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EXHIBIT 1.1
PUGET SOUND ENERGY, INC.
SENIOR MEDIUM-TERM NOTES, SERIES C
DISTRIBUTION AGREEMENT
November 1, 2000
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON SMITH BARNEY INC.
c/o Merrill Lynch & Co.
World Financial Center
North Tower, 10th Floor
New York, New York 10281-1310
Ladies and Gentlemen:
Puget Sound Energy, Inc. a Washington corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, and Salomon Smith Barney Inc. (each, an "Agent", and
collectively, the "Agents," which term shall also include any additional agents
named in any Terms Agreement (as defined herein)) with respect to the issue and
sale by the Company of its Senior Medium-Term Notes, Series C, Due Nine Months
or More From Date of Issue (the "Notes"). The Notes are to be issued pursuant
to an Indenture, dated as of December 1, 1997, as supplemented by a Third
Supplemental Indenture, dated as of October 1, 2000 (collectively, the
"Indenture"), between the Company and State Street Bank and Trust Company, as
trustee (the "Trustee"). Prior to the Substitution Date (as defined in the
Indenture), the Notes will be secured by the delivery to the Trustee of
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(i) first mortgage bonds issued under the Company's electric mortgage indenture
or (ii) first mortgage bonds issued under the Company's gas mortgage indenture,
as specified in the Prospectus referred to below (collectively, the "Pledged
Bonds"). As of the date hereof, the Company has authorized the issuance and sale
of up to U.S. $500,000,000 aggregate initial offering price of Notes to or
through the Agents pursuant to the terms of this Agreement. It is understood,
however, that the Company may from time to time authorize the issuance of
additional Notes and that such additional Notes may be sold to or through the
Agents pursuant to the terms of this Agreement, all as though the issuance of
such Notes were authorized as of the date hereof.
This Agreement provides both for the sale of Notes by the Company to
one or more Agents as principal for resale to investors and other purchasers and
for the sale of Notes by the Company directly to investors (as may from time to
time be agreed to by the Company and the applicable Agent), in which case the
applicable Agent will act as an agent of the Company in soliciting offers for
the purchase of Notes.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-47302) for the
registration of the Notes, under the Securities Act of 1933, as amended (the
"1933 Act") and the offering thereof from time to time in accordance with Rule
415 of the rules and regulations of the Commission under the 1933 Act (the "1933
Act Regulations"), and the Company has filed such post-effective amendments
thereto as may be required prior to any acceptance by the Company of an offer
for the purchase of Notes. Such registration statement (as so amended, if
applicable) has been declared effective by the Commission and the Indenture has
been duly qualified under the Trust Indenture Act of 1939, as amended (the "1939
Act"). Such registration statement (as so amended, if applicable) is referred
to
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herein as the "Registration Statement"; and the final prospectus and all
applicable amendments or supplements thereto (including the final prospectus
supplement and pricing supplement relating to the offering of Notes), in the
form first furnished to the applicable Agent(s), are collectively referred to
herein as the "Prospectus"; provided, however, that all references to the
"Registration Statement" and the "Prospectus" shall also be deemed to include
all documents incorporated therein by reference pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act"), prior to any acceptance by
the Company of an offer for the purchase of Notes; provided, further, that if
the Company files a registration statement with the Commission pursuant to Rule
462(b) of the 1933 Act Regulations (the "Rule 462(b) Registration Statement"),
then, after such filing, all references to the "Registration Statement" shall
also be deemed to include the Rule 462(b) Registration Statement. A "preliminary
prospectus" shall be deemed to refer to any prospectus used before the
registration statement became effective and any prospectus furnished by the
Company after the registration statement became effective and before any
acceptance by the Company of an offer for the purchase of Notes which omitted
information to be included upon pricing in a form of prospectus filed with the
Commission pursuant to Rule 424(b) of the 1933 Act Regulations. For purposes of
this Agreement, all references to the Registration Statement, Prospectus or
preliminary prospectus or to any amendment or supplement thereto shall be deemed
to include any copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "disclosed", "contained," "included" or "stated"
(or other references of like import) in the Registration Statement, Prospectus
or preliminary prospectus shall be deemed to include all such financial
statements and
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schedules and other information which is incorporated by reference in the
Registration Statement, Prospectus or preliminary prospectus, as the case may
be; and all references in this Agreement to amendments or supplements to the
Registration Statement, Prospectus or preliminary prospectus shall be deemed to
include the filing of any document under the 1934 Act which is incorporated by
reference in the Registration Statement, Prospectus or preliminary prospectus,
as the case may be.
1. Appointment as Agent.
(a) Appointment. Subject to the terms and conditions stated herein and subject
to the reservation by the Company of the right to sell Notes directly on its own
behalf, the Company hereby agrees that Notes will be sold exclusively to or
through the Agents. The Company agrees that it will not appoint any other agents
to act on its behalf, or to assist it, in the placement of the Notes.
(b) Sale of Notes. The Company shall not sell or approve the solicitation of
offers for the purchase of Notes in excess of the amount which shall be
authorized by the Company from time to time or in excess of the aggregate
initial offering price of Notes registered pursuant to the Registration
Statement. The Agents shall have no responsibility for maintaining records with
respect to the aggregate initial offering price of Notes sold, or of otherwise
monitoring the availability of Notes for sale, under the Registration Statement.
(c) Purchases as Principal. The Agents shall not have any obligation to
purchase Notes from the Company as principal. However, absent an agreement
between an Agent and the Company that such Agent shall be acting solely as an
agent for the Company, such Agent
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shall be deemed to be acting as principal in connection with any offering of
Notes by the Company through such Agent. Accordingly, the Agents, individually
or in a syndicate, may agree from time to time to purchase Notes from the
Company as principal for resale to investors and other purchasers determined by
such Agents. Any purchase of Notes from the Company by an Agent as principal
shall be made in accordance with Section 3(a) hereof.
(d) Solicitations as Agent. If agreed upon between an Agent and the Company,
such Agent, acting solely as an agent for the Company and not as principal, will
solicit offers for the purchase of Notes. Such Agent will communicate to the
Company, orally, each offer for the purchase of Notes solicited by it on an
agency basis other than those offers rejected by such Agent. Such Agent shall
have the right, in its discretion reasonably exercised, to reject any offer for
the purchase of Notes, in whole or in part, and any such rejection shall not be
deemed a breach of its agreement contained herein. The Company may accept or
reject any offer for the purchase of Notes, in whole or in part. Such Agent
shall make reasonable efforts to assist the Company in obtaining performance by
each purchaser whose offer for the purchase of Notes has been solicited by it on
an agency basis and accepted by the Company. Such Agent shall not have any
liability to the Company in the event that any such purchase is not consummated
for any reason. If the Company shall default on its obligation to deliver Notes
to a purchaser whose offer has been solicited by such Agent on an agency basis
and accepted by the Company, the Company shall (i) hold such Agent harmless
against any loss, claim or damage arising from or as a result of such default by
the Company and (ii) pay to such Agent any commission to which it would
otherwise be entitled absent such default.
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(e) Reliance. The Company and the Agents agree that any Notes purchased from
the Company by one or more Agents as principal shall be purchased, and any Notes
the placement of which an Agent arranges as an agent of the Company shall be
placed, by such Agent in reliance on the representations, warranties, covenants
and agreements of the Company contained herein and on the terms and conditions
and in the manner provided herein.
