation shall mail notice of such change by first
class mail, postage prepaid, to the Trust Company and to each Holder at
such Holder's address as the same appears on the Stock Books of the
Corporation.
(ii) Each dividend shall be paid to the Holder of Units as
its name appears on the Stock Books of the Corporation at the opening of
business on the Business Day next preceding the Dividend Payment Date or
Additional Dividend Payment Date therefor. Dividends in arrears that
were payable on any past Dividend Payment Date or Additional Dividend
Payment Date may be declared and paid at any time, without reference to
any regular Dividend Payment Date or Additional Dividend Payment Date.
The persons entitled to such dividend payments shall be the Holders
whose names appear on the Stock Books of the Corporation on a date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by
the Board of Directors of the Corporation or a duly designated committee
thereof.
(c) (i) The dividend rate (the "Initial Dividend Rate") on
Series A FLEX DARTS during the period from and after the Date of
Original Issue to the Initial Dividend Payment Date (the "Initial
Dividend Period") shall be 6% per annum. Commencing on the Initial
Dividend Payment Date, the dividend rate on Series A FLEX DARTS for each
subsequent dividend period (hereinafter referred to as a "Subsequent
Dividend Period," and the Initial Dividend Period or any Subsequent
Dividend Period being hereinafter referred to as a "Dividend Period"),
which Subsequent Dividend Period shall commence on the last day of the
preceding Dividend Period and shall end on the next Dividend Payment
Date, shall be equal to the rate per annum that results from
implementation of the Auction Procedures.
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<PAGE>
(ii) The amount of dividends per share of the Series A
FLEX DARTS payable for any Dividend Period or part thereof (including,
during a Designated Dividend Period of 26 or 52 weeks, each period
commencing on a Dividend Payment Date or Additional Dividend Payment
Date and ending on the immediately succeeding Additional Dividend
Payment Date or Dividend Payment Date, as the case may be) shall be
computed by multiplying the Applicable Rate for such Dividend Period by
a fraction, the numerator of which shall be the number of days in the
period commencing on the immediately preceding Dividend Payment Date or
Additional Dividend Payment Date, as the case may be, and ending on the
applicable Dividend Payment Date or Additional Dividend Payment Date, as
the case may be (calculated by counting the first day thereof but
excluding the last day thereof), and the denominator of which shall be
360 and multiplying the rate so obtained by $100. The amount of
dividends per Unit of Series A FLEX DARTS payable for anv Dividend
Period or part thereof shall be computed by multiplying the amount of
dividends per share of Series A FLEX DARTS determined as aforesaid by
1,000.
(d) Holders of Units shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on the Units. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend
payment on Units that may be in arrears.
4. LIQUIDATION PREFERENCES. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series A FLEX DARTS shall be entitled to
receive, for each share thereof, the sum of $100, together with accrued
dividends, before any distribution of the assets shall be made to the holders
of the Preference Stock, the Common Stock or stock of any other class
ranking junior as to assets in liquidation to the Series A FLEX DARTS; but
the holders of the Series A FLEX DARTS shall be entitled to no further
participation in such distribution.
5. REDEMPTION. The Series A FLEX DARTS shall be redeemable by the
Corporation only in whole Units as provided below:
(a) At its option, the Corporation, by resolution of its Board of
Directors or a duly designated committee thereof may, out of funds legally
available therefor, redeem the Units as a whole or from time to time in part
(but in whole Units only) on any Dividend Payment Date at $100 per share
($100,000 per Unit), plus an amount equal to accrued and unpaid dividends
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<PAGE>
on such shares (whether or not earned or declared) to the redemption date.
In addition to the requirements of Article VI, Section 5 of :he Articles,
whenever Units are to be redeemed, at least 30 and not more than 45 days
prior to the date fixed for redemption the Corporation shall mail a notice
("Notice of Redemption") by first-class mail, postage prepaid to each Holder
of record of Units to be redeemed and to the Trust Company. A Notice of
Redemption shall be addressed to the Holder at the address of the Holder
appearing on the Stock Books of the Corporation maintained by the Trust
Company. The Notice of Redemption shall also be published in The Wall Street
Journal at least 15 days and not more than 45 days prior to the date fixed
for redemption. The Notice of Redemption shall include a statement of (i)
the redemption date, (ii) the redemption price, (iii) the number of Series A
FLEX DARTS and number of Units to be redeemed, (iv) the place or places where
Units are to be surrendered for payment of the redemption price, that
dividends on the shares to be redeemed will cease to accrue on such
redemption date, and (vi) the CUSIP number for the Series A FLEX DARTS. No
defect in the Notice of Redemption or in the mailing or publication thereof
shall affect the validity of the redemption proceedings, except as required
by law.
(b) If Notice or Redemption shall have been given as aforesaid and
the Corporation shall have deposited a sum sufficient to redeem the Series A
FLEX DARTS as to which Notice of Redemption has been given with the Trust
Company, with irrevocable instructions and authority to pay the redemption
price to the Holders thereof, or if no such deposit is made, then upon such
date fixed for redemption (unless the Corporation shall default in making
payment of the redemption price), all rights of the Holders thereof as
shareholders of the Corporation by reason of the ownership of such shares
(except their right to receive the redemption price thereof, but without
interest), shall terminate, and such shares shall no longer be deemed
outstanding. The Corporation shall be entitled to receive, from time to
time, from the Trust Company the interest, if any, on such monies deposited
with it and the Holders of any shares so redeemed shall have no claim to any
such interest.
6. AUCTION PROCEDURES.
(a) CERTAIN DEFINITIONS
Capitalized terms not defined in this paragraph 6 shall have the
respective meanings specified in paragraphs 1 through 5 above. As used in
this paragraph 6, the following terms shall have the following meanings,
unless the context otherwise requires:
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<PAGE>
(i) "Affiliate" shall mean any Person known to the Trust
Company to be controlled by, in control, of, or under common control
with the Corporation.
(ii) "Agent Member" shal1 mean the member of the Securities
Depository that will act on behalf of a Bidder and is identified as such
in such Bidder's Master Purchaser's Letter.
(iii) "Applicable 'AA' Composite Commercial Paper Rate," on any
Auction Date, shall mean (i) if the next succeeding Designated Dividend
Period does not exceed nine weeks, (A) the interest equivalent of the 60-
day rate on commercial paper placed on behalf of issuers whose corporate
bonds are rated "AA" by Standard & Poor's Corporation or its successor
("S&P") or the equivalent of such rating by S&P or another rating
agency, as such 60-day fate is made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date, or (B) in the event that the Federal
Reserve Bank of New York does not make available such a rate, then the
interest equivalent of the 60-day rate on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by
Commercial Paper Dealer to the Trust Company for the close of business
on the Business Day immediately preceding such date, (ii) if the next
succeeding Designated Dividend Period is a period of 10, 11 or 12 weeks,
the arithmetic average of the interest equivalent of the 60-day and 90-
day rates on such commercial paper as so determined, (iii) if the next
succeeding Designated Dividend Period is a period of 13 weeks, or 14
weeks as a result of a change in the Minimum Holding Period, the
interest equivalent of the 90-day rate on such commercial paper as so
determined, or (iv) if the next succeeding Designated Dividend Period is
a period of 26 weeks, the interest equivalent of the 180-day rate on
such commercial paper as s-o determined. For purposes of this
definition, the "interest equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given maturity shall
be equal to the quotient of (A) the discount rate divided by (B) the
difference between (x) 1.00 and (y) a fraction, the numerator of which
shall be the product of the discount rate times the number of days in
which such commercial paper matures and the denominator of which shall
be 360. If the rate obtained by the Trust Company is quoted on a basis
other than a discount rate, the Trust Company shall convert the quoted
rate to its interest equivalent after consultation with the Corporation
as to the method of such conversion. If the Commercial Paper Dealer
does not quote a rate required to determine the Applicable "AA"
Composite
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<PAGE>
Commercial Paper Rate, the Applicable "AA" Composite Commercial Paper Rate
shall be determined on the basis of the quotation furnished by any
Substitute Commercial Paper Dealer selected by the Corporation to provide
such rate.
(iv) "Auction" shall mean the periodic operation of the
procedures set forth in this paragraph 6.
(v) "Auction Date" shall mean the Business Day 2xt preceding a
Dividend Payment Date.
(vi) "Available Units" shall have the meaning specified in
paragraph 6(d)(i) below.
(vii) "Bid" shall have the meaning specified in paragraph 6(b)(i)
below.
(viii) "Bidder" shall have the meaning specified in paragraph
6(b)(i) below.
(ix) "Board of Directors" shall mean the Board of Directors of
the Corporation, or any duly authorized committee of the Board of
Directors acting on behalf thereof.
(x) "Broker-Dealer" shall mean any broker-dealer, or other
entity permitted by law to perform the functions required of a Broker-
Dealer in this paragraph 6, that has been selected by the Corporation
and has entered into a Broker-Dealer Agreement with the Trust Company
that remains effective.
(xi) "Broker-Dealer Agreement" shall mean an agreement between
the Trust Company and a Broker-Dealer pursuant to which such Broker-
Dealer agrees to follow the procedures specified in this paragraph 6.
(xii) "Commercial Paper Dealer" shall mean Shearson Lehman
Commercial Paper Incorporated.
(xiii) "Existing Holder," when used with respect to Units, shall
mean a Person who has signed a Master Purchaser's Letter and is listed
as the beneficial owner of such Units in the records of the Trust
Company.
(xiv) "FLEX DARTS" shall mean the 500,000 shares of the
Corporation's $100 par value preferred stock designated "Flexible Dutch
Auction Rate Transferable Securities $100 Par Value Preferred Stock,
Series A."
(xv) "Hold Order" shall have the meaning specified in paragraph
6(b)(i) below.
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(xvi) "Master Purchaser's letter" shall mean a Master Purchaser's
Letter in which a Person agrees, among other things, to offer to
purchase, purchase, offer to sell and/or sell Units as set forth in this
paragraph 6.
(xvii) "Maximum Applicable Rate" on any Auction Date shall mean
the percentage of the Reference Rate in effect on such Auction Date,
determined as set forth below, based on the prevailing rating of FLEX
DARTS in effect at the close of business on the Business Day preceding
such Auction Date and the length of the next succeeding Designated
Dividend Period:
<TABLE>
<CAPTION>
Prevailing Rating/Percentage
----------------------------------------------
Designated AA/aa Below
Dividend Period or Above A/a BBB/baa BB/ba BB/ba
--------------- -------- --- ------- ----- -----
<S> <C> <C> <C> <C> <C>
7 to 10 weeks 110% 120% 130% 200% 205%
11 to 13 weeks* 1l5% 125% 140% 200% 215%
26 weeks 120% 130% 150% 215% 225%
52 weeks 130% 150% 175% 225% 260%
</TABLE>
For purposes of this definition, (x) the "prevailing rating" of FLEX
DARTS shall be (i) AA/aa or above if FLEX DARTS have ratings of AA- or
better by S&P and aa3 or better by Moody's Investors Service, Inc. or
its successor ("Moody's"), or the equivalent of both such ratings by
such agencies or a substitute rating agency(s) selected as provided
below, (ii) if not AA/aa or above, then A/a if FLEX DARTS have ratings
of A- or better by S&P and a3 or better by Moody's or the equivalent of
both such ratings by such agencies or a substitute rating agency(s)
selected as provided below, (iii) if not AA/aa or above or A/a, then
BBB/baa, if FLEX DARTS have rating's of BBB- or better by S&P and baa3
or better by Moody's or the equivalent of both such ratings by such
agencies or a substitute rating agency(s) selected as provided below,
(iv) if not AA/aa or
----------------
* If the Company adjusts the Normal Designated Dividend Period to 14
weeks as a result of a change in the minimum Holding Period, then the
Maximum Applicable Rate will be determined in the same manner as
determined for a Designated Dividend Period of 13 weeks.
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<PAGE>
above, A/a or BBB/baa, when BB/ba if FLEX DARTS have ratings of BB- or
better by S&P and ba3 or better by Moody's, or the equivalent of both such
ratings by such agencies or a substitute rating agency(s) selected as
provided below, and (v) if not AA/aa or above, A/a, BBB/baa or BB/ba, then
below BB/ba, and (y) the Designated Dividend Period shall be determined as
provided in paragraph 3(b)(i) above without giving effect to subclause (B)
thereof. The Corporation shall take all reasonable action necessary to
enable S&P and Moody's to provide ratings for FLEX DARTS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's
shall make such a rating available, Salomon Brothers Inc and Shearson
Lehman Brothers Inc. or their successors shall select a nationally
recognized securities rating agency or two nationally recognized securities
rating agencies to act as substitute rating agency(s), as the case may be.
(xviii) "Minimum Applicable Rate," on any Auction Date, shall mean
59% of the Reference Rate in effect on such Auction Date.
(xix) "One-Year Treasury Rate," on any Auction Date, shall mean
the interest equivalent of (i) the rate for the most recent date set
forth in H.15(519) for such Auction Date under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market/1-Year" or (ii) if
by the close of business on the Business Day immediately preceding such
Auction Date such H.15(519) is not yet published or is otherwise not
available to the Trust Company,, the arithmetic mean of the secondary
market bid rates of the reference dealers as of the close of business on
the Business Day immediately preceding such Auction Date quoted by such
reference dealers to the Trust Company for the issue of United States
Treasury bills with a remaining maturity closest to one year. For
purposes of this definition, the "interest equivalent" of a rate stated
on a discount basis (a "discount rate") shall be equal to the quotient
of (A) the discount rate divided by (B) the difference between 1.00 and
the discount rate; "H.15(519)," for any Auction Date, shall mean the
weekly statistical release designated as such, or any successor
publication, published by the Board of Governors of the Federal Reserve
System on the Monday immediately preceding such Auction Date; and
"reference dealers" shall mean three primary United States Government
securities dealers in The City of New York. If the bid rates obtained
by the Trust Company are quoted on a basis other than a discount rate,
the Trust Company shall convert the quoted rates to their interest
equivalent after consultation with the Corporation as to the method of
such conversion.
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<PAGE>
(xx) "Order" shall have the meaning specified in paragraph
6(b)(i) below.
(xxi) "Outstanding" shall mean, as of any date, FLEX DARTS
theretofore issued by the Corporation except, without duplication, (A)
any FLEX DARTS theretofore cancelled or delivered to the Trust Company
for cancellation, or redeemed by the Corporation or as to which a notice
of redemption shall have been given by the Corporation, (B) any FLEX
DARTS as to which the Corporation or any Affiliate thereof shall be an
Existing Holder and (C) any FLEX DARTS represented by any certificate in
lieu of which a new certificate has been executed and delivered by the
Corporation.
(xxii) "Person" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a
joint venture or other entity or a government or any agency or poli-
tical subdivision thereof.
(xxiii) "Potential Holder" shall mean any Person, including any
Existing Holder, (A) who shall have executed a Master Purchaser's Letter
and (B) who may be interested in acquiring Units (or, in the case of an
Existing Holder, additional Units).
(xxiv) "Reference Rate," on any Auction Date, shall mean (A) if
the next succeeding Designated Dividend Period is a period not exceeding
26 weeks, the Applicable "AA" Composite Commercial Paper Rate on such
Auction Date and (B) if such Designated Dividend Period is a period of
52 weeks, the One-Year Treasury Rate on such Auction Date. For purposes
of this definition, the Designated Dividend Period succeeding each
Auction Date shall be determined as provided in paragraph 3(b)(i) but
without giving effect to subclause (B) thereof.
(xxv) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns or any other securities
depository selected by the Corporation which agrees to follow the
procedures required to be followed by such securities depository in
connection with FLEX DARTS.
(xxvi) "Sell Order" shall have the meaning specified in paragraph
6(b)(i) below.
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<PAGE>
(xxvii) "Submission Deadline" shall mean 12:30 p.m., New York City
time, on any Auction Date or such other time on any Auction Date by
which Broker-Dealers are required to submit Orders to the Trust Company,
as specified by the Trust Company from time to time.
(xxviii) "Submitted Bid" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxix) "Submitted Hold Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxx) "Submitted Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxxi) "Submitted Sell Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxxii) "Substitute Commercial Paper Dealer" shall mean any
commercial paper dealer that is a leading dealer in the commercial paper
markets, provided that neither such dealer nor any of its affiliates is
a Commercial Paper Dealer.
(xxxiii) "Sufficient Clearing Bids" shall have the meaning specified
in paragraph 6(d)(i) below.
(xxxiv) "Trust Company" shall mean Manufacturers Hanover Trust
Company and its successors and assigns or any other bank, trust company
or other entity selected by the Corporation which agrees to follow the
Auction Procedures for the purposes of determining the Applicable Rate
for FLEX DARTS.
(xxxv) "Units" shall mean units consisting of 1,000 shares of FLEX
DARTS.
(xxxvi) "Winning Bid Rate" shall have the meaning specified in
paragraph 6(d)(i) below.
(b) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS
(i) On or prior to each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer
information as to:
(1) the number of Outstanding Units, if any,
held by such Existing Holder which such Existing Holder desires to
continue to hold without regard to the Applicable Rate for the next
succeeding Dividend Period;
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<PAGE>
(2) the number of Outstanding Units, if any,
held by such Existing Holder which such Existing Holder desires to
continue to hold, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per annum
specified by such Existing Holder; and/or
(3) the number of Outstanding Units, if any,
held by such Existing Holder which such Existing Holder offers to sell
without regard to the Applicable Rate for the next succeeding Dividend
Period; and
(B) each Broker-Dealer, using a list of Potential
Holders that shall be maintained in good faith for the purpose of
conducting a competitive Auction shall contact Potential Holders,
including Persons that are not Existing Holders, on such list to
determine the number of Outstanding Units, if any, which each such
Potential Holder offers to purchase, provided that the Applicable Rate
for the next succeeding Dividend Period shall not be less than the rate
per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 6(b)(i)
is hereinafter referred to as an "Order" and each Existing Holder and
each Potential Holder placing an Order is hereinafter referred to as a
"Bidder"; an Order containing the information referred to in clause
(A)(1) of this paragraph 6(b)(i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (A)(2)
or (B) of this paragraph 6(b)(i) is hereinafter referred to as a "Bid";
and an Order containing the information referred to in clause (A)(3) of
this paragraph 6(b)(i) is hereinafter referred to as a "Sell Order."
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Units specified
in such Bid if the Applicable Rate determined on such Auction Date shall
be less than the rate specified in such Bid; or
(2) such number or a lesser number of
Outstanding FLEX DARTS to be determined as set forth in paragraph
6(e)(i)(D) if the Applicable Rate determined on such Auction Date shall
be equal to the rate specified therein; or
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<PAGE>
(3) such number or a lesser number of Outstanding Units to be
determined as set forth in paragraph 6(e)(ii)(C) if such specified rate
shall be higher than the Maximum Applicable Rate and Sufficient Clearing
Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding Units specified
in such Sell Order; or
(2) such number or a lesser number of
Outstanding Units to be determined as set forth in paragraph 6(e)(ii)(C)
if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding Units specified
in such Bid if the Applicable Rate determined on such Auction Date shall
be higher than the rate specified therein; or
(2) such number or a lesser number of
Outstanding Units to be determined as set forth in paragraph 6(e)(i)(E)
if the Applicable Rate determined on such Auction Date shall be equal to
the rate specified therein.
(c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO TRUST COMPANY
(i) Each Broker-Dealer shall submit in writing to the Trust
Company prior to the Submission Deadline on each Auction Date all Orders
obtained by such Broker-Dealer, specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding Units that are
the subject of such Order;
(C) to the extent that such Bidder is an Existing
Holder:
(1) the number of Outstanding Units, if any,
subject to any Hold Order placed by such Existing Holder;
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<PAGE>
(2) the number of Outstanding Units, if any,
subject to any Bid placed by such Existing Holder and the rate specified
in such Bid; and
(3) the number of Outstanding Units, if any,
subject to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder,
the rate specified in such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Trust Company shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or orders covering all of the Outstanding Units
held by an Existing Holder is not submitted to the Trust Company prior
to the Submission Deadline, the Trust Company shall deem a Hold Order to
have been submitted on behalf of such Existing Holder covering the
number of Outstanding Units held by such Existing Holder and not subject
to Orders submitted to the Trust Company.
(iv) If one or more Orders covering in the aggregate more than
the number of Outstanding Units held by an Existing Holder are submitted
to the Trust Company, such Orders shall be considered valid as follows
and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and including the number of
Outstanding Units held by such Existing Holder; provided that if more
than one Hold Order is submitted on behalf of such Existing Holder and
the number of Units subject to such Ho1d Orders exceeds the number of
Outstanding Units held by such Existing Holder, the number of Units
subject to such Hold Orders shall be reduced pro rata so that such Hold
Orders shall cover the number of Outstanding Units held by such Existing
Holder;
(B) (1) any Bid shall be considered valid up to and
including the excess of the number of Outstanding Units held by such
Existing Holder over the number of Units subject to Hold Orders referred
to in clause (A) of this paragraph 6(c)(iv);
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<PAGE>
(2) subject to clause (1) above, if more than
one Bid with the same rate is submitted on behalf of such Existing
Holder and the number of Outstanding Units subject to such Bids is
greater than such excess, the number of Outstanding Units subject to
such Bids shall be reduced pro rata so that such Bids shall cover the
number of Outstanding Units equal to such excess; and
(3) subject to clause (1) above, if more than
one Bid with different rates is submitted on behalf of such Existing
Holder, such Bids shall be considered valid in the ascending order of
their respective rates and in any such event the number, if any, of such
Outstanding Units subject to Bids not valid under this clause (B) shall
be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding Units held by such
existing Holder over the number of Outstanding Units subject to Hold
Orders referred to in clause (A) of this paragraph 6(c)(iv) and Bids
referred to in clause (B) of this paragraph 6(c)(iv).
(v) If more than one Bid is submitted on behalf of any
Potential Holder, each Bid submitted shall be a separate Bid with the
rate and Units therein specified.
(vi) If any rate specified in any Bid is lower than the Minimum
Applicable Rate for the Dividend Period to which such Bid relates, such
Bid shall be deemed to be a Bid specifying a rate equal to such Minimum
Applicable Rate.
(vii) Orders by Existing Holders and Potential Holders must
specify the numbers of Units in whole Units. Any Order that specifies a
number of Units other than in whole Units will be invalid and will not
be considered a Submitted Order for purposes of an Auction.
(d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE
(i) Not earlier than the Submission Deadline on each Auction
Date, the Trust Company shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a
"Submitted Sell Order," as the case may be, or as a "Submitted Order")
and shall determine:
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<PAGE>
(A) the excess of the total number of Outstanding Units
over the number of Outstanding Units that are the subject of Submitted
Hold Orders (such excess being hereinafter referred to as the "Available
Units");
(B) from the Submitted Orders, whether:
(1) the number of Outstanding Units that are
the subject of Submitted Bids by Potential Holders specifying one or
more rates equal to or lower than the Maximum Applicable Rate exceeds or
is equal to the sum of:
(2) [a] the number of Outstanding Units that
are the subject of Submitted Bids by Existing Holders specifying one or
more rates higher than the Maximum Applicable Rate and
[b] the number of Outstanding Units that
are subject to Submitted Sell Orders if such excess or such equality
exists (other than because the number of Outstanding Units in clauses
[a] and [b] above are each zero because all the Outstanding Units are
the subject of Submitted Hold Orders), such Submitted Bids in clause (1)
above being hereinafter referred to collectively as "Sufficient Clearing
Bids" and
(C) if Sufficient Clearing Bids exist, the lowest rate
specified in the Submitted Bids (the "Winning Bid Rate"), which if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids from
Existing Holders specifying lower rates were rejected, thus entitling
such Existing Holders to continue to hold the Units that are the subject
of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids from
Potential Holders specifying lower rates were accepted, thus entitling
the Potential Holders to purchase the Units that are the subject of such
Submitted Bids, would result in the number of shares subject to all
Submitted Bids specifying the Winning Bid Rate or a lower rate being at
least equal to the Available Units.
(ii) Promptly after the Trust Company has made the
determinations pursuant to paragraph 6(d)(i), the Trust Company shall
advise the Corporation of the Maximum Applicable Rate and the Minimum
Applicable Rate and, based on such determinations, the Applicable Rate
for the next succeeding Dividend Period shall be as follows:
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<PAGE>
(A) if Sufficient Clearing Bids exist, then the
Applicable Rate for the next succeeding Dividend Period shall be equal
to the Winning Bid Rate so determined;
(B) if sufficient Clearing Bids do not exist (other
than because all of the Outstanding Units are the subject of Submitted
Hold Orders), then the Applicable Rate for the next succeeding Dividend
Period shall be equal to (1) the Maximum Applicable Rate, if the next
succeeding Designated Dividend Period is a Normal Designated Dividend
Period, or (2) if the next succeeding Designated Dividend Period as
designated by the Corporation is not a Normal Designated Dividend
Period, the higher of (x) the Maximum Applicable Rate as determined for
such next succeeding Designated Dividend Period and (y) the Maximum
Applicable Rate as determined pursuant to paragraph 6(a)(xiv) above,
assuming that such next succeeding Designated Dividend Period is a
Normal Designated Dividend Period; or
(C) if all of the Outstanding Units are the subject of
Submitted Hold Orders, then the Applicable Rate for the next succeeding
Dividend Period shall be equal to the Minimum Applicable Rate.
(e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF UNITS
Based on the determinations made pursuant to paragraph 6(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and
the Trust Company shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraphs 6(e)(iii) and 6(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall
be accepted and the Submitted Bid of each of the Existing Holders
specifying any rate that is higher than the Winning Bid Rate shall be
rejected, thus requiring each such Existing Holder to sell the
Outstanding Units that are the subject of such Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate that is lower than the Winning Bid Rate shall be
accepted, thus entitling each such Existing Holder to continue to hold
the Outstanding Units that are the subject of such Submitted Bid;
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<PAGE>
(C) the Submitted Bid of each of the Potential Holders
specifying any rate that is lower than the Winning Bid Rate shall be
accepted, thus requiring the Potential Holder to purchase the Units hat
are the subject of such Submitted Bid;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate that is equal to the Winning Bid Rate shall be
accepted, thus entitling each such Existing Holder to continue to hold
the Outstanding Units that are the subject of such Submitted Bid, unless
the number of Outstanding Units subject to all such Submitted Bids shall
be greater than the number of Outstanding Units ("remaining Units")
equal to the excess of the Available Units over the number of
Outstanding Units subject to Submitted Bids described in clauses (B) and
(C) of this paragraph 6(e)(i), in which event the Submitted Bids of each
such Existing Holder shall be rejected, and each such Existing Holder
shall be required to sell Outstanding Units, but only in an amount equal
to the difference between (1) the number of Outstanding Units then held
by such Existing Holder subject to such Submitted Bid and (2) the number
of Units obtained by multiplying (x) the number of remaining Units by
(y) a fraction, the numerator of which shall be the number of
Outstanding Units held by such Existing Holder subject to such Submitted
Bid and the denominator of which shall be the sum of the number of
Outstanding Units subject to such Submitted Bids made by all such
Existing Holders that specified a rate equal to the Winning Bid Rate;
and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate that is equal to the Winning Bid Rate shall be
accepted but only in an amount equal to the number of Outstanding Units
obtained by multiplying (x) the difference between the Available Units
and the number of Outstanding Units subject to Submitted Bids described
in clauses (B), (C) and (D) of this paragraph 6(e)(i) by (y) a fraction,
the numerator of which shall be the number of Outstanding Units subject
to such Submitted Bid and the denominator of which shall be the sum of
the number of Outstanding Units subject to such Submitted Bids made by
all such Potential Holders that specified rates equal to the Winning Bid
Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding Units are subject to Submitted Hold
Orders), subject to the provisions of paragraphs 6(e)(iii) and 6(e)(iv),
Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be
rejected:
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<PAGE>
(A) the Submitted Bid of each Existing Holder
specifying any rate that is equal to or lower than the Maximum
Applicable Rate shall be accepted, thus entitling such Existing Holder
to continue to hold the Outstanding Units that are the object of such
Submitted Bid;
(B) the Submitted Bid of each Potential Holder
specifying any rate that is equal to or lower than the Maximum
Applicable Rate shall be accepted, thus requiring such Potential Holder
to purchase the Outstanding Units that are the subject of such Submitted
Bid; and
(C) the Submitted Bids of each Existing Holder
specifying any rate that is higher than the Maximum Applicable Rate
shall be rejected and the Submitted Sell Orders of each Existing Holder
shall be accepted, in both cases only in an amount equal to the
difference between (1) the number of (outstanding Units then held by
such Existing Holder subject to such Submitted Bid or Submitted Sell
Order and (2) the number of Units obtained by multiplying (x) the
difference between the Available Units and the aggregate number of
Outstanding Units subject to Submitted Bids described in clauses (A) and
(B) of this paragraph 6(e)(ii) by (y) a fraction, the numerator of which
shall be the number of Outstanding Units held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and the
denominator of which shall be the number of Outstanding Units subject to
all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph
6(e)(i) or 6(e)(ii), any Existing Holder would be entitled or required
to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a Unit on any Auction Date, the Trust Company
shall, in such manner as, in its sole discretion, it shall determine,
round up or down the number of Units to be purchased or sold by any
Existing Holder or Potential Holder on such Auction Date so that the
number of Outstanding Units purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be whole Units.
(iv) If, as a result of the procedures described in paragraph
6(e)(i), any Potential Holder would be entitled to purchase less than a
whole Unit on any Auction Date, the Trust Company shall, in such manner
as, in its sole discretion, it shall determine, allocate Units for
purchase among Potential Holders so that only whole Units are purchased
on such Auction Date by any Potential Holder, even if such allocation
results in one or more of such Potential Holders not purchasing Units on
such Auction Date.
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(v) Based on the results of each Auction, the Trust Company
shall determine the aggregate number of Outstanding Units to be
purchased and the aggregate number of Outstanding Units to be sold by
Potential Holders and Existing Holders on whose behalf each
Broker-Dealer submitted Bids or Sell Orders, and, with respect to each
Broker-Dealer, to the extent that such aggregate number of Outstanding
Units to be purchased and such aggregate number of Outstanding Units to
be sold differ, determine to which other Broker Dealer(s) acting for one
or more purchasers such Broker Dealer shall deliver, or from which other
Broker-Dealer(s) acting for one or more sellers such Broker-Dealer shall
receive, as the case may be, Outstanding Units.
(f) MISCELLANEOUS
The Board of Directors may interpret the provisions of this paragraph 6 to
resolve anv inconsistency or ambiguity, remedy any formal defect or make any
other change or modification which does not adversely affect the rights of
Existing Holders of Units. An Existing Holder (A) may sell, transfer or
otherwise dispose of Units only pursuant to a Bid or Sell Order in accordance
with the procedures described in this paragraph 6 or to or through a
Broker-Dealer or to a Person that has delivered a signed copy of a Master
Purchaser's Letter to the Trust Company, provided that in the case of all
transfers other than pursuant to Auctions such Existing Holder, its
Broker-Dealer or its Agent Member advises the Trust Company of such transfer
and (B) shall have the ownership of the Units held by it maintained in book
entry form by the Securities Depository in the account of its Agent Member,
which in turn will maintain records of such Existing Holder's beneficial
ownership. Neither the Corporation nor any Affiliate shall submit an Order,
either directly or indirectly, in any Auction. Except as otherwise provided by
law, all of the Outstanding Units shall be represented by a certificate
registered in the name of the nominee of the Securities Depository and no
Person acquiring Units shall be entitled to receive a certificate representing
such Units. If any entity acting as Trust Company should resign as such at any
time, the Corporation will use its best efforts to enter into an agreement(s)
with a successor Trust Company containing substantially the same terms and
conditions as the agreement with the Trust Company.
(g) HEADINGS OF SUBDIVISIONS
The headings of the various subdivisions of this paragraph 6 are for
convenience of reference only and shall not affect the interpretation of any
of the provisions hereof.
-23-
<PAGE>
7. VOTING RIGHTS. Holders of the Series A FLEX DARTS shall have no
voting rights, either general or special, except as expressly required by
applicable law and the Articles.
8. SINKING FUND. The Series A FLEX DARTS shall not be entitled to the
benefits of a sinking fund.