2. Representations and Warranties.
(a) The Company represents and warrants to each Agent as of the date hereof, as
of the date of each acceptance by the Company of an offer for the purchase of
Notes (whether to such Agent as principal or through such Agent as agent), as of
the date of each delivery of Notes (whether to such Agent as principal or
through such Agent as agent) (the date of each such delivery to such Agent as
principal is referred to herein as a "Settlement Date"), and as of any time that
the Registration Statement or the Prospectus shall be amended or supplemented
(each of the times referenced above is referred to herein as a "Representation
Date"), as follows:
(i) Due Incorporation, Valid Existence and Due Qualification of the
Company. The Company has been duly organized and is validly existing as a
corporation under the laws of the State of Washington with corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into this Agreement
and consummate the transactions contemplated in the Prospectus; the Company
is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business,
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except where the failure to so qualify or be in good standing would not
result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise (a "Material
Adverse Effect").
(ii) Significant Subsidiaries. The Company has no significant
subsidiaries (as such term is defined in Rule 1-02 of Regulation S-X
promulgated under the 1933 Act).
(iii) Registration Statement and Prospectus. The Company meets the
requirements for use of Form S-3 under the 1933 Act; the Registration
Statement (including any Rule 462(b) Registration Statement) has become
effective under the 1933 Act and no stop order suspending the effectiveness
of the Registration Statement (including any Rule 462(b) Registration
Statement) has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with; the
Indenture has been duly qualified under the 1939 Act; at the respective
times that the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto (including the filing of
the Company's most recent Annual Report on Form 10-K with the Commission
(the "Annual Report on Form 10-K")) became effective and at each
Representation Date, the Registration Statement (including any Rule 462(b)
Registration Statement) and any amendments thereto complied and will comply
in all material respects with the requirements of the 1933 Act and the 1933
Act Regulations and the 1939 Act and the rules and regulations of the
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Commission under the 1939 Act (the "1939 Act Regulations") and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; each preliminary prospectus and
prospectus filed as part of the Registration Statement as originally filed
or as part of any amendment thereto, or filed pursuant to Rule 424 under
the 1933 Act, complied when so filed in all material respects with the 1933
Act Regulations; each preliminary prospectus and the Prospectus delivered
to the applicable Agent(s) for use in connection with the offering of Notes
are identical to any electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T; and at the date hereof, at the date of the Prospectus and
at each Representation Date, neither the Prospectus nor any amendment or
supplement thereto included or will include an untrue statement of a
material fact or omitted or will 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
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Agents expressly for use in the
Registration Statement or the Prospectus.
(iv) Incorporated Documents. The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934
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Act (the "1934 Act Regulations") and, when read together with the other
information in the Prospectus, at the date hereof, at the date of the
Prospectus and at each Representation Date, did not and will not include an
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.
(v) Independent Accountants. The accountants who certified the financial
statements and any supporting schedules thereto included in the
Registration Statement and the Prospectus are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.
(vi) Financial Statements. The consolidated financial statements of the
Company included in the Registration Statement and the Prospectus, together
with the related schedules and notes, as well as those financial
statements, schedules and notes of any other entity included in the
Registration Statement and the Prospectus, present fairly the consolidated
financial position of the Company and its subsidiaries, or such other
entity, as the case may be, at the dates indicated and the consolidated
statement of operations, stockholders' equity and cash flows of the Company
and its subsidiaries, or such other entity, as the case may be, for the
periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved; the supporting
schedules, if any, included in the Registration Statement and the
Prospectus present fairly in accordance with GAAP the information required
to be stated therein; the selected financial data and the summary financial
information included in the
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Registration Statement and the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Registration Statement and the
Prospectus; and any pro forma consolidated financial statements of the
Company and its subsidiaries and the related notes thereto included in the
Registration Statement and the Prospectus present fairly the information
shown therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(vii) No Material Changes. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as otherwise stated therein, (1) there has been no event or
occurrence that would result in a Material Adverse Effect and (2) there
have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise.
(viii) Authorization, etc. of this Agreement, the Indenture, the Notes and
the Pledged Bonds. This Agreement has been duly authorized, executed and
delivered by the Company; the Indenture has been duly authorized, executed
and delivered by the Company and will be a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by (1)
bankruptcy, insolvency,
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reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally or (2) general equitable principles
(regardless of whether enforcement is considered in a proceeding in equity
or at law); the Notes and the Pledged Bonds have been duly authorized by
the Company for offer, sale, issuance and delivery pursuant to this
Agreement and, when issued, authenticated and delivered in the manner
provided for in the Indenture and delivered against payment of the
consideration therefor, will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as enforcement thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or (2) general
equitable principles (regardless of whether enforcement is considered in a
proceeding in equity or at law); the Notes will be substantially in a form
previously certified to the Agents and contemplated by the Indenture; and
each holder of Notes will be entitled to the benefits of the Indenture.
(ix) Descriptions of the Indenture, the Notes and the Pledged Bonds. The
Indenture, the Notes and the Pledged Bonds conform and will conform in all
material respects to the statements relating thereto contained in the
Prospectus and are substantially in the form filed or incorporated by
reference, as the case may be, as an exhibit to the Registration Statement.
(x) Accuracy of Exhibits. There are no contracts or documents which are
required to be described in the Registration Statement, the Prospectus or
the documents incorporated by reference therein or to be filed as exhibits
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thereto which have not been so described and filed as required.
(xi) Absence of Defaults and Conflicts. Neither the Company nor any of
its subsidiaries is in violation of the provisions of its charter or by-
laws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them may be bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(collectively, "Agreements and Instruments"), except for such defaults that
would not result in a Material Adverse Effect; and the execution, delivery
and performance of this Agreement, the Indenture, the Notes and the Pledged
Bonds and any other agreement or instrument entered into or issued or to be
entered into or issued by the Company in connection with the transactions
contemplated by the Prospectus, the consummation of the transactions
contemplated in the Prospectus (including the issuance and sale of the
Notes and the use of proceeds therefrom as described in the Prospectus) and
the compliance by the Company with its obligations hereunder and under the
Indenture, the Notes and the Pledged Bonds and such other agreements or
instruments have been duly authorized by all necessary corporate action and
do not and will not, whether with or without the giving of notice or the
passage of time or both, conflict with or constitute a breach of, or
default or event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the
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Company or any of its subsidiaries (a "Repayment Event") under, or result
in the creation or imposition of any lien, charge or encumbrance upon any
assets, properties or operations of the Company or any of its subsidiaries
pursuant to, any Agreements and Instruments, nor will such action result in
any violation of the provisions of the charter or by-laws of the Company or
any of its subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their assets, properties or
operations.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or to the knowledge of
the Company, threatened, against or affecting the Company or any of its
subsidiaries which is required to be disclosed in the Registration
Statement and the Prospectus (other than as stated therein), or which may
reasonably be expected to result in a Material Adverse Effect, or which may
reasonably be expected to materially and adversely affect the assets,
properties or operations thereof, the performance by the Company of its
obligations under this Agreement, the Indenture, the Notes and the Pledged
Bonds or the consummation of the transactions contemplated in the
Prospectus; and the aggregate of all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party or
of which any of their respective assets, properties or operations is the
subject which are not described in the Registration Statement and the
Prospectus, including ordinary routine litigation incidental to the
business, may not reasonably be expected to result in a Material Adverse
Effect.