9. CONVERSION. The Units shall not be convertible into shares of
stock of the Corporation of any other class, into any shares of $100 par
value Preferred Stock of the Corporation or any other series, or into any
other type of securities.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed in duplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this fourteenth day of
January, 1988.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ R. R. Sonstelie
-------------------------------
R. R. Sonstelie,
President
By /s/ W. E. Watson
--------------------------------
W. E. Watson,
Secretary
-24-
<PAGE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR THE
7-3/4% SERIES PREFERRED STOCK
(CUMULATIVE, $100 PAR VALUE)
--------------------------
Pursuant to Section 23B.06.020 of the Washington Business Corporation
Act, Puget Sound Power & Light Company (the "Company"), a Washington
corporation, hereby states that at a meeting of the Board of Directors of the
Company duly convened and held on March 18, 1992, the following resolution
was duly adopted:
RESOLVED - That pursuant to the authority expressly vested in it by
theCompany's Articles of Incorporation (the "Articles") and subject to the
preferences, limitations, relative rights and other terms and provisions set
forth in the Articles, the Board of Directors of the Company hereby
establishes an additional series of the Company's $100 par value Preferred
Stock, sets forth the designation of the series, and fixes and determines the
relative rights and preferences thereof, including the rate of dividends, the
price, terms and conditions of redemption, and the creation of a sinking
fund, as follows:
1. DESIGNATION. The shares of such series shall be designated "7-3/4%
Series Preferred Stock (Cumulative, $100
PAGE 1
<PAGE>
par value)" (the "New Preferred Stock" herein) and the number of shares
constituting such series shall be 750,000.
2. DIVIDENDS. The holders of the New Preferred Stock shall be entitled
to annual preferential dividends at the rate of 7-3/4%, in accordance with
the provisions of Article VI, Section 3 of the Articles. Dividends shall
commence to accrue from the date of the original issue of the shares. The
first dividend date shall be May 15, 1992.
3. REDEMPTION. The Company may, at its option expressed by resolution
of the Board of Directors, redeem the New Preferred Stock as a whole at any
time or in part from time to time in accordance with the provisions of
Section 5 of the Articles at the following prices per share, applicable to
the redemption periods during which such redemptions occur:
<TABLE>
<CAPTION>
12 Month Redemption 12 Month Redemption
Period Ended Price Period Ended Price
February 15, Per Share February 15, Per Share
------------ --------- ------------ ---------
<S> <C> <C> <C>
1993 $107.75 2001 $103.62
1994 107.23 2002 103.10
1995 106.72 2003 102.58
1996 106.20 2004 102.07
1997 105.68 2005 101.55
1998 105.17 2006 101.03
1999 104.65 2007 101.52
2000 104.13
</TABLE>
and at $100.00 per share if redeemed thereafter, plus an amount in each case
equal to accrued and unpaid dividends (sometimes in the Articles called the
"optional redemption price"); provided however, that no such redemption shall
be
PAGE 2
<PAGE>
made prior to February 15, 1997 if such redemption is a part of or in
anticipation of any refunding operation involving the application, directly
or indirectly, of borrowed funds or the proceeds of an issue of any stock
ranking superior to or on a parity with the New Preferred Stock if such
borrowed funds have an interest rate or cost to the Company or such stock has
a dividend rate or cost to the Company (calculated in accordance with
generally accepted financial practice) of less than the dividend rate per
annum of the New Preferred Stock.
4. SINKING FUND. The New Preferred Stock shall be entitled to the
benefits of a sinking fund as follows:
(A) On February 15 in each year, commencing with the year 1998, the
Company shall, upon notice given as provided in Section 5 of the Articles
redeem 37,500 shares of New Preferred Stock at a price per share equal to
$100, together with accrued and unpaid dividends (sometimes in the Articles
called the "sinking fund redemption price"). The Company may, at its option,
by written notice signed by its President or one of its Vice-Presidents and
given to the transfer agent for the New Preferred Stock, redeem an additional
37,500 shares of New Preferred Stock on any said February 15, which right
shall be noncumulative. The obligation to redeem shares of the New Preferred
Stock pursuant to the provisions of this Section, as such obligation may be
increased by the Company pursuant to the preceding
PAGE 3
<PAGE>
sentence, is herein sometimes referred to as the "sinking fund obligation."
(B) The sinking fund obligation shall be cumulative so that if on any
February 15, on or after February 15, 1998, the Company shall not have
satisfied to the full extent the sinking fund obligation then due, for any
reason whatsoever, then any such deficiency shall be made good before (i) any
dividend shall be paid upon or set apart for the shares of Common Stock or of
any other class of stock ranking junior as to dividends or assets in
liquidation to the New Preferred Stock (other than a dividend in stock
ranking junior as to dividends and assets in liquidation to the New Preferred
Stock) or any other distribution shall be made on any shares of such junior
stock, (ii) any shares of stock ranking junior to the New Preferred Stock as
to dividends or assets in liquidation may be redeemed, purchased or otherwise
retired for a consideration by the Company (other than in exchange for, or
from the proceeds of any substantially concurrent sale hereafter made of,
other shares of stock of the Company ranking junior to the New Preferred
Stock as to dividends and assets in liquidation), or (iii) any shares of New
Preferred Stock or of any stock ranking on a parity with the New Preferred
Stock may be redeemed, purchased or otherwise retired for consideration by
the Company. Nothing herein contained, however, shall prevent the Company
from satisfying,
PAGE 4
<PAGE>
in whole or in part, its obligations in respect of any sinking or purchase fund
for shares of any other series of Preferred Stock, provided that any sinking
fund obligations for the New Preferred Stock, which shall have theretofore
become due as aforesaid and not have been satisfied, shall be satisfied buy a
percentage not less than that by which any obligation of the Company in respect
of any such other fund is to be satisfied.
(C) The Company shall have the right to satisfy, in whole or in part,
any sinking fund obligation (including any deficiency in any past sinking
fund obligation) by crediting against such obligation any shares of the New
Preferred Stock purchased or otherwise acquired by the Company, such credit
to be effected by delivering to the transfer agent for the New Preferred
Stock not later than the January 1 next preceding the February 15 on which
there is due any sinking fund obligation in respect of which such credit is
to be taken, a certificate signed by its President or one of its Vice
Presidents or its Treasurer, or one of its Assistant Treasurers, specifying
the election of the Company to take such credit and stating that no previous
sinking fund credit has been taken in respect of any such shares.
(D) At least one day prior to the February 15 on which any sinking
obligation is due, the Company shall deliver to the transfer agent for the
New Preferred Stock, in trust for such redemption, an amount of money
sufficient to
PAGE 5
<PAGE>
redeem all shares of such stock called for redemption to satisfy such
obligation, to be held and applied as provided in Section 5 of the Articles, and
certificates properly endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank and bearing all necessary stock
transfer tax stamps thereto affixed and cancelled, for any shares of such stock
purchased or otherwise acquired by the Company which are to be used as a credit
against the sinking fund obligation due on such date, for cancellation as
provided in Section 5 of the Articles with respect to shares redeemed for
sinking fund purposes.
5. CONVERSION. The shares of the New Preferred Stock shall not be
convertible into shares of stock of the Company of any other class, into any
shares of Preferred Stock of the Company of any other series or into any
other type of securities.
PAGE 6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in triplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this 23rd day of March,
1992.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ R. R. Sonstelie
-------------------------------
R. R. Sonstelie, President
By /s/ Wilbur E. Watson
------------------------------
Wilbur E. Watson, Secretary
PAGE 7
<PAGE>
[Seal of the State of Washington]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE OF WASHINGTON SECRETARY OF STATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I, RALPH MUNRO, Secretary of State of the State of Washington and custodian of
its seal, hereby certify that
RESTATED ARTICLES OF INCORPORATION
of
PUGET SOUND POWER & LIGHT COMPANY
a Washington Profit corporation.
was/were filed for record in this office on the date indicated below.
Corporation Number: 2-151207-4 Date: January 5, 1988
Given under my hand and the seal of the State
of Washington, at Olympia, the State Capitol
/s/ RALPH MUNRO
---------------------------------------------
RALPH MUNRO, SECRETARY OF STATE
<PAGE>
[Seal of the State of Washington]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE OF WASHINGTON SECRETARY OF STATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I, RALPH MUNRO, Secretary of State of the State of Washington and custodian of
its seal, hereby certify that the attached is a true and correct copy of
RESTATED ARTICLES OF INCORPORATION
of
PUGET SOUND POWER & LIGHT COMPANY
as filed in this office on January 5, 1988
Date: January 5, 1988
Given under my hand and the seal of the State
of Washington, at Olympia, the State Capitol
/s/ RALPH MUNRO
---------------------------------------------
RALPH MUNRO, SECRETARY OF STATE
<PAGE>
RESTATED ARTICLES OF INCORPORATION Exhibit 3.1
OF
PUGET SOUND POWER & LIGHT COMPANY
Pursuant to RCW 23A.16.075 and a resolution duly adopted by the Board of
Directors on October 8, 1987, the following constitutes Restated Articles of
Incorporation of the undersigned, a Washington Corporation. These Restated
Articles of Incorporation correctly set forth without change the
corresponding provisions of the Articles of Incorporation as heretofore
amended and supersede the oriqinal Articles of Incorporation and all
amendments thereto.
ARTICLE I.
The name of this Corporation is PUGET SOUND POWER & LIGHT COMPANY.
ARTICLE II.
The purposes for which this Corporation is formed are as follows:
SECTION 1. To engage in the electric utility business, including, but
not limited to, the generation, purchase, interchange, transmission and sale
of electricity and the furnishing of electric service generally, and to
engage in any business or activity directly or indirectly related to the
electric utility business.
SECTION 2. To engage in the gas utility business, including, but not
limited to, the manufacture, purchase, distribution and sale of gas and the
furnishing of gas service generally, and to engage in any business or
activity directly or indirectly related to the gas utility business.
SECTION 3. To engage in the transportation business and any business or
activity directly or indirectly related to the transportation of persons or
property by any means of conveyance.
SECTION 4. To engage in the real estate business, including, but not
limited to, the purchase or other acquisition of real property and the
subdividing, platting, development, improvement, use, sale or other
disposition of real property or any interest therein and to engage in any
business or activity directly or indirectly related to the real estate
business.
SECTION 5. To engage in any form of public service or utility business
and any business or activity directly or indirectly related thereto.
<PAGE>
SECTION 6. To purchase or otherwise acquire, and to own, hold, use,
mortgage, pledge or otherwise encumber, and to assign, sell, or otherwise
dispose of, shares of stock or other securities of any kind whatsoever of any
corporation or entity, and while the holder or owner thereof to exercise all
of the rights of such ho1der or owner.
SECTION 7. To borrow money with or without the giving of security of
any kind or nature, and to execute and deliver notes, debentures, bonds and
other evidences of indebtedness and to act as guarantor or surety, and,
without limiting the generality of the foregoing, to mortgage, pledge,
hypothecate or otherwise encumber the whole or any portion of the property of
this Corporation, real, personal or mixed.
SECTION 8. To carry on any business or activity which may lawfully be
conducted by a corporation organized under the Washington Business
Corporation Act, which may seem to this Corporation capable of being
conveniently carried on in connection with any branch of this Corporation's
business or calculated directly or indirectly to enhance the value of, or
render profitable, any of this Corporation's business, property or rights.
SECTION 9. In general, to do any or all of the things herein-before set
forth, and such other things as are incidental or conducive to the attainment
of the objects and purposes of this Corporation, or any of them, in any place
whatsoever, as principal, agent, or otherwise, either alone or in conjunction
with any person, firm, association or corporation; and to do such acts and
things and to exercise any and all such powers to the full extent authorized
or permitted to be done or exercised by a corporation under any laws that may
be now or hereafter applicable or available to this Corporation.
SECTION 10 . The several clauses contained in this statement of purposes
shall be construed as both purposes and powers and the statements contained
in each clause shall be in no way limited or restricted by reference to or
inference from the terms of any other clause, but shall be regarded as
independent purposes and powers; and nothing contained in these purposes
shall be deemed in any way to limit or exclude any power, right or privilege
given to this Corporation by law.
ARTICLE III.
The duration of this Corporation shall be perpetual.
ARTICLE IV.
The location and post office address of the registered office of this
Corporation shall be Puget Power Building, 10608 N.E. 4th, Bellevue,
Washington 98009.
2
<PAGE>
ARTICLE V.
The total authorized shares of this Corporation shall consist of Eighty
Million (80,000,000) shares of Common Stock without par value, Three Million
(3,000,000) shares of Preferred Stock having a par value of One Hundred
Dollars a share, Thirteen Million (13,000,000) shares of Preferred Stock
having a par value of Twenty-five Dollars a share, and Seven Hundred Thousand
(700,000) shares of Preference Stock having a par value of Fifty Dollars a
share.
ARTICLE VI.
The provisions as to the respective rights, privileges, voting power,
preferences, qualifications and restrictions of the several classes of stock
are as follows:
SECTION 1. PREFERRED STOCK - GENERAL.
The authorized Preferred Stock of this Corporation shall consist of two
classes: stock of the par value of $100 per share entitled "$100 par value
Preferred Stock" and stock of the par value of $25 per share entitled "$25
par value Preferred Stock". The $100 par value Preferred Stock and the $25
par value Preferred Stock are sometimes collectively referred to herein as the
"Preferred Stock," and unless otherwise specified all references herein to
Preferred Stock shall be deemed to include the stock of both classes.
The $100 par value Preferred Stock and the $25 par value Preferred Stock
shall rank equally with respect to dividends and distribution of assets upon
liquidation, dissolution or winding up of this Corporation.
Shares of the Preferred Stock may be divided into and issued in series.
The series of the $100 par value Preferred Stock shall be of the same class
and of equal rank and identical in all respects, and the series of the $25
par value Preferred Stock shall be of the same class and of equal rank and
identical in all respects, except as to the following relative rights and
preferences as to which there may be variations between the different series
of the $100 par value Preferred Stock and between the different series of the
$25 par value Preferred Stock:
(a) The rate of dividends, dividend periods and dividend payment
dates;
(b) Whether shares may be redeemed and, if so, the redemption price
and the terms and conditions of redemption;
(c) The amount payable upon shares in event of
3
<PAGE>
voluntary and involuntary liquidation;
(d) Sinking fund provisions, if any, for the redemption or
purchase of shares;
(e) The terms and conditions, if any, on which the shares may be
converted; and
(f) Any other terms, conditions, or provisions which the Board of
Directors shall have the authority to fix and determine under the Washington
Business Corporation Act, as now in effect or hereafter amended.
The Board of Directors is hereby expressly vested with the authority to
divide any or all of the Preferred Stock into series and fix the designations
of series and, within the limitations set forth herein, fix and determine the
relative rights and preferences of the shares of any series so established.
SECTION 2. SPECIAL PROVISIONS OF PARTICULAR SERIES OF PREFERRED STOCK.
2.01. The second series* of $100 par value Preferred Stock is
designated 4.84% Preferred Stock and consists of 150,000 shares. The holders
of the 4.84% Preferred Stock shall be entitled to preferential dividends at
the rate of Four and 84/lOO percent (4.84%) per annum as provided in Section
3.
2.02. This Corporation may, at its option expressed by resolution of
the Board of Directors, redeem the 4.84% Preferred Stock as a whole at any
time or in part from time to time in accordance with the provisions of
Section 5 at:
$105.00 per share if redeemed prior to May 15, 1967,
$104.00 per share if redeemed on May 15, 1967 or
thereafter prior to May 15, 1972,
$103.00 per share if redeemed on May 15, 1972 or
thereafter prior to May 15, 1977,
$102.00 per share if redeemed on or after May 15, 1977,
in each case together with any accrued dividends (herein sometimes called the
"optional redemption price").
- -----------------------------------
* Note: The provisions relating to the "first series of Preferred Stock"
have been eliminated because the "first series" was redeemed and cancelled
pursuant to a Certificate of Redemption, filed with the Secretary of State on
May 19, 1964. Section 2 has been renumbered accordingly.
4
<PAGE>
2.03. The 4.84% Preferred Stock shall be entitled to the benefits of a
sinking fund as follows:
(A) On May 15 in each year, commencing with the year l966, this
Corporation shall, upon notice given as provided in Section 5, redeem at
a price per share equal to $100.00, together with accrued dividends
(herein sometimes called the "sinking fund redemption price"), a number
of shares of the 4.84% Preferred Stock equal to two percent (2%) of the
maximum number of shares thereof outstanding at any one time prior to
such May 15. The obligation to redeem shares of the 4.84% Preferred
Stock pursuant to the provisions of this Section is herein sometimes
referred to as the "sinking fund obligations".
(B) The sinking fund obligation shall be cumulative so that if on
any May 15, on or after May 15, 1966, this Corporation shall not have
satisfied to the full extent the sinking fund obligation then due, for
any reason whatsoever, then any such deficiency shall be made good
before (i) any dividend shall be paid upon or set apart for the shares
of Common Stock or of any other class of stock ranking junior as to
dividends or assets in liquidation to the Preferred Stock (other than a
dividend in stock ranking junior as to dividends and assets in
liquidation to the Preferred Stock) or any other distribution shall be
made on any shares of such junior stock, (ii) any shares of stock
ranking junior to the Preferred Stock as to dividends or assets in
liquidation may be redeemed, purchased or otherwise retired for a
consideration by this Corporation (other than in exchange for, or from
the proceeds of any substantially concurrent sale hereafter made of,
other shares of stock of this Corporation ranking junior to the
Preferred Stock as to dividends and assets in liquidation) or (iii) any
shares of Preferred Stock or of any stock ranking on a parity with the
Preferred Stock may be redeemed, purchased or otherwise retired for a
consideration by this Corporation. Nothing herein contained, however,
shall prevent this Corporation from satisfying, in whole or in part, its
obligations in respect of any sinking or purchase fund for shares of any
other series of Preferred Stock, provided that any sinking fund
obligations for the 4.84% Preferred Stock, which shall have theretofore
become due as aforesaid and not have been satisfied, shall be satisfied
by a percentage not less than that by which any obligation of this
Corporation in respect of any such other fund is to be satisfied.
(C) This Corporation shall have the right to satisfy in whole or
in part any sinking fund obligation (including any deficiency in any
past sinking fund obligation) by crediting against such obligation any
shares of the 4.84% Preferred Stock purchased or otherwise acquired by
this Corporation, such credit to be effected by delivering to the
Transfer Agent for the 4.84% Preferred Stock not later than the April 1
5
<PAGE>
next preceding the May 15 on which there is due any sinking fund
obligation in respect of which such credit is to be taken, a certificate
signed by its President or one of its Vice Presidents or its Treasurer
or one of its Assistant Treasurers, specifying the election of this
Corporation to take such credit and stating that no previous sinking
fund credit has been taken in respect of any such shares.
(D) At least one day prior to the May 15 on which any sinking fund
obligation is due, this Corporation shall deliver to the Transfer Agent
for the 4.84% Preferred Stock, in trust for such redemption, an amount
of money sufficient to redeem all shares of such stock called for
redemption to satisfy such obligation, to be held and applied as
provided in Section 5, and certificates properly endorsed in blank for
transfer or accompanied by proper instruments of assignment or transfer
in blank and bearing all necessary stock transfer tax stamps thereto
affixed and cancelled, for any shares of such stock purchased or
otherwise acquired by this Corporation which are to be used as a credit
against the sinking fund obligation due on such date, for cancellation
as provided in Section 5 with respect to shares redeemed for sinking
fund purposes.
2.04. The third series of $100 par value Preferred Stock is designated
4.70% Preferred Stock and consists of 150,000 shares. The holders of the
4.70% Preferred Stock shall be entitled to preferential dividends at the rate
of Four and 70/100 percent (4.70%) Per annum as provided in Section 3.
2.05. This Corporation may, at its option expressed by resolution of the
Board of Directors, redeem the 4.70% Preferred Stock as a whole at any time
or in part from time to time in accordance with the provisions of Section 5
at:
$107.00 per share if redeemed prior to May 15, 1969,
$104.00 per share if redeemed on May 15, 1969 or
thereafter prior to May 15, 1974,
$102.00 per share if redeemed on May 15, 1974 or
thereafter prior to May 15, 1979,
$101.00 per share if redeemed on or after May 15, 1979,
in each case together with any accrued dividends (herein sometimes called the
"optional redemption price").
2.06. The 4.70% Preferred Stock shall be entitled to the benefits of a
sinking fund as follows:
(A) On May 15 in each year, commencing with the year 1968, this
Corporation shall, upon notice given as provided in Section 5, redeem at
a price per share equal to $100.00,
6
<PAGE>
together with accrued dividends (herein sometimes called the "sinking fund
redemption price"), a number of shares of the 4.70% Preferred Stock equal
to two percent (2%) of the maximum number of shares thereof outstanding at
any one time prior to such May 15. The obligation to redeem shares of the
4.70% Preferred Stock pursuant to the provisions of this Section is herein
sometimes referred to as the "sinking fund obligation".
(B) The sinking fund obligation shall be cumulative so that if on
any May 15, on or after May 15, 1968, this Corporation shall not have
satisfied to the full extent the sinking fund obligation then due, for
any reason whatsoever, then any such deficiency shall be made good
before (i) any dividend shall be paid upon or set apart for the shares
of Common Stock or of any other class of stock ranking junior as to
dividends or assets in liquidation to the Preferred Stock (other than a
dividend in stock ranking junior as to dividends and assets in
liquidation to the Preferred Stock) or any other distribution shall be
made on any shares of such junior stock, (ii) any shares of stock
ranking junior to the Preferred Stock as to dividends or assets in
liquidation may be redeemed, purchased or otherwise retired for a
consideration by this Corporation (other than in exchange for, or from
the proceeds of any substantially concurrent sale hereafter made of,
other shares of stock of this Corporation ranking junior to the
Preferred Stock as to dividends and assets in liquidation) or (iii) any
shares of Preferred Stock or of any stock ranking on a parity with the
Preferred Stock may be redeemed, purchased or otherwise retired for a
consideration by this Corporation. Nothing herein contained, however,
shall prevent this Corporation from satisfying, in whole or in part, its
obligations in respect of any sinking or purchase fund for shares of any
other series of Preferred Stock, provided that any sinking fund
obligations for the 4.70% Preferred Stock, which shall have theretofore
become due as aforesaid and not have been satisfied, shall be satisfied
by a percentage not less than that by which any obligation of this
Corporation in respect of any such other fund is to be satisfied.
(C) This Corporation shall have the right to satisfy in whole or
in part any sinking fund obligation (including any deficiency in any
past sinking fund obligation) by crediting against such obligation any
shares of the 4.70% Preferred Stock purchased or otherwise acquired by
this Corporation, such credit to be effected by delivering to the
Transfer Agent for the 4.70% Preferred Stock not later than the April 1
next preceding the May 15 on which there is due any sinking fund
obligation in respect of which such credit is to be taken, a certificate
signed by its President or one of its Vice Presidents or its Treasurer
or one of its Assistant Treasurers, specifying the election of this
Corporation to take such credit and stating that no previous sinking
fund
7
<PAGE>
credit has been taken in respect of any such shares.
(D) At least one day prior to the May 15 on which any sinking fund
obligation is due, this Corporation shall deliver to the Transfer Agent
for the 4.70% Preferred Stock, in trust for such redemption, an amount
of money sufficient to redeem all shares of such stock called for
redemption to satisfy such obligation, to be held and applied as
provided in Section 5, and certificates properly endorsed in blank for
transfer or accompanied by proper instruments of assignment or transfer
in blank and bearing all necessary stock transfer tax stamps thereto
affixed and cancelled, for any shares of such stock purchased or
otherwise acquired by this Corporation which are to be used as a credit
against the sinking fund obligation due on such date, for cancellation
as provided in Section 5 with respect to shares redeemed for sinking
fund purposes.
SECTION 3. DIVIDEND PROVISIONS RELATING TO ALL SERIES OF PREFERRED STOCK.
Out of the assets of this Corporation available for dividends the
holders of the Preferred Stock at the time outstanding shall be entitled to
receive, but only when and as declared by the Board of Directors, dividends
at the rate per annum fixed for each series, and no more, payable quarterly
on February 15, May 15, August 15 and November 15 in each year, provided,
however, that as to any series of Preferred Stock issued after May 15, 1987,
the Board of Directors may declare dividends at the rate or rates, or in
accordance with methods or procedures established from time to time by the
Board of Directors as to any such series, which may be subject to adjustment
in accordance with a method or procedure adopted by resolution of the Board
of Directors at the time of creation of such series, payable from time to
time when and as declared by the Board of Directors or a committee or
designee thereof. Dividends on the shares of Preferred Stock of each series
shall be cumulative, and, at the option of the Board of Directors, shall,
with respect to particular shares of each series, commence to accrue from the
date of the original issue of such particular shares or from the dividend
date next preceding such original issue.
No dividend shall be paid upon or set apart for the shares of Common
Stock or of any other class of stock ranking junior as to dividends to the
Preferred Stock (other than a dividend in stock ranking junior as to
dividends and assets in liquidation to the Preferred Stock), no other
distribution shall be made on any shares of such junior stock and no
expenditure shall be made for the purchase, redemption or other retirement
for a consideration of shares of this Corporation's stock of any class
ranking junior as to assets in liquidation to the Preferred Stock (other than
in exchange for, or from the proceeds of any substantially concurrent sale
hereafter made of, other shares of stock of this Corporation ranking junior
to the Preferred Stock as to dividends and assets in liquidation), unless
full dividends on all shares of the
8
<PAGE>
Preferred Stock for all past dividend periods shall have been paid or declared
and a sum sufficient for the payment thereof set apart and the full dividend for
the then current dividend period shall have been or concurrently shall be paid
or declared and a sum sufficient for the payment thereof set apart. The amount
of any deficiency for past dividend periods may be paid or declared and set
apart at any time without reference to any dividend payment date. No
accumulation of unpaid dividends on the Preferred Stock shall bear interest.
Dividends remaining unclaimed by the holders of such Preferred Stock for six
years after having been declared and made available for payment to such holders
of Preferred Stock shall revert to this Corporation for its general corporate
purposes and the obligations of this Corporation to pay such dividends shall at
that time cease and determine. Any dividends declared or paid on the Preferred
Stock in an amount less than full cumulative dividends accrued or in arrears
upon all Preferred Stock outstanding shall, if more than one series be
outstanding, be divided between the different series in proportion to the
aggregate amounts which would be distributable to the Preferred Stock of each
series if full cumulative dividends to the next preceding dividend date were
declared and paid thereon.
So long as any shares of the Preferred Stock shall be outstanding, this
Corporation shall not declare or pay any dividends on any shares of its stock
of any class ranking junior as to dividends to the Preferred Stock (other
than dividends payable in shares of any such junior stock) or make any other
distribution on any shares of such junior stock, or make any expenditures for
the purchase, redemption or other retirement for a consideration of shares of
its stock of any class ranking junior as to assets in liquidation to the
Preferred Stock (other than in exchange for, or from the proceeds of any
substantially concurrent sale hereafter made of, other shares of stock of
this Corporation ranking junior to the Preferred Stock as to dividends and
assets in liquidation), if the aggregate amount of all such dividends,
distributions and expenditures paid or made by this Corporation and its
predecessor, Puget Sound Power & Light Company, a Massachusetts corporation,
after December 31, 1957, would exceed the aggregate amount of this
Corporation's net income available for dividends on junior stock accumulated
after December 31, 1957, by this Corporation and its predecessor, Puget Sound
Power & Light Company, a Massachusetts corporation, plus the sum of
$7,500,000.
SECTION 4. LIQUIDATION PROVISIONS RELATING TO ALL SERIES OF PREFERRED STOCK.
In the event of any involuntary liquidation, dissolution or winding up
of this Corporation, the holders of the $100 par value Preferred Stock shall
be entitled to receive for each share thereof the sum of $100 together with
accrued dividends and the holders of the $25 par value Preferred Stock shall
be entitled to receive the amount per share determined by the Board of
Directors for each series at the time of its issuance (which amount shall not
be less than the par value or greater than the issue price
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thereof) together with accrued dividends, before any distribution of the assets
shall be made to the holders of Common Stock, Preference Stock or stock of any
other class ranking junior to the Preferred Stock as to assets in liquidation.
In the event of any voluntary liquidation, dissolution or winding up of this
Corporation, the holders of the Preferred Stock shall be entitled to receive an
amount per share equal to the then applicable optional redemption price, before
any distribution of the assets shall be made to the holders of Common Stock,
Preference Stock or stock of any other class ranking junior to the Preferred
Stock as to assets in liquidation. In either such event the holders of the
Preferred Stock shall be entitled to no further participation in such
distribution. If, upon any such liquidation, dissolution or winding up, the
assets distributable among the holders of the Preferred Stock shall be
insufficient to permit the payment of the full preferential amounts aforesaid,
then the entire assets of this Corporation to be distributed shall be
distributed among the holders of all series of the Preferred Stock then
outstanding, ratably per share in proportion to the full preferential amounts
per share to which they are respectively entitled as hereinabove provided. A
consolidation or merger of this Corporation or sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of this Corporation shall not
constitute a dissolution, liquidation or winding up of this Corporation within
the meaning of this Section 4.
SECTION 5. REDEMPTION PROVISIONS RELATING TO ALL SERIES OF PREFERRED STOCK.
This Corporation (a) at its option, expressed by resolution of its Board
of Directors, may at any time or from time to time redeem the whole or any
part of the Preferred Stock or of any series thereof at the optional
redemption price for each such series; (b) at its option, expressed by
resolution of its Board of Directors, or upon the happening of a specified
event or events, may redeem the whole or any part of any series of the
Preferred Stock created after May 15, 1987, at such time or times, price or
prices, or rate or rates, as shall be fixed by resolution of the Board of
Directors or from time to time in accordance with a method or procedure
adopted by resolution of the Board of Directors at the time of the issuance
of such series; and (c) may redeem the whole or any part of the Preferred
Stock or of any series thereof at the sinking fund redemption price for each
such series at such time or times and to the extent necessary to satisfy the
obligations of this Corporation in respect of any sinking fund for any series
of the Preferred Stock. Notice of any proposed redemption of Preferred Stock
shall be given by this Corporation by mailing a copy of such notice at least
thirty days but not more than ninety days prior to the date fixed for such
redemption to the holders of the Preferred Stock to be redeemed of record on
such date as shall be fixed by resolution of the Board of Directors at their
respective addresses then appearing on the books of this Corporation. Any
such redemption of any shares of
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Preferred Stock shall be in such amount, at such place and by such method,
whether by lot or pro rata, as shall from time to time be determined by vote of
the Board of Directors, subject, in any case, to the provisions established for
any series of Preferred Stock. On or after the date specified in such notice,
each holder of shares of Preferred Stock called for redemption as aforesaid,
upon presentation and surrender at the place designated in such notice of the
certificates for such shares of Preferred Stock held by him, properly endorsed
in blank for transfer or accompanied by proper instruments of assignment or
transfer in blank (if required by this Corporation) and bearing all necessary
stock transfer tax stamps thereto affixed and cancelled, shall be entitled to
receive therefor the redemption funds to which he is entitled. On and after the
date fixed for redemption, if notice is given as aforesaid, and unless default
is made by this Corporation in providing money for payment of the redemption
price, all dividends on the shares called for redemption shall cease to accrue;
and on and after such redemption date, unless default be made as aforesaid, or
on and after the date of earlier deposit by this Corporation with a bank or
trust company doing business in the City of New York, New York, or in the City
of Boston, Massachusetts, or in the City of Seattle, Washington, and having a
capital and surplus of at least $1,000,000, in trust for the benefit of the
holders of the shares of the Preferred Stock so called for redemption, of all
funds necessary for such redemption as aforesaid (provided in the latter case
that there shall have been mailed as aforesaid to holders of record of shares to
be redeemed a notice of the redemption thereof or that this Corporation shall
have executed and delivered to the Transfer Agent for the Preferred Stock or to
the bank or trust company with which such deposit is made an instrument
irrevocably authorizing it to mail such notice at this Corporation's expense)
all rights of the holders of the shares called for redemption as shareholders of
this Corporation, except only the right to receive the redemption price without
interest, shall cease and determine. Any interest which shall have been allowed
by such bank or trust company shall belong to this Corporation and shall be paid
to it from time to time. Any funds so deposited which shall remain unclaimed by
the holders of such Preferred Stock at the end of six years after the redemption
date shall be paid over by such bank or trust company to this Corporation and
thereby revert to the general funds of this Corporation, to be used by it for
its general corporate purposes, and thereafter such holders shall have no claim
against such bank or trust company or this Corporation therefor. Any shares of
Preferred Stock redeemed as aforesaid shall be cancelled and shall not be
reissued. This Corporation may also from time to time purchase shares of its
Preferred Stock at not exceeding the optional redemption price applicable to the
particular shares at the time in effect plus customary brokerage commissions.