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(xiii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such franchises, permits, licenses, approvals,
consents, certificates of public convenience and necessity and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies,
including, without limitation, the Washington Utilities and Transportation
Commission (the "Utilities Commission") and cities and towns within the
service territory of the Company, necessary for the Company and its
subsidiaries to conduct the business now operated by them and for the
Company to own and operate the its electric plant and its gas plant; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure so
to comply would not, singly or in the aggregate, result in a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and effect
would not result in a Material Adverse Effect; and neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xiv) Environmental Laws. Except as otherwise stated in the Registration
Statement and the Prospectus and except as would not, singly or in the
aggregate, result in a Material Adverse Effect (A) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation,
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ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiaries have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its subsidiaries and (D) there are no events
or circumstances that may reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xv) No Filings, Regulatory Approvals etc. The Utilities Commission has
issued an Order Establishing Compliance with RCW 80.08.040 with respect to
the Notes and the Pledged Bonds (the "Order") and the Order has not been
rescinded,
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annulled or modified. No other filing with, or approval, authorization,
consent, license, registration, qualification, order or decree of, any
court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by the Company of its obligations
under this Agreement, the Indenture, the Notes and the Pledged Bonds or in
connection with the transactions contemplated in the Prospectus, except
such as have been previously obtained or rendered, as the case may be.
(xvi) Investment Company Act. The Company is not, and upon the issuance
and sale of the Notes as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus will not be, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended (the ("1940 Act").
(xvii) Ratings. The Medium-Term Note Program under which the Notes are
issued (the "Program"), as well as the Notes, are rated Baa1 by Moody's
Investors Service, and A- by Standard & Poor's Ratings Service, or such
other rating as to which the Company shall have most recently notified the
Agents pursuant to Section 4(a) hereof.
(b) Additional Certifications. Any certificate signed by any officer of the
Company or any of its subsidiaries and delivered to one or more Agents or to
counsel for the Agents in connection with an offering of Notes to one or more
Agents as principal or through an Agent as agent shall be deemed a
representation and warranty by the Company to such Agent or Agents as to the
matters covered thereby on the date of such certificate and, unless subsequently
amended or supplemented, at each Representation Date subsequent thereto.
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3. Purchases as Principal; Solicitations as Agent.
(a) Purchases as Principal. Notes purchased from the Company by the Agents,
individually or in a syndicate, as principal shall be made in accordance with
terms agreed upon between the Agents and the Company as set forth in a terms
agreement between the Agents and the Company (the "Terms Agreement") (which
terms, unless otherwise agreed, shall, to the extent applicable, include those
terms specified in the form of such agreement attached as Exhibit A hereto and
shall be agreed upon orally, with written confirmation prepared by such Agent or
Agents and mailed to the Company). An Agent's commitment to purchase Notes as
principal shall be deemed to have been made on the basis of the representations
and warranties of the Company herein contained and shall be subject to the terms
and conditions herein set forth. Unless the context otherwise requires,
references herein to "this Agreement" shall include the applicable Terms
Agreement or other agreement of one or more Agents to purchase Notes from the
Company as principal. Each purchase of Notes, unless otherwise agreed, shall be
at a discount from the principal amount of each such Note equivalent to the
applicable commission set forth in Schedule A hereto. The Agents may engage the
services of any broker or dealer in connection with the resale of the Notes
purchased by them as principal and may allow all or any portion of the discount
received from the Company in connection with such purchases to such brokers or
dealers. At the time of each purchase of Notes from the Company by one or more
Agents as principal, such Agent or Agents shall specify the requirements for the
officers' certificate, opinion of counsel and comfort letter pursuant to
Sections 7(b), 7(c) and 7(d) hereof.
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If the Company and two or more Agents enter into an agreement pursuant to
which such Agents agree to purchase Notes from the Company as principal and one
or more of such Agents shall fail at the Settlement Date to purchase the Notes
which it or they are obligated to purchase (the "Defaulted Notes"), then the
nondefaulting Agents shall have the right, within 24 hours thereafter, to make
arrangements for one of them or one or more other Agents or underwriters to
purchase all, but not less than all, of the Defaulted Notes in such amounts as
may be agreed upon and upon the terms herein set forth; provided, however, that
if such arrangements shall not have been completed within such 24-hour period,
then:
(a) if the aggregate principal amount of Defaulted Notes does not
exceed 10% of the aggregate principal amount of Notes to be so purchased by
all of such Agents on the Settlement Date, the nondefaulting Agents shall
be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective initial underwriting
obligations bear to the underwriting obligations of all nondefaulting
Agents; or
(b) if the aggregate principal amount of Defaulted Notes exceeds 10%
of the aggregate principal amount of Notes to be so purchased by all of
such Agents on the Settlement Date, such agreement shall terminate without
liability on the part of any nondefaulting Agent.
No action taken pursuant to this paragraph shall relieve any defaulting Agent
from liability in respect of its default. In the event of any such default
which does not result in a termination of such agreement, either the
nondefaulting Agents or the Company shall have the right to postpone the
Settlement Date for a period not exceeding seven days in order to effect any
required
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changes in the Registration Statement or the Prospectus or in any other
documents or arrangements.
(b) Solicitations as Agent. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, when
agreed by the Company and an Agent, such Agent, as an agent of the Company, will
use its reasonable efforts to solicit offers for the purchase of Notes upon the
terms set forth in the Prospectus. The Agents are not authorized to appoint sub-
agents with respect to Notes sold through them as agent. All Notes sold through
an Agent as agent will be sold at 100% of their principal amount unless
otherwise agreed upon between the Company and such Agent.
The Company reserves the right, in its sole discretion, to suspend
solicitation of offers for the purchase of Notes through an Agent, as an agent
of the Company, commencing at any time for any period of time or permanently.
As soon as practicable after receipt of instructions from the Company, such
Agent will suspend solicitation of offers for the purchase of Notes from the
Company until such time as the Company has advised such Agent that such
solicitation may be resumed.
The Company agrees to pay each Agent a commission, in the form of a
discount, equal to the applicable percentage of the principal amount of each
Note sold by the Company as a result of a solicitation made by such Agent, as an
agent of the Company, as set forth in Schedule A hereto.
(c) Administrative Procedures. The purchase price, interest rate or formula,
maturity date and other terms of the Notes specified in Exhibit A hereto (as
applicable) shall be agreed upon between the Company and the applicable Agent(s)
and specified in a pricing supplement to the Prospectus (each, a "Pricing
Supplement") to be prepared by the Company in connection
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with each sale of Notes. Except as otherwise specified in the applicable Pricing
Supplement, the Notes will be issued in denominations of U.S. $1,000 or any
larger amount that is an integral multiple of U.S. $1,000. Administrative
procedures with respect to the issuance and sale of the Notes (the "Procedures")
shall be agreed upon from time to time among the Company, the Agents and the
Trustee. The Agents and the Company agree to perform, and the Company agrees to
cause the Trustee to agree to perform, their respective duties and obligations
specifically provided to be performed by them in the Procedures.
4. Covenants of the Company.
The Company covenants and agrees with each Agent as follows:
(a) Notice of Certain Events. The Company will notify the Agents immediately,
and confirm such notice in writing, of (i) the effectiveness of any post-
effective amendment to the Registration Statement or the filing of any amendment
or supplement to the Prospectus (other than any amendment or supplement thereto
providing solely for the determination of the variable terms of the Notes or
relating solely to the offering of securities other than the Notes), (ii) the
receipt of any comments from the Commission, (iii) any request by the Commission
for any amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, (iv) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, or of any order preventing or suspending the use of any preliminary
prospectus, or of the initiation of any proceedings for that purpose, (v) any
change in the rating assigned by any nationally recognized statistical rating
organization to the Program or any debt securities (including the Notes) of the
Company, or the public announcement by any nationally recognized statistical
<PAGE>
rating organization that it has under surveillance or review, with possible
negative implications, its rating of the Program or any such debt securities, or
the withdrawal by any nationally recognized statistical rating organization of
its rating of the Program or any such debt securities and (iv) the expected date
of any Substitution Date under the Indenture. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing or Use of Amendments. The Company will give the Agents advance
notice of its intention to file or prepare any additional registration statement
with respect to the registration of additional Notes, any amendment to the
Registration Statement (including any filing under Rule 462(b) of the 1933 Act
Regulations) or any amendment or supplement to the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus
(other than an amendment or supplement thereto providing solely for the
determination of the variable terms of the Notes or relating solely to the
offering of securities other than the Notes or an amendment or supplement
pursuant to the requirements of the 1934 Act and the 1934 Act Regulations), will
furnish to the Agents copies of any such document a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file any
such document to which the Agents or counsel for the Agents shall object.
(c) Delivery of the Registration Statement. The Company has furnished to each
Agent and to counsel for the Agents, without charge, signed and conformed copies
of the Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein and
documents incorporated or deemed to be incorporated by reference therein) and
signed and
<PAGE>
conformed copies of all consents and certificates of experts. The Registration
Statement and each amendment thereto furnished to the Agents will be identical
to any electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of the Prospectus. The Company will deliver to each Agent,
without charge, as many copies of each preliminary prospectus as such Agent may
reasonably request, and the Company hereby consents to the use of such copies
for purposes permitted by the 1933 Act. The Company will furnish to each Agent,
without charge, such number of copies of the Prospectus (as amended or
supplemented) as such Agent may reasonably request. The Prospectus and any
amendments or supplements thereto furnished to the Agents will be identical to
any electronically transmitted copies thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(e) Preparation of Pricing Supplements. The Company will prepare, with respect
to any Notes to be sold to or through one or more Agents pursuant to this
Agreement, a Pricing Supplement with respect to such Notes in a form previously
approved by the Agents. The Company will deliver such Pricing Supplement no
later than 11:00 a.m., New York City time, on the business day following the
date of the Company's acceptance of the offer for the purchase of such Notes and
will file such Pricing Supplement pursuant to Rule 424(b)(3) under the 1933 Act
not later than the close of business of the Commission on the fifth business day
after the date on which such Pricing Supplement is first used.
(f) Revisions of Prospectus -- Material Changes. Except as otherwise provided
in subsection (m) of this Section 4, if at any time during the term of this
Agreement any event shall occur or condition shall exist as a result of which it
is necessary, in the opinion of
<PAGE>
counsel for the Agents or counsel for the Company, to amend the Registration
Statement in order that the Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or to
amend or supplement the Prospectus in order that the Prospectus will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances existing at the time the Prospectus is delivered to a
purchaser, or if it shall be necessary, in the opinion of either such counsel,
to amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company shall give immediate notice, confirmed in writing, to
the Agents to cease the solicitation of offers for the purchase of Notes in
their capacity as agents and to cease sales of any Notes they may then own as
principal, and the Agents shall as soon as practicable cease any such
solicitation or sales, and the Company will promptly prepare and file with the
Commission, subject to Section 4(b) hereof, such amendment or supplement as may
be necessary to correct such statement or omission or to make the Registration
Statement and Prospectus comply with such requirements, and the Company will
furnish to the Agents, without charge, such number of copies of such amendment
or supplement as the Agents may reasonably request. In addition, the Company
will comply with the 1933 Act, the 1933 Act Regulations, the 1934 Act and the
1934 Act Regulations so as to permit the completion of the distribution of each
offering of Notes.
(g) Prospectus Revisions -- Periodic Financial Information. Except as
otherwise provided in subsection (m) of this Section 4, on or prior to the date
on which there shall be released to the general public interim financial
statement information related to the Company with respect to each of the first
three quarters
<PAGE>
of any fiscal year or preliminary financial statement information with respect
to any fiscal year, the Company shall furnish such information to the Agents,
confirmed in writing, and shall, as required by the 1933 Act and the 1933 Act
Regulations, cause the Prospectus to be amended or supplemented to include
financial information with respect thereto and corresponding information for the
comparable period of the preceding fiscal year, as well as such other
information and explanations as shall be necessary for an understanding thereof
or as shall be required by the 1933 Act or the 1933 Act Regulations.
(h) Prospectus Revisions -- Audited Financial Information. Except as otherwise
provided in subsection (m) of this Section 4, on or prior to the date on which
there shall be released to the general public financial information included in
or derived from the audited consolidated financial statements of the Company for
the preceding fiscal year, the Company shall furnish such information to the
Agents, confirmed in writing, and shall, as required by the 1933 Act and the
1933 Act Regulations, cause the Prospectus to be amended or supplemented to
include such audited consolidated financial statements and the report or
reports, and consent or consents to such inclusion, of the independent
accountants with respect thereto, as well as such other information and
explanations as shall be necessary for an understanding of such consolidated
financial statements or as shall be required by the 1933 Act or the 1933 Act
Regulations.
(i) Earnings Statements. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
security holders an earnings statement for the purposes of, and to provide the
benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(j) Reporting Requirements. The Company, during the period when the Prospectus
is required to be
<PAGE>
delivered under the 1933 Act or the 1934 Act, will file all documents required
to be filed with the Commission pursuant to the 1934 Act within the time periods
prescribed by the 1934 Act and the 1934 Act Regulations.
(k) Restriction on Offers and Sales of Securities. Unless otherwise agreed
upon between one or more Agents acting as principal and the Company, between the
date of an agreement made in accordance with Section 3(a) hereof by such
Agent(s) to purchase the related Notes from the Company and the Settlement Date
with respect thereto, the Company will not, without the prior written consent of
such Agent(s), issue, sell, offer or contract to sell, grant any option for the
sale of, or otherwise dispose of, any debt securities of the Company (other than
the Notes that are to be sold pursuant to such agreement or commercial paper in
the ordinary course of business).
(l) Use of Proceeds. The Company will use the net proceeds received by it from
the issuance and sale of the Notes in the manner specified in the Prospectus.
(m) Suspension of Certain Obligations. The Company shall not be required to
comply with the provisions of subsections (f), (g) or (h) of this Section 4
during any period from the time (i) the Agents shall have suspended solicitation
of offers for the purchase of Notes in their capacity as agents pursuant to a
request from the Company and (ii) no Agent shall then hold any Notes purchased
from the Company as principal, as the case may be, until the time the Company
shall determine that solicitation of offers for the purchase of Notes should be
resumed or an Agent shall subsequently purchase Notes from the Company as
principal.
5. Conditions of Agents' Obligations.
<PAGE>
The obligations of one or more Agents to purchase Notes from the
Company as principal and to solicit offers for the purchase of Notes as an agent
of the Company, and the obligations of any purchasers of Notes sold through an
Agent as an agent of the Company, will be subject to the accuracy of the
representations and warranties on the part of the Company herein contained or
contained in any certificate of an officer of the Company or any of its
subsidiaries delivered pursuant to the provisions hereof, to the performance and
observance by the Company of its covenants and other obligations hereunder, and
to the following additional conditions precedent:
(a) Effectiveness of Registration Statement. The Registration Statement
(including any Rule 462(b) Registration Statement) has become effective under
the 1933 Act and no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act and no proceedings for that
purpose shall have been instituted or shall be pending or threatened by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Agents.
(b) Legal Opinions. On the date hereof, the Agents shall have received the
following legal opinions, dated as of the date hereof and in form and substance
reasonably satisfactory to the Agents (it being understood that such legal
opinions will be subject to reasonable and customary assumptions, qualifications
and exclusions):
(1) Opinion of Counsel for the Company. The favorable opinion of Perkins
Coie LLP counsel for the Company, to the effect set forth in Exhibit B
hereto and to such further effect as the Agents may reasonably request.