Subject to the provisions of Section 6(A)(iv), shares of Preferred Stock so
purchased may in the discretion of the Board of Directors be cancelled, reissued
or otherwise disposed of from time to time to the extent permitted by law,
provided, however, shares of any series of the Preferred Stock
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having the benefit of a sinking fund may not be reissued or otherwise disposed
of as shares of the same series. If and so long as there are dividends in
arrears on any shares of Preferred Stock, this Corporation shall not redeem or
purchase any shares of the Preferred Stock unless in connection therewith all of
the outstanding Preferred Stock is redeemed or a bona fide offer to purchase all
of the outstanding Preferred Stock is made to all of the holders thereof at the
same percentage of the then applicable optional redemption prices. This
Corporation may, from time to time and without the consent or vote of the
holders of Preferred Stock, take such appropriate corporate action as may be
necessary to reduce the authorized Preferred Stock with respect to any shares of
any series of Preferred Stock redeemed or purchased and cancelled.
SECTION 6. RESTRICTIONS ON CORPORATE ACTION FOR BENEFIT OF ALL SERIES OF
PREFERRED STOCK.
(A) So long as any of the Preferred Stock is outstanding this
Corporation shall not, without the consent (given in writing or by a vote in
person or by proxy at a meeting called for the purpose of the holders of
shares of the $100 par value Preferred Stock of all series then outstanding)
of the holders of at least two-thirds of the aggregate number of shares of
the $100 par value Preferred Stock then outstanding, or of each series of the
then outstanding $100 par value Preferred Stock if then so required by the
laws of the State of Washington, and the consent (given in writing or by a
vote in person or by proxy at a meeting called for the purpose of the holders
of shares of the $25 par value Preferred Stock of all series then
outstanding) of the holders of at least two-thirds of the aggregate number of
shares of $25 par value Preferred Stock then outstanding, or of each series
of the then outstanding S25 par value Preferred Stock if then so required by
the laws of the State of Washington,
(i) create or authorize any shares of stock, or increase the
authorized amount of any class of stock ranking as to dividends or assets in
liquidation prior to the Preferred Stock, or of any obligation or security
convertible into stock ranking as to dividends or assets in liquidation prior
to the Preferred Stock, or
(ii) amend, change or repeal any of the express terms of the
Preferred Stock outstanding in any manner prejudicial to the holders thereof,
except that, if such amendment, change or repeal is prejudicial to the
holders of less than all the series of the Preferred Stock, the consent of
the holders of two-thirds of the total number of shares of the series so
affected shall alone be required, or
(iii) sell, lease or otherwise dispose of all or substantially all
of its property (but no consent of the holders of the Preferred Stock shall
be required by the foregoing in connection with the creation or amendment of
any mortgage or other
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encumbrance securing indebtedness upon any or all of the assets of this
Corporation), or
(iv) issue any shares of the Preferred Stock or issue any stock of
any class ranking as to dividends or as to assets in liquidation on a parity
with the Preferred Stock or dispose of any shares of Preferred Stock or of
such parity stock previously reacquired, unless
(a) the net income available for dividends on Preferred
Stock, as defined herein, for a period of twelve consecutive calendar months
within the fifteen calendar months immediately preceding the calendar month
within which such additional shares of stock are to be issued or disposed of,
shall have seen at least two and one-half (2 1/2) times the aggregate annual
dividend requirements upon the entire amount of Preferred Stock and any
stocks of this Corporation of any class ranking as to dividends or assets in
liquidation prior to or on a parity with the Preferred Stock to be
outstanding after giving effect to the issuance or disposition of such
additional shares,
(b) the gross income available for payment of interest
charges, as defined herein, for a period of twelve consecutive calendar
months within the fifteen calendar months immediately preceding the calendar
month within which such additional shares of stock are to be issued or
disposed of, shall have been at least one and one-half (1 1/2) times the sum
of (1) the aggregate annual interest charges on all indebtedness of this
Corporation to be outstanding after giving effect to the issuance or
disposition of such additional shares, and (2) the aggregate annual dividend
requirements upon the entire amount of Preferred Stock and any stocks of this
Corporation of any class ranking as to dividends or assets in liquidation
prior to or on a parity with the Preferred Stock to be outstanding after
giving effect to the issuance or disposition of such additional shares, and
(c) the aggregate of the capital of this Corporation
applicable to all stock ranking as to dividends and assets in liquidation
junior to the Preferred Stock, plus capital surplus and earned surplus of
this Corporation, including premiums on stock of this Corporation of any
class, shall be not less than the aggregate amount payable upon involuntary
liquidation, dissolution or winding up of this Corporation to the holders of
shares of Preferred Stock and of stock ranking as to assets in liquidation
prior to or on a parity with the Preferred Stock to be outstanding after
giving effect to the issuance or disposition of such additional shares but
excluding all such shares to be retired in connection with such proposed
issuance or disposition.
The foregoing computations shall be made as if this Corporation and its
predecessor, Puget Sound Power & Light Company, a Massachusetts corporation,
were the same corporation. There shall be excluded from the foregoing
computations interest charges on all indebtedness and dividend requirements
on all shares of stock
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which are to be retired in connection with the issuance or disposition of such
additional shares. The gross income of any property acquired by this
Corporation during or after the period for which income is computed, or of any
property which is to be acquired in connection with the issuance or disposition
of any such additional shares, if capable of being separately determined or
estimated, may be included on a pro forma basis in the foregoing computations;
and the gross income of any property disposed of by this Corporation during or
after the period for which income is computed, if capable of being separately
determined or estimated, shall be excluded on a pro forma basis in the foregoing
computations.
(B) So long as any of the $100 par value Preferred Stock is outstanding
or any of the $25 par value Preferred Stock is outstanding, this Corporation
shall not, without the consent (given in writing or by vote in person or by
proxy at a meeting called for the purpose of the holders of shares of the
$100 par value Preferred Stock of all series then outstanding) of the holders
of a majority of the aggregate number of shares of the $100 par value
Preferred Stock then outstanding, or of each series of the then outstanding
$100 par value Preferred Stock if then so required by the laws of the State
of Washington, or such greater proportion of such aggregate number of shares
or of each series as shall then be required by such laws, and the consent
(given in writing or by a vote in person or by proxy at a meeting ca1led for
the purpose of the holders of shares of the $25 par value Preferred Stock of
all series then outstanding), of the holders of a majority of the aggregate
number of shares of the $25 par value Preferred Stock then outstanding, or of
each series of the then outstanding $25 par value Preferred Stock if then so
required by the laws of the State of Washington, or such greater proportion
of such aggregate number of shares or of each series as shall then be
required by such laws,
(i) merge or consolidate with or into any other corporation or
corporations, unless such merger or consolidation, or the issuance and
assumption of all securities to be issued or assumed in connection with any
such merger or consolidation, shall have been ordered, approved, authorized
or permitted by a regulatory authority of the United States of America or of
the State of Washington having jurisdiction in the premises; provided that
the provisions of this paragraph (i) shall not apply
(a) to a purchase or other acquisition by this corporation
of franchises or assets of another corporation, in any manner which does not
involve a merger or consolidation, or
(b) to the merger into this Corporation of another
corporation all the stock and other securities of which are at the time owned
by this Corporation, or
(ii) issue, assume or create unsecured securities (notes
debentures or other securities representing unsecured
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indebtedness other than unsecured indebtedness maturing by its terms in one
year or less from the date of its issue) for any purpose except to refund
outstanding unsecured securities theretofore issued or assumed, if thereby the
aggregate principal amount of such unsecured securities would exceed fifteen
percent (15%) of the sum of (1) the total principal amount of all bonds or
other securities representing secured indebtedness of this Corporation then to
be outstanding, and (2) the capital represented by stock (including premiums
on stock) of this Corporation and the capital and earned surplus of this
corporation; provided, however, that any unsecured securities theretofore
issued under any authorization of holders of Preferred Stock given pursuant
hereto and the $15,000,000 principal amount of 5 1/4% Debentures due
November 1, 1983, of Puget Sound Power & Light Company, a Massachusetts
corporation, predecessor to this corporation (and any securities to refund the
same), shall not be considered in determining the amount of other unsecured
securities which may be issued, assumed or created within the aforesaid fifteen
percent (15%) limitation.
(C) The voting rights of the $100 par value Preferred Stock hereinabove
set forth shall not be effective if, in connection with any of the matters
specified in paragraphs (A) or (B), provision is made for the redemption or
other retirement of all of the $100 par value Preferred Stock at the time
outstanding, or provision is made that the proposed action shall not be
effective unless provision is made for the redemption or other retirement of
all shares of the $100 par value Preferred Stock at the time outstanding.
(D) The voting rights of the $25 par value Preferred Stock hereinabove
set forth shall not be effective if, in connection with any of the matters
specified in paragraphs (A) or (B), provision is made for the redemption or
other retirement of all of the $25 par value Preferred Stock at the time
outstanding, or provision is made that the proposed action shall not be
effective unless provision is made for the redemption or other retirement of
all shares of the $25 par value Preferred Stock at the time outstanding.
SECTION 7. VOTING RIGHTS OF ALL CLASSES OF STOCK.
The holders of the $100 par value Preferred Stock and the holders of the
$25 par value Preferred Stock shall not be entitled to vote except
(a) as provided above in Section 6;
(b) as may from time to time be mandatorily required by the laws
of the State of Washington; and
(c) if and whenever dividends payable on any of the Preferred
Stock shall be in arrears in an amount equivalent to or exceeding four full
quarterly dividends, the holders of the shares
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of the $100 par value Preferred Stock voting separately as a class shall be
entitled to elect the smallest number of directors necessary to constitute a
majority of the full Board of Directors, the holders of the $25 par value
Preferred Stock voting separately as a class shall be entitled to elect two
directors (provided, that if no shares of $100 par value Preferred Stock are
outstanding, the holders of the $25 par value Preferred Stock voting separately
as a class shall be entitled to elect the smallest number of directors necessary
to constitute a majority of the full Board of Directors), and the holders of the
Common Stock voting separately as a class shall be entitled, subject to the
right of the holders of the Preference Stock voting separately as a class to
elect two directors under certain circumstances, to elect the remaining
directors; but when all arrears in dividends on the Preferred Stock and the
current dividend thereon shall have been declared and set apart for payment, all
voting rights given by this clause (c) shall be divested from the Preferred
Stock (subject, however, to being at any time or from time to time similarly
revived and divested).
So long as the holders of Preferred Stock shall have the right to elect
directors under the terms of the foregoing clause (c), the number of
directors constituting a full Board shall be an odd number fixed by the
Board of Directors and stated in the notice of each meeting at which a full
Board of Directors is to be elected.
Whenever, under the provisions of the foregoing clause (c), the rights
of holders of the Preferred Stock to elect directors shall accrue or shall
terminate, the Board of Directors may, and within ten days after delivery to
this Corporation at its registered office in the State of Washington of a
request or requests to such effect signed by the holders of at least ten
percent (10%) of the outstanding shares of any class of stock entitled to
vote shall, call a special meeting in accordance with the Bylaws of this
Corporation of the holders of the class or classes of stock of this
Corporation entitled to vote, to be held within forty days from the delivery
of such request, for the purpose of electing a full Board of Directors to
serve until the next annual meeting and until their respective successors
shall be elected and shall qualify; provided, however, that if the annual
meeting of shareholders for the election of directors is to be held within
sixty days after the delivery of such request, the Board of Directors need
not act thereon. If, at any meeting called as aforesaid or at any annual
meeting of shareholders after accrual or termination of the rights of
holders of the Preferred Stock to elect directors as in the foregoing clause
(c) provided, any director shall not be reelected, his term of office shall
end upon the election and qualification of his successor, notwithstanding
that the term for which such director was originally elected shall not at
the time have expired.
If, during any interval between annual meetings of shareholders for the
election of directors while holders of the
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Preferred Stock shall be entitled to elect any director pursuant to the
foregoing clause (c), the number of directors in office who have been elected by
the holders of the $100 par value Preferred Stock or by the holders of the $25
par value Preferred Stock, or by the holders of the Common Stock, as the case
may be, shall become less than the total number of directors subject to election
by holders of shares of such class, whether by reason of the resignation, death,
or removal of any director or directors, or an increase in the total number of
directors, the vacancy or vacancies shall be filled (1) by the remaining
directors or director, if any, then in office who either were or was elected by
the votes of shares of such class or succeeded to a vacancy originally filled by
the votes of shares of such class or, (2) if there is no such director remaining
in office, at a special meeting of holders of shares of such class which shall
be called by the President of this Corporation to be held within forty days
after there shall have been delivered to this Corporation at its registered
office in the State of Washington a request or requests signed by the holders of
at least ten percent (10%) of the outstanding shares of such class.
Any director may be removed from office for cause by vote of the
holders of a majority of the shares of the class of stock which voted for
his election (or for his predecessor in case such director was elected by
directors). A special meeting of the holders of shares of any class may be
called by a majority vote of the Board of Directors or by the President for
the purpose of removing a director in accordance with the provisions of the
preceding sentence, and shall be called within forty days after there shall
have been delivered to this Corporation at its registered office in the
State of Washington a request or requests to such effect signed by the
holders of at least ten percent (10%) of the outstanding shares of the class
entitled to vote with respect to the removal of any such director.
Whenever, under the provisions of the Articles of Incorporation, the
rights of the holders of Preferred Stock to elect directors shall accrue and
be exercised, the amount of all dividends on the Preferred Stock which shall
be in arrears shall as soon as practicable be paid out of any assets of this
Corporation available therefor.
Holders of Preferred Stock of any series and holders of stock of any
other class shall not be entitled to receive notice of any meeting of
holders of any class of stock at which they are not entitled to vote.
Each holder of $100 par value Preferred Stock, as to all matters in
respect of which such stock has voting power, is entitled to one vote for
each share of stock standing in his name.
Each holder of $25 par value Preferred Stock, as to all matters in
respect of which such stock has voting power, is entitled to one vote for
each share of stock standing in his name.
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Subject to the voting rights expressly conferred upon the Preferred
Stock or upon other classes of stock by the Articles of Incorporation, the
holders of the Common Stock shall exclusively possess the full voting power
for the election of directors, and for all other purposes.
The holders of the Preference Stock shall not be entitled to vote
except
(a) as may from time to time be mandatorily required by the
laws of the State of Washington;
(b) if and whenever dividends payable on any of the Preference
Stock shall be in arrears in an amount equivalent to or exceeding four full
quarterly dividends, the holders of the shares of the Preference Stock
voting separately as a class shall be entitled to elect the smallest number
of directors necessary to constitute a majority of the full Board of
Directors and the holders of the Common Stock voting separately as a class
shall be entitled to elect the remaining directors, provided, such right of
the holders of Preference Stock shall not be exercisable during periods when
holders of the Preferred Stock are exercising their rights to elect
directors under Section 7 of this Article VI, and when all arrears in
dividends on the Preference Stock and the current dividend thereon shall
have been declared and set apart for payment, all voting rights given by
this clause (b) shall be divested from the Preference Stock (subject,
however, to being at any time or from time to time similarly revived and
divested);
(c) during periods when holders of the Preferred Stock are
exercising their rights to elect directors, as provided above, the holders
of the shares of the Preference Stock voting separately as a class shall be
entitled to elect two directors in addition to those elected by the holders
of the $100 par value Preferred Stock and the holders of the $25 par value
Preferred Stock and in place of two of the directors who would otherwise be
elected by the holders of the Common Stock, which right of election by the
holders of the Preference Stock shall continue until the rights of the
Preferred Stock to elect directors terminate, at which time subject to (b)
above of this paragraph it is likewise to terminate;
(d) any amendment to the Articles of Incorporation or Bylaws
altering materially any existing provisions of the Preference Stock, or
creating or enlarging any class of stock having rights and preferences
senior to those of the Preference Stock must be approved by a two-thirds
vote of the shares of the Preference Stock voting separately as a class; and
(e) any amendment to the Articles of Incorporation increasing
the authorized shares of Preference Stock or creating or enlarging any class
of stock ranking on a parity with the Preference Stock must be approved by a
vote of a majority of the
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holders of the shares of the Preference Stock voting separately as a class.
Each holder of Preference Stock, as to all matters in respect to which
such stock has voting power, is entitled to one vote for each share of stock
standing in his name.
Whenever, under the provisions of the foregoing clauses (b) and (c), the
rights of holders of the Preference Stock to elect directors shall accrue or
shall terminate, the Board of Directors may, and within ten days after
delivery to this Corporation at its registered office in the State of
Washington of a request or requests to such effect signed by the holders of
at least ten percent (10%) of the outstanding shares of any class of stock
entitled to vote shall, call a special meeting in accordance with the Bylaws
of this Corporation of the holders of the class or classes of stock of this
Corporation entitled to vote, to be held within forty days from the delivery
of such request, for the purpose of electing Directors pursuant to clause
(b) or (c), as the case may be, to serve until the next annual meeting and
until their respective successors shall be elected and shall qualify;
provided, however, that if the annual meeting of shareholders for the
election of directors is to be held within sixty days after the delivery of
such request, the Board of Directors need not act thereon. If, at any
meeting called as aforesaid or at any annual meeting of shareholders after
accrual or termination of the right of holders of the Preference Stock to
elect directors as in the foregoing clauses (b) and (c) provided, any
director shall not be reelected, his term of office shall end upon the
election and qualification of his successor, notwithstanding that the term
for which such director was originally elected shall not at the time have
expired.
If, during any interval between annual meetings of shareholders for
the election of directors while holders of the Preference Stock shall be
entitled to elect any director pursuant to the foregoing clauses (b) and
(c), the number of directors in office who have been elected by the holders
of the Preference Stock, or by the holders of the Common Stock, as the case
may be, shall become less than the total number of directors subject to
election by holders of shares of such class, whether by reason of the
resignation, death or removal of any director or directors, or an increase
in the total number of directors, the vacancy or vacancies shall be filled
(1) by the remaining directors or director, if any, then in office who
either were or was elected by the votes of shares of such class or succeeded
to a vacancy originally filled by the votes of shares of such class or (2),
if there is no such director remaining in office, at a special meeting of
holders of shares of such class which shall be called by the President of
this Corporation to be held within forty days after there shall have been
delivered to this Corporation at its registered office in the State of
Washington a request or requests signed by the holders of at least ten
percent (10%) of the outstanding shares of such class.
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SECTION 8. COMMON STOCK.
DIVIDENDS. Subject to compliance with the requirements of Section 3
and of any sinking or purchase fund for any series of Preferred Stock,
dividends may be declared by the Board of Directors and paid upon the Common
Stock, to the exclusion of the Preferred Stock, out of any assets of this
Corporation available for dividends.
LIQUIDATION PROVISIONS. Subject to compliance with the requirements of
Section 4, in the event of any liquidation, dissolution or winding up of this
Corporation, the holders of the Common Stock shall be entitled to receive,
pro rata, all of the remaining assets of this Corporation available for
distribution to its shareholders.
SECTION 9. DEFINITIONS.
(A) The term "gross income available for payment of interest charges"
shall mean the total operating revenues of this Corporation, less the total
operating expenses, taxes (including income, excess profits and other taxes
based on or measured by income or undistributed earnings or undistributed
income), and other appropriate items, including provision for maintenance,
and provision for retirements, depreciation or obsolescence, plus or minus,
as the case may be, any net non-operating income or deductions, but
excluding any charges on account of interest on debt or on account of debt
discount and expense, all to be determined in accordance with sound
accounting practice. In determining such "gross income available for
payment of interest charges", no deduction or adjustment shall be made for
or in respect of (1) profits or losses from the sale, abandonment or other
disposition of property properly carried in the plant or investment accounts
of this Corporation, or taxes paid on or in respect of any such profits, or
(2) charges for the elimination or amortization of utility plant adjustment
accounts or other intangibles.
(B) The term "net income available for dividends on Preferred Stock"
shall mean the total operating revenues of this Corporation, less the total
operating expenses, taxes (including income, excess profits and other taxes
based on or measured by income of undistributed earnings or undistributed
income), interest charges, dividend requirements on any stock ranking prior
as to dividends or assets in liquidation to the Preferred Stock and other
appropriate items, including provision for maintenance, and provision for
retirements, depreciation or obsolescence, and including charges for
amortization of debt discount and expense, plus or minus, as the case may
be, any net non-operating income or deductions, all to be determined in
accordance with sound accounting practice. In determining such "net income
available for dividends on Preferred Stock", no deduction or adjustment
shall be made for or in respect of (1) expenses in connection with the
issuance, redemption or retirement of any securities of this
20
<PAGE>
Corporation, including any amount paid in excess of the principal amount or par
or stated value of securities redeemed or retired and, in the event that such
redemption or retirement is effected with the proceeds of sale of other
securities of this Corporation, interest or dividends on the securities redeemed
or retired from the date on which the funds required for retirement are
deposited in trust for such purpose to the date of redemption or retirement, (2)
profits or losses from the sale, abandonment or other disposition of property
properly carried in the plant or investment accounts of this Corporation, or
taxes paid on or in respect of any such profits, (3) charges for the elimination
or amortization of utility plant adjustment accounts or other intangibles, or
(4) any earned surplus adjustment (including tax adjustments) applicable to any
period prior to January 1, 1959.
(C) The term "net income available for dividends on junior stock" shall
mean "net income available for dividends on Preferred Stock," as defined and
determined above, less the sum of all dividends paid and all dividends
accrued and unpaid on any outstanding Preferred Stock and any other class of
stock ranking on a parity with the Preferred Stock as to dividends.
(D) The term "sound accounting practice" shall mean recognized
principles of accounting practice followed by companies engaged in a
business similar to that of this Corporation, provided that any applicable
rules, regulations or orders of any public regulatory authority having
jurisdiction over the accounts of this Corporation shall be controlling,
except to the extent that this Corporation, at that time, shall be
contesting in good faith the validity or applicability to this Corporation
of any such rule, regulation or order.
(E) The term "accrued dividends" means, in respect of each share of
the Preferred Stock, that amount which shall be equal to simple interest
upon the par value thereof at the annual rate thereon and no more from the
date upon which cumulative dividends on such share commence to accrue to the
date fixed for payment of any amount to be distributed in liquidation or
upon redemption less the aggregate amount of all dividends theretofore paid
or declared and set apart for payment thereon.
(F) The term "this Corporation" includes, to the extent applicable,
its predecessor, Puget Sound Power & Light Company, a Massachusetts
corporation, in addition to this Corporation.
SECTION 10. PREEMPTIVE RIGHTS.
No preemptive right shall exist with respect to shares of stock or
securities convertible into shares of stock. Any and all shares of stock
and securities convertible into shares of stock that may be issued at any
time may, in whole or in part, be disposed of without having been offered to
shareholders.
SECTION 11. PREFERENCE STOCK.
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<PAGE>
11.01. GENERAL. Stock of the par value of $50 per share entitled
"Preference Stock" may be issued by the Board of Directors in series which
shall be of the same class and of equal rank and identical in all respects
except that to the extent not established herein the Board of Directors shall
have the authority to fix the designation of the series and to fix and
determine the following relative rights and preferences of the shares of any
series so established:
(a) The rate of dividends;
(b) Whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(c) The amount payable upon shares in event of voluntary and
involuntary liquidation;
(d) Sinking fund provisions, if any, for the redemption or
purchase of shares;
(e) The terms and conditions, if any, on which the shares may
be converted; and
(f) Any other terms, conditions, or provisions which the Board
of Directors shall have the authority to fix and determine under the
Washington Business Corporation Act, as now in effect or hereafter amended.
11.02. DIVIDEND RIGHTS. Out of the assets of this Corporation
available for dividends, the holders of the Preference Stock at the time
outstanding shall be entitled to receive, but only when and as declared by
the Board of Directors, dividends at the rate per annum fixed for each series
by the Board of Directors at the time of issuance of each series, and no
more, payable quarterly on the dates fixed by the Board of Directors at the
time of issuance of each series. Dividends on the shares of Preference Stock
of each series shall be cumulative, and, at the option of the Board of
Directors, shall, with respect to particular shares of each series, commence
to accrue from the date of the original issue of such particular shares or
from the quarterly dividend date next preceding such original issue. The
Preference Stock shall be considered junior stock for purposes of Section 3
of this Article VI.
No dividend shall be paid upon or set apart for the shares of Common
Stock or of any other class of stock ranking junior as to dividends to the
Preference Stock (other than a dividend in stock ranking junior as to
dividends and assets in liquidation to the Preference Stock), no other
distribution shall be made on any shares of such junior stock and no
expenditure shall be made for the purchase, redemption or other retirement
for a consideration of shares of this Corporation's stock of any class
ranking junior
22
<PAGE>
as to assets in liquidation to the Preference Stock (other than in exchange for,
or from the proceeds of any substantially concurrent sale hereafter made of,
other shares of stock of this Corporation ranking junior to the Preference Stock
as to dividends and assets in liquidation), unless full dividends on all shares
of the Preference Stock for all past quarterly dividend periods shall have been
paid or declared and a sum sufficient for the payment thereof set apart and the
full dividend for the then current quarterly dividend period shall have been or
concurrently shall be paid or declared and a sum sufficient for the payment
thereof set apart. The amount of any deficiency for past dividend periods may be
paid or declared and set apart at any time without reference to any quarterly
dividend payment date. No accumulation of unpaid dividends on the Preference
Stock shall bear interest. Dividends remaining unclaimed by the holders of such
Preference Stock for six years after having been declared and made available for
payment to such holders of Preference Stock shall revert to this Corporation for
its general corporate purposes and the obligation of this Corporation to pay
such dividends shall at that time cease and determine. Any dividends declared
or paid on the Preference Stock in an amount less than full cumulative dividends
accrued or in arrears upon all Preference Stock outstanding shall, if more than
one series be outstanding, be divided between the different series in proportion
to the aggregate amounts which would be distributable to the Preference Stock of
each series if full cumulative dividends to the next preceding quarterly
dividend date were declared and paid thereon.
11.03. LIQUIDATION PROVISIONS. In the event of any liquidation,
dissolution or winding up of this Corporation, if involuntary, the holders of
the Preference Stock shall be entitled to receive, for each share thereof,
the sum of $50 together with accrued dividends, or, in case such liquidation,
dissolution or winding up shall have been voluntary, an amount per share
equal to the then applicable optional redemption price, before any distri-
bution of the assets shall be made to the holders of the Common Stock or
stock of any other class ranking junior as to assets in liquidation to the
Preference Stock, but after payment of the liquidation rights of the
Preferred Stock, provided for in Section 4 of this Article VI. The holders
of the Preference Stock shall be entitled to no further participation in such
distribution. If upon any such liquidation, dissolution or winding up, the
assets distributable among the holders of the Preference Stock shall be
insufficient to permit the payment of the full preferential amount aforesaid,
then after payment of such liquidation rights of the Preferred Stock the
entire assets of this Corporation to be distributed shall be distributed
among the holders of all series of the Preference Stock then outstanding,
ratably per share in proportion to the full preferential amounts per share to
which they are respectively entitled as hereinabove provided. A consoli-
dation or merger of this Corporation or sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of
all or substantially all of the property or assets of this Corporation shall
not constitute a dissolution,
23
<PAGE>
liquidation or winding up of this Corporation within the meaning of this Section
11.03.
11.04. CONVERSION RIGHTS. The Board of Directors may fix and
determine, prior to the issuance of each series of the Preference Stock, to
the extent then permitted by the Washington Business Corporation Act, the
terms and conditions, if any, on which shares may be converted into, or
exchanged for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Company, and the price
or prices or the rates of exchange and the adjustment at which such shares
shall be convertible or exchangeable. The Board of Directors may also
establish antidilution provisions for each convertible series.
ARTICLE VII.
The amount of paid-in capital with which this Corporation will begin
business is the sum of SIX HUNDRED DOLLARS ($600.00).
ARTICLE VIII.
SECTION 1. The Board of Directors of this Corporation shall be, and
hereby is, expressly vested with full power and authority to issue and sell,
from time to time, the authorized but unissued shares of stock and securities
convertible into shares of stock, upon such terms and conditions and for such
lawful consideration as the Board of Directors shall determine, all in
accordance with the laws of the State of Washington.
SECTION 2. The authority to make, alter, amend or repeal bylaws not
inconsistent with law or these Articles of Incorporation shall be, and is
hereby, expressly vested in the Board of Directors of this Corporation,
subject to the power of the shareholders to change or repeal such bylaws;
provided, however, that the Board of Directors shall not make or alter any
bylaws fixing their qualifications, classifications, term of office, or
compensation.
SECTION 3. The number of Directors of this Corporation shall be fixed
in the manner provided in the Bylaws, provided that the number of Directors
shall not be less than nine. The Directors shall be divided into three
classes, each class to be as nearly equal in number as possible, any Director
or Directors in excess of a number divisible by three being assigned to the
first class or to the first and second classes, as the case may be. At the
Annual Meeting of Shareholders in 1982, the Directors of the first class
shall be elected to serve until the next ensuing Annual Meeting, the
Directors of the second class to serve until the second ensuing Annual
Meeting, and the Directors of the third class to serve until the third
ensuing Annual Meeting, and in each
24
<PAGE>
case until their respective successors shall have been elected and qualified or
until their prior death, resignation or removal. Beginning at the Annual
Meeting of Shareholders in the year 1983, and thereafter at each Annual Meeting,
successors to the Directors of the class whose term of office shall then expire
shall be elected to serve until the third ensuing Annual Meeting, and until
their respective successors shall have been elected and qualified or until their
prior death, resignation or removal. In case of any change in the number of
Directors, the respective classes shall be adjusted so that thereafter each of
the three classes shall be as nearly equal in number as possible, any Director
or Directors in excess of the number divisible by three being assigned to the
class or classes having the shortest unexpired terms.
ARTICLE IX.
The following Statements of Relative Rights and Preferences annexed
hereto are hereby incorporated by reference in these Restated Articles of
Incorporation as though fully set forth herein:
Annex A Statement of Relative Rights and Preferences for the 8%
Preferred Stock, $100 par value.
Annex B Statement of Relative Rights and Preferences for the 9.36%
Preferred Stock, $25 par value.
Annex C Statement of Relative Rights and Preferences for the
Adjustable Rate Cumulative Preferred Stock Series A ($100
par value).
ARTICLE X
LIMITATION OF DIRECTOR LIABILITY
To the full extent that the Washington Business Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation
or elimination of the liability of Directors, a Director of the Corporation
shall not be liable to the Corporation or its Shareholders for monetary
damages for conduct as a Director. Any amendment to or repeal of this
Article X shall not adversely affect any right or protection of a Director of
the Corporation for or with respect to any acts or omissions of such Director
occurring prior to such amendment or repeal.
25
<PAGE>
IN WITNESS WHEREOF, We have hereunto set our hands this 4th day of
January, 1988.
/s/ John W. Ellis
------------------------
John W. Ellis
/s/ W. E. Watson
------------------------
W. E. Watson
AFFIDAVIT
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
John W. Ellis and W. E. Watson, being first duly sworn on oath, depose and
say:
(1) That we have been authorized to execute the foregoing Restated
Articles of Incorporation by resolution of the Board of Directors adopted at
the duly constituted meeting held October 8, 1987;
(2) That the Restated Articles of Incorporation correctly set forth
the text of the Articles of Incorporation as amended and supplemented to the
date hereof; and
(3) That the Restated Articles supersede and take the place of
heretofore existing Articles of Incorporation and amendments thereto.
/s/ John W. Ellis
-----------------------
John W. Ellis
/s/ W. E. Watson
-----------------------
W. E. Watson
SUBSCRIBED AND SWORN to before me this 4th day of January, 1988
/s/ Lucius H. Biglow, Jr.