<PAGE>
(2) Opinion of Counsel for the Agents. The favorable opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, counsel for the Agents, relating to
statements or omissions of material facts included in the Registration
Statement and the Prospectus.
(c) Officer's Certificate. On the date hereof, there shall not have been,
since the respective dates as of which information is given in the Prospectus,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and the Agents shall have received a certificate of
the President or a Vice President of the Company and of the chief financial
officer, chief accounting officer or treasurer of the Company, dated as of the
date hereof, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties of the Company herein contained
are true and correct with the same force and effect as though expressly made at
and as of the date of such certificate, (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the date of such certificate, and (iv) no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or, to the best
of such officer's knowledge, are threatened by the Commission.
(d) Comfort Letter of Pricewaterhouse-Coopers, LLP On the date hereof, the
Agents shall have received a letter from PricewaterhouseCoopers LLP, dated as of
the date hereof and in form and substance
<PAGE>
satisfactory to the Agents, to the effect set forth in Exhibit C hereto.
(e) Additional Documents. On the date hereof, counsel to the Agents shall have
been furnished with such documents and opinions as such counsel may reasonably
require for the purpose of enabling such counsel to pass upon the issuance and
sale of Notes as herein contemplated and related proceedings, or in order to
evidence the accuracy of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of Notes as herein
contemplated shall be reasonably satisfactory in form and substance to the
Agents and to counsel to the Agents.
If any condition specified in this Section 5 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the applicable Agent or Agents by notice to the Company at any time and any
such termination shall be without liability of any party to any other party
except as provided in Section 10 hereof and except that Sections 8, 9, 11, 14
and 15 hereof shall survive any such termination and remain in full force and
effect.
6. Delivery of and Payment for Notes Sold through an Agent as Agent.
Delivery of Notes sold through an Agent as an agent of the Company
shall be made by the Company to such Agent for the account of any purchaser only
against payment therefor in immediately available funds. In the event that a
purchaser shall fail either to accept delivery of or to make payment for a Note
on the date fixed for settlement, such Agent shall promptly notify the Company
and deliver such Note to the Company and, if such Agent has theretofore paid the
Company for such Note, the Company will promptly return such funds to such
<PAGE>
Agent. If such failure has occurred for any reason other than default by such
Agent in the performance of its obligations hereunder, the Company will
reimburse such Agent on an equitable basis for its loss of the use of the funds
for the period such funds were credited to the Company's account.
7. Additional Covenants of the Company.
The Company further covenants and agrees with each Agent as follows:
(a) Reaffirmation of Representations and Warranties. Each acceptance by the
Company of an offer for the purchase of Notes (whether to one or more Agents as
principal or through an Agent as agent), and each delivery of Notes (whether to
one or more Agents as principal or through an Agent as agent), shall be deemed
to be an affirmation that the representations and warranties of the Company
herein contained are true and correct at the time of such acceptance or sale, as
the case may be, and an undertaking that such representations and warranties
will be true and correct at the time of delivery to such Agent(s) or to the
purchaser or its agent, as the case may be, of the Notes relating to such
acceptance or sale, as the case may be, as though made at and as of each such
time (it being understood that such representations and warranties shall relate
to the Registration Statement and Prospectus as amended and supplemented to each
such time).
(b) Subsequent Delivery of Certificates. Each time that (i) the Registration
Statement or the Prospectus shall be amended or supplemented (other than by an
amendment or supplement providing solely for the determination of the variable
terms of the Notes or relating solely to the offering of securities other than
the Notes), (ii) (if required in connection with the purchase of Notes from the
Company by one or more Agents as principal) the Company sells Notes to one or
more
<PAGE>
Agents as principal or (iii) the Company sells Notes in a form not previously
certified to the Agents by the Company, the Company shall furnish or cause to be
furnished to the Agent(s), forthwith a certificate dated the date of filing with
the Commission or the date of effectiveness of such amendment or supplement, as
applicable, or the date of such sale, as the case may be, in form reasonably
satisfactory to the Agent(s) to the effect that the statements contained in the
certificate referred to in Section 5(c) hereof which were last furnished to the
Agents are true and correct at the time of the filing or effectiveness of such
amendment or supplement, as applicable, or the time of such sale, as the case
may be, as though made at and as of such time (except that such statements shall
be deemed to relate to the Registration Statement and the Prospectus as amended
and supplemented to such time) or, in lieu of such certificate, a certificate of
the same tenor as the certificate referred to in Section 5(c) hereof, modified
as necessary to relate to the Registration Statement and the Prospectus as
amended and supplemented to the time of delivery of such certificate (it being
understood that, in the case of clause (ii) above, any such certificate shall
also include a certification that there has been no material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise since the date of the agreement by such Agent(s) to purchase Notes
from the Company as principal).
(c) Subsequent Delivery of Legal Opinions. Each time that (i) the Registration
Statement or the Prospectus shall be amended or supplemented (other than by an
amendment or supplement providing solely for the determination of the variable
terms of the Notes or relating solely to the offering of securities other than
the Notes), (ii) (if required in connection with the purchase of Notes from the
Company by one or more Agents as principal) the Company sells Notes to one or
more
<PAGE>
Agents as principal or (iii) the Company sells Notes in a form not previously
certified to the Agents by the Company, the Company shall furnish or cause to be
furnished forthwith to the Agent(s) and to counsel to the Agents the written
opinion of Perkins Coie LLP counsel to the Company, or other counsel reasonably
satisfactory to the Agent(s), dated the date of filing with the Commission or
the date of effectiveness of such amendment or supplement, as applicable, or the
date of such sale, as the case may be, in form and substance reasonably
satisfactory to the Agent(s), of the same tenor as the opinion referred to in
Section 5(b)(1) hereof, but modified, as necessary, to relate to the
Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such opinion or, in lieu of such opinion, counsel last
furnishing such opinion to the Agents shall furnish the Agent(s) with a letter
substantially to the effect that the Agent(s) may rely on such last opinion to
the same extent as though it was dated the date of such letter authorizing
reliance (except that statements in such last opinion shall be deemed to relate
to the Registration Statement and the Prospectus as amended and supplemented to
the time of delivery of such letter authorizing reliance).
(d) Subsequent Delivery of Comfort Letters. Each time that (i) the
Registration Statement or the Prospectus shall be amended or supplemented to
include additional financial information (other than by an amendment or
supplement relating solely to the issuance and/or offering of securities other
than the Notes) or (ii) (if required in connection with the purchase of Notes
from the Company by one or more Agents as principal) the Company sells Notes to
one or more Agents as principal, the Company shall cause PricewaterhouseCoopers
LLP forthwith to furnish to the Agent(s) a letter, dated the date of filing with
the Commission or the date of effectiveness of such amendment or supplement, as
applicable, or the date of such sale, as the case may be, in form satisfactory
to the Agent(s),
<PAGE>
of the same tenor as the letter referred to in Section 5(d) hereof but modified
to relate to the Registration Statement and Prospectus as amended and
supplemented to the date of such letter.
8. Indemnification.
(a) Indemnification of the Agents. The Company agrees to indemnify and hold
harmless each Agent and each person, if any, who controls such Agent within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim and damage whatsoever, as
incurred, arising out of an untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or any amendment
thereto), or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided that (subject to
<PAGE>
Section 8(d) hereof) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by such Agent), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Agents
expressly for use in the Registration Statement (or any amendment thereto) or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided further, that such indemnity with respect to the
Prospectus shall not inure to the benefit of any Agent (or any person
controlling any Agent) from whom the person asserting any such loss, liability,
claim, damage or expense purchased the Notes which are the subject thereof if
such person did not receive a copy of the Prospectus (or the Prospectus as
supplemented), excluding documents incorporated therein by reference, at or
prior to the confirmation of the sale of such Notes to such person in any case
where such delivery is required by the 1933 Act and the untrue statement or
omission of a material fact contained in the Prospectus was corrected in the
Prospectus as supplemented.
<PAGE>
(b) Indemnification of Company, Directors and Officers. Each Agent severally
agrees to indemnify and hold harmless the Company, its directors, each of its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in Section 8(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by the Agents expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified party shall give
notice as promptly as reasonably practicable to each indemnifying party of any
action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 8(a) hereof,
counsel to the indemnified parties shall be selected by the applicable Agent(s)
and, in the case of parties indemnified pursuant to Section 8(b) hereof, counsel
to the indemnified shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to
<PAGE>
the indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 8 or 9 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable in accordance with Section 8(a)(iii) for any
settlement of the nature contemplated by Section 8(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
<PAGE>
accordance with such request prior to the date of such settlement.
9. Contribution. If the indemnification provided for in Section 8 hereof is
for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the applicable Agent(s), on the other hand, from the offering of the
Notes that were the subject of the claim for indemnification or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, on the one
hand, and the applicable Agent(s), on the other hand, in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and
the applicable Agent(s), on the other hand, in connection with the offering of
the Notes that were the subject of the claim for indemnification shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of such Notes (before deducting expenses) received by the Company and
the total discount or commission received by each applicable Agent, as the case
may be, bears to the aggregate initial offering price of such Notes.
The relative fault of the Company, on the one hand, and the applicable
Agent(s), on the other hand, shall be determined by reference to, among other
things,
<PAGE>
whether any untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the applicable Agent(s) and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Agents agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the applicable Agent(s) were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 9.
Notwithstanding the provisions of this Section 9, (i) no Agent shall
be required to contribute any amount in excess of the amount by which the total
discount or commission received by such Agent in connection with the offering of
the Notes that were the subject of the claim for indemnification exceeds the
amount of any damages which such Agent has otherwise been required to pay by
reason of any applicable untrue or alleged untrue statement or omission or
alleged omission and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. In addition, in connection with an offering of Notes
purchased from the Company by two or more Agents as principal, the respective
obligations of such Agents to contribute pursuant to this Section 9 are several,
and not joint, in proportion to the aggregate principal amount of Notes that
each such Agent has agreed to purchase from the Company.
For purposes of this Section 9, each person, if any, who controls an
Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934
Act shall
<PAGE>
have the same rights to contribution as such Agent, and each director of the
Company, each officer of the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company.
10. Payment of Expenses.
The Company will pay all expenses incident to the performance of its
obligations under this Agreement, including:
(a) The preparation, filing, printing and delivery of the Registration
Statement as originally filed and all amendments thereto and any preliminary
prospectus, the Prospectus and any amendments or supplements thereto;
(b) The preparation, printing and delivery of this Agreement and the Indenture;
(c) The preparation, issuance and delivery of the Notes, including any fees and
expenses relating to the eligibility and issuance of Notes in book-entry form
and the cost of obtaining CUSIP or other identification numbers for the Notes;
(d) The fees and disbursements of the Company's accountants, counsel and other
advisors or agents (including any calculation agent) and of the Trustee and its
counsel;
(e) The reasonable fees and disbursements of counsel to the Agents incurred in
connection with the establishment of the Program and incurred from time to time
in connection with the transactions contemplated hereby;
<PAGE>
(f) The fees charged by nationally recognized statistical rating organizations
for the rating of the Program and the Notes;
(g) The fees and expenses incurred in connection with any listing of Notes on a
securities exchange;
(h) The filing fees incident to, and the reasonable fees and disbursements of
counsel to the Agents in connection with, the review, if any, by the National
Association of Securities Dealers, (the "NASD"); and
(i) Any advertising and other out-of-pocket expenses of the Agents incurred
with the approval of the Company.
11. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto or thereto shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
the Agents or any controlling person of an Agent, or by or on behalf of the
Company, and shall survive each delivery of and payment for the Notes.
12. Termination.
(a) Termination of this Agreement. This Agreement (excluding any agreement by
one or more Agents to purchase Notes from the Company as principal) may be
terminated for any reason, at any time by either the Company or an Agent, as to
itself, upon the giving of 30 days' prior written notice of such termination to
the other party hereto.
<PAGE>
(b) Termination of Agreement to Purchase Notes as Principal. The applicable
Agent(s) may terminate any agreement by such Agent(s) to purchase Notes from the
Company as principal, immediately upon notice to the Company, at any time prior
to the Settlement Date relating thereto, if (i) there has been, since the date
of such agreement or since the respective dates as of which information is given
in the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) there has occurred any
material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development or event involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the reasonable judgment of such
Agent(s), impracticable to market such Notes or enforce contracts for the sale
of such Notes, or (iii) trading in any securities of the Company has been
suspended or limited by the Commission or a national securities exchange, or if
trading generally on the New York Stock Exchange or the American Stock Exchange
or in the NASDAQ National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by either of said exchanges or by such system or by order of the
Commission, the NASD or any other governmental authority, or (iv) a banking
moratorium has been declared by either Federal or New York authorities, or (v)
the rating assigned by any nationally recognized statistical rating organization
to the Program or any debt securities (including the Notes) of the Company as of
the date of such agreement shall have been lowered or withdrawn since that date
or if any such rating organization shall have publicly announced
<PAGE>
that it has under surveillance or review its rating of the Program or any such
debt securities, or (vi) there shall have come to the attention of such Agent(s)
any facts that would cause such Agent(s) to believe that the Prospectus, at the
time it was required to be delivered to a purchaser of such Notes, included an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time of such delivery, not misleading.
(c) General. In the event of any such termination, neither party will have any
liability to the other party hereto, except that (i) the Agents shall be
entitled to any commissions earned in accordance with the third paragraph of
Section 3(b) hereof, (ii) if at the time of termination (a) any Agent shall own
any Notes purchased by it from the Company as principal or (b) an offer to
purchase any of the Notes has been accepted by the Company but the time of
delivery to the purchaser or his agent of such Notes relating thereto has not
occurred, the covenants set forth in Sections 4 and 7 hereof shall remain in
effect until such Notes are so resold or delivered, as the case may be, and
(iii) the covenant set forth in Section 4(k) hereof, the provisions of Section
10 hereof, the indemnity and contribution agreements set forth in Sections 8 and
9 hereof, and the provisions of Sections 11, 14 and 15 hereof shall remain in
effect.
13. Notices.
Unless otherwise provided herein, all notices required under the terms
and provisions hereof shall be in writing, either delivered by hand, by mail or
by telex, telecopier or telegram, and any such notice shall be effective when
received at the address specified below.
If to the Company:
<PAGE>
Puget Sound Energy,
411-108th Avenue N.E.
Bellevue, Washington 98004-5515
Attention: Treasurer
Telecopy No.: (425) 462-3300
If to the Agents:
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower - 10th Floor
New York, New York 10281-1310
Attention: MTN Product Management
Telecopy No.: (212) 449-2234
Salomon Smith Barney Inc.
Seven World Trade Center
New York, NY 10048
Attention: Medium Term Note Department
Telecopy No.: (212) 783-2274
or at such other address as such party may designate from time to time by notice
duly given in accordance with the terms of this Section 13.