------------------------
Notary Public in and for the State of
Washington, residing at Medina. My
appointment expires September 2, 1991
26
<PAGE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR
THE ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, SERIES A ($100 PAR VALUE)
--------------------
Pursuant to Section 23A.08-130 of the Washington Business
Corporation Act, Puget Sound Power & Light Company (the "Company"), a
Washington corporation, hereby states that at a meeting of the Board of
Directors of the Company duly convened and held on December 13, 1982, the
following resolution was duly adopted:
RESOLVED - That pursuant to the authority expressly vested in it
by the Company's Articles of Incorporation (the "Articles") and subject to
the preferences, limitations, relative rights and other terms and provisions
set forth in the Articles, the Board of Directors of the Company hereby
establishes an additional series of the Company's $100 par value Preferred
Stock, sets forth the designation of the series, and fixes and determines the
relative rights and preferences thereof, including the rate of dividends, the
price, terms and conditions of redemption, and the amount payable upon shares
in event of voluntary or involuntary liquidation, as follows:
ANNEX C TO RESTATED ARTICLES OF INCORPORATION
40
<PAGE>
1. DESIGNATION. The shares of such series shall be designated
"Adjustable Rate Cumulative Preferred Stock, Series A ($100 par value)" (the
"Adjustable Rate Preferred Stock" herein) and the number of shares
constituting such series shall be 400,000.
2. DIVIDENDS. The holders of the Adjustable Rate Preferred Stock
shall be entitled to annual preferential dividends, in accordance with the
provisions of Article VI, Section 3 of the Articles in an amount determined
in accordance with the formula described in the next succeeding paragraph.
Dividends shall commence to accrue from the date of the original issue of the
shares. The first dividend date shall be February 15, 1983.
The annual dividend per share on the Adjustable Rate Preferred
Stock will be computed at the rate of 10.8% per annum based on par value for
the initial dividend period ending February 15, 1983 and at 1% below the
Applicable Rate, from time to time in effect for each subsequent dividend
period. However, the dividend rate for any dividend period shall in no event
be less than 7% per annum or greater than 14-1/2% per annum.
Except as provided below in this paragraph, the "Applicable
Rate" for any dividend period will be the highest of (i) the Treasury Bill
Rate, (ii) the Ten Year Constant Maturity Rate, and ( iii) the Twenty Year
Constant Maturity Rate (each as hereinafter defined) for such dividend
period. In the event that the Company determines in good faith that for any
reason one or more of such rates cannot be determined for any dividend
period,
41
<PAGE>
then the Applicable Rate for such dividend period shall be the higher
of whichever of such rates can be so determined. In the event that the
Company determines in good faith that none of such rates can be determined
for any dividend period, then the Applicable Rate in effect for the preceding
dividend period shall be continued for such dividend period.
Except as provided below in this paragraph, the "Treasury Bill
Rate" for each dividend period will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period (as defined below)) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board during the Calendar
Period immediately prior to the ten calendar days immediately preceding the
February 15, May 15, August 15 or November 15, as the case may be, prior to
the dividend period for which the dividend rate on the Adjustable Rate
Preferred Stock is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum market discount rate during
any such Calendar Period, then the Treasury Bill Rate for the related
dividend period shall be the arithmetic average of the two most recent weekly
per annum market discount rates (or the one weekly per annum market discount
rate, if only one such rate shall be published during the relevant Calendar
Period) for three-month U.S. Treasury bills, as published weekly during such
Calendar Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event that a
42
<PAGE>
per annum market discount rate for three-month U.S. Treasury bills shall not be
published by the Federal Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar Period, then the
Treasury Bill Rate for such dividend period shall be the arithmetic average of
the two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period) for all of the U.S. Treasury bills then having
maturities of not less than 80 nor more than 100 days, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such rates, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In the event that the
Company determines in good faith that for any reason no such U.S. Treasury bill
rates are published as provided above during such Calendar Period, then the
Treasury Bill Rate for such dividend period shall be the arithmetic average of
the per annum market discount rates based upon the closing bids during such
Calendar Period for each of the issues of marketable non-interest-bearing U.S.
Treasury securities with a maturity of not less than 80 nor more than 100 days
from the date of each such quotation, as quoted daily for each business day in
New York City(or less frequently if daily quotations shall not be generally
available) to the Company by at least three recognized U.S. Government
securities dealers selected by the Company. In the event that the Company
determines in good faith that for any reason the Company cannot determine the
Treasury Bill Rate for any
43
<PAGE>
dividend period as provided above in this paragraph, the Treasury Bill Rate for
such dividend period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during the related Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from the date of each
such quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the Company
by at least three recognized U.S. Government securities dealers selected by the
Company.
Except as provided below in this paragraph, the "Ten Year
Constant Maturity Rate" for each dividend period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the February
15, May 15, August 15, or November 15, as the case may be, prior to the
dividend period for which the dividend rate on the Adjustable Rate Preferred
Stock is being determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Ten Year Average Yield during such
Calendar Period, then the Ten Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the two most recent weekly per
annum Ten Year Average Yields (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be
44
<PAGE>
published during such Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that a per annum Ten Year Average
Yield shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such Calendar
Period, then the Ten Year Constant Maturity Rate for such dividend period shall
be the arithmetic average of the two most recent weekly per annum average yields
to maturity (or the one weekly average yield to maturity, if only one such yield
shall be published during such Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities(other than Special
Securities (as defined below)) then having maturities of not less than eight nor
more than twelve years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency selected
by the Company. In the event that the Company determines in good faith that for
any reason the Company cannot determine the Ten Year Constant Maturity Rate for
any dividend period as provided above in this paragraph, then the Ten Year
Constant Maturity Rate for such dividend period shall be the arithmetic average
of the per annum average yields to maturity based upon the closing bids during
such Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eight nor more than twelve years
45
<PAGE>
from the date of each such quotation, as quoted daily for each business day in
New York City (or less frequently if daily quotations shall not be generally
available) to the Company by at least three recognized U.S. Government
securities dealers selected by the Company.
Except as provided below in this paragraph, the "Twenty Year
Constant Maturity Rate" for each dividend period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields
(or the one weekly per annum Twenty Year Average Yield, if only one such
Yield shall be published during the relevant Calendar Period), as published
weekly by the Federal Reserve Board during the Calendar Period immediately
prior to the ten calendar days immediately preceding the February 15, May 15,
August 15, or November 15, as the case may be, prior to the dividend period
for which the dividend rate on the Adjustable Rate Preferred Stock is being
determined. In the event that the Federal Reserve Board does not publish
such a weekly per annum Twenty Year Average Yield during such Calendar
Period, then the Twenty Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the two most recent weekly per annum
Twenty Year Average Yields (or the one weekly per annum Twenty Year Average
Yield, if only one such Yield shall be published during such Calendar
Period), as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Company. In the event that a per annum Twenty Year Average Yield shall not
be published by the Federal Reserve Board or by any
46
<PAGE>
Federal Reserve Bank or, by any U.S. Government department or agency during such
Calendar Period, then the Twenty Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if only
one such yield shall be published during such Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having maturities of not less than eighteen nor
more than twenty-two years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board shall not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company determines in
good faith that for any reason the Company cannot determine the Twenty Year
Constant Maturity Rate for any dividend period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the issues
of actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than
eighteen nor more than twenty-two years from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Company by at least three
recognized U.S. Government securities dealers selected by the Company.
47
<PAGE>
The Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Twenty Year Constant Maturity Rate shall each be rounded to the
nearest five one-hundredths of a percentage point.
The amount of dividends per share payable for each dividend
period shall be computed by dividing the dividend rate for such dividend
period by four and applying such rate against the par value per share of the
Adjustable Rate Preferred Stock. The amount of dividends payable for the
initial dividend period or any period shorter than a full quarterly dividend
period shall be computed on the basis of 30-day months, a 360-day year and
the actual number of days elapsed in such period.
The dividend rate with respect to each dividend period will be
calculated as promptly as practicable by the Company according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Company will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new dividend period to which it applies and will cause
notice of such dividend rate to be enclosed with the dividend payment checks
next mailed to the holder of the Adjustable Rate Preferred Stock.
As used herein, the term "Calendar Period" means a period of
fourteen calendar days; the term "Special Securities" means securities which
can, at the option of the holder, be surrendered at face value in payment of
any Federal estate tax or
48
<PAGE>
which provide tax benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or substantial discount; the
term "Ten Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years); and the yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities (adjusted to constant
maturities of twenty years).
3. REDEMPTION. The Company may not redeem the Adjustable Rate
Preferred Stock prior to November 15, 1987. Thereafter the Company may, at
its option expressed by resolution of the Board of Directors, redeem the
Adjustable Rate Preferred Stock as a whole at any time or in part from time
to time in accordance with the provisions of Article VI, Section 5, of the
Articles at the redemption price of $103 per share if redeemed in the period
from November 15, 1987 through November 14, 1992 and at its par value per
share if redeemed thereafter, in each case together with any accrued
dividends (sometimes in the Articles called the "optional redemption price").
4. LIQUIDATION PREFERENCES. In the event of any liquidation,
dissolution or winding up of the Company, if involuntary, the holders of the
Adjustable Rate Preferred Stock shall be entitled to receive, for each share
thereof, the sum of $100 together with accrued dividends, or, in case such
liquidation, dissolution or winding up shall have been voluntary, an amount
per share equal to $103 through November 14, 1992 and $100 thereafter, plus
accrued dividends, before any distribution of the assets
49
<PAGE>
shall be made to the holders of the Preference Stock, the Common Stock or stock
of any other class ranking junior as to assets in liquidation to the Adjustable
Rate Preferred Stock; but the holders of the Adjustable Rate Preferred Stock
shall be entitled to no further participation in such distribution.
5. SINKING FUND. The Adjustable Rate Preferred Stock shall not
be entitled to the benefits of a sinking fund.
6. CONVERSION. The shares of the Adjustable Rate Preferred Stock
shall not be convertible into share of stock of the Company of any other
class, into any shares of $100 par value Preferred Stock of the Company of
any other series or into any other type of securities.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in duplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this 13th day of
December, 1982.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ John W. Ellis
-------------------------------
John W. Ellis, President
By /s/ W. E. Watson
-------------------------------
W. E. Watson, Secretary
50
<PAGE>
STATE OF WASHINGTON )
) ss
COUNTY OF KING )
W. E. Watson, being duly sworn, on oath deposes and says that he is
Secretary of Puget Sound Power & Light Company, that he has read the
foregoing document, knows the contents thereof and believes the same to be
true.
/s/ W. E. Watson
----------------------------------
W. E. Watson
SUBSCRIBED AND SWORN to me this 13th day of December, 1982.
/s/ Lucius H. Biglow, Jr.
--------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Medina
51
<PAGE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES
FOR THE 8% PREFERRED STOCK
-----------------------------------
Pursuant to Section 23A.08.130 of the Washington Business Corporation
Act, Puget Sound Power & Light Company (the "Company"), a Washington
corporation, hereby states that at a meeting of the Board of Directors of
the Company duly convened and held on October 3, 1973, the following
resolution was duly adopted:
RESOLVED - That pursuant to the authority expressly vested in it by
the Company's Articles of Incorporation and subject to the preferences,
limitations and relative rights set forth in the Company's Restated Articles of
Incorporation (the "Articles") which are applicable to Preferred Stock of all
series or to all classes of stock of the Company, the Board of Directors of the
Company hereby establishes a series of the Company's Preferred Stock and fixes
and determines the relative rights and preferences of such series, including the
designation of the series, the rate of dividends, the price, terms and
conditions of redemption, and the creation of a sinking fund, as follows:
ANNEX A TO RESTATED ARTICLES OF INCORPORATION
27
<PAGE>
1. DESIGNATION. The shares of such series shall be designated
"8% Preferred Stock" (the "New Preferred Stock" herein and the number of
shares constituting such series shall be 150,000.
2. DIVIDENDS. The holders of the New Preferred Stock shall be
entitled to preferential dividends at the rate of eight percent (8%) as
provided in Section 3 of the Articles.
3. REDEMPTION. The Company may, at its option expressed by
resolution of the Board of Directors, redeem the New Preferred Stock as a
whole at any time or in part from time to time in accordance with the
provisions of Section 5 of the Articles at:
$108.00 per share if redeemed on or prior to February 15, 1978,
$105.00 per share if redeemed thereafter and on or prior to
February 15, 1983,
$103.00 per share if redeemed thereafter and on or prior to
February 15, 1988, and
$101.00 per share if redeemed thereafter,
in each case together with any accrued dividends (sometimes in the Articles
called the "optional redemption price"); provided however, that no such
redemption shall be made prior to October 1,1978 if such redemption is a
part of or in anticipation of any refunding operation involving the
application, directly or indirectly, of borrowed funds or the proceeds of an
issue of any stock ranking, as to dividends or assets, prior to or on a
parity with the New Preferred Stock if such borrowed funds have an interest
rate or cost to the Company (calculated in accordance
28
<PAGE>
with generally accepted financial practice), or such stock has a dividend rate
or cost to the Company (so calculated) less than the dividend rate per annum of
the New Preferred Stock.
4. SINKING FUND. The New Preferred Stock shall be entitled to
the benefits of a sinking fund as follows:
(A) On February 15 in each year, commencing with the year
1975, the Company shall, upon notice given as provided in Section 5 of the
Articles, redeem at a price per share equal to $100, together with accrued
dividends (sometimes in the Articles called the "sinking fund redemption
price"), a number of shares of the New Preferred Stock as follows: 4,000
shares per year in the years 1975 through 1984, 5,000 shares per year in the
years 1985 through 1989, 6,000 shares per year in the years 1990 through
2003, and 1,000 shares in the year 2004. The Company may, at its option, by
written notice signed by its President or one of its Vice-Presidents and
given to the transfer agent for the New Preferred Stock, increase by not
more than 100% the number of shares provided in the preceding sentence to be
redeemed on any said February 15, which right shall be noncumulative. The
obligation to redeem shares of the New Preferred Stock pursuant to the
provisions of this Section, as such obligation may be increased by the
Company pursuant to the preceding sentence, is herein sometimes referred to
as the "sinking fund obligation."
(B) The sinking fund obligation shall be cumulative so that
if on any February 15, on or after February 15, 1975, the Company shall not
have satisfied to the full extent the sinking fund obligation then due, for
any reason whatsoever, then
29
<PAGE>
any such deficiency shall be made good before (i) any dividend shall be paid
upon or set apart for the shares of Common Stock or of any other class of stock
ranking junior as to dividends or assets in liquidation to the Preferred Stock
(other than a dividend in stock ranking junior as to dividends and assets in
liquidation to the Preferred Stock) or any other distribution shall be made on
any shares of such junior stock, (ii) any shares of stock ranking junior to the
Preferred Stock as to dividends or assets in liquidation may be redeemed,
purchased or otherwise retired for a consideration by the Company (other than in
exchange for, or from the proceeds of any substantially concurrent sale
hereafter made of, other shares of stock of the Company ranking junior to the
Preferred Stock as to dividends and assets in liquidation), or (iii) any shares
of Preferred Stock or of any stock ranking on a parity with the Preferred Stock
may be redeemed, purchased or otherwise retired for a consideration by the
Company. Nothing herein contained, however, shall prevent the Company from
satisfying, in whole or in part, its obligations in respect of any sinking or
purchase fund for shares of any other series of Preferred Stock, provided that
any sinking fund obligations for the New Preferred Stock, which shall have
theretofore become due as aforesaid and not have been satisfied, shall be
satisfied by a percentage not less than that by which any obligation of the
Company in respect of any such other fund is to be satisfied.
(C) The Company shall have the right to satisfy, in whole or
in part, any sinking fund obligation (including any deficiency in any past
sinking fund obligation) by crediting
30
<PAGE>
against such obligation any shares of the New Preferred Stock purchased or
otherwise acquired by the Company, such credit to be effected by delivering to
the transfer agent for the New Preferred Stock not later than the January 1 next
preceding the February 15 on which there is due any sinking fund obligation in
respect of which such credit is to be taken, a certificate signed by its
President or one of its Vice-Presidents or its Treasurer or one of its Assistant
Treasurers, specifying the election of the Company to take such credit and
stating that no previous sinking fund credit has been taken in respect of any
such shares.
(D) At least one day prior to the February 15 on which any
sinking fund obligation is due, the Company shall deliver to the transfer
agent for the New Preferred Stock, in trust for such redemption, an amount
of money sufficient to redeem all shares of such stock called for redemption
to satisfy such obligation, to be held and applied as provided in Section 5
of the Articles, and certificates properly endorsed in blank for transfer or
accompanied by proper instruments of assignment or transfer in blank and
bearing all necessary stock transfer tax stamps thereto affixed and
cancelled, for any shares of such stock purchased or otherwise acquired by
the Company which are to be used as a credit against the sinking fund
obligation due on such date, for cancellation as provided in Section 5 of
the Articles with respect to shares redeemed for sinking fund purposes.
5. CONVERSION. The shares of the New Preferred Stock shall not
be convertible into shares of stock of the Company of any other class, into
any shares of Preferred Stock of the Company
31
<PAGE>
of any other series or into any other type of securities.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in triplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this 3rd day of
October, 1973.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ Ralph M. Davis
----------------------------
Ralph M. Davis, President
By /s/ Wilbur E. Watson
---------------------------
Wilbur E. Watson, Secretary
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
WILBUR E. WATSON, being duly sworn, on oath deposes and says that
he is Secretary of Puget Sound Power & Light Company, that he has read the
foregoing document, knows the contents thereof and believes the same to be
true.
/s/ Wilbur E. Watson
--------------------------------
Wilbur E. Watson, Secretary
SUBSCRIBED AND SWORN to before me this 3rd day of October, 1973.
/s/ Russel E. Olson
--------------------------------
Notary Public in and for the State of
Washington, residing at Bellevue
32
<PAGE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR
THE 9.36% PREFERRED STOCK, $25 PAR VALUE
--------------------------
Pursuant to Section 23A.08.130 of the Washington Business
Corporation Act, Puget Sound Power & Light Company (the "Company"), a
Washington Corporation, hereby states that at a meeting of the Board of
Directors of the Company duly convened and held on February 5, 1979, the
following resolution was duly adopted:
RESOLVED - That pursuant to the authority expressly vested in it by
the Company's Articles of Incorporation (the "Articles") and subject to the
preferences, limitations, relative rights and other terms and provisions set
forth in the Articles, the Board of Directors of the Company hereby
establishes an additional series of the Company's $25 par value Preferred
Stock, sets forth the designation of the series, and fixes and determines the
relative rights and preferences thereof, including the rate of dividends, the
price, terms and conditions of redemption, the creation of a sinking fund,
and the amount payable upon shares in the event of voluntary or involuntary
liquidation, as follows:
ANNEX B TO RESTATED ARTICLES OF INCORPORATION
33
<PAGE>
1. DESIGNATION. The shares of such series shall be designated
"9.36% Preferred Stock, $25 par value" (the "New Preferred Stock" herein) and
the number of shares constituting such series shall be 2,000,000.
2. DIVIDENDS. The holders of the New Preferred Stock shall be
entitled to annual preferential dividends, in accordance with the provisions
of Article VI, Section 3 of the Articles at the rate of nine and 36/100
percent (9.36%) of the par value thereof. Dividends shall commence to accrue
from the date of the original issue of the shares. The first dividend date
shall be May 15, 1979.
3. REDEMPTION. The Company may, at its option expressed by
resolution of the Board of Directors, redeem the New Preferred Stock as a
whole at any time or in part from time to time in accordance with the
provisions of Article VI, Section 5, of the Articles at:
$27.35 per share if redeemed on or prior to
March 1, 1984;
$26.55 per share if redeemed thereafter and on
or prior to March 1, 1989;
$25.75 per share if redeemed thereafter and on
or prior to March 1, 1994;
$25.25 per share if redeemed thereafter;
in each case together with any accrued dividends (sometimes in the Articles
called the "optional redemption price"); provided, however, that no such
redemption shall be made prior to March 1, 1984 if such redemption is a part
of or in anticipation of any refunding operation involving the application,
directly or indirectly,
34
<PAGE>
of borrowed funds or the proceeds of an issue of any stock ranking, as to
dividends or assets in liquidation, prior to or on a parity with the New
Preferred Stock if such funds or proceeds have an effective cost to the Company
(calculated in accordance with generally accepted financial practice) below that
of the New Preferred Stock.
4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Company, if involuntary, the holders of the
New Preferred Stock shall be entitled to receive, for each share thereof, the
sum of $25 together with accrued dividends, or, in case such liquidation,
dissolution or winding up shall have been voluntary, an amount per share
equal to the then applicable optional redemption price, before any
distribution of the assets shall be made to the holders of the Preference
Stock, the Common Stock or stock of any other class ranking junior as to
assets in liquidation to the New Preferred Stock; but the holders of the New
Preferred Stock shall be entitled to no further participation in such
distribution.
5. SINKING FUND. The New Preferred Stock shall be entitled to
the benefits of a sinking fund as follows:
(A) On March 1 in each year, commencing with the year 1987,
the Company shall, upon notice given as provided in Section 5 of the
Articles, redeem 81,000 shares per year at a price per share equal to $25,
together with accrued dividends (sometimes in the Articles called the
"sinking fund redemption price. The Company may, at its option, by written
notice signed by its President or one of its Vice Presidents and given to the
35
<PAGE>
transfer agent for the New Preferred Stock, increase by not more than 100%
the number of shares provided in the preceding sentence to be redeemed on any
said March 1, which right shall be non-cumulative. The obligation to redeem
shares of the New Preferred Stock pursuant to the provisions of this Section,
as such obligation may be increased by the Company pursuant to the preceding
sentence, is herein sometimes referred to as the "sinking fund obligation."
(B) The sinking fund obligation shall be cumulative so that if
on any March 1, on or after March 1, 1987, the Company shall not have
satisfied to the full extent the sinking fund obligation then due, for any
reason whatsoever, then any such deficiency shall be made good before (i) any
dividend shall be paid upon or set apart for the shares of Common Stock or of
any other class of stock ranking junior as to dividends or assets in
liquidation to the New Preferred Stock (other than a dividend in stock
ranking junior as to dividends and assets in liquidation to the New Preferred
Stock) or any other distribution shall be made on any shares of such junior
stock, (ii) any shares of stock ranking junior to the New Preferred Stock as
to dividends or assets in liquidation may be redeemed, purchased or otherwise
retired for a consideration by the Company (other than in exchange for, or
from the proceeds of any substantially concurrent sale hereafter made of,
other shares of stock of the Company ranking junior to the New Preferred
Stock as to dividends and assets in liquidation) or (iii) any shares of New
Preferred Stock or of any stock ranking on a parity with the New Preferred
Stock may be
36
<PAGE>
redeemed, purchased or otherwise retired for a consideration by the Company.
Nothing herein contained, however, shall prevent the Company from satisfying, in
whole or in part, its obligations in respect of any sinking or purchase fund for
shares of any other series or class of Preferred Stock, provided that any
sinking fund obligations for the New Preferred Stock, which shall have
theretofore become due as aforesaid and not have been satisfied, shall be
satisfied by a percentage not less than that by which any obligation of the
Company in respect of any such other fund is to be satisfied.
(C) The Company shall have the right to satisfy, in whole or
in part, any sinking fund obligation (including any deficiency in any past
sinking fund obligation) by crediting against such obligation any shares of
the New Preferred Stock purchased or otherwise acquired by the Company, such
credit to be effected by delivering to the transfer agent for the New
Preferred Stock not later than the January 15 next preceding the March 1 on
which there is due any sinking fund obligation in respect of which such
credit is to be taken, a certificate signed by its President or one of its
Vice Presidents or its Treasurer, specifying the election of the Company to
take such credit and stating that no previous sinking fund credit has been
taken in respect of any such shares.
(D) At least one day prior to the March 1 on which any
sinking fund obligation is due, the Company shall deliver to the transfer
agent for the New Preferred Stock, in trust for such redemption, an amount of
money sufficient to redeem all shares of
37
<PAGE>
such stock called for redemption to satisfy such obligation, to be held and
applied as provided in Section 5 of the Articles, and certificates properly
endorsed in blank for transfer or accompanied by proper instruments of
assignment or transfer in blank and bearing all necessary stock transfer tax
stamps thereto affixed and cancelled, for any shares of such stock purchased or
otherwise acquired by the Company which are to be used as a credit against the
sinking fund obligation due on such date, for cancellation as provided in
Section 5 of the Articles with respect to shares redeemed for sinking fund
purposes.
6. CONVERSION. The shares of the New Preferred Stock shall not
be convertible into shares of stock of the Company of any other class, into
any shares of $25 par value Preferred Stock of the Company of any other
series or into any other type of securities.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in duplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this 5th day of
February, 1979.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ John W. Ellis
------------------------------
John W. Ellis, President
By /s/ Wilbur E. Watson
------------------------------
W. E. Watson, Secretary
38
<PAGE>
STATE OF WASHINGTON )
) ss
COUNTY OF KING )
W. E. Watson, being duly sworn, on oath deposes and says that he is
Secretary of Puget Sound Power & Light Company, that he has read the
foregoing document, knows the contents thereof and believes the same to be
true.
/s/ Wilbur E. Watson
-----------------------------
W. E. Watson
SUBSCRIBED AND SWORN to before me this 5th day of February, 1979.
/s/ Lucius H. Biglow, Jr.
----------------------------
Notary Public in and for the
State of Washington, residing
in Medina
39
<PAGE>
EXHIBIT 3.2
<PAGE>
BYLAWS Exhibit 3.2
OF
PUGET SOUND POWER & LIGHT COMPANY
(As amended to September 1, 1987)
ARTICLE I.
NAME.
The name of the corporation (hereinafter referred to as this Corporation) is
PUGET SOUND POWER & LIGHT COMPANY.
ARTICLE II.
SHAREHOLDERS' MEETINGS.
SECTION 1. ANNUAL MEETING. The Annual Meeting of the Shareholders shall be
held on the second Tuesday of May in each year if not a legal holiday, and if
a legal holiday then on the next succeeding business day not a legal holiday.
In the event that such Annual Meeting is omitted by oversight or otherwise on
the date herein provided for, the Directors shall cause a meeting in lieu
thereof to be held as soon thereafter as conveniently may be, and any
business transacted or elections held at such meeting shall be as valid as if
transacted or held at the Annual Meeting. Such subsequent meeting shall be
called in the same manner and as provided for Special Shareholders' Meetings.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Shareholders may be
called at any time by the Board of Directors. If more than eighteen months
are allowed to elapse without the Annual Shareholders' Meeting being held,
any Shareholder may call such meeting to be held at the registered office of
this Corporation. At any time, upon written request of any Director, or of
any Shareholder or Shareholders holding in the aggregate one-fifth of the
voting power of all Shareholders, it shall be the duty of the Secretary to
call a Special Meeting of Shareholders to be held at the registered office at
such time as the Secretary may fix, not less than ten nor more than thirty-
five days after the receipt of said request, and if the Secretary shall
neglect or refuse to issue such call, the Director or Shareholder or
Shareholders making the request may do so.
SECTION 3. PLACE OF MEETING . The Board of Directors may designate any
place, either within or without the State of Washington, as the place of
meeting for any Annual Meeting of Shareholders or for any Special Meeting of
Shareholders called by the Board of Directors. If no designation is made, or
if a Special Meeting of Shareholders be otherwise called, the place of
meeting shall be the registered office of this Corporation.
SECTION 4. NOTICE. A written notice, stating the place, day and hour of any
Shareholders' Meeting and the objects for which such meeting is called, shall
be given by the Secretary at least ten days before the meeting to each
Shareholder entitled to vote thereat by mailing such notice, postage prepaid,
addressed to such Shareholder at his address as it appears upon the books of
this Corporation. Notice of any Shareholders' Meeting may be waived in
writing by any Shareholder at any time.
SECTION 5. QUORUM. At any meeting of the Shareholders, whether of one or
more than one class, the presence, in person or by proxy, of the holders of a
majority of the voting power of all Shareholders shall constitute a quorum,
but if a meeting cannot be organized because a quorum has not attended, those
present may adjourn the meeting to such time and place as they may determine
and the meeting may be held as adjourned without further notice, but any
meeting at which Directors are to be elected shall be adjourned only from day
to day until such Directors have been elected. When a quorum is present at
any meeting, the holders of a majority of the voting power of the
Shareholders represented thereat shall decide any question brought before
such meeting, unless the question is one upon which, by express provision of
law, by the Articles of Incorporation or by these Bylaws, a larger or
different vote is required, in which case such express provision shall govern
and control the decision of such question. The election of Directors by the
Preferred Stock or the Preference Stock, voting as separate classes, and the
election of Directors by the Common Stock, although held at the same time and
place, shall be deemed to be subjects of separate meetings.
SECTION 6. PROXY AND VOTING. The voting power of the respective classes of
stock of this Corporation shall be as provided in the Articles of
Incorporation. Shareholders of record entitled to vote may vote at any
meeting either in person or by proxy in writing which shall be filed with the
Secretary before being voted. Such proxy shall entitle the holder thereof to
vote at any adjournment of such meeting but shall not be valid after the
final adjournment thereof.
<PAGE>
ARTICLE III.
BOARD OF DIRECTORS.
SECTION 1. NUMBER, TERM OF OFFICE AND QUALIFICATIONS. The Board of
Directors shall consist of such number of Directors, not less than seven nor
more than twenty-five, as shall be determined from time to time by resolution
of the Board of Directors, but any such determination shall be subject to
revision by the Shareholders. The Directors shall be elected at the Annual
Meeting of Shareholders or at any meeting held in lieu thereof, as
hereinbefore provided. In the event of any increase in the number of
Directors, within such limits, by such a resolution, the vacancy or vacancies
so resulting shall be filled by a majority vote of the Directors then in
office. Except as otherwise provided in Article VI hereof, each Director
shall serve until the next Annual Meeting of Shareholders and until his
successor is duly elected and qualified.
SECTION 2. ELECTION OF DIRECTORS BY PREFERRED OR PREFERENCE SHAREHOLDERS.
Wherever under the provisions of the Articles of Incorporation the holders of
Preferred Stock or Preference Stock shall be entitled, voting as a class
apart from the holders of Common Stock, to elect Directors, the provisions of
the Articles of Incorporation with regard to fixing the number of Directors
constituting a full Board of Directors, the election of Directors, their
tenure of office, the filling of vacancies in the Board, and the removal of
Directors, shall control.
SECTION 3. GENERAL POWERS. The Board of Directors shall have the entire
management of the business of this Corporation. In the management and control
of the property, business and affairs of this Corporation, the Board of
Directors is hereby vested with all the powers possessed by this Corporation
itself so far as this delegation of authority is not inconsistent with the
laws of the State of Washington, with the Articles of Incorporation or with
these Bylaws.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such places within or without the State of Washington and at
such times as the Board by resolution may determine from time to time, and if
so determined no notice thereof need be given.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President, a
Vice President, the Secretary or two or more Directors. The person or persons
authorized to call such Special Meetings may fix any place, within or without
the State of Washington, as the place for holding any Special Meeting called
by them.
SECTION 6. NOTICE . Notice of any Special Meeting of the Board of Directors,
stating the time and place thereof, shall be given by mailing the same to
each Director at his residence or business address at least two days before
the meeting or by delivering the same to him personally or by telephoning or
telegraphing the same to him at his residence or business address at least
one day before the meeting, unless, in case of exigency, the Chairman of the
Board or the President or in their absence the Secretary shall prescribe a
shorter notice to be given personally or by telephoning or telegraphing each
Director at his residence or business address. Any Director may waive notice
of any meeting and attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting. Notice of any meeting shall be given by the
person or persons authorized to call such meeting or, at the request of such
person or persons, by the Secretary.
SECTION 7. QUORUM. One-third of the total number of Directors, but not less
than three, shall constitute a quorum for the transaction of business, but a
less number may adjourn any meeting from time to time and the meeting may be
held as adjourned without further notice. When a quorum is present at any
meeting a majority of the members present thereat shall decide any question
brought before such meeting, except as otherwise provided by law, by the
Articles of Incorporation or by these Bylaws.
SECTION 8. COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services as Directors, and as members of committees,
as may be fixed from time to time by resolution of the Board of Directors and
expenses, if any, may be allowed for attendance at meetings of the Board of
Directors or committees thereof; provided that nothing herein contained shall
be construed to preclude any Director from serving this Corporation in any
other capacity and receiving compensation therefor. Any compensation so fixed
by the Board of Directors shall be subject to revision by the Shareholders
ARTICLE IV.
EXECUTIVE AND OTHER COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may elect from its
number an Executive Committee of not less than three members, which Committee
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of this Corporation when the Board is
not in session. The Executive Committee shall report its action to the Board
of Directors. The Executive Committee may make rules for the notice, holding
and conduct of its meetings and the keeping of the records thereof.
<PAGE>
SECTION 2. OTHER COMMITTEES. The Board of Directors may likewise appoint
from its number or from the Shareholders other committees from time to time,
the number composing such committees and the powers conferred upon such
committees to be determined by vote of the Board of Directors.
ARTICLE V.
OFFICERS.