14. Parties.
This Agreement shall inure to the benefit of and be binding upon the
Agents and the Company and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto and their respective
successors and the controlling persons, officers and directors referred to in
Sections 8 and 9 hereof and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
<PAGE>
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the parties
hereto and their respective successors, and said controlling persons, officers
and directors and their heirs and legal representatives, and for the benefit of
no other person, firm or corporation. No purchaser of Notes shall be deemed to
be a successor by reason merely of such purchase.
15. GOVERNING LAW; FORUM.
THIS AGREEMENT AND ALL THE RIGHTS AND OBLIGATIONS OF THE PARTIES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY THE COMPANY AGAINST ANY AGENT IN CONNECTION WITH OR
ARISING UNDER THIS AGREEMENT SHALL BE BROUGHT SOLELY IN THE STATE OR FEDERAL
COURT OF APPROPRIATE JURISDICTION LOCATED IN THE BOROUGH OF MANHATTAN, THE CITY
OF NEW YORK.
16. Effect of Headings.
The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
17. Counterparts.
This Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts hereof shall
constitute a single instrument.
<PAGE>
If the foregoing is in accordance with the Agents' understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this Distribution Agreement, along with all counterparts, will become
a binding agreement among the Agents and the Company in accordance with its
terms.
Very truly yours,
PUGET SOUND ENERGY,
By: /s/ Donald E. Gaines
Name: Donald E. Gaines
Title: Treasurer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Amery B. Dunn
Authorized Signatory
SALOMON SMITH BARNEY INC.
By: /s/ Howard Hiller
Authorized Signatory
<PAGE>
SCHEDULE A
As compensation for the services of the Agents hereunder, the Company
shall pay the applicable Agent, on a discount basis, a commission for the sale
of each Note equal to the principal amount of such Note multiplied by the
appropriate percentage set forth below:
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL
MATURITY RANGES AMOUNT
--------------- ----------
<S> <C>
From 9 months to less than 1 year............ .125%
From 1 year to less than 18 months........... .150
From 18 months to less than 2 years.......... .200
From 2 years to less than 3 years............ .250
From 3 years to less than 4 years............ .350
From 4 years to less than 5 years............ .450
From 5 years to less than 6 years............ .500
From 6 years to less than 7 years............ .550
From 7 years to less than 10 years........... .600
From 10 years to less than 15 years.......... .625
From 15 years to less than 20 years.......... .700
From 20 years to less than 30 years.......... .750
Exactly 30 years............................. .875
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Greater than 30 years........................ /1/
</TABLE>
------------
/1/ As agreed to by the Company and the applicable Agent at the time of sale.
<PAGE>
EXHIBIT A
FORM OF TERMS AGREEMENT
Principal Amount: $_______
Interest Rate or Formula:
If Fixed Rate Note,
Interest Rate:
Interest Payment Dates:
If Floating Rate Note,
Interest Rate Basis(es):
If LIBOR,
[ ] LIBOR Reuters Page:
[ ] LIBOR Telerate Page:
Designated LIBOR Currency:
If CMT Rate,
Designated CMT Telerate Page:
If Telerate Page 7052:
[ ] Weekly Average
[ ] Monthly Average
Designated CMT Maturity Index:
Index Maturity:
Spread and/or Spread Multiplier, if any:
Initial Interest Rate, if any:
Initial Interest Reset Date:
Interest Reset Dates:
Interest Payment Dates:
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:
Fixed Rate Commencement Date, if any:
Fixed Interest Rate, if any:
Day Count Convention:
Calculation Agent:
Redemption Provisions:
Initial Redemption Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction, if any:
Repayment Provisions:
Optional Repayment Date(s):
1
<PAGE>
Original Issue Date:
Stated Maturity Date:
Specified Currency:
Exchange Rate Agent:
Authorized Denomination:
Purchase Price: ___%, plus accrued interest, if any, from ___________
Price to Public: ___%, plus accrued interest, if any, from ___________
Issue Price:
Settlement Date and Time:
Additional/Other Terms:
Also, in connection with the purchase of Notes from the Company by one or more
Agents as principal, agreement as to whether the following will be required:
Officers' Certificate pursuant to Section 7(b) of the Distribution
Agreement.
Legal Opinion pursuant to Section 7(c) of the Distribution Agreement.
Comfort Letter pursuant to Section 7(d) of the Distribution Agreement.
[Agents]
By:
Its
Accepted and Agreed to
Puget Sound Energy, Inc.
By:
Its
2
<PAGE>
EXHIBIT B
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)(1)
1. The Company has been duly incorporated and is validly existing as a
corporation under the laws of the state of Washington.
2. The Company has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into the Distribution Agreement and consummate the transactions
contemplated in the Prospectus.
3. The Company is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in good
standing would not result in a Material Adverse Effect.
4. The Distribution Agreement has been duly authorized, executed and delivered
by the Company.
5. The Note Indenture has been duly authorized by the Company and, when
executed and delivered by the Company (assuming due authorization, execution and
delivery thereof by the Note Trustee), will constitute a valid and legally
binding agreement of the Company.
6. The Notes have been duly authorized by the Company for offer, sale,
issuance and delivery pursuant to the Distribution Agreement and, when issued
and authenticated in the manner provided for in the Note Indenture and delivered
against payment of the consideration therefor, will constitute valid and legally
binding obligations of the Company, enforceable against
1
<PAGE>
the Company in accordance with their terms; and the Notes, in the forms
certified on the date hereof, are in substantially the form contemplated by, and
each registered holder thereof is entitled to the benefits of, the Note
Indenture. The Pledged Bonds have been duly authorized by the Company for
issuance and delivery pursuant to the Mortgage and, when issued and
authenticated in the manner provided for in the Mortgage, and delivered to the
Note Trustee as contemplated by the Note Indenture, will constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their terms; and the Pledged Bonds, in the forms certified on
the date hereof, are in substantially the form contemplated by, and each
registered holder thereof is entitled to the benefits of, the Mortgage. The
Company's obligations under each Note will be secured by the Pledged Bonds
delivered to the Note Trustee in trust for the benefit of the holders of such
Note. Assuming compliance by the Company and the Note Trustee with terms of the
Pledged Bonds, no persons or entities other than the Note Trustee (or any
successor thereof) and the holders of the Notes will have any interest in the
Pledged Bonds.
7. The Note Indenture and the Notes, in the forms certified on the date
hereof, conform in all material respects to the statements relating thereto
contained in the Prospectus and are in substantially the form filed or
incorporated by reference, as the case may be, as an exhibit to the Registration
Statement.
8. The information in the Prospectus under "Securities," "Description of
Senior Notes," "Pledged Electric Bonds and Electric Utility Mortgage" and
"Pledged Gas Bonds and Gas Utility Mortgage," or any caption purporting to cover
such matters, the information in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 under "Regulation and Rates" and "Legal
Proceeding" and the information in the Registration Statement under Item 15, to
the extent that such information constitutes matters of law, summaries of
2
<PAGE>
legal matters, the Company's charter and bylaws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material respects.
9. To the best of our knowledge, neither the Company nor any of
its subsidiaries is in violation of its charter or bylaws, and no default by the
Company or any of its subsidiaries exists in the due performance or observance
of any obligation, agreement, covenant or condition contained in any agreement
providing for the issuance of the Company's securities or under which the
Company has outstanding indebtedness for borrowed money, except for such
defaults which would not reasonably be expected to have a Material Adverse
Effect.
10. The execution, delivery and performance of the Distribution Agreement, the
Note Indenture and the Notes and any other agreement or instrument entered into
or issued or to be entered into or issued by the Company in connection with the
transactions contemplated in the Prospectus, the consummation of the
transactions contemplated in the Prospectus (including the issuance and sale of
the Notes and the use of the proceeds therefrom as described in the Prospectus)
and the compliance by the Company with its obligations thereunder have been duly
authorized by all necessary corporate action and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event under, or result in the
creation or imposition of any lien, charge or encumbrance upon any assets,
properties or operations of the Company or any of its subsidiaries pursuant to,
any agreement and instrument known to us, which, in the event of any such
conflict, breach, default, Repayment Event or imposition of lien, charge or
encumbrance, would be reasonably expected to have a Material Adverse Effect, nor
will such action result in any violation of the provisions of the charter or
bylaws of the Company or any applicable law, statute, rule, regulation,
judgment, order, writ or decree, known to us, of any government, government
instrumentality or
3
<PAGE>
court, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their assets, properties or operations.
11. To the best of our knowledge, there is no action, suit, proceeding, inquiry
or investigation to which the Company or any of its subsidiaries is a party,
before or brought by any court or governmental agency or body, domestic or
foreign, which might reasonably be expected to result in a Material Adverse
Effect or which might reasonably be expected to materially and adversely affect
the assets, properties or operations of the Company or any of its subsidiaries,
the performance by the Company of its obligations under the Distribution
Agreement, the Note Indenture or the Notes or the consummation of the
transactions contemplated in the Prospectus.
12. All descriptions in the Prospectus of contracts and other documents to
which the Company or any of its subsidiaries are a party are accurate in all
material respects; and, to the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits to the Registration Statement other than
those described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are correct
in all material respects.
13. To the best of our knowledge, there are no statutes or regulations that are
required to be described in the Prospectus that are not described as required.
14. The Registration Statement has been declared effective under the 1933 Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and to the best
of our knowledge, no stop order suspending the effectiveness of the Registration
4
<PAGE>
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been initiated or are pending or threatened by the Commission.
15. The Registration Statement and the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to the
Registration Statement and Prospectus, excluding the documents incorporated by
reference therein, as of their respective effective or issue dates (other than
the financial statements and supporting schedules and other financial and
statistical data included therein or omitted therefrom and the Trustee's
Statement of Eligibility on Form T-1 (the "Form T-1"), as to which we express no
opinion), complied as to form in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations.
16. The documents incorporated by reference in the Prospectus (other than the
financial statements and supporting schedules and other financial and
statistical data included therein or omitted therefrom, as to which we express
no opinion), when they were filed with the Commission, complied as to form in
all material respects with the requirements of the 1934 Act and the 1934 Act
Regulations.
17. The Company is not, and upon the issuance and sale of the Notes and the
application of the net proceeds therefrom as described in the Prospectus will
not be, an "investment company" within the meaning of the 1940 Act.
18. The Washington Utilities and Transportation Commission has issued an Order,
dated [ ], with respect to the Notes and the Pledged Bonds and such
Order has not been rescinded, annulled or modified. Except for such filings
subsequent to the date hereof as may be specifically required by the Washington
Utilities and Transportation Commission in order to effectuate the Order, and
except for filings of the Seventy-Eighth Supplemental Indenture under applicable
recording laws in
5
<PAGE>
the states of Washington and Montana, no other filing with, or approval,
authorization, consent, license, registration, qualification, order or decree
of, any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by the Company of its obligations
under the Distribution Agreement, the Note Indenture or the Notes or the
consummation of the transactions contemplated in the Prospectus other than under
the 1933 Act, the 1933 Act Regulations, the 1939 Act and the 1939 Act
Regulations, which have been made, obtained or rendered, as applicable, and
other than compliance with the provisions of applicable state securities or
"blue sky" laws.
Although we assume no responsibility for the factual accuracy, completeness
or fairness of any statements made in the Registration Statement or any post-
effective amendment thereto or the Prospectus or any amendment or supplement
thereto, except as stated in paragraphs 8, 12 and 13 hereof, we have reviewed
the Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendment or supplement thereto, participated in conferences
with representatives of the Company, its accountants and your representatives
and legal counsel, at which the contents of the Registration Statement,
including any post-effective amendment thereto, and the Prospectus, including
any amendment or supplement thereto, and related matters were discussed, and we
do not know of any reason to believe that, at the effective date of the
Registration Statement or any post-effective amendment thereto, or at the date
hereof, the Registration Statement contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus or any amendment or supplement thereto, at the time such
Prospectus was issued, at the time any such amended or supplemented Prospectus
was issued, or at the date hereof, included or includes any untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the
6
<PAGE>
statements therein, in light of the circumstances under which they
were made, not misleading (except that we express no view as to the accuracy of
the financial statements or supporting schedules or the other financial and
statistical information contained in the Registration Statement or any post-
effective amendment thereto or in the Prospectus or any amendment or supplement
thereto).
7
<PAGE>
EXHIBIT C
FORM OF ACCOUNTANT'S COMFORT LETTER
PURSUANT TO SECTION 5(d)
We are independent public accountants with respect to the Company and its
subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations
and:
(i) in our opinion, the audited consolidated financial statements
and the related financial statement schedules included or incorporated by
reference in the Registration Statement and the Prospectus comply as to
form in all material respects with the applicable accounting requirements
of the 1933 Act and the 1933 Act Regulations;
(ii) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of a
reading of the unaudited interim consolidated financial statements of the
Company for the [three- month periods ended _________, 19__ and _________,
19__, the three- and six-month periods ended _________, 19__ and _________,
19__ and the three- and nine-month periods ended _________, 19__ and
_________, 19__, included or incorporated by reference in the Registration
Statement and the Prospectus (collectively, the "10-Q Financials")]/2/ [, a
reading of the unaudited interim consolidated financial statements of the
Company for the _____-month periods ended _________, 19___ and _________,
19___, included or incorporated by reference in the Registration Statement
and the Prospectus (the
------------
/2/ Include the appropriate dates of the 10-Q Financials.
1
<PAGE>
"_____-month financials")]/3/ [, a reading of the latest available
unaudited interim consolidated financial statements of the Company],/4/ a
reading of the minutes of all meetings of the stockholders and directors of
the Company and its subsidiaries and committees thereof since [day after
end of last audited period], inquiries of certain officials of the Company
and its subsidiaries responsible for financial and accounting matters, a
review of interim financial information in accordance with standards
established by the American Institute of Certified Public Accountants in
Statement on Auditing Standards No. 71, Interim Financial Information ("SAS
71"),/5/ with respect to the
------------
/3/ Include if non-10-Q Financials are included or incorporated by reference in
the Registration Statement and the Prospectus.
/4/ Include if the latest available unaudited financial statements are more
recent than the unaudited financial statements included or incorporated by
reference in the Registration Statement and the Prospectus.
/5/ Note that a review in accordance with SAS 71 is required for an accountant
to give negative assurance on interim financial information. A review in
accordance with SAS 71 will only be performed at the request of the Company and
the accountant's report, if any, related to that review will be addressed only
to the Company. Many companies have a SAS 71 review performed in connection with
the preparation of their 10-Q Financials. See Codification of Statements on
Auditing Standards, AU (S) 722 for a description of the procedures that
constitute such a review. The comfort letter itself should recite that the
review was performed and a copy of the report, if any, should be attached to the
comfort letter. Any report issued pursuant to SAS 71 that is mentioned in the
Registration Statement should also be included in the Registration Statement as
an exhibit. If a review in accordance with SAS 71 has not and will not be
performed by the accountants, they should be prepared to perform certain agreed-
upon procedures on the interim financial information and to report their
findings thereon in the comfort letter. See Codification of Statements on
Auditing