SECTION I . NUMBER. The officers of this Corporation shall be a President,
one or more Vice Presidents, a Secretary and a Treasurer. Each Vice President
may be assigned by the Board of Directors an additional title descriptive of
the functions assigned to him. The Board of Directors at its discretion may
elect from its number a Chairman of the Board.
SECTION 2. ELECTION AND TERM OF OFFICE . The officers shall be elected
annually by the Board of Directors after election of the Directors by the
Shareholders and at such other times as the Board of Directors may determine
and shall hold office until their successors are duly elected and qualified,
subject, however, to the provisions of Article VI hereof, and a meeting of
the Directors may be held without notice for the election of officers
immediately after the Annual Meeting of the Shareholders and at the same
place.
SECTION 3. ELIGIBILITY. The President may, but need not, be a Shareholder
and shall be a Director of this Corporation. The Vice Presidents, Treasurer,
Secretary and such other officers as may be elected or appointed may, but
need not, be Shareholders or Directors of this Corporation. Any two of the
offices of Vice President, Secretary and Treasurer may be combined in one
person.
SECTION 4. ADDITIONAL OFFICERS AND AGENTS. The Board of Directors at its
discretion may appoint a Controller, one or more Assistant Treasurers, one or
more Assistant Secretaries and such other officers or agents as it may deem
advisable and may prescribe the duties thereof. All officers and agents
appointed pursuant to this Section 4 shall hold office during the pleasure of
the Board of Directors.
SECTION 5. PRESIDENT. The President shall be the chief executive officer of
this Corporation and perform the duties commonly incident to his office and,
when present, shall preside at all meetings of the Board of Directors and of
Shareholders, except that if there shall be a Chairman of the Board the
President shall not, unless the Chairman of the Board is absent or disabled,
perform such duties as are by these Bylaws or by a resolution of the Board of
Directors delegated exclusively to the Chairman of the Board. The President
is authorized to sign all certificates of stock, bonds, deeds and contracts
of this Corporation and to perform such other duties as the Board of
Directors from time to time shall determine.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, when present,
shall preside at all meetings of the Board of Directors and shall have such
other powers as the Board of Directors shall by resolution from time to time
prescribe. The Board of Directors may by resolution designate the Chairman of
the Board as the chief executive officer of this Corporation. The Chairman of
the Board, if present and designated for such purpose by resolution of the
Board of Directors, shall preside over meetings of Shareholders.
SECTION 7. VICE PRESIDENTS. Any Vice President, except as especially
limited by resolution of the Board of Directors, shall perform the duties and
have the powers of the President during the absence or disability of the
President and shall have power to sign all certificates of stock, bonds,
deeds and contracts of this Corporation. Each Vice President shall perform
such other duties and have such other powers as the Board of Directors from
time to time shall determine.
SECTION 8. TREASURER. The Treasurer shall be the financial officer of this
Corporation unless the Board of Directors shall have designated a Vice
President to serve as principal financing and accounting officer, and shall
have the powers and perform the duties commonly incident to the office of
Treasurer and such other duties as the Board of Directors from time to time
shall determine. He shall have the care and custody of all money, funds and
securities of this Corporation and shall deposit or cause to be deposited all
funds of this Corporation in such depositories as the Board of Directors may
designate. He shall have power to endorse for deposit or collection, or
otherwise, all checks, drafts, bills of exchange or orders for the payment of
money payable to this Corporation. He is authorized to sign all checks,
drafts, bills of exchange and orders for the payment of money of this
Corporation. All checks, drafts or orders for the payment of money shall be
signed either manually or, if and to the extent authorized by the Board of
Directors, through the use of a facsimile signature, by the Treasurer or an
Assistant Treasurer or such other officer or agent as the Board of Directors
shall by resolution direct. In the absence of the Treasurer, an Assistant
Treasurer shall perform his duties.
SECTION 9. SECRETARY. The Secretary shall keep accurate minutes of all
meetings of Shareholders, of the Board of Directors and of the Executive
Committee and shall perform all the duties commonly incident to his office
and shall perform such other duties and have such other powers as the Board
of Directors from time to time shall determine. In his absence an Assistant
Secretary or a Secretary pro tempore shall perform his duties.
<PAGE>
ARTICLE VI.
RESIGNATIONS AND REMOVALS
SECTION 1. RESIGNATIONS. Any Director or officer of this Corporation may
resign at any time by giving written notice to the Board of Directors or to
the Chairman of the Board or to the President or to the Secretary, and any
member of any committee may resign by giving written notice either as
aforesaid or to the committee of which he is a member or to the chairman
thereof. Any such resignation shall take effect at the time specified
therein, or if the time be not specified, upon receipt thereof and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 2. REMOVALS. Subject to the provisions of the following Section 3
and of the laws of the State of Washington, the holders of Common Stock, at
any meeting called for the purpose, by vote of a majority of the stock issued
and outstanding, may remove from office any Director or officer elected or
appointed by the holders of Common Stock or the Board of Directors or the
Executive Committee and elect or appoint his successor. The Board of
Directors, by vote of not less than a majority of the entire Board, may
remove from office any officer, agent or member or members of any committee
elected or appointed by it or by the Executive Committee.
SECTION 3. REMOVAL BY PREFERRED OR PREFERENCE SHAREHOLDERS. Whenever under
the provisions of the Articles of Incorporation the holders of the Preferred
Stock or the Preference Stock shall be entitled as classes apart from the
Common Stock, to elect Directors, the holders of the Preferred Stock or the
Preference Stock, as the case may be, shall have the exclusive power to
remove any Director elected by holders of Preferred Stock or Preference
Stock, as the case may be, or, if elected by Directors, whose predecessor was
elected by the holders of Preferred Stock or Preference Stock, as the case
may be, and they shall have no power to participate in the removal of any
other Director or officer.
ARTICLE VII.
VACANCIES
If the office of any Director or officer or agent becomes vacant by reason of
death, resignation, removal, disqualification or otherwise, a quorum of the
remaining Directors as constituted for the time being may choose, by a
majority vote, a successor or successors who shall hold office for the
unexpired term, but any vacancy in the Board of Directors may be filled for
an unexpired term by the Shareholders at a meeting called for that purpose
unless such vacancy shall have been filled by the Directors, but all subject
to the provisions of the Articles of Incorporation relating to the rights of
the holders of the Preferred Stock and Preference Stock, voting as classes
apart from the Common Stock, to elect Directors.
ARTICLE VIII.
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION . Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved (including,
without limitation, as a witness) in any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding'), by reason of the fact that he or she is or was
a Director or officer of the Corporation or, that being or having been such a
Director or officer or an employee of the Corporation, he or she is or was
serving at the request of an executive officer of the Corporation as a
Director, officer, employee or agent of another Corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (hereinafter an "Indemnitee"), whether the
basis of a Proceeding is alleged action in an official capacity as such a
Director, officer, employee or agent or in any other capacity while serving
as such a Director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the full extent permitted by applicable law as
then in effect, against all expense, liability and loss (including attorneys'
fees, judgements, fines, ERISA excise taxes or penalties and amounts to be
paid in settlement) actually and reasonably incurred or suffered by such
Indemnitee in connection therewith and such indemnification shall continue as
to an Indemnitee who has ceased to be a Director, officer, employee or agent
and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators; provided, however, that no indemnification shall be provided
to any such Indemnitee if the Corporation is prohibited by the nonexclusive
provisions of the Washington Business Corporation Act or other applicable law
as then in effect from paying such indemnification; and provided, further,
that except as provided in Section 2 of this Article with respect to
proceedings seeking to enforce rights to indemnification, the Corporation
shall indemnify any such Indemnitee in connection with a Proceeding (or part
thereof) initiated by such Indemnitee only if a Proceeding (or part thereof)
was authorized or ratified by the Board of Directors of the Corporation. The
right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses
incurred in defending any Proceeding in advance of its final disposition
(hereinafter an "Advancement of Expenses'). Any Advancement of Expenses shall
be made only upon delivery to the Corporation of an undertaking (hereinafter
an "Undertaking"), by or on behalf of such Indemnitee, to repay all amounts
so advanced it it shall ultimately be determined by final judicial decision
from which there is no further right to appeal that such Indemnitee is not
entitled to be indemnified for such expenses under this Section and (1) upon
delivery to
<PAGE>
the Corporation of a written affirmation (hereinafter an "Affirmation") by the
Indemnitee of his or her good faith belief that such Indemnitee has met the
standard of conduct necessary for indemnification by the Corporation pursuant to
this Article or (2) upon such determination (hereinafter a "Determination") as
may be permitted or required by the Washington Business Corporation Act or other
applicable law.
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1 of
this Article is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an Advancement of Expenses, in which case the applicable period
shall be twenty days, the Indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part, in any such suit or in a suit brought by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. The Indemnitee shall be presumed to be
entitled to indemnification under this Article upon submission of a written
claim (and, in an action brought to enforce a claim for an Advancement of
Expenses, where the required Undertaking and Affirmation or Determination
have been tendered to or made by the Corporation) and thereafter the
Corporation shall have the burden of proof to overcome the presumption that
the Indemnitee is so entitled. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or its
Shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its Shareholders) that the Indemnitee
is not entitled to indemnification shall be a defense to the suit or create a
presumption that the Indemnitee is not so entitled.
SECTION 3. NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
Advancement of Expenses conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Restated Articles of Incorporation, Bylaws, general
or specific action of the Board of Directors, contract or otherwise.
SECTION 4. INSURANCE, CONTRACTS AND FUNDING The Corporation may maintain
insurance, at its expense, to protect itself and any Director, officer,
employee or agent of the Corporation or another Corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Washington Business
Corporation Act. The Corporation may enter into contracts with any Director,
officer, employee or agent of the Corporation in furtherance of the
provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
SECTION 5. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, by action of its Board of Directors, grant rights to
indemnification and Advancement of Expenses to employees and agents of the
Corporation with the same scope and effect as the provisions of this Article
with respect to the indemnification and Advancement of Expenses of Directors
and officers of the Corporation or pursuant to rights granted pursuant to, or
provided by, the Washington Business Corporation Act or otherwise.
SECTION 6. PERSONS SERVING OTHER ENTITIES. Any person who is or was a
Director, officer, or employee of the Corporation who is or was serving (1)
as a Director or officer of another corporation of which a majority of the
shares entitled to vote in the election of its Directors is held by the
Corporation or (2) in an executive or management capacity in a partnership,
joint venture, trust, or other enterprise of which the Corporation or a
wholly owned subsidiary of the Corporation is a general partner or has a
majority ownership shall be deemed to be so serving at the request of an
executive officer of the Corporation and entitled to indemnification and
Advancement of Expenses under Section 1.
SECTION 7. PROCEDURES FOR THE SUBMISSION OF CLAIMS. The Board of Directors
may establish reasonable procedures for the submission of claims for
indemnification pursuant to this Article VIII, determination of the
entitlement of any person thereto, and review of any such determination. Such
procedures shall be set forth in an appendix to these Bylaws and shall be
deemed for all purposes to be a part hereof.
<PAGE>
ARTICLE IX.
STOCK CERTIFICATES AND TRANSFER OF STOCK.
SECTION 1. CERTIFICATES OF STOCK . Every Shareholder shall be entitled to a
certificate or certificates of the stock of this Corporation in such form,
conformable with statutory requirements, as may be prescribed by the Board of
Directors, duly numbered and sealed with the corporate seal of this
Corporation and setting forth the number and kind of shares to which such
Shareholder is entitled. Such certificates shall be signed by the President
or a Vice President and by the Treasurer or an Assistant Treasurer or by the
Secretary or an Assistant Secretary. The Board of Directors may also appoint
one or more Transfer Agents and Registrars for its stock of any class or
classes and may require stock certificates to be countersigned and registered
by one or more of such Transfer Agents and Registrars and in all cases where
stock certificates are signed by such a Transfer Agent or Registrar the
signatures of any of this Corporation's officers named in this Section and
the Seal of this Corporation upon such stock certificates may be facsimiles
engraved or printed. In case any officer or officers who shall have signed,
or whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers for
any reason before such certificate or certificates have been delivered by
this Corporation, such certificate or certificates may nevertheless be issued
and delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers.
SECTION 2. TRANSFER OF STOCK. Shares of stock may be transferred by
delivery of the certificate accompanied either by an assignment in writing on
the back of the certificate or by a written power of attorney to sell, assign
and transfer the same on the books of this Corporation, signed by the person
appearing by the certificate to be the owner of the shares represented
thereby, and shall be transferable on the books of this Corporation upon
surrender thereof so assigned or endorsed. The person registered on the books
of this Corporation as the owner of any shares of stock shall be entitled
exclusively as the owner of such shares to receive dividends and to vote as
such owner in respect thereof. It shall be the duty of every Shareholder to
notify this Corporation of his post-office address.
SECTION 3. LOSS OF CERTIFICATES. The Board of Directors may authorize the
issuance of new certificates of stock to replace certificates of stock lost,
stolen, mutilated or destroyed, or alleged to be lost, stolen, mutilated or
destroyed, upon such terms and in accordance with such procedures as the
Board of Directors shall deem proper and prescribe.
ARTICLE X.
BONDS AND DEBENTURES.
Every bond or debenture issued by this Corporation shall be signed by the
President or any Vice President and by the Treasurer or an Assistant
Treasurer or by the Secretary or an Assistant Secretary, and shall be sealed
with the Seal of this Corporation. The Seal may be a facsimile, engraved or
printed. Where any such bond or debenture is authenticated with the manual
signature of an authorized officer of the corporate or other trustee
designated by the indenture of trust or other agreement under which said
security is issued, the signatures of any of this Corporation's officers
named herein may be facsimiles. In case any officer or officers who shal1
have signed, or whose facsimile signature or signatures shall have been used
on, any bond or debenture shall cease to be such officer or officers for any
reason before the same has been delivered by this Corporation, such bond or
debenture may nevertheless be issued and delivered as though the person or
persons who signed it or whose facsimile signature or signatures shall have
been used thereon had not ceased to be such officer or officers.
ARTICLE XI.
SEAL.
The Corporate Seal shall have inscribed thereon the name of this Corporation
and the words "Corporate Seal Washington." In lieu of the Corporate Seal, a
facsimile thereof may be impressed or affixed or reproduced.
ARTICLE XII.
AMENDMENTS
Subject to any limitations imposed by law or the Articles of Incorporation,
these Bylaws may be added to, altered, amended, or repealed in whole or in
part (a) at any Annual or Special Meeting of the Shareholders by affirmative
vote of the holders of a majority of the voting power of all Shareholders,
provided notice of the proposed addition, alteration, amendment or repeal is
given in the notice of said meeting or (b) at any Regular or Special Meeting
of the Board of Directors by affirmative vote of a majority of the Board of
Directors, provided notice of the proposed addition, alteration, amendment or
repeal is given in the notice of said meeting.
<PAGE>
- --------------------------------------------------------------------------------
PUGET SOUND POWER & LIGHT COMPANY,
Seller and Servicer,
and
CHEMICAL BANK,
a New York banking corporation
Trustee
on behalf of the Certificateholders
--------------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of [___________]
--------------------------------------------
$[___________]
Puget Power Conservation Grantor Trust 1995-1
[__]% Conservation Certificates
- --------------------------------------------------------------------------------
<PAGE>
CONTENTS
SECTION 1. Definitions................................................... 2
Section 1.1 Definitions.............................................. 2
Section 1.2 Usage of Terms........................................... 13
Section 1.3 References............................................... 13
Section 1.4 Headings................................................. 14
SECTION 2. Creation of Trust............................................. 14
SECTION 3. Transfer of Property.......................................... 14
Section 3.1 Transfer of Property to the Trust........................ 14
Section 3.2 Commercial Law and Statutory Characterization of
Transaction.............................................. 14
Section 3.3 Certain Further Assurances............................... 15
Section 3.4 Closing.................................................. 15
SECTION 4. Acceptance by Trustee......................................... 15
SECTION 5. Custody of Purchased Assets Documentation..................... 15
Section 5.1 Purchased Assets Documentation........................... 15
Section 5.2 Appointment as Custodian; Acceptance of Custodial
Responsibility........................................... 16
Section 5.3 Duties of Servicer as Custodian.......................... 16
(a) Safekeeping.............................................. 16
(b) Maintenance of and Access to Records..................... 16
(c) Final Inspection of Documents............................ 17
Section 5.4 Instructions; Authority to Act................................ 17
PAGE i
<PAGE>
Section 5.5 Indemnification Regarding Custodial Obligations.......... 17
Section 5.6 Effective Period and Termination......................... 17
SECTION 6. Administration and Servicing of Purchased Assets.............. 18
Section 6.1 Appointment of Servicer; Acceptance of Appointment....... 18
Section 6.2 Duties of Servicer....................................... 18
Section 6.3 Collection of Certain Purchased Assets and Related
Matters.................................................. 18
Section 6.4 Realization Upon, and Maintenance of, Purchased
Assets................................................... 19
Section 6.5 Rate Adjustment Mechanism................................ 19
Section 6.6 Maintenance of Filings in Respect of Purchased Assets.... 21
Section 6.7 Dominion and Control of the Purchased Assets;
Covenant of Servicer..................................... 21
Section 6.8 Servicing Fee............................................ 21
Section 6.9 Monthly Servicer's Certificate........................... 21
Section 6.10 Statement as to Compliance............................... 22
Section 6.11 Annual Report By Independent Public Accountants.......... 22
Section 6.12 Access to Certain Documentation and Information
Regarding Purchased Assets............................... 22
Section 6.13 Reports to Certificateholders, Certificate Owners and
the Rating Agencies...................................... 23
SECTION 7. Distributions; Statements to Parties.......................... 23
Section 7.1 Collection Account....................................... 23
Section 7.2 Collections.............................................. 24
Section 7.3 Distributions............................................ 24
PAGE ii
<PAGE>
Section 7.4 Calculation of Bondable Conservation Investment
Balance.................................................. 25
Section 7.5 Certificate Regarding Servicing Fee...................... 25
Section 7.6 Certificates............................................. 26
SECTION 8. The Certificates.............................................. 27
Section 8.1 The Certificates......................................... 27
Section 8.2 Execution, Authentication and Delivery of Certificates... 27
Section 8.3 Registration of Transfer and Exchange of Certificates.... 27
Section 8.4 Mutilated, Destroyed, Lost or Stolen Certificates........ 29
Section 8.5 Persons Deemed Owners of Certificate..................... 29
Section 8.6 Access to List of Certificateholders' Names and
Addresses................................................ 30
Section 8.7 Maintenance of Office or Agency.......................... 30
Section 8.8 Book-Entry Certificates.................................. 30
Section 8.9 Notices to Clearing Agency............................... 32
Section 8.10 Definitive Certificates.................................. 32
Section 8.11 Appointment of Paying Agent.............................. 33
Section 8.12 Authenticating Agent..................................... 33
Section 8.13 Actions of Certificateholders............................ 35
SECTION 9. The Seller.................................................... 35
Section 9.1 Representations and Warranties of Seller................. 35
(a) Organization and Good Standing........................... 36
(b) Power and Authority..................................... 36
(c) Validity; Binding Obligations............................ 36
PAGE iii
<PAGE>
(d) No Violation............................................. 36
(e) No Proceedings........................................... 37
(f) Governmental Approvals................................... 37
(g) No Liens, Claims or Encumbrances......................... 37
Section 9.2 Liability of Seller; Indemnities......................... 37
Section 9.3 Merger or Consolidation of Seller........................ 39
Section 9.4 Limitation on Liability of Seller and Others............. 39
SECTION 10. The Servicer.................................................. 39
Section 10.1 Representations and Warranties of Servicer............... 39
(a) Organization and Good Standing........................... 39
(b) Power and Authority...................................... 40
(c) Binding Obligations...................................... 40
(d) No Violation............................................. 40
(e) No Proceedings........................................... 40
(f) Governmental Approvals................................... 40
Section 10.2 Liability of Servicer; Indemnities....................... 41
Section 10.3 Merger or Consolidation of Servicer...................... 41
Section 10.4 Limitation on Liability of Servicer and Others........... 42
Section 10.5 Servicer Not to Resign................................... 42
Section 10.6 Delegation of Duties..................................... 43
Section 10.7 Certain Covenants of Servicer............................ 43
SECTION 11. Event of Servicing Termination................................ 43
Section 11.1 Event of Servicing Termination........................... 43
PAGE iv
<PAGE>
Section 11.2 Notification to Certificateholders....................... 44
Section 11.3 Waiver of Past Defaults.................................. 44
SECTION 12. The Trustee................................................... 44
Section 12.1 No Power to Engage in Business or to Vary Investments.... 44
Section 12.2 Duties of Trustee........................................ 45
Section 12.3 Certain Matters Affecting the Trustee.................... 47
Section 12.4 Trustee Not Liable for Certificates or Purchased Assets.. 48
Section 12.5 Trustee May Own Certificates............................. 49
Section 12.6 Trustee's Fees and Expenses.............................. 49
Section 12.7 Eligibility Requirements for Trustee..................... 49
Section 12.8 Resignation or Removal of Trustee........................ 50
Section 12.9 Successor Trustee........................................ 50
Section 12.10 Merger or Consolidation of Trustee....................... 51
Section 12.11 Appointment of Co-Trustee or Separate Trustee............ 51
Section 12.12 Representations and Warranties of Trustee................ 53
(a) Organization and Good Standing........................... 53
(b) Power and Authority...................................... 53
(c) No Violation............................................. 53
(d) No Governmental Authorization Required................... 53
(e) Due Authorization, Execution and Delivery................ 54
(f) Governmental Approvals................................... 54
Section 12.13 Tax Returns.............................................. 54
PAGE v
<PAGE>
Section 12.14 Trustee May Enforce Claims Without Possession of
Certificates............................................. 54
Section 12.15 Maintenance of Office or Agency.......................... 55
SECTION 13. Termination of the Trust...................................... 55
SECTION 14. Miscellaneous Provisions...................................... 56
Section 14.1 Amendment................................................ 56
Section 14.2 Protection of Title to Trust............................. 57
Section 14.3 Limitation on Rights of Certificateholders............... 58
Section 14.4 Governing Law............................................ 59
Section 14.5 Notices.................................................. 59
Section 14.6 Severability of Provisions............................... 59
Section 14.7 Assignment............................................... 60
Section 14.8 Certificates Nonassessable and Fully Paid................ 60
Section 14.9 Third-Party Beneficiaries................................ 60
Section 14.10 Certificates Owned by Servicer........................... 60
PAGE vi
<PAGE>
EXHIBITS
Exhibit A Form of Bill of Sale
Exhibit B Form of Tariff
Exhibit C Form of Initial Commission Order
Exhibit D Forms of (x) Procedures for Implementation of Revised Tariff,
(y) Periodic Adjustment Application, and (z) Periodic Commission
Order
Exhibit E Form of Conservation Certificate
Exhibit F Form of Monthly Servicer's Certificate
Exhibit G Form of Trustee's Certificate
SCHEDULES
Schedule A Commission Approval of Bondable Conservation Investments
Schedule B Pro Forma Schedule
PAGE vii
<PAGE>
POOLING AND SERVICING AGREEMENT
This Pooling and Servicing Agreement (this "AGREEMENT"), dated as of
[___________], 1995, is made with respect to the formation of the Puget Power
Conservation Grantor Trust 1995-1 (the "TRUST"), between Puget Sound Power &
Light Company, a Washington corporation (the "SELLER" and the "SERVICER" in its
respective capacities as such), and Chemical Bank, as trustee (the "TRUSTEE").
WITNESSETH
WHEREAS, the Seller, as provider and distributor of energy resources to
Customers (defined below), has obtained certain assets through, among other
things, its investments in a variety of programs designed to conserve energy
resources by financially assisting Customers with their acquisition and
installation of a range of energy-efficient equipment;
WHEREAS, pursuant to the Statute (defined below), the State of Washington
has enacted legislation that enables the Seller to sell the Purchased Assets
(defined below), pursuant to the transaction contemplated hereby, in order to
reduce the overall costs to Customers of programs designed to promote the
efficient use of energy resources;
WHEREAS, the Seller desires to establish the Trust for the purposes of
effectuating the sale of the Purchased Assets by granting and conveying to the
Trust the Purchased Assets, and causing the Trust to, among other things,
distribute payments received in respect of the Purchased Assets and to issue
Certificates (defined below) representing undivided fractional interests in the
assets of the Trust; and
WHEREAS, the Seller, the Servicer and the Trustee desire to set forth in
this Agreement the assets that will be conveyed to the Trust for the benefit of
the Certificateholders (defined below), the rights of the Certificateholders and
the rights and obligations of the Seller, as grantor and originator of the
Trust, of the Servicer, as servicing agent for the Trustee, and of the Trustee,
as trustee for the Certificateholders; and
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
PAGE 1
<PAGE>
SECTION 1. DEFINITIONS
SECTION 1.1 DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
"AFFECTED CUSTOMERS" shall have the meaning set forth in the definition of
Equipment Sale Contracts.
"AGGREGATE CERTIFICATE AMOUNT" means [_________________________].
"AGGREGATE CERTIFICATE BALANCE" means, as of any date of determination, the
aggregate Certificate Balance of all of the Certificates.
"AGGREGATE REMITTANCE AMOUNT" means, in respect of each Collection Period,
the aggregate amount of (x) all Allocated Conservation Amounts received by the
Servicer during such Collection Period, PLUS (y) all Termination Fees received
by the Servicer during such Collection Period, PLUS (z) all Allocated Sale
Amounts received by the Servicer during such Collection Period.
"ALLOCATED CONSERVATION AMOUNTS" means that amount of each payment made by
or on behalf of the Customers allocated to the Trust pursuant to the Tariff or
any Revised Tariff, as the case may be; PROVIDED, HOWEVER, that in each case in
which a Customer has paid an amount (such paid amount, the "AMOUNT PAID") less
than the amount billed to such Customer in respect of all amounts due from such
Customer including, , all amounts due from such Customer and allocated by the
Servicer to any other entity (such billed amount, the "AMOUNT BILLED") during
such Collection Period, for purposes of this definition, the "ALLOCATED
CONSERVATION AMOUNT" shall be equal to the product of (i) the Allocated
Conservation Amount and (ii) the quotient obtained by dividing the Amount Paid
by the Amount Billed.
"ALLOCATED SALE AMOUNTS" shall mean the amount of the Bondable Conservation
Investments that the Commission, in accordance with the provisions of RCW
80.28.303(6)(a)(ii), removes from the rate base of the Servicer as a result of
any sale or transfer pursuant to an Equipment Sale Contract.
"AMOUNT BILLED" shall have the meaning set forth in the definition of
Allocated Conservation Amounts.
"AMOUNT PAID" shall have the meaning set forth in the definition of
Allocated Conservation Amounts.
"AUTHENTICATING AGENT" shall have the meaning set forth in Section 8.12.
PAGE 2
<PAGE>
"AUTHORIZED OFFICER" means any officer in the Corporate Trust Department of
the Trustee, identified to the Servicer in writing from time to time, with
direct responsibility for the administration of this Agreement.
"BILL OF SALE" means that certain bill of sale, dated as of the Closing
Date, between the Seller and the Trustee, substantially in the form of Exhibit
A.
"BONDABLE CONSERVATION INVESTMENT AMOUNT" means $[_________], the
unamortized balance of amounts invested by the Seller in the Bondable
Conservation Investments as reflected on the books of the Seller as of the
Closing Date.
"BONDABLE CONSERVATION INVESTMENT BALANCE" means (a) on the Closing Date,
the Bondable Conservation Investment Amount or (b) on any Calculation Date, the
balance calculated pursuant to Section 7.4.
"BONDABLE CONSERVATION INVESTMENTS" means the investments and expenditures
of the Seller, approved by the Commission and set forth in Schedule A, made in
connection with energy conservation programs and meeting the requirements of
"bondable conservation investments" as set forth in the Statute.
"BOOK-ENTRY CERTIFICATES" means beneficial interests in the Certificates
described in Section 8.8, the ownership and transfer of which shall be made
through book entries by a Clearing Agency pursuant to Section 8.8.
"BUSINESS DAY" means a day, other than a Saturday or a Sunday, on which the
Trustee and banks located in New York, New York and Seattle, Washington are open
for the purpose of conducting commercial banking business.
"CALCULATION DATE" means September 30 in each year from and including 1995
to and including 2003, and March 31, 2004; PROVIDED, HOWEVER, that if any such
day is not a Business Day, "Calculation Date" shall mean the next succeeding
such day.
"CERTIFICATE" means a certificate evidencing a fractional undivided
interest in the Trust executed on behalf of the Trust, and authenticated, by the
Trustee substantially in the form of Exhibit E.
"CERTIFICATE AMOUNT" means, with respect to a Certificate, the initial
stated amount of such Certificate.
"CERTIFICATE BALANCE" means, with respect to a Certificate and as of any
date of determination, the difference with respect to such Certificate between
(x) the Certificate Amount of such Certificate and (y) the sum of all amounts
previously paid by the Trustee to the holder of such Certificate pursuant to
Section 7.3(a)(iv).
PAGE 3
<PAGE>
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency or on the books of a direct or indirect Clearing
Agency Participant.
"CERTIFICATE PAYMENT ACCOUNT" means the segregated trust account opened in
the name of [________], for the benefit of the Certificateholders, into which
the Trustee initially distributes amounts pursuant to Section 7.3(a)(iii) and
(iv).
"CERTIFICATE RATE" means [___]% per annum.
"CERTIFICATE REGISTER" means the register maintained pursuant to Section
8.3.
"CERTIFICATEHOLDER" or "Holder" means the Person in whose name a
Certificate is registered in the Certificate Register.
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The
initial Clearing Agency shall be The Depository Trust Company.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers of securities deposited with the Clearing Agency.
"CLOSING DATE" means [____________].
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION ACCOUNT" means the segregated trust account opened in the name
of the Trustee, as trustee, for the benefit of the Certificateholders (a) into
which the Servicer shall make remittances on each Remittance Date pursuant to
Section 7.2 and (b) from which the Trustee shall make distributions pursuant to
Section 7.3(a).
"COLLECTION PERIOD" means a period of time equal to one calendar month ,
except that the first Collection Period will commence on the Closing Date and
end on the last day of the calendar month in which the Closing Date occurs. The
last Collection Period will end on March 31, 2005.
"COMMISSION" means the Washington Utilities and Transportation Commission
or any successor governmental agency.
"CONSERVATION ASSET TRANSACTION" means the transaction contemplated by this
Agreement, the Exhibits hereto, the Underwriting Agreement and the other
documents and instruments executed and delivered in connection herewith and
therewith.
PAGE 4
<PAGE>
"CONSERVATION ASSET TRANSACTION AMOUNT" means an aggregate amount
recoverable by the Trust under the Tariff representing the sum of (i) the
Bondable Conservation Investment Amount and (ii) interest on the Bondable
Conservation Investment Balance, at the Certificate Rate, for the period
commencing on the Closing Date and ending on September 30, 2004.
"CONSERVATION REPAYMENT CONTRACT" means any contract between the Seller and
any Customer imposing an obligation on the Customer to pay a fee in respect of
all or part of the subject Bondable Conservation Investments in the event such
Customer changes energy suppliers.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which its
corporate trust business shall be principally administered, which office shall
be the office specified as such in this Agreement, or such office at some other
address as the Trustee may designate from time to time by notice to the
Certificateholders, the Seller, the Servicer, the Paying Agent and the Transfer
Agent and Certificate Registrar.
"CUSTOMER" means each retail customer of Puget Sound Power & Light Company
or its successors or assigns obligated pursuant to the Tariff or the Revised
Tariff, as the case may be, to pay Allocated Conservation Amounts to Puget Sound
Power & Light Company or its successors or assigns in connection with the
distribution and provision of energy to such Customer, or any other Person who
owes or may be liable for such Allocated Conservation Amounts.
"DEFINITIVE CERTIFICATES" shall have the meaning set forth in Section 8.8.
"DEPOSIT DATE" means the Business Day immediately preceding each
Distribution Date.
"DISTRIBUTION DATE" means, for each Distribution Period, the 11th calendar
day (or if such 11th calendar day is not a Business Day, the Business Day
immediately succeeding such 11th calendar day) immediately succeeding the last
day of such Distribution Period, provided, however, that such date must be at
least one Business Day following the related Remittance Date.
"DISTRIBUTION PERIOD" means the period from and including the Closing Date
to and including June 30, 1995 and, thereafter, each of the following periods in
each year ending on March 31, 2005:
January 1 to and including March 31;
April 1 to and including June 30;
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July 1 to and including September 30; and
October 1 to and including December 31.
"EQUIPMENT SALE CONTRACTS" means any contract of the Servicer, or
governmental judgment, order or decree, resulting in (a) the sale or transfer
(whether voluntary or involuntary) of any property of the Servicer used by the
Servicer to serve any Customers, (b) such Customers (the "AFFECTED CUSTOMERS")
no longer constituting "Customers" of the Servicer, and (c) the Commission
removing a portion of the Bondable Conservation Investments from the Servicer's
rate base in accordance with the provisions of RCW 80.28.303(6)(a)(ii).
"EVENT OF SERVICING TERMINATION" shall have the meaning set forth in
Section 11.1.
"GENERAL TARIFF" means the general tariff system in effect in respect of
rates which the Commission approves as chargeable by the Servicer to Customers
in connection with the provision and distribution of energy and other services
to such Customers.
"INITIAL COMMISSION ORDER" means that certain Supplemental Order of the
Commission, issued in Docket No. [_____________] and approving, among other
things, the Tariff and the Conservation Asset Transaction, substantially in the
form of Exhibit C.
"MONTHLY SERVICER'S CERTIFICATE" means a certificate, substantially in the
form of Exhibit F, completed and executed by the Servicer by its chairman of the
board, president, treasurer or controller or any executive vice president,
senior vice president or vice president pursuant to Sections 6.9 and 7.6(a).
"OPINION OF COUNSEL" means a written opinion of counsel in form and
substance reasonably satisfactory to the recipient of such opinion of counsel.
"PAYING AGENT" shall have the meaning set forth in Section 8.11 and shall
initially be Chemical Bank.
"PERIODIC ADJUSTMENT APPLICATION" means each application of the Servicer to
the Commission seeking approval of the terms of each Revised Tariff, the form of
which is contained in Exhibit D.
"PERIODIC COMMISSION ORDER" means each Supplemental Order of the Commission
approving a Revised Tariff, a pro forma copy of which is contained in Exhibit D.
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"PERMITTED INVESTMENTS" means, at any time, any one or more of the
following obligations and securities maturing in not more than 60 days or such
lesser time as is necessary for payment of distributions on a Distribution Date:
(i) obligations of the United States of America or any agency
thereof, provided such obligations are backed by the full faith and credit
of the United States of America;
(ii) general obligations of or obligations guaranteed as to the
timely payment of interest and principal by any state of the United States
of America or the District of Columbia then rated in the highest long-term
rating category by the Rating Agencies or such lower ratings (as approved
in writing by the Rating Agencies) as will not result in the qualification,
downgrading or withdrawal of the ratings then assigned to the Certificates
by the Rating Agencies;
(iii) commercial paper which is then rated in the highest short-term
rating category by the Rating Agencies or such lower rating categories (as
approved in writing by the Rating Agencies) as will not result in the
qualification, downgrading or withdrawal of the ratings then assigned to
the Certificates by the Rating Agencies;
(iv) certificates of deposit, demand or time deposits, federal funds
or banker's acceptances issued by any depository institution or trust
company (including the Trustee acting in its commercial banking capacity)
incorporated under the laws of the United States or of any state thereof or
incorporated under the laws of a foreign jurisdiction with a branch or
agency located in the United States of America and subject to supervision
and examination by federal or state banking authorities, provided that the
short-term unsecured deposit obligations of such depository institution or
trust company is then rated in the highest short-term rating category by
the Rating Agencies or such lower rating categories (as approved in writing
by the Rating Agencies) as will not result in the qualification,
downgrading or withdrawal of the ratings then assigned to the Certificates
by the Rating Agencies;
(v) demand or time deposits of, or certificates of deposit issued by,
any bank, trust company, savings bank or other savings institution provided
that such deposits or certificates of deposit are fully insured by the
FDIC;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation (A) the short-term unsecured debt or deposits
of which are rated in the highest short-term rating category by the Rating
Agencies or the long-term unsecured debt of which is rated in the
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highest long-term rating category by the Rating Agencies or (B) that are
otherwise approved in writing by the Rating Agencies as investments that
will not result in the qualification, downgrading or withdrawal of the
ratings then assigned to the Certificates by the Rating Agencies;
(vii) repurchase obligations with respect to any security described
in clause (i), (ii) or (ix) herein or any other security issued or
guaranteed by the FHLMC, the FNMA or any other agency or instrumentality of
the United States of America that is backed by the full faith and credit of
the United States of America, in either case entered into with a federal
agency or a depository institution or trust company (acting as principal)
described in (iv) above or a corporation (acting as principal) described in
(vi) above;
(viii) investments in money market funds, which funds are (A) not
subject to any sales, load or other similar charge; (B) rated in the
highest rating category by the Rating Agencies; and (C) invested solely in
obligations described in clauses (i) through (vii) above.
(ix) interests in any open-end or closed-end management type
investment company or investment trust (A) registered under the Investment
Company Act of 1940, as from time to time amended, the portfolio of which
is limited to obligations of the United States or obligations guaranteed by
the United States and to agreements to repurchase such obligations, which
agreements, with respect to principal and interest, are at least 100%
collateralized by such obligations marked to market on a daily basis and
pursuant to which the investment company or investment trust is required to
take delivery of such obligations either directly or through an independent
custodian designated in accordance with the Investment Company Act of 1940,
as from time to time amended and (B) acceptable to the Rating Agencies (as
approved in writing by the Rating Agencies) as collateral for securities
having ratings equivalent to the ratings of the Certificates on the Closing
Date; and
(x) such other investments where either (A) the short-term unsecured
debt or deposits of the obligor on such investments are rated in the
highest short-term rating category by the Rating Agencies or (B) such
investments are acceptable to, and approved in writing by, the Rating
Agencies and will not result in the qualification, downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agencies.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated
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organization, or government or any agency or political subdivision thereof, or
any other entity of whatever nature.
"PRELIMINARY PROSPECTUS" means that certain preliminary prospectus issued
in connection with the prospective purchase and sale of the Certificates.
"PRO FORMA SCHEDULE" means the pro forma schedule of Projected Bondable
Conservation Investment Balances set forth in Schedule B, as the same may be
modified from time to time pursuant to Section 6.5.
"PROJECTED BONDABLE CONSERVATION INVESTMENT BALANCE" means, in respect of
each Calculation Date, the amount set forth in respect of such date in the Pro
Forma Schedule.
"PROSPECTUS" means that certain prospectus issued in connection with the
purchase and sale of the Certificates.
"PURCHASED ASSET DOCUMENTATION" shall have the meaning set forth in Section
5.1.
"PURCHASED ASSETS" means, collectively, the Purchased Conservation
Investment Assets, the Purchased Contract Rights and the Purchased Sale
Proceeds.
"PURCHASED CONSERVATION INVESTMENT ASSETS" means, collectively, (i) all of
the Seller's right, title and interest in and to, and to receive, the Allocated
Conservation Amounts in accordance with the Tariff and Commission Orders and
(ii) all of the Seller's rights to have the Conservation Asset Transaction
Amount recoverable through Rates pursuant to and in accordance with the Statute.
"PURCHASED CONTRACT RIGHTS" means all of the Seller's right, title and
interest under the Conservation Repayment Contracts in and to the Termination
Fees.
"PURCHASED SALE PROCEEDS" means all of the Seller's right, title and
interest to the portion of the price paid to the Servicer, or the governmental
award or payment in favor of the Servicer, in connection with any Equipment Sale
Contract relating to the Bondable Conservation Investments allocable to the
Affected Customers, such portion of such price or award to equal, for all
purposes of this Agreement, the Allocated Sale Amounts.
"QUALIFIED TRUST INSTITUTION" means an institution organized under the laws
of the United States of America or one of the states thereof or incorporated
under the laws of a foreign jurisdiction with a branch or agency located in the
United States of America or one of the states thereof and subject to supervision
and examination by
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federal or state banking authorities which at all times (i) is authorized under
such laws to act as a trustee or in any other fiduciary capacity, (ii) has not
less than one billion dollars in assets under fiduciary management, (iii) has a
minimum net worth of at least $50,000,000, and (iv) has a long-term deposits
rating in one of the four highest rating categories by each of the Rating
Agencies rating such institution.
"RATE ADJUSTMENT" means each adjustment to the revenues allocated to the
Trust in respect of the Conservation Asset Transaction Amount pursuant to which
(a) in the case where immediately prior to any such adjustment the Tariff was in
effect, a Revised Tariff shall take effect or (b) in the case where immediately
prior to any such adjustment a Revised Tariff was in effect, a subsequent
Revised Tariff shall take effect.
"RATE ADJUSTMENT MECHANISM" shall have the meaning set forth in Section
6.5(b).
"RATES" means the schedule of rates that the Seller is authorized to bill
Customers from the Closing Date through September 30, 2004 in exchange for the
Seller's provision and distribution of power to such Customers.
"RATING AGENCIES" means the nationally recognized statistical rating
organizations initially rating the Certificates.
"RECORD DATE" means, with respect to any Distribution Date, the Business
Day prior to such Distribution Date unless Definitive Certificates are issued,
in which case "RECORD DATE" shall mean the last day of the immediately preceding
calendar month.
"REGISTRATION STATEMENT" means the Form S-1 registration statement
(Registration No. 33-______) filed with the Securities and Exchange Commission
by the Seller, as registrant, in respect of the Certificates issued by the
Trust.
"REGULATORY YEAR" means (i) the period from the Closing Date through and
including September 30, 1995 (the "Initial Regulatory Year") and (ii) for each
period following the Initial Regulatory Year until September 30, 2004, the
period from and including October 1st of each year through and including
September 30th of the following year.
"REMITTANCE DATE" means, for each Collection Period, the 10th calendar day
(or, if such 10th calendar day is not a Business Day, the Business Day
immediately succeeding such 10th calendar day) immediately succeeding the end of
such Collection Period.
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"REVISED TARIFF" means any schedule to the General Tariff, in replacement
of the Tariff (or any Revised Tariff then in effect), allocating revenues to the
Trust in respect of the Conservation Asset Transaction Amount, in an amount
equal to the Revised Tariff Amount, and put into effect from time-to-time by the
Commission's issuance of a Periodic Commission Order, such that, taking into
account from the effective date of the Revised Tariff the then expected rate of
delinquencies and expected numbers of Customers, (i) upon the next Calculation
Date (or on September 30, 2004 in the case of a Revised Tariff taking effect
after March 31, 2004), the Bondable Conservation Investment Balance is
anticipated to be equal to the Projected Bondable Conservation Investment
Balance as of such date and (ii) thereafter, the Bondable Conservation
Investment Balance is anticipated to be amortized in accordance with the Pro
Forma Schedule..
"REVISED TARIFF AMOUNT" means, at any date of determination, an amount,
determined by the Servicer taking into account (from the effective date of the
Revised Tariff) the then expected rate of delinquencies and the expected numbers
of Customers, such that (assuming effectuation of such tariff) (i) upon the next
Calculation Date (or on September 30, 2004 in the case of a Revised Tariff
taking effect after March 31, 2004), the Bondable Conservation Investment
Balance is anticipated to be equal to the Projected Bondable Conservation
Investment Balance as of such date and (ii) thereafter, the Bondable
Conservation Investment Balance is anticipated to be amortized in accordance
with the Pro Forma Schedule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" means Puget Sound Power & Light Company, solely in its capacity as
the seller of the Purchased Assets under this Agreement, and each successor to
Puget Sound Power & Light Company (in the same capacity) pursuant to Section
9.3.
"SERVICER" means Puget Sound Power & Light, solely in its capacity as the
servicer of the Purchased Assets under this Agreement, each successor to Puget
Sound Power & Light Company, solely (in the same capacity) pursuant to Section
10.3, and each successor Servicer pursuant to Section 11.1.
"SERVICING FEE" means, with respect to each Distribution Period, the fee
payable to the Servicer pursuant to Section 7.3(a)(ii) for services rendered
during such Distribution Period, in an amount equal to the sum of (i) $_________
and (ii) the investment earnings on amounts deposited in the Collection Account
during such Distribution Period.
"STATUTE" means ch. 268 of Laws of Washington 1994, codified at RCW
80.28.005, RCW 80.28.303, RCW 80.28.306 and RCW 80.28.309.
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"TARIFF" means Schedule 102 (Designation of Revenues Allocable to Bondable
Conservation Investments) to the General Tariff, substantially in the form of
Exhibit B, as the same shall be adjusted in accordance with the terms thereof.
"TERMINATION FEES" means all amounts paid by Customers under Conservation
Repayment Contracts.
"TRANSFER AGENT AND CERTIFICATE REGISTRAR" shall have the meaning set forth
in Section 8.3 and shall initially be Chemical Bank.
"TRUST" means the trust created by this Agreement, the estate of which
shall consist of the property transferred thereto pursuant to this Agreement,
together with funds deposited in the Collection Account and proceeds thereof.
"TRUSTEE" means Chemical Bank, solely in its capacity as Trustee hereunder,
its successor in interest pursuant to Section 12.10, and any successor Trustee
pursuant to Section 12.9.
"TRUSTEE FEE" means, with respect to each Distribution Period, the fee
payable to the Trustee pursuant to Section 7.3(a)(i) for services rendered
during the Distribution Period, in an amount equal to $__________.
"TRUSTEE'S CERTIFICATE" means a certificate, substantially in the form of
Exhibit G, completed and executed by an Authorized Officer pursuant to Section
7.6(b).
"UCC" means the Uniform Commercial Code as in effect in the State of
Washington.
"UNDERWRITING AGREEMENT" means that certain Underwriting Agreement in
respect of the issuance and sale of the Certificates among Puget Sound Power &
Light Company, Salomon Brothers Inc and Chemical Securities Inc.
"VARIANCE" shall occur on each Calculation Date on which the Bondable
Conservation Investment Balance shall be more than two percent (2%) greater or
lower than the Projected Bondable Conservation Investment Balance as of such
date.
SECTION 1.2 USAGE OF TERMS
With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
gender; references to "writing" include printing, typing, lithography and other
means of reproducing words in a visible form; references to agreements and other
contractual instruments include all subsequent amendments thereto or changes
therein effected in
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accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
term "including" means "including, ."
SECTION 1.3 REFERENCES
All references to the Record Date prior to the first Record Date in the
life of the Trust shall be deemed to be references to the Closing Date. All
references to "as of a Record Date" shall refer to the close of business on such
Record Date.
SECTION 1.4 HEADINGS
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 2. CREATION OF TRUST
Upon the execution of this Agreement by the parties hereto, there is hereby
created the Puget Power Conservation Grantor Trust 1995-1.
SECTION 3. TRANSFER OF PROPERTY
SECTION 3.1 TRANSFER OF PROPERTY TO THE TRUST
In consideration of the Trustee's delivery to the Seller of authenticated
Certificates, in authorized denominations, in an aggregate amount equal to the
Aggregate Certificate Amount, the Seller hereby agrees, pursuant to the Bill of
Sale, to absolutely, unconditionally and irrevocably transfer, assign and
otherwise convey to the Trustee on behalf of the Trust, without recourse or
reversion, and the Trustee agrees, on behalf of the Trust, to acquire from the
Seller all right, title and interest of the Seller in and to (i) the Purchased
Conservation Investment Assets, (ii) the Purchased Contract Rights, (iii) the
Purchased Sale Proceeds, and (iv) all proceeds of the foregoing items described
in clauses (i), (ii) and (iii).
SECTION 3.2 COMMERCIAL LAW AND STATUTORY CHARACTERIZATION OF
TRANSACTION
The Seller and the Trustee expressly state, for purposes of RCW
80.28.306(5), and for commercial law purposes, that the Conservation Asset
Transaction shall constitute a "sale or other absolute transfer" of the
Purchased Conservation Investment Assets by the Seller to a "finance subsidiary"
(as defined in RCW 80.28.005(4)). It is the intention of the parties hereto and
the Trust that the Purchased Assets will not be property of the estate created
in the event the Seller becomes the subject of bankruptcy or similar
proceedings. In the event that,
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notwithstanding the foregoing, the Conservation Asset Transaction is
recharacterized as a pledge to secure a loan, the Seller hereby grants to the
Trustee on behalf of the Trust for the benefit of the Certificateholders a
security interest in all of the Seller's right, title and interest in the
Purchased Assets and all proceeds thereof to secure the loan deemed to be made
in connection with such pledge and, in such event, this Agreement shall
constitute a security agreement creating a security interest pursuant to RCW
80.28.306(2).
SECTION 3.3 CERTAIN FURTHER ASSURANCES
In connection with the sale of the Purchased Assets, the Seller agrees to
record and file financing statements with respect to the Purchased Assets
meeting the requirements of applicable state law in Washington in such manner,
and to take such other actions as may be necessary under Washington law, as is
necessary to perfect the sale and assignment of the Purchased Assets to the
Trust.
SECTION 3.4 CLOSING
The closing of the purchase of the sale of the Purchased Assets, and
transfer of the Certificates under this Agreement shall occur at 9:00 a.m. on
the Closing Date at the offices of Perkins Coie, 1201 Third Avenue, 40th Floor,
Seattle, Washington, or at such other time and place as the parties may agree.
SECTION 4. ACCEPTANCE BY TRUSTEE
The Trustee does hereby accept all consideration transferred and conveyed
by the Seller pursuant to Section 3.1, and to be transferred and conveyed
pursuant to the Bill of Sale, and declares that the Trustee shall hold such
consideration upon the trusts herein set forth for the benefit of the
Certificateholders, subject to the terms and provisions of this Agreement.
SECTION 5. CUSTODY OF PURCHASED ASSETS DOCUMENTATION
SECTION 5.1 PURCHASED ASSETS DOCUMENTATION
To assure uniform quality in servicing the Purchased Assets and to reduce
administrative costs, the Trustee, upon the execution and delivery of this
Agreement, agrees to have the Servicer hold, and act as custodian, of the
following documents or instruments, copies of which are hereby constructively
delivered to the Trustee: (i) the original executed Conservation Repayment
Contracts or, if no such original exists, a copy of such original executed
Conservation Repayment Contract; and (ii) all other material documents that the
Seller or Servicer, as the case may be, shall keep on file, in accordance with
its customary procedures, relating specifically and exclusively
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to the Purchased Assets including copies of all material documents filed with
the Commission in connection with any Rate Adjustment (such documents and
instruments, collectively, the "PURCHASED ASSET DOCUMENTATION").
SECTION 5.2 APPOINTMENT AS CUSTODIAN; ACCEPTANCE OF CUSTODIAL
RESPONSIBILITY
The Trustee (i) subject to Section 5.6, hereby irrevocably appoints the
Servicer as its agent to serve as custodian of the Purchased Asset
Documentation, such irrevocable appointment being coupled with an interest, and
hereby agrees not to revoke such appointment except in accordance with the
express terms hereof and (ii) shall have no responsibility to monitor the
Servicer's performance as custodian and shall have no liability in connection
with the Servicer's performance of such duties hereunder. Subject to Section
5.6, the Servicer hereby accepts the foregoing appointment as agent, and agrees
to act as custodian of the Purchased Asset Documentation pursuant to and in
accordance with the terms of this Agreement.
SECTION 5.3 DUTIES OF SERVICER AS CUSTODIAN
(a) SAFEKEEPING
The Servicer, in its capacity as custodian, shall hold the Purchased Asset
Documentation for the benefit of the Trustee and all present and future
Certificateholders, and shall maintain such accurate and complete accounts,
records and computer systems pertaining to the Purchased Asset Documentation as
shall enable the Trustee to comply with its obligations pursuant to this
Agreement. In performing its duties as custodian, the Servicer shall act with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to the assets that the Servicer services for itself. The
Servicer shall promptly report to the Trustee any failure on its part to hold
the Purchased Asset Documentation and maintain its accounts, records and
computer systems as herein provided, and promptly take appropriate action to
remedy any such failure.
(b) MAINTENANCE OF AND ACCESS TO RECORDS
The Servicer shall maintain the Purchased Asset Documentation at its head
office, Puget Sound Power & Light Company, One Bellevue Center, 411 - 108th
Avenue N.E., Bellevue, Washington 98004, or at such other office as shall be
specified to the Trustee by 30 days' prior written notice. The Servicer shall,
at the request of the Trustee, make available for inspection to the Trustee or
its duly authorized representatives, attorneys or auditors the Purchased Asset
Documentation at such times during normal operating hours as the Trustee shall
reasonably instruct which does not unreasonably interfere with the Servicer's
normal operations.
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(c) FINAL INSPECTION OF DOCUMENTS
Upon termination of the custodial agreement set forth in Section 5.1 and
instruction from the Trustee, the Servicer shall, at the request of the Trustee,
make available for final inspection any portion of the Purchased Asset
Documentation to the Trustee, the Trustee's agent or the Trustee's designee, as
the case may be, at such place or places as the Trustee may reasonably designate
as soon as reasonably practicable to the extent it does not unreasonably
interfere with the Servicer's normal operations. The Servicer shall not be
responsible for any loss occasioned by the failure of the Trustee, its agent or
its designee to conduct such an inspection or any delay in doing so.
SECTION 5.4 INSTRUCTIONS; AUTHORITY TO ACT
The Servicer shall be deemed to have received proper instructions with
respect to the Purchased Asset Documentation upon its receipt of written
instructions signed by an Authorized Officer. A certified copy of a by-law or
of a resolution of the board of directors of the Trustee shall constitute
conclusive evidence of the authority of any such Authorized Officer to act and
shall be considered in full force and effect until receipt by the Servicer of
written notice to the contrary given by the Trustee.
SECTION 5.5 INDEMNIFICATION REGARDING CUSTODIAL OBLIGATIONS
The Servicer, as custodian, shall indemnify the Trustee and its officers,
directors, employees and agents for any and all liabilities, losses or damages
(including any property, excise, sales or similar taxes) that may be imposed on
or incurred or asserted against the Trustee or its officers, directors,
employees or agents as the sole and direct result of any material breach of the
Servicer's obligations as custodian of the Purchased Asset Documentation;
PROVIDED, HOWEVER, that the Servicer shall not be liable for any portion of any
such amount resulting from the willful misfeasance, bad faith or negligence of
the Trustee or any loss occasioned by any action or omission in respect
of which the Servicer has received instructions from the Trustee or by the
failure of the Trustee or its agent or designee to return any document to the
Servicer or any delay in doing so.
SECTION 5.6 EFFECTIVE PERIOD AND TERMINATION
(a) The Servicer's appointment as custodian shall become effective as of
the Closing Date and shall continue in full force and effect until the earlier
of (i) the termination of the Trust or (ii) the appointment of a successor
Servicer pursuant to Section 10.5 or 11.1.
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SECTION 6. ADMINISTRATION AND SERVICING OF PURCHASED ASSETS
SECTION 6.1 APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT
Subject to Section 11.1, the Trustee hereby irrevocably appoints the
Servicer as its agent to service the Purchased Assets pursuant to the terms
hereof, such irrevocable appointment being coupled with an interest, and hereby
agrees not to revoke such appointment except in accordance with the express
terms hereof. Subject to Section 10.5, the Servicer hereby accepts the
foregoing appointment as servicing agent pursuant to the terms hereof.
SECTION 6.2 DUTIES OF SERVICER
The Servicer shall manage, service, administer and make collections on the
Purchased Assets, to the extent expressly required by the terms of this
Agreement, with reasonable care, using that degree of skill and attention that
the Servicer exercises with respect to assets that the Servicer services for
itself. The Servicer's duties shall include billing, collection and posting of
all payments, responding to inquiries by Customers or by the Commission,
federal, local or other state governmental authorities with respect to the
Purchased Assets, investigating delinquencies, accounting for collections,
furnishing quarterly and annual statements to the Trustee with respect to
distributions, and taking action in connection with the Rate Adjustment
Mechanism to the extent expressly set forth in Section 6.5. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer. Without limiting the generality of the foregoing, the Servicer
shall be, and is hereby, authorized and empowered by the Trustee to (a) execute
and deliver, on behalf of itself, the Trust, the Trustee, the Certificateholders
or any of them, any and all instruments, documents or notices and (b) on behalf
of itself, the Trust, the Trustee, the Certificateholders or any of them, make
any filing with, and to any, in proceedings of any kind with, or position with
any governmental authorities (including with the Commission), in each case in
respect of any of the Purchased Assets. The Trustee shall furnish the Servicer
with such documents as have been prepared by the Servicer for execution by the
Trustee and as are necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder.
SECTION 6.3 COLLECTION OF CERTAIN PURCHASED ASSETS AND RELATED
MATTERS
(a) The Servicer shall use all reasonable efforts to collect all Allocated
Conservation Amounts, Allocated Sale Amounts and Termination Fees as and when
the same shall become due, and shall follow such collection procedures as it
follows with respect to comparable assets that it services for itself. The
Servicer shall not
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change the amount of or reschedule the due date of any scheduled payment of any
Allocated Conservation Amount or Termination Fee or change any material term of
any Purchased Asset, except as provided by the terms of the Purchased Asset or
as contemplated by this Agreement or as required by law or court order;
provided, however, that the Servicer may take any of the foregoing actions to
the extent that such action would be in accordance with customary practices of
the Servicer with respect to comparable assets that it services for itself.
(b) The Servicer shall allocate all payments received by the Servicer
through March 31, 2005 from Customers in respect of bills sent by the Servicer
to Customers during the period commencing on the first Business Day following
the Closing Date and ending on September 30, 2004, as between the Servicer and
the Trust, in accordance with the terms of the Tariff or any Revised Tariff, as
the case may be, in effect from time to time.
SECTION 6.4 REALIZATION UPON, AND MAINTENANCE OF, PURCHASED ASSETS
On behalf of the Trust, the Servicer shall use all reasonable efforts,
consistent with its customary servicing procedures, (a) to enforce, and maintain
rights in respect of, the Purchased Assets, in each case to the same extent that
it services comparable assets that it services for itself and (b) to maintain
the aggregate amount of revenues allocated to the Trust pursuant to the Tariff
or any Revised Tariff, as the case may be, by making necessary filings or
refilings with the Commission (including in connection with any general
resetting, recategorization, reclassification or reallocation of revenues or
rates). The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of any of
the Purchased Assets, which, in the Servicer's judgment, may include the taking
of legal action.
SECTION 6.5 RATE ADJUSTMENT MECHANISM
(a) The Servicer shall calculate the Bondable Conservation Investment
Balance as of each Calculation Date and shall deliver a written copy of such
calculation in reasonable detail to the Trustee not later than two Business Days
prior to the Distribution Date immediately following such Calculation Date. The
Trustee shall promptly notify the Servicer of the occurrence, and the amount, of
any Variance. Within 30 days following the Calculation Date to which a Variance
relates, the Servicer shall apply with the Commission for a Rate Adjustment to
remain in effect until the earlier of (i) the next Rate Adjustment and (ii)
September 30, 2004.
(b) In connection with each such Rate Adjustment, the Servicer shall (i)
calculate the relevant Revised Tariff Amount for the then-current Regulatory
Year and each subsequent Regulatory Year, (ii) file an application substantially
in the form
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of the Periodic Adjustment Application with the Commission (such application,
together with the Rate Adjustment contemplated thereby, collectively, the "RATE
ADJUSTMENT MECHANISM"), (iii) take all reasonable actions, and make all
reasonable efforts in order to effectuate the Rate Adjustment Mechanism, and
(iv) send to the Trustee copies of all notices and documents, in Servicer's
reasonable judgment, material to the Rate Adjustment Mechanism.
(c) It is expressly agreed and acknowledged by the Trustee, on behalf of
itself, the Trust and each of the Certificateholders, that (i) in connection
with any Rate Adjustment Mechanism, the Servicer is acting solely in its
capacity as servicing agent hereunder, (ii) the Servicer is not responsible in
any manner for, and shall have no liability whatsoever as a result of any
action, decision, ruling or other determination made or not made, or any delay
(other than any delay resulting from the Servicer's failure to file the
applications required by Section 6.5(b)(ii) in a timely manner), by the
Commission in any way related to the Purchased Conservation Investment Assets
(it being acknowledged by the Seller that the foregoing is not intended to, and
shall not, relieve the Seller of liability for any misrepresentation under
Section 9.1(b)-(f)) or in connection with any Rate Adjustment Mechanism, the
subject of any filings under Section 6.4, any proposed Rate Adjustment, or the
approval of any Revised Tariff or any Revised Tariff Amount and the scheduled
adjustments thereto, (iii) the Servicer shall have no liability whatsoever
relating to the calculation of the Revised Tariff Amount and the scheduled
adjustments thereto (including as a result of any inaccuracy of any of the
assumptions made in such calculation regarding expected delinquencies and
expected numbers of customers) or as a result of any person (including the
Certificateholders) not receiving any payment, amount or return anticipated or
expected during any Distribution Period or in respect of any Certificate
generally, except only to the extent that the same is directly caused by a
computational error in calculating the Revised Tariff Amount attributable to
the Servicer's gross negligence, and (iv) to the extent that the Servicer
remains liable or responsible for any matters described in Section 6.5(c)(ii)
or (iii) (other than in accordance with the terms of such Sections), the
Trustee, on behalf of itself, the Trust and each of the Certificateholders,
hereby absolutely, unconditionally and irrevocably releases the Servicer of any
such liability or responsibility. The Servicer hereby acknowledges that the
terms of this Section 6.5(c) are not intended to, and shall not, relieve the
Servicer of liability for any misrepresentation by the Servicer under Section
10 or the breach by the Servicer of its other agreements under this Agreement.
SECTION 6.6 MAINTENANCE OF FILINGS IN RESPECT OF PURCHASED ASSETS
(a) The Servicer, in accordance with the written instructions of the
Trustee, shall take such steps as are necessary to maintain the perfection of
the Trust's interest
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in the Purchased Assets including the filing of financing statements and
continuation statements.
(b) The Servicer shall file with the Securities and Exchange Commission on
behalf of the Trust such periodic reports as are required from time to time
under Section 13 of the Securities Exchange Act of 1934, as amended. The
Trustee shall, at the Servicer's request, provide the Servicer with information
necessary for the Servicer to file such reports.
SECTION 6.7 DOMINION AND CONTROL OF THE PURCHASED ASSETS;
COVENANT OF SERVICER
Notwithstanding any other provision herein, the Servicer and the Trustee
agree that the Trustee shall have dominion and control over the Purchased
Assets, and the Servicer, in accordance with the terms hereof, is acting solely
as the servicing agent for the Trustee with respect to the Purchased Assets.
The Servicer hereby agrees that it shall not take any action that is not
authorized by the Trustee, and which is not consistent with its customary
procedures and practices, that shall impair the rights of the Trust in the
Purchased Assets unless such action is required by law or court or regulatory
order.
SECTION 6.8 SERVICING FEE
In consideration for its services hereunder, the Servicer shall receive the
Servicing Fee as set forth in Section 7.3(a)(ii). The Servicer shall be
required to pay from its own account all expenses incurred by it in connection
with its activities hereunder.
SECTION 6.9 MONTHLY SERVICER'S CERTIFICATE
On or before each Remittance Date, the Servicer, in accordance with
Section 7.6(a), shall deliver to the Trustee, the Paying Agent and each Rating
Agency a Monthly Servicer's Certificate for the Collection Period preceding
such Determination Date. The Servicer shall deliver to the Trustee and each
Rating Agency any public financial information in respect of the Servicer, or
any material information regarding the Purchased Assets to the extent it is
available to the Servicer, in each case that the Trustee and each Rating Agency
reasonably requests in order to monitor the performance by the Servicer
hereunder.
SECTION 6.10 STATEMENT AS TO COMPLIANCE
The Servicer shall deliver to the Trustee on or before April 30 of each
year commencing April 30, 1995 to and including April 30, 2005, a certificate
signed by
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the chairman of the board, the president, the treasurer, the controller, any
executive or senior vice president or any vice president of the Servicer,
stating that (A) a review of the activities of the Servicer during the year
ended the preceding December 31 (or shorter period in the case of the first
such certificate) and of its performance under this Agreement has been made
under such officer's supervision and (B) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all of its material
obligations in all material respects under this Agreement throughout such year,
or, if there has been a material default in the fulfillment of any such
material obligation, specifying each such default known to such officer and the
nature and status thereof.
SECTION 6.11 ANNUAL REPORT BY INDEPENDENT PUBLIC ACCOUNTANTS
(a) The Servicer shall cause a firm of independent public accountants
(which may provide other services to the Servicer) to prepare, and the Servicer
shall deliver to the Trustee, a report addressed to the Servicer, which may be
included as part of the Servicer's customary auditing activities, for the
information and use of the Trustee on or before May 31 of each year, beginning
May 31, 1995 to and including May 31, 2005, to the effect that such firm has
reported on the Servicer's procedures and records relating to servicing of the
Purchased Assets under this Agreement and that, on the basis of such report,
such firm is of the opinion such servicing has been conducted in compliance
with this Agreement except for (A) such exceptions as such firm believes to be
immaterial and (B) such other exceptions as shall be set forth in such firm's
report.
(b) The report of the independent certified public accountants shall also
indicate that such accounting firm is independent of the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
SECTION 6.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING PURCHASED ASSETS
The Servicer shall provide to the Certificateholders access to the
Purchased Asset Documentation in such cases, but only in such cases, where the
Certificateholders shall be required by applicable statutes or regulations to
have access to such documentation. Access by the Certificateholders shall be
afforded without charge, but only upon reasonable request and during normal
business hours which do not unreasonably interfere with the Servicer's normal
operations. Nothing in this Section 6.12 shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding Customers, and the failure of the
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Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section 6.12.
SECTION 6.13 REPORTS TO CERTIFICATEHOLDERS, CERTIFICATE OWNERS AND
THE RATING AGENCIES
(a) The Servicer and the Trustee shall provide free of charge to any
Certificateholder or Certificate Owner who so requests in writing (addressed to
the Corporate Trust Office, in the case of a request to the Trustee) a copy of
any Monthly Servicer's Certificate described in Section 6.9, the annual
compliance statement described in Section 6.10, or the annual accountants'
report described in Section 6.11.
(b) The Trustee shall forward to the Rating Agencies the statements and
reports referred to in Section 6.13(a), the statements to Certificateholders
described in Sections 7.6(a) and (b), and any other reports it may receive
pursuant to this Agreement.
SECTION 7. DISTRIBUTIONS; STATEMENTS TO PARTIES
SECTION 7.1 COLLECTION ACCOUNT
(a) The Servicer shall establish the Collection Account in the name of the
Trustee for the benefit of the Certificateholders. The Collection Account shall
be a segregated identifiable trust account established in the trust department
of a Qualified Trust Institution.
(b) Should any depositary of the Collection Account cease to be a
Qualified Trust Institution, then the Servicer shall, at the instruction of the
Trustee, cause the Collection Account to be moved to a Qualified Trust
Institution, unless the Servicer provides the Trustee with a letter from each
Rating Agency to the effect that the current ratings assigned to the
Certificates by the Rating Agencies will not be adversely affected by such
depositary's ceasing to be a Qualified Trust Institution.
(c) All amounts held in the Collection Account shall be invested by the
bank or trust company then maintaining the account at the written direction of
the Servicer in Permitted Investments that mature on a date proximate to but
not later than the Deposit Date next succeeding the date of investment;
PROVIDED, HOWEVER, that if the Collection Account is maintained with the
Trustee, such Permitted Investments may mature on the Distribution Date next
succeeding the date of investment, if the Trustee is the obligor on such
investments (including repurchase agreements on which the Trustee in its
commercial capacity is liable as principal).
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SECTION 7.2 COLLECTIONS
The Servicer shall remit to the Collection Account, on each Remittance
Date, the Aggregate Remittance Amount received by the Servicer from or on
behalf of Customers during the immediately preceding Collection Period (whether
attributable to that period or any prior period). Any such collections
remitted to the Collection Account shall be in immediately available funds and
shall be remitted no later than 1:00 p.m., New York City time, on or before the
Remittance Date.
SECTION 7.3 DISTRIBUTIONS
(a) On each Distribution Date, the Trustee shall cause to be made the
following distributions, to the extent of the funds in the Collection Account,
in the following order of priority and in the amounts set forth in the
applicable Trustee's Certificate:
(i) not later than 12:00 noon, New York time, to itself, as Trustee,
the sum of (x) the Trustee Fee for such Distribution Period PLUS (y) the
amount, if any, of any Trustee Fee previously due but not paid to the
Trustee under Section 7.3(a)(i)(x) in respect of any previous Distribution
Periods, if any;
(ii) not later than 12:00 noon, New York City time, to the Servicer,
by wire transfer of immediately available funds the sum of (x) the
Servicing Fee for such Distribution Period PLUS (y) the amount, if any, of
any Servicing Fee previously due but not paid to the Servicer under Section
7.3(a)(ii)(x) in respect of any previous Distribution Period;
(iii) to the Certificateholders, through an intermediary transfer to
the Certificate Payment Account, by check mailed by or on behalf of the
Paying Agent (in the case of Definitive Certificates) to each
Certificateholder's respective address of record (or in the case of
Certificates registered in the name of a Clearing Agency, by wire transfer
of immediately available funds), an amount equal to the sum of (x) the
product of the quarterly Certificate Rate and the Aggregate Certificate
Balance as of the first day of such related Distribution Period
(calculated on the basis of a 360-day year comprised of twelve 30-day
months) PLUS (y) the aggregate amounts, if any, previously due but not paid
to Certificateholders under Section 7.3(a)(iii)(x) in respect of any
previous Distribution Periods PLUS (z) the product of the quarterly
Certificate Rate and the aggregate amount, if any, previously due and not
paid to the Certificateholders under Section 7.3(a)(iii)(x); and
(iv) to the Certificateholders, through an intermediary transfer to
the Certificate Payment Account, by check mailed by or on behalf of the
Paying
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Agent (in the case of Definitive Certificates) to each Certificateholder's
respective address of record (or in the case of Certificates registered in
the name of the Clearing Agency, by wire transfer of immediately available
funds), the balance of the Collection Account as of such Distribution Date
after giving effect to all distributions made or to be made pursuant to
Sections 7.3(a)(i), 7.3(a)(ii) and 7.3(a)(iii).
(b) To the extent that the Paying Agent wires funds to a Clearing
Agency, the Paying Agent will request the Qualified Trust Institution then
maintaining the Collection Account to make such wire distribution, and the
Qualified Trust Institution then maintaining the Collection Account shall
promptly deliver to the Paying Agent a confirmation of such wire distribution.
The Paying Agent shall have no liability in connection with any failure by the
Qualified Trust Institution to make such distribution.
SECTION 7.4 CALCULATION OF BONDABLE CONSERVATION INVESTMENT
BALANCE
On each Distribution Date, the Trustee shall calculate the Bondable
Conservation Investment Balance in the manner set forth below. On the last day
of the Distribution Period immediately preceding each Distribution Date, the
Bondable Conservation Investment Balance, as of such date, shall equal (i) the
Bondable Conservation Investment Balance as of the last day of the immediately
preceding Distribution Period (or, in the case of the first Distribution
Period, as of the Closing Date), MINUS (ii) the excess of (a) the amounts
remitted by the Servicer to the Collection Account, pursuant to Section 7.2,
during the Distribution Period to which such Distribution Date relates
(including all interest accruing on such remitted amounts) over (b) the amounts
payable to the Certificateholders pursuant to Section 7.3(a)(iii) on such
Distribution Date, plus the amounts payable to the Trustee pursuant to Section
7.3(a)(i) on such Distribution Date, plus the amounts payable to the Servicer
pursuant to Section 7.3(a)(ii) on such Distribution Date. Such calculations
shall not in any way affect the order and priority of the distributions as set
forth in Section 7.3.
SECTION 7.5 CERTIFICATE REGARDING SERVICING FEE
Within five days after the last date of each Distribution Period, the
Trustee shall prepare and furnish to the Servicer a certificate setting forth
the amount to be distributed on the Distribution Date in respect of such
Distribution Period pursuant to Section 7.3(a)(ii) and the component parts
thereof.
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SECTION 7.6 CERTIFICATES
(a) On each Remittance Date, the Servicer shall prepare and furnish to the
Trustee a Monthly Servicer's Certificate for the related Collection Period
setting forth the Aggregate Remittance Amount, and the component parts thereof
(i.e., the amount of received Allocated Conservation Amounts, any Allocated
Sale Amounts and any Termination Fees).
(b) On each Distribution Date, Trustee shall prepare and furnish to the
Paying Agent, and the Paying Agent shall include with the distribution to each
Certificateholder, a Trustee's Certificate, based on information in the Monthly
Servicer's Certificate furnished pursuant to Sections 6.9 and 7.6(a), setting
forth for the related Distribution Period, in addition to the information set
forth in Section 7.6(a), the following information:
(i) the amounts to be distributed pursuant to Section 7.3(a), and the
component parts thereof (i.e., the amounts to be distributed pursuant to
Sections 7.3(a)(i), (ii), (iii) and (iv)), both in the aggregate and per
$1,000 original Certificate Amount;
(ii) the amount of the Aggregate Certificate Balance, both in the
aggregate and per $1,000 original Certificate Amount (after giving effect
to payments described in Section 7.3(a)(iv));
(iii) the Bondable Conservation Investment Balance, both in the
aggregate and per $1,000 original Certificate Amount, as of the last day of
the preceding Distribution Period (as determined pursuant to Section 7.4);
and
(iv) if such Distribution Date relates to a Distribution Period the
last day of which is a Calculation Date, the Trustee shall also prepare and
furnish, in accordance with Section 7.6(b), a comparison between the
Bondable Conservation Investment Balance and the Projected Bondable
Conservation Investment Balance as of such Calculation Date, both in the
aggregate and per $1,000 original Certificate Amount, together with a
statement indicating whether or not a Variance exists as of such
Calculation Date.
(c) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Trustee shall
prepare and furnish to the Paying Agent, and the Paying Agent shall furnish to
each Person who at any time during such calendar year shall have been a
Certificateholder (and, upon written request, to each Person who at any time
during such calendar year shall have been a Certificate Owner), a statement
containing the aggregate amounts determined
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in Section 7.6(b)(i) for such calendar year, for the purposes of such
Certificateholder's preparation of federal income tax returns.
SECTION 8. THE CERTIFICATES
SECTION 8.1 THE CERTIFICATES
The Certificates shall be issued in denominations of $1,000 and integral
multiples thereof; PROVIDED, HOWEVER, that one Certificate may be issued in a
denomination that includes any residual portion of the Certificate Amount. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an Authorized Officer or other authorized signatory of the
Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals shall have
ceased to be so authorized prior to the execution, authentication and delivery
of such Certificates or did not hold such offices or positions at the date of
such Certificates. No Certificate shall entitle the Certificateholder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Certificate an authentication substantially in the form of
Exhibit E executed by the Trustee by manual or facsimile signature; such
authentication shall constitute conclusive evidence that such Certificate has
been duly authenticated and delivered hereunder. All Certificates shall be
dated the date of their authentication.
SECTION 8.2 EXECUTION, AUTHENTICATION AND DELIVERY OF CERTIFICATES
In exchange for the Purchased Assets and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trustee of the
Purchased Assets and the delivery to the Trustee of the other components of the
Trust, the Trustee shall deliver to, or upon the order of, the Seller,
Certificates duly executed by the Trustee, on behalf of the Trust, and
authenticated by the Trustee in authorized denominations equaling the Aggregate
Certificate Amount, and evidencing the entire ownership of the Trust.
SECTION 8.3 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES
(a) The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and certificate registrar (the "TRANSFER AGENT
AND CERTIFICATE REGISTRAR"), in accordance with the provisions of Section 8.7,
a register (the "CERTIFICATE REGISTER") in which, subject to such reasonable
regulations as it may prescribe, the Transfer Agent and Certificate Registrar
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Certificate Register shall
list the names of the Certificateholders and
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their respective ownership interests in the Trust, and shall be treated as
definitive and binding for all purposes hereunder. Only those persons
registered as Certificateholders in the Certificate Register shall be
recognized as having any interest in the Trust or as possessing the rights of a
Certificateholder hereunder. A transfer of ownership of a Certificate shall be
effectuated only by an appropriate entry in the Certificate Register. Chemical
Bank is hereby initially appointed Transfer Agent and Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided. In the event that, subsequent to the date of
issuance of the Certificates, the Trustee is unable to act as Transfer Agent
and Certificate Registrar, the Trustee shall, with the consent of the Seller,
appoint another bank or trust company, having an office or agency located in
New York City and which agrees to act in accordance with the provisions of this
Agreement applicable to it, to act, as successor Transfer Agent and Certificate
Registrar under this Agreement.
(b) Chemical Bank shall be permitted to resign as Transfer Agent and
Certificate Registrar upon 30 days' written notice to the Trustee and the
Servicer; PROVIDED, HOWEVER, that such resignation shall not be effective and
Chemical Bank shall continue to perform its duties as Transfer Agent and
Certificate Registrar until the Trustee has appointed a successor Transfer
Agent and Certificate Registrar with the consent of the Trustee and the
Servicer.
(c) Upon surrender for registration of transfer of any Certificate at the
office or agency of the Transfer Agent and Certificate Registrar maintained
pursuant to Section 8.7, the Transfer Agent and Certificate Registrar shall
make an appropriate entry in the Certificate Register to reflect such transfer,
and the Trustee shall execute, authenticate and (if the Transfer Agent and
Certificate Registrar is different than the Trustee, then the Transfer Agent
and Certificate Registrar shall) deliver, in the name of the designated
transferee or transferees, one or more new Certificates in authorized
denominations of a like aggregate amount. At the option of a Certificateholder,
Certificates may be exchanged for other Certificates of authorized denominations
of a like aggregate amount at such office or agency.
(d) Whenever any Certificate is surrendered for exchange, the Trustee
shall execute, authenticate and (if the Transfer Agent and Certificate
Registrar is different from the Trustee, then the Transfer Agent and
Certificate Registrar shall) deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in form satisfactory
to the Trustee and the Transfer Agent and Certificate Registrar duly executed
by the Certificateholder, which signature on such assignment must be guaranteed
by a member of the New York Stock Exchange or a commercial bank or trust
company.
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(e) Each Certificate surrendered for registration of transfer or exchange
shall be canceled by the Transfer Agent and Certificate Registrar or retained
in accordance with its standard retention policy and disposed of or retained in
a manner satisfactory to the Trustee.
(f) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Certificate Registrar may
require payment of a sum by such Certificateholder sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
SECTION 8.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES
If (A) any mutilated Certificate shall be surrendered to the Transfer Agent
and Certificate Registrar, or if the Transfer Agent and Certificate Registrar
shall receive evidence to its satisfaction of the destruction, loss, or theft
of any Certificate and (B) there shall be delivered to the Trustee and the
Transfer Agent and Certificate Registrar such security or indemnity as may be
required to save each of them and the Trust harmless, then, in the absence of
notice to the Trustee that such Certificate shall have been acquired by a bona
fide purchaser, the Trustee on behalf of the Trust shall execute, authenticate
and (if the Transfer Agent and Certificate Registrar is different from the
Trustee, then Transfer Agent and Certificate Registrar shall) deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and denomination but bearing a
number not contemporaneously outstanding. In connection with the issuance of
any new Certificate under this Section 8.4, the Trustee or the Transfer Agent
and Certificate Registrar, as the case may be, may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this
Section 8.4 shall constitute conclusive evidence of ownership in the Trust, as
if originally issued, whether or not a lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 8.5 PERSONS DEEMED OWNERS OF CERTIFICATE
Prior to due presentation of a Certificate for registration of transfer,
the Trustee, the Paying Agent, the Transfer Agent and Certificate Registrar or
any agent of any of them may treat the Person in whose name any Certificate
shall be registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 7.3 and for all other purposes
whatsoever, and none of the Trustee, the Paying Agent, the Transfer Agent and
Certificate Registrar or any agent of any of them shall be bound by any notice
to the contrary.
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SECTION 8.6 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES
The Transfer Agent and Certificate Registrar shall furnish to the Servicer
or the Paying Agent (or to the Trustee if the Trustee is not the Transfer Agent
and Certificate Registrar), within 15 days after receipt by the Transfer Agent
and Certificate Registrar of a request therefor from the Servicer, the Trustee
or the Paying Agent in writing, a list of the names and addresses of the
Certificateholders as of the most recent Record Date, in such form as the
Servicer, the Trustee or the Paying Agent may reasonably require. If, at such
time, if any, as Definitive Certificates have been issued, three or more
Certificateholders, or one or more Certificateholders aggregating not less than
25% of the Aggregate Certificate Balance apply in writing to the Transfer Agent
and Certificate Registrar (or the Trustee if the Trustee is acting as the
Transfer Agent and Certificate Registrar), and such application states that the
applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates, and such
application is accompanied by a copy of the communication that such applicants
propose to transmit, then the Transfer Agent and Certificate Registrar (or the
Trustee, as the case may be) shall, within five Business Days after the receipt
of such application, afford such applicants access during normal business hours
to the current list of Certificateholders. Each Certificateholder, by
receiving and holding a Certificate, shall be deemed to have agreed not to hold
any of the Servicer, the Trustee, the Transfer Agent and Certificate Registrar
or any of their respective agents accountable by reason of the disclosure of
its name and address, regardless of the source from which such information was
derived.
SECTION 8.7 MAINTENANCE OF OFFICE OR AGENCY
The Transfer Agent and Certificate Registrar shall maintain in New York,
New York an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange. The Transfer Agent and
Certificate Registrar initially designates its agency located at its office at
450 West 33rd Street, New York, New York 10001 for such purposes. The Transfer
Agent and Certificate Registrar shall give prompt written notice to the
Trustee, the Servicer and to Certificateholders of any change in the location
of such office or agency.
SECTION 8.8 BOOK-ENTRY CERTIFICATES
The Certificates (other than a Certificate representing any residual
portion of the Aggregate Certificate Amount), upon original issuance, shall be
issued in the form of typewritten Certificates representing the Book-Entry
Certificates, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by the Seller or on its
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behalf. The Certificates shall initially be registered on the Certificate
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Certificate Owner will receive a definitive certificate representing
such Certificate Owner's interest in the Certificates, except as provided in
Section 8.10. Unless and until definitive, fully registered Certificates
("DEFINITIVE CERTIFICATES") have been issued to Certificateholders pursuant to
Section 8.10:
(i) the provisions of this Section 8.8 shall be in full force and
effect;
(ii) the Seller, the Servicer, the Paying Agent, the Transfer Agent
and Certificate Registrar and the Trustee may deal with the Clearing Agency
and the Clearing Agency Participants for all purposes (including the making
of distributions in respect of the Certificates and the taking of actions
by the Certificateholders) as the authorized representatives of the
Certificate Owners;
(iii) to the extent that the provisions of this Section 8.8
conflict with any other provisions of this Agreement, the provisions of
this Section 8.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency (or to the extent Certificate Owners are not Clearing
Agency Participants through the Clearing Agency Participants through which
such Certificate Owners own Book-Entry Certificates) and shall be limited
to those established by law and agreements between such Certificate Owners
and the Clearing Agency and/or the Clearing Agency Participants and all
references in this Agreement to actions by Certificateholders shall refer
to actions taken by the Clearing Agency upon instructions from the
Clearing Agency Participants, and all references in this Agreement to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to the Clearing
Agency or its nominee, as registered Holder of the Certificates, as the
case may be, for distribution to Certificate Owners in accordance with the
procedures of the Clearing Agency; and
(v) pursuant to the Depository Agreement, the initial Clearing Agency
will make book-entry transfers among the Clearing Agency Participants and
receive and transmit distributions of principal and interest on the
Certificates to the Clearing Agency Participants, for distribution by such
Clearing Agency Participants to the Certificate Owners or their nominees.
SECTION 8.9 NOTICES TO CLEARING AGENCY
Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued
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to Certificate Owners pursuant to Section 8.10, the Trustee and the Paying Agent
shall give all such notices and communications specified herein to be given by
it to Certificateholders to the Clearing Agency.
SECTION 8.10 DEFINITIVE CERTIFICATES
If (i) (A) the Trustee advises the Servicer in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
under the Depository Agreement and (B) the Trustee is unable to locate a
qualified successor or (ii) the Trustee, at its option, elects to terminate the
book-entry system through the Clearing Agency, provided, however, that
Certificate Owners representing beneficial interests aggregating greater than
50% of the Aggregate Certificate Balance advise the Clearing Agency and the
Trustee (and the Clearing Agency shall notify the Trustee in writing thereof)
through the Clearing Agency Participants in writing that the continuation of the
book-entry system through the Clearing Agency is no longer in the interests of
the Certificate Owners, or (iii) after the Servicer becomes subject to
insolvency proceedings, Certificate Owners representing beneficial interests
aggregating greater than 50% of the Aggregate Certificate Balance advise the
Clearing Agency and the Trustee (and the Clearing Agency shall notify the
Trustee in writing thereof) through the Clearing Agency Participants in writing
that the continuation of a book-entry system through the Clearing Agency is no
longer in the best interests of the Certificate Owners, the Trustee shall
notify the Clearing Agency of the occurrence of any event described in clauses
(i) and (ii) above and of the availability of Definitive Certificates to
Certificate Owners requesting the same. Upon surrender to the Transfer Agent
and Certificate Registrar by the Clearing Agency of Certificates registered in
the name of such Clearing Agency or its nominee, accompanied by re-registration
instructions from the Clearing Agency for registration of the Definitive
Certificates, the Trustee shall execute, authenticate and (if the Transfer
Agent and Certificate Registrar is different from the Trustee, then the
Transfer Agent and Certificate Registrar shall) deliver Definitive
Certificates. The Trustee shall arrange for, and will bear all costs of, the
printing and issuance of such Definitive Certificates. None of the Seller, the
Servicer, the Transfer Agent and Certificate Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on such instruction. Upon the issuance
of Definitive Certificates, all references herein to obligations imposed upon
or to be performed by the Clearing Agency shall be deemed to be imposed upon
and performed by the Transfer Agent and Certificate Registrar, to the extent
applicable with respect to such Definitive Certificates and the Trustee, the
Paying Agent and the Transfer Agent and Certificate Registrar shall recognize
the Holders of the Definitive Certificates as Certificateholders hereunder.
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SECTION 8.11 APPOINTMENT OF PAYING AGENT
(a) The Paying Agent shall have the revocable power to withdraw funds from
the Certificate Payment Account and make distributions to the
Certificateholders. The Trustee may revoke such power and remove the Paying
Agent, if the Trustee determines in its sole discretion that the Paying Agent
shall have failed to perform its obligations under this Agreement in any
material respect or for other cause. The Paying Agent shall initially be
Chemical Bank. Chemical Bank shall be permitted to resign as Paying Agent upon
30 days' written notice to the Servicer and the Trustee. In the event that
Chemical Bank shall no longer be the Paying Agent, the Trustee shall appoint a
successor to act as Paying Agent, which shall be a bank or trust company. If
at any time the Trustee shall be acting as the Paying Agent, the provisions of
Sections 12.2, 12.3 and 12.4 shall apply to the Trustee in its role as Paying
Agent.
(b) The Trustee shall cause the Paying Agent (if other than itself) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of
the Certificateholders or other party entitled thereto until such sums shall be
paid to such Certificateholders or other party entitled thereto and shall
agree, and if the Trustee is the Paying Agent it hereby agrees, that it shall
comply with all requirements of the Code regarding the withholding by the
Trustee of payments in respect of federal income taxes due from Certificate
Owners.
(c) Chemical Bank in its capacity as initial Paying Agent hereunder agrees
that it (i) will hold all sums held by it hereunder for payment to the
Certificateholders in trust for the benefit of the Certificateholders or other
party entitled thereto until such sums shall be paid to such Certificateholders
or other party entitled thereto and (ii) shall comply with all requirements of
the Code regarding the withholding by the Trustee of payments in respect of
federal income taxes due from Certificate Owners.
SECTION 8.12 AUTHENTICATING AGENT
(a) The Trustee may appoint one or more authenticating agents with respect
to the Certificates who shall be authorized to act on behalf of the Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates. Whenever
reference is made in this Agreement to the authentication of Certificates by
the Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication on behalf of the Trustee by an
authenticating agent and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent. Any authenticating
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agent appointed by the Trustee shall require the consent of the Servicer, which
consent may not be unreasonably withheld.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and the Servicer. The Trustee may at any
time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Servicer. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
an authenticating agent shall cease to be acceptable to the Trustee or the
Servicer, the Trustee may promptly appoint a successor authenticating agent
with the consent of the Servicer. Any successor authenticating agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent. Any successor authenticating
agent appointed by the Trustee shall require the consent of the Servicer, which
consent may not be unreasonably withheld.
(d) The Servicer shall pay from its own account, from time to time,
reasonable compensation to the Authenticating Agent for its services under this
Section 8.12.
(e) The provisions of Sections 12.2, 12.3 and 12.4 shall be applicable to
any authenticating agent.
(f) Pursuant to an appointment made under this Section 8.13, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the certificates referred to in the within mentioned
Agreement.
CHEMICAL BANK
as Trustee
By:__________________________
Authorized Signatory
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or
_________________________________
as Authenticating Agent
for the Trustee,
By:______________________________
Authorized Signatory
SECTION 8.13 ACTIONS OF CERTIFICATEHOLDERS
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or
by an agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, when required, to the Seller or
the Servicer. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee, the Seller and the Servicer, if made in
the manner provided in this Section 8.13.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done, by the Trustee, the Seller or the Servicer in reliance thereon, whether
or not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter referred
to in this Section 8.13 as it shall deem necessary.
SECTION 9. THE SELLER
SECTION 9.1 REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller makes the following representations and warranties on which the
Trustee shall rely in accepting the Purchased Assets in trust and authenticating
the
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Certificates. The representations and warranties shall speak as of the
execution and delivery of this Agreement, and shall survive the sale of the
Purchased Assets to the Trustee.
(a) ORGANIZATION AND GOOD STANDING
The Seller has been duly organized and is in good standing under the laws
of the State of Washington, with power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is presently conducted.
(b) Power and Authority
The Seller has the power and authority to execute and deliver this
Agreement and to carry out its terms; the Seller has the power and authority to
sell and assign the Purchased Assets property to be sold and assigned to the
Trustee as part of the Trust; and the execution, delivery and performance of
this Agreement has been duly authorized by the Seller by all necessary
corporate action.
(c) VALIDITY; BINDING OBLIGATIONS
This Agreement constitutes a legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights in general
and by general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(d) NO VIOLATION
The consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not (A) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under the charter or bylaws of the Seller, or conflict
with or breach any of the material terms or provisions of, or constitute (with
or without notice or lapse of time) a default under, any indenture, agreement
or other instrument to which the Seller is a party or by which it is bound, (B)
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument, or
(C) violate any law or, to the best of the Seller's knowledge, any order, rule
or regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties.
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(e) NO PROCEEDINGS
There are no proceedings or investigations pending or, to the best of the
Seller's knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties (A) asserting the invalidity of this
Agreement or the Certificates and (B) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by
this Agreement.
(f) GOVERNMENTAL APPROVALS
No authorization or approval or other action by, and no notice to or filing
with, and no consent by, any governmental authority, regulatory body or third
party is required for the due execution and delivery by the Seller of this
Agreement and the Underwriting Agreement and the performance by the Seller of
its obligations under this Agreement except for (i) the Initial Commission
Order and (ii) such authorizations, approvals, notices, consents and filings
that have been duly received or made, as the case may be, as of the date of
this Agreement.
(g) NO LIENS, CLAIMS OR ENCUMBRANCES
There are no liens, claims or encumbrances on any of the Purchased Assets
arising by, through or under the Seller.
SECTION 9.2 LIABILITY OF SELLER; INDEMNITIES
(a) The Seller shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Seller in such capacity under
this Agreement and shall have no other obligations or liabilities hereunder.
(b) The Seller shall indemnify, defend and hold harmless the Trustee, the
Trust and the Certificateholders from and against any taxes that may at any time
be asserted against the Trustee or the Trust with respect to the sale of the
Purchased Assets to the Trust or the issuance and original sale of the
Certificates, including any sales, gross receipts, general corporation,
tangible or intangible personal property, privilege, excise or license taxes
(but not any income taxes, gross receipts taxes (including Washington State
business and occupation tax), franchise taxes or similar taxes imposed on the
Trustee, the Trust or any Certificateholder arising out of the transactions
contemplated by this Agreement), and any utility tax imposed on the Trust with
respect to the Purchased Asset to the extent such taxes have not been imposed
on the Seller with respect to the Purchased Assets, costs and expenses in
defending against the same.
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(c) The Seller shall indemnify, defend and hold harmless the Trustee, its
officers, directors, employees and agents, the Trust and the Certificateholders
from and against any loss, liability or expense to the extent that the same is
incurred as the sole and direct result of the Seller's material breach of its
representations contained in Section 9.1 or its covenants and agreements
hereunder.
(d) The Seller agrees to indemnify and hold harmless the Trustee and each
person, if any, who controls the Trustee within the meaning of the Securities
Act , against any losses, claims, damages, liabilities or expenses, joint or
several, to which the Trustee or such controlling person (within the meaning of
the Securities Act) may become subject, under the Securities Act, the
Securities Exchange Act of 1934, as amended, the Trust Indenture Act of 1939,
as amended, or other federal, state or foreign statutory law or regulation, or
at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, and the
Seller will reimburse the Trustee and each such controlling person for any
legal and other expenses as such expenses are reasonably incurred by the
Trustee or such controlling person in connection with investigation and
defending any such loss, claim, damage, liability, expense or action; provided,
however, that the Seller will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Seller by the Trustee
expressly for use in preparation of the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto.
(e) Indemnification under Section 9.2(b)-(d) shall survive the termination
of this Agreement and the resignation or removal of the Trustee, shall not be
payable from the Purchased Assets, and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Seller shall have made
any indemnity payments to the Trust or the Trustee pursuant to this Section 9.2
and the Trust or the Trustee thereafter shall collect any of such amounts from
others, the Trust shall repay such amounts to the Seller, without interest.
(f) The Person to be indemnified shall provide the Seller with a
certificate and accompanying Opinion of Counsel requesting indemnification and
setting forth the basis of such request.
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SECTION 9.3 MERGER OR CONSOLIDATION OF SELLER
Any corporation or other entity (i) into which the Seller may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Seller shall be a party and in which the Seller is not the
surviving entity, or (iii) which may succeed to all or substantially all of the
business of the Seller, which corporation or other entity shall execute an
agreement of assumption to perform every obligation of the Seller hereunder,
shall be the successor to the Seller hereunder without the execution or filing
of any document or any further act by any of the parties to this Agreement.
The Seller shall give prompt notice of any such merger or consolidation to the
Trustee and the Rating Agencies. Any successor to the Seller shall, in
accordance with the Statute, perform and satisfy all unperformed obligations of
the Seller hereunder in the same manner, and to the same extent, as the
previous Seller.
SECTION 9.4 LIMITATION ON LIABILITY OF SELLER AND OTHERS
The Seller and any director, officer, employee or agent of the Seller may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Seller shall not be under any obligation under
this Agreement to appear in, prosecute or defend any legal action that shall be
unrelated to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
SECTION 10. THE SERVICER
SECTION 10.1 REPRESENTATIONS AND WARRANTIES OF SERVICER
The Servicer makes the following representations and warranties on which
the Trustee shall rely in accepting the Purchased Assets in trust and
authenticating the Certificates. The representations shall speak as of the
execution and delivery of this Agreement, and shall survive the sale of the
Purchased Assets to the Trustee.
(a) ORGANIZATION AND GOOD STANDING
The Servicer has been duly organized and is in good standing under the laws
of the State of Washington, with power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is presently conducted.
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(b) POWER AND AUTHORITY
The Servicer has the power and authority to execute and deliver this
Agreement and to carry out its terms; and the execution, delivery and
performance of this Agreement has been duly authorized by the Servicer by all
necessary corporate action.
(c) BINDING OBLIGATIONS
This Agreement constitutes a legal, valid and binding obligation of the
Servicer enforceable in accordance with its terms subject, as to enforcement,
to applicable bankruptcy, insolvency, reorganization, liquidation or other
similar laws and equitable principles relating to or affecting the enforcement
of creditors' rights in general and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or law.
(d) NO VIOLATION
The consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not (A) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under the articles of incorporation or bylaws of the
Servicer, or conflict with or breach any of the material terms or provisions
of, or constitute (with or without notice or lapse of time) a default under,
any indenture, agreement or other instrument to which the Servicer is a party
or by which it is bound, (B) result in the creation or imposition of any lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument, or (C) violate any law or, to the best of the
Servicer's knowledge, any order, rule or regulation applicable to the Servicer
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Servicer or
its properties.
(e) NO PROCEEDINGS
There are no proceedings or investigations pending or, to the best of the
Servicer's knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties (A) asserting the invalidity of this
Agreement or the Certificates and (B) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by
this Agreement.
(f) GOVERNMENTAL APPROVALS
No authorization or approval or other action by, and no notice to or filing
with, or consent by, any governmental authority, regulatory body or third party
is required
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for the due execution and delivery by the Servicer of this Agreement and the
Underwriting Agreement and the performance by the Servicer of its obligations
under this Agreement except for (i) the Initial Commission Order and (ii) such
authorizations, approvals, notices and filings that have been duly received or
made, as the case may be, as of the date of this Agreement.
SECTION 10.2 LIABILITY OF SERVICER; INDEMNITIES
(a) The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Servicer under this Agreement
and shall have no other obligations or liabilities hereunder.
(b) The Servicer shall indemnify, defend and hold harmless the Trustee,
its officers, directors, employees and agents, the Trust and the
Certificateholders from and against any and all costs, expenses, losses,
claims, damages and liabilities to the extent that the same is incurred as the
sole and direct result of the material breach by the Servicer of its duties
under Section 5.3 or Section 6, its representations under Section 10.1 or its
covenants under Section 10.7.
(c) Indemnification under this Section 10.2 shall include reasonable fees
and expenses of counsel and expenses of litigation, and shall not be payable out
of the Purchased Assets. If the Servicer shall have made any indemnity
payments pursuant to this Section 10.2 and the recipient thereafter collects
any of such amounts from others, the recipient shall promptly repay such
amounts to the Servicer, without interest. The indemnification obligations of
the Servicer set forth in this Section 10.2 shall survive the termination of
this Agreement, the termination of the Servicer with respect to any act or
failure to act which occurs prior to such Servicer's termination and the
resignation or removal of the Trustee.
(d) The Person to be indemnified shall provide the Servicer with a
certificate and accompanying Opinion of Counsel requesting indemnification and
setting forth the basis of such request.
SECTION 10.3 MERGER OR CONSOLIDATION OF SERVICER
Any corporation or other entity (i) into which the Servicer may be merged
or consolidated, (ii) which may result from any merger, conversion or
consolidation to which the Servicer shall be a party and in which the Seller is
not the surviving entity, or (iii) which may succeed to all or substantially
all of the business of the Servicer, which corporation or other entity shall
execute an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement. The Servicer shall give prompt written notice of any
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such merger or consolidation to the Trustee and the Rating Agencies. Any
successor to the Servicer shall, in accordance with the Statute, perform and
satisfy all unperformed obligations of the Servicer hereunder in the same
manner, and to the same extent, as the previous Servicer.
SECTION 10.4 LIMITATION ON LIABILITY OF SERVICER AND OTHERS
Neither the Servicer nor any of the directors or officers or employees or
agents of the Servicer shall be under any liability to the Trust, the Trustee
or the Certificateholders (except in the case of the Servicer to the extent
provided under this Agreement) for any action taken or for refraining from the
taking of any action pursuant to this Agreement or for errors in judgment;
PROVIDED, HOWEVER, that this provision shall not protect the Servicer against
any liability that would otherwise be imposed by reason of the breach by the
Servicer of its obligations and duties under this Agreement. The Servicer and
any director, officer, employee or agent of the Servicer may rely in good faith
on the advice of counsel or on any document of any kind, prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
Except to the extent provided in Section 6.4, the Servicer shall not have
any obligation under this Agreement to appear in, prosecute or defend any legal
action; PROVIDED, HOWEVER, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties to this Agreement and the interests of the
Certificateholders under this Agreement.
SECTION 10.5 SERVICER NOT TO RESIGN
The Servicer shall not resign from its obligations and duties under this
Agreement except (i) in the event of the appointment of a successor Servicer
pursuant to Section 11.1 or (ii) upon receipt by the Trustee of notice from
each of the Rating Agencies to the effect that the rating then assigned to the
Certificates by each respective Rating Agency will not be withdrawn or reduced
as a result of such resignation and such appointment. Notice of any such
determination permitting the resignation of Puget Sound Power & Light Company
or any successor Servicer shall be communicated to the Trustee and the Rating
Agencies at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time). No
such resignation shall become effective, except as provided in Section 10.3,
until a successor Servicer shall have assumed by written statement the
responsibilities and obligations of the Servicer and, in connection with any
resignation permitted by clause (ii) above, the Trustee shall have received
written
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confirmation from each of the Rating Agencies that the rating then assigned to
the Certificates shall remain in effect.
SECTION 10.6 DELEGATION OF DUTIES
So long as Puget Sound Power & Light Company acts as Servicer, the Servicer
shall have the right, in the ordinary course of its business, to delegate any of
its duties under this Agreement to any Person. Any compensation payable to
such Person shall be paid by the Servicer from its own funds and none of the
Trust, the Trustee or the Certificateholders shall have any liability to such
Person with respect thereto. Notwithstanding any delegation of duties by the
Servicer pursuant to this Section 10.6, the Servicer shall not be relieved of
its liability and responsibility with respect to such duties, and any such
delegation shall not constitute a resignation within the meaning of Section
10.5. Any agreement that may be entered into by the Servicer and a Person that
provides for any delegation of the Servicer's duties hereunder shall be deemed
to be between the Servicer and such Person alone, and the Trustee and the
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect thereto.
SECTION 10.7 CERTAIN COVENANTS OF SERVICER
(a) The Servicer covenants and agrees, in servicing the Purchased Assets
as contemplated by Section 6, to comply with all laws applicable to, and
binding upon, the Servicer and relating to such Purchased Assets the
noncompliance with which would have a material adverse effect on the value of
the Purchased Assets; PROVIDED, HOWEVER, that the foregoing is not intended to,
and shall not, impose any liability on the Servicer for noncompliance with any
law that the Servicer is contesting in good faith in accordance with its
customary standards and procedures.
(b) The Servicer covenants to use all reasonable efforts to include in the
purchase price of any voluntary sale constituting an Equipment Sale Contract, or
to seek to recover as part of any governmental award or payment in connection
with any involuntary sale, transfer or condemnation constituting an Equipment
Sale Contract, an amount equal to the portion of the Bondable Conservation
Investments allocable to the Affected Customers.
SECTION 11. EVENT OF SERVICING TERMINATION
SECTION 11.1 EVENT OF SERVICING TERMINATION
If the Servicer fails to make remittances required by Section 7.2 that
continue unremedied for a period of five Business Days after the date on which
notice of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the
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Trustee, then, for so long as such failure shall not have been remedied, the
Holders of Certificates evidencing not less than 100% of the Aggregate
Certificate Balance, by notice given in writing to the Servicer and to the
Trustee may terminate all of the rights and obligations of the Servicer under
this Agreement provided that a successor Servicer shall have been appointed
(such event, the "Event of Servicing Termination"). The predecessor Servicer
shall cooperate with the successor Servicer and the Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for remittance, shall have been remitted by the Servicer
in the Collection Account, or shall thereafter be received with respect to a
Purchased Asset. All reasonable costs and expenses (including attorneys' fees
and disbursements) incurred in connection with transferring the Purchased Asset
Documentation to the successor Servicer and amending this Agreement to reflect
such succession as Servicer pursuant to this Section 11.1 shall be paid by the
predecessor Servicer upon presentation of reasonable documentation of such cost
and expenses.
SECTION 11.2 NOTIFICATION TO CERTIFICATEHOLDERS
Upon delivery of written notice by the Trustee to the Servicer of an Event
of Servicing Termination or upon any Servicer termination, or appointment of a
successor Servicer pursuant to this Section 11, the Trustee shall give prompt
written notice thereof to Certificateholders at their respective addresses of
record, and to the Rating Agencies.
SECTION 11.3 WAIVER OF PAST DEFAULTS
The Holders of Certificates evidencing not less than 51% of the Aggregate
Certificate Balance, may, on behalf of all Certificateholders, waive any default
by the Servicer in the performance of its obligations hereunder and its
consequences, except a default under Section 7.2 (waiver of which shall require
100% of the Certificateholders). Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Servicing Termination arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
SECTION 12. THE TRUSTEE
SECTION 12.1 NO POWER TO ENGAGE IN BUSINESS OR TO VARY INVESTMENTS
Notwithstanding any provision or agreement to the contrary in this
Agreement or in any other agreement, the Trustee, acting on behalf of the Trust
(but not
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individually), shall not have any power to engage in any business, commercial
or other activity for profit, and the Trustee shall not have any power to vary
the Trust estate, whether consisting of a Purchased Asset, a Permitted
Investment or any other amount in any account maintained for the benefit of the
Trust or the Certificateholders or Certificate Owners, by disposition of said
property, investment or amount and the reinvestment of the proceeds realized or
by any other action calculated to take advantage of any variation or change in
the market or in market conditions, for the purpose of improving the investment
or return of the Certificateholders or Certificate Owners.
SECTION 12.2 DUTIES OF TRUSTEE
(a) The Trustee shall undertake to perform such duties and only such
duties as are specifically set forth in this Agreement.
(b) The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement; PROVIDED, HOWEVER, that the
Trustee shall not be responsible for the accuracy or content of any such
resolution, certificate, statement, opinion, report, document, order or other
instrument furnished by the Servicer to the Trustee pursuant to this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith or willful misfeasance; PROVIDED, HOWEVER, that:
(i) The Trustee shall not be liable except for the performance of
such duties and obligations as shall be specifically set forth in this
Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee, the permissible right of the Trustee to do
things enumerated in this Agreement shall not be construed as a duty and,
in the absence of bad faith on the part of the Trustee, or manifest error,
the Trustee may conclusively rely upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Agreement as to the truth of the statements made and the correctness of
the opinions expressed therein;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by an Authorized Officer of the Trustee, unless
it shall be proved that the Trustee shall have been negligent in
ascertaining the pertinent facts; and
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(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken in good faith in accordance
with this Agreement or at the direction of the Holders of Certificates
evidencing not less than 25% of the Aggregate Certificate Balance relating
to the time, method and place of conducting any proceeding or any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Agreement.
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall be
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability shall not be reasonably assured to it,
and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer (including its obligations as
custodian) under this Agreement except during such time, if any, as the Trustee
shall be the successor to, and be vested with the rights, duties, powers and
privileges of, the Servicer in accordance with the terms of this Agreement.
(e) The Trustee shall not be charged with knowledge of an Event of
Servicing Termination until such time as an Authorized Officer shall have actual
knowledge or have received written notice thereof.
(f) Except for actions expressly authorized by this Agreement or, based
upon an Opinion of Counsel, in the best interests of Certificateholders, the
Trustee shall take no action reasonably likely to impair the security
interests, if any, created or existing in respect of any Purchased Asset or to
impair the value of any Purchased Asset.
(g) All information obtained by the Trustee, the Paying Agent or any
Certificateholder regarding the Customers, the Purchased Assets, and all and
every part of the Purchased Asset Documentation, whether upon the exercise of
its rights under this Agreement or otherwise, shall be maintained by the
Trustee in confidence and shall not be disclosed to any other Person, other
than internal counsel, unless such disclosure is pursuant to the terms of this
Agreement or required by any applicable law or regulation.
(h) In the event that the Paying Agent or the Transfer Agent and
Certificate Registrar shall fail to perform any obligation, duty or agreement
in the manner or on the day required to be performed by the Paying Agent or the
Transfer Agent and Certificate Registrar, as the case may be, under this
Agreement, the Trustee shall be obligated promptly upon an Authorized Officer
obtaining knowledge thereof to
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perform such obligation, duty or agreement in the manner so required to the
extent the information necessary to such performance is reasonably available to
the Trustee after the Trustee has made a reasonable effort to obtain such
information. The Trustee shall not be liable for the acts or omissions of any
Paying Agent, any Authenticating Agent or the Transfer Agent and Certificate
Registrar appointed hereunder with due care by the Trustee hereunder.
SECTION 12.3 CERTAIN MATTERS AFFECTING THE TRUSTEE
Except as otherwise provided in Section 12.2:
(a) The Trustee may request, and may rely and shall be protected in acting
or refraining from acting upon, any resolution, certificate of auditors or
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document (including the annual
auditor's report and the letter of independent certified public accountants
described in Section 6.11, the Monthly Servicer's Certificate described in
Section 7.6(a), and the annual compliance statement described in Section 6.10)
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) The Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it under this Agreement in good
faith and in accordance with such advice or Opinion of Counsel, which counsel
has been selected by the Trustee with due care. A copy of any such Opinion of
Counsel shall be provided to the Servicer.
(c) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend
any litigation under this Agreement or in relation to this Agreement, at the
request, order or direction of any of the Certificateholders pursuant to the
provisions of this Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; PROVIDED, HOWEVER, that
the Trustee shall have the right to decline to follow any such request, order
or direction if the Trustee, in accordance with an Opinion of Counsel
determines that the action or proceeding may not lawfully be taken or if the
Trustee in good faith determines that the action or proceeding so directed would
involve it in personal liability or be unjustly prejudicial to the nonassenting
Certificateholders.
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and without negligence and believed by
it to be
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authorized or within the discretion or rights or powers conferred upon it by
this Agreement.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by Holders of Certificates
evidencing not less than 25% of the Aggregate Certificate Balance; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation shall be, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such cost,
expense or liability or payment of such expenses as a condition precedent to so
proceeding. Nothing in this clause (e) shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding Customers.
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties under this Agreement either directly or by or through agents
or attorneys or a custodian, which agents or attorneys shall have any or all of
the rights, powers, duties and obligations of the Trustee conferred on them by
such appointment.
SECTION 12.4 TRUSTEE NOT LIABLE FOR CERTIFICATES OR PURCHASED ASSETS
(a) The Trustee shall make no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other than as set forth in
Section 12.12), or of any Purchased Asset or related document. The Trustee shall
have no obligation or liability (i) to perform any of the duties of the Seller
or Servicer unless explicitly set forth in this Agreement, (ii) for the
preparation or filing of any report or statement with the Securities and
Exchange Commission, (iii) for the efficacy of the Trust or its ability to
generate the payments to be distributed to Certificateholders hereunder, (iv) in
respect of the validity of the assignment of any Purchased Asset to the Trust or
of any intervening assignment (unless it is the assignor), (v) in respect of the
compliance by the Seller or the Servicer with any warranty or representation
made under this Agreement or in any related document and the accuracy of any
such warranty or representation (except after the Trustee's receipt of notice or
other discovery of any noncompliance therewith or any breach thereof or as
otherwise provided herein), (vi) the satisfaction of any condition relating to
the Purchased Asset, (vii) in connection with any investment of funds by the
Servicer or any loss resulting therefrom (it being understood that the Trustee
shall remain responsible for any Trust property that it may hold), (viii) for
the acts or omissions of the Seller, the Servicer (including in its capacity as
custodian hereunder) or any Customer, (ix) for any action of the Servicer taken
in the name of the Trustee, or
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(x) for any action by the Trustee taken at the instruction of the Servicer;
PROVIDED, HOWEVER, that the foregoing shall not relieve the Trustee of its
obligation to perform its duties under this Agreement.
(b) Except (i) with respect to a claim based on the failure of the Trustee
to perform its duties under this Agreement, (ii) based on the Trustee's willful
misconduct, negligence or bad faith, or (iii) based on the Trustee's
nonperformance or breach of a representation and warranty specified in Section
12.12, no recourse shall be had for any claim or defense based on any provision
of this Agreement, the Certificates or any Purchased Asset or assignment
thereof against the Trustee in its individual capacity.
SECTION 12.5 TRUSTEE MAY OWN CERTIFICATES
The Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates and may deal with the Seller and the Servicer in banking
transactions with the same rights as it would have if it were not Trustee.
SECTION 12.6 TRUSTEE'S FEES AND EXPENSES
As compensation for its services and expenses hereunder, the Trustee shall
be paid the Trustee Fee pursuant to Section 7.3.
SECTION 12.7 ELIGIBILITY REQUIREMENTS FOR TRUSTEE
The Trustee shall at all times be a state banking corporation or national
banking association organized and doing business under the laws of such state or
the United States of America; authorized under such laws to exercise corporate
trust powers; and having a combined capital and surplus of at least $100,000,000
as of the last day of the most recent fiscal quarter for such institution and
subject to supervision or examination by federal or state authorities. If such
state banking corporation or national banking association shall publish reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section 12.7, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The Trustee shall at all times be rated in one
of the four highest rating categories by each Rating Agency that publishes a
rating of the Trustee. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 12.7, the Trustee
shall resign immediately in the manner and with the effect specified in Section
12.8.
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SECTION 12.8 RESIGNATION OR REMOVAL OF TRUSTEE
(a) The Trustee may at any time resign and be discharged from the trust
hereby created by giving written notice thereof to the Servicer. Upon giving
such notice of resignation, the Holders of Certificates aggregating not less
than 51% of the Aggregate Certificate Balance may appoint a successor Trustee by
written instrument which instrument shall be delivered to the successor Trustee.
If no successor Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 12.7 or shall be legally unable to act, or shall
be adjudged bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, at the instruction of the Holders of
Certificates aggregating not less than 51% of the Aggregate Certificate Balance,
the Trustee shall promptly resign. The Holders of Certificates aggregating not
less than 51% of the Aggregate Certificate Balance shall promptly appoint a
successor Trustee by written instrument which instrument shall be delivered to
the successor Trustee. If the Trustee fails to resign, the Certificateholders
shall remove the Trustee and appoint a successor Trustee by written instrument
in duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee.
(c) The Holders of Certificates aggregating not less than 51% of the
Aggregate Certificate Balance may remove the Trustee without cause.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 12.8 shall
not become effective until acceptance of appointment by the successor Trustee
pursuant to Section 12.9.
SECTION 12.9 SUCCESSOR TRUSTEE
(a) Any successor Trustee appointed pursuant to Section 12.8 shall
execute, acknowledge and deliver to the Servicer and to its predecessor Trustee
an instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor under this Agreement with like effect as if originally named as
Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement
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and the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties, and obligations.
(b) No successor Trustee shall accept appointment as provided in this
Section 12.9 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 12.7.
(c) Upon acceptance of appointment by a successor Trustee pursuant to this
Section 12.9, the successor Trustee shall mail notice of the successor of such
Trustee under this Agreement to all Certificateholders at their respective
addresses of record, to the Rating Agencies.
SECTION 12.10 MERGER OR CONSOLIDATION OF TRUSTEE
Any corporation or other entity (i) into which the Trustee may be merged or
consolidated, (ii) which may result from any merger, conversion or consolidation
to which the Trustee shall be a party, or (iii) which may succeed to all or
substantially all of the corporate trust business of the Trustee, which
corporation or other entity executes an agreement of assumption to perform
every obligation of the Trustee under this Agreement, shall be the successor of
the Trustee hereunder, provided such corporation or other entity shall be
eligible pursuant to Section 12.7, without the execution or filing of any
instrument or any further act on the part of any of the parties hereto. The
Trustee shall provide prompt written notice of any merger or consolidation to
the Seller, the Servicer and the Rating Agencies.
SECTION 12.11 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE
(a) Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Purchased Asset may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person,
in such capacity and for the benefit of the Certificateholders, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 12.11, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. The appointment of
any separate trustee or co-trustee shall not absolve the Trustee of its
obligations under this Agreement. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case an Event of Servicing Termination shall have occurred and be
continuing, the Trustee alone shall have the
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power to make such appointment. No notice to Certificateholders of the
appointment of any co-trustee or separate trustee or separate trustees shall be
required pursuant to Section 12.9.
(b) Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee under this Agreement or as
successor to the Servicer under this Agreement), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee.
(ii) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement.
(iii) The Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Section 12.11. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or properties
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Trustee. Each such instrument shall be filed with the Trustee and a copy thereof
given to the Servicer.
(d) Any separate trustee or co-trustee may at any time appoint the Trustee
or its agent or attorney-in-fact with full power and authority, to the extent
not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies
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and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor Trustee.
SECTION 12.12 REPRESENTATIONS AND WARRANTIES OF TRUSTEE
The Trustee makes the following representations and warranties on which the
Seller, the Servicer and the Certificateholders may rely:
(a) ORGANIZATION AND GOOD STANDING
The Trustee is a national banking association duly organized, validly
existing and in good standing under the laws of the United States.
(b) POWER AND AUTHORITY
The Trustee has full power, authority and legal right to execute, deliver
and perform this Agreement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement.
(c) NO VIOLATION
The execution and delivery of this Agreement and the performance by the
Trustee of its obligations under this Agreement do not (i) violate any provision
of any law governing the trust powers of the Trustee or, to the best of the
Trustee's knowledge, any order, writ, judgment or decree of any court,
arbitrator or governmental authority applicable to the Trustee or any of its
assets, (ii) violate any provision of the articles of incorporation or bylaws of
the Trustee, or (iii) conflict with, result in any breach of any of the terms or
provisions of, or constitute (with or without notice or lapse of time) a default
under, any indenture, agreement or other instrument to which the Trustee is a
party or by which it is bound to the extent such conflict, breach or default
would impair the Trustee's obligation or ability to perform under this
Agreement.
(d) NO GOVERNMENTAL AUTHORIZATION REQUIRED
The execution, delivery and performance by the Trustee of this Agreement do
not require the authorization, consent, or approval of, the giving of notice to,
the filing or registration with, or the taking of any other action in respect
of, any governmental authority or agency regulating the corporate trust
activities of the Trustee.
(e) DUE AUTHORIZATION, EXECUTION AND DELIVERY
This Agreement has been duly authorized, executed and delivered by the
Trustee and shall constitute the legal, valid and binding agreement of the
Trustee,
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enforceable in accordance with its terms except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights generally.
(f) GOVERNMENTAL APPROVALS
No authorization or approval or other action by, and no notice to or filing
with, or consent by, any governmental authority, regulatory body or third party
is required for the due execution and delivery by the Trustee of this Agreement
and the performance by the Trustee of its obligations under this Agreement
except for such authorizations, approvals, notices and filings that have been
duly received or made, as the case may be, as of the date of this Agreement.
SECTION 12.13 TAX RETURNS
(a) The Servicer shall be entitled to review drafts of any federal tax
returns required to be filed by the Trust, it being understood that the Trustee
shall not file any returns inconsistent with the return position of the Seller
with respect to the Purchased Assets. The Trustee shall provide evidence that
Certificateholders have received any information required by the Code or the
regulations thereunder in light of those return purposes. The Trustee, upon
request, will furnish the Servicer with all such information known to the
Trustee as may be reasonably required in connection with the preparation of all
tax returns of the Trust, and shall, upon request, execute such returns.
(b) The Trustee shall be responsible for the withholding and payment of
any United States withholding taxes imposed with respect to the payment of
distributions to Certificateholders or Certificate Owners, and the Trustee, from
its own funds and not from the Trust estate, shall indemnify, defend and hold
harmless the Seller and the Servicer from and against any loss, liability or
expense relating to such withholding taxes.
SECTION 12.14 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES
All rights of action and claims under this Agreement or the Certificates
may be prosecuted and enforced by the Trustee without the possession of any of
the Certificates or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name or in its capacity as Trustee. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been recovered.
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SECTION 12.15 MAINTENANCE OF OFFICE OR AGENCY
The Trustee shall maintain at its expense in New York, New York, an office
or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served. The
Trustee initially designates the Corporate Trust Office as its office for such
purposes. The Trustee will give prompt written notice to the Servicer, the
Paying Agent, the Transfer Agent and Certificate Registrar and the
Certificateholders of any change in the location of such office or agency.
SECTION 13. TERMINATION OF THE TRUST
(a) The Trust, and the respective obligations and responsibilities of the
Seller, the Servicer and the Trustee shall terminate with respect to the
Certificateholders at the close of business on the Distribution Date next
following the final Distribution Period ending on March 31, 2005.
(b) Notice of any termination, specifying the Distribution Date upon which
the Certificateholders may surrender their Certificates to the Transfer Agent
and Certificate Registrar for payment of the final distribution and
cancellation, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 15th day and not later than the
25th day of the month next preceding the specified Distribution Date stating the
amount of any such final payment, and that the Record Date otherwise applicable
to such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Transfer
Agent and Certificate Registrar therein specified. The Trustee shall give such
notice to the Transfer Agent and Certificate Registrar, the Paying Agent and the
Rating Agencies at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Paying Agent shall cause to
be distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 7.3.
(c) In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above- mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders upon receipt of the appropriate
records from the Transfer Agent and Certificate Registrar to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall remain
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subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies and after the payment of all amounts owing to the Trustee and the
Servicer under this Agreement shall be transferred by the Trustee to the
Servicer, which shall be obligated to pay the final distribution without
interest to any remaining Certificateholders which surrender their Certificates
for cancellation prior to the time such funds escheat to the State of Washington
pursuant to applicable law.
(d) All Certificates surrendered for payment of the final distribution
with respect to such Certificates and cancellation shall be canceled by the
Transfer Agent and Certificate Registrar and shall be disposed of in a manner
satisfactory to the Trustee and the Servicer.
SECTION 14. MISCELLANEOUS PROVISIONS
SECTION 14.1 AMENDMENT
(a) This Agreement may be amended by the Seller, the Servicer and the
Trustee, without prior notice to or the consent of any of the
Certificateholders, (i) to cure any ambiguity, to correct or supplement any
provision in this Agreement which may be inconsistent with any other provision
herein or therein, to evidence a succession to the Servicer or the Seller
pursuant to this Agreement or to add any other provisions with respect to
matters or questions arising under this Agreement that shall not be inconsistent
with the provisions of this Agreement; PROVIDED, HOWEVER, that such action shall
not, as evidenced by an Officer's Certificate or an Opinion of Counsel delivered
to the Trustee, adversely and materially affect the interests of the Trust or
any of the Certificateholders and PROVIDED, FURTHER, that the Trustee shall
deliver written notice of such changes to each Rating Agency prior to the
execution of any such amendment, or (ii) to effect a transfer or assignment in
compliance with Section 14.7(i).
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer and the Trustee, with the consent of the Holders of Certificates
evidencing not less than 51% of the Aggregate Certificate Balance, for the
purpose of adding any provision to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Certificateholders (including effecting a transfer or assignment in
compliance with Section 14.7(ii)); PROVIDED, HOWEVER, that no such amendment,
except with the consent of the Holders of all Certificates then outstanding,
shall (A) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments of Purchased Assets, or distributions
that shall be required to be made on any Certificate (B) be applicable to
Section 11, or (C) reduce the aforesaid percentage of the Aggregate Certificate
Balance required to consent to any such amendment.
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(c) Promptly after the execution of any amendment or consent referred to
in this Section 14.1, the Trustee shall furnish a copy of such amendment or
consent to each Certificateholder and to the Rating Agencies.
(d) It shall not be necessary for the consent of Certificateholders
pursuant to this Section 14.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee shall not be obligated to enter into any such amendment which
affects the Trustee's own rights, duties or immunities under this Agreement.
(f) Prior to the execution of any amendment to this Agreement, other than
an amendment permitted pursuant to clause (a)(i) of this Section 14.1, the
Servicer shall have received written notice from each of the Rating Agencies
that the rating of the Certificates will not be reduced or withdrawn as a result
of such amendment.
SECTION 14.2 PROTECTION OF TITLE TO TRUST
(a) The Servicer shall, at the written request of the Trustee, execute and
file such financing statements and continuation statements, all in such manner
and in such places as may be requested by the Trustee and required by law to
protect the interests of the Trustee under this Agreement in the Purchased
Assets and in the proceeds thereof. The Servicer shall deliver (or cause to be
delivered) to the Trustee file-stamped copies of, or filing receipts for, such
documents filed as provided above, as soon as available following such filing.
(b) If the Seller changes its name, identity or corporate structure in any
manner that would make any financing statement or continuation statement filed
by the Servicer in accordance with paragraph (a) above seriously misleading as
interpreted pursuant to SECTION 9-402(7) of the UCC, the Seller shall promptly
file appropriate revised financing statements and continuation statements or
amendments thereto and shall give the Trustee written notice thereof.
(c) If as a result of any relocation of the Seller's chief executive
office the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of any
new financing statement, the Seller shall promptly file such amendment or new
financing statement
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and shall give the Trustee written notice thereof. The Servicer shall at all
times maintain each office from which it shall service Purchased Assets, and its
principal executive office, within the State of Washington.
(d) The Servicer shall maintain accounts and records as to the Purchased
Assets accurately and in accordance with its standard accounting procedures, and
sufficient detail to permit reconciliation between payments or recoveries on (or
with respect to) the Purchased Assets and the amounts from time to time
deposited in the Collection Account in respect of the Purchased Assets.
(e) For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.
SECTION 14.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS
(a) The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor entitle the Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as expressly
provided in this Agreement) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties to this Agreement,
nor shall anything set forth in this Agreement or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken pursuant to any
provision of this Agreement.
(c) No Certificateholder shall have any right by virtue or by availing
itself of any provision of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Certificateholder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates evidencing not less than
51% of the Aggregate Certificate Balance shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own name as
Trustee under this Agreement and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request and offer of indemnity, shall have
either neglected or refused to institute any such action, suit or proceeding; no
one or more Certificateholders shall
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have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of any other of the Certificateholders, or to obtain or seek to
obtain priority over or preference to any other such Certificateholder, or to
enforce any right, under this Agreement, except in the manner provided in this
Agreement and for the equal, ratable and common benefit of all
Certificateholders.
SECTION 14.4 GOVERNING LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF WASHINGTON, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER
THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 14.5 NOTICES
All demands, notices and communications under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, or sent by telecopy or other similar form of rapid transmission and
shall be deemed to have been duly given upon receipt (A) in the case of the
Seller, at 411 108th Avenue N.E., Bellevue, Washington 98004-4415, Attention:
Chief Financial Officer, Telecopy Number: (206) 462-3300, or at such other
address as shall be designated by the Seller in a written notice to the Trustee,
(B) in the case of the Servicer, at 411 108th Avenue N.E., Bellevue, Washington
98004-4415, Attention: Chief Financial Officer, Telecopy Number: (206) 462-3300,
or at such other address as shall be designated by the Servicer in a written
notice to the Trustee, and (C) in the case of the Trustee, at [______________,
____________, ___________] Attention: [______________], Telecopy Number:
[_____________]. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of record of such Certificateholder. Any notice to a Certificateholder
so mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder shall
receive such notice.
SECTION 14.6 SEVERABILITY OF PROVISIONS
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Certificateholders
thereof.
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SECTION 14.7 ASSIGNMENT
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 9.3 and 10.3, neither the Seller nor the Servicer may
transfer or assign all, or a portion of, its rights, obligations and duties
under this Agreement unless (i) such transfer or assignment will not result in a
reduction or withdrawal by the Rating Agencies of the rating then assigned to
the Certificates or (ii) the Trustee and Holders of Certificates evidencing not
less than 100% of the Aggregate Certificate Balance consent thereto. Without
limiting Section 10.5, any transfer or assignment with respect to the Servicer
of all of its rights, obligations and duties will not become effective until a
successor Servicer has assumed the Servicer's rights, duties and obligations
under this Agreement. In the event of a transfer or assignment pursuant to
clause (ii) above, the Rating Agencies shall be provided with notice of such
transfer or assignment.
SECTION 14.8 CERTIFICATES NONASSESSABLE AND FULLY PAID
The interests represented by the Certificates shall be nonassessable for
any losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Trustee pursuant to Section 8.2, each Certificate
shall be deemed fully paid.
SECTION 14.9 THIRD-PARTY BENEFICIARIES
This Agreement will inure to the benefit of and be binding upon the parties
hereto, the Certificateholders and the Certificate Owners and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other person will have any right or obligation hereunder.
SECTION 14.10 CERTIFICATES OWNED BY SERVICER
In determining whether the Holders of the requisite percentage of the
Aggregate Certificate Balance have given any request, demand, authorization,
direction, notice, consent or waiver under this Agreement, any Certificates
owned by the Servicer or any Person controlling, controlled by or under common
control with the Servicer shall be disregarded and deemed not to be part of the
Aggregate Certificate Balance.
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IN WITNESS WHEREOF, the parties have caused this Pooling and Servicing
Agreement to be duly executed by their respective officers as of the day and
year first above written.
PUGET SOUND POWER & LIGHT
COMPANY, as Seller
By ______________________________
Name:
Title:
CHEMICAL BANK, as Trustee
By ______________________________
Name:
Title:
PUGET SOUND POWER & LIGHT
COMPANY, as Servicer
By ______________________________
Name:
Title:
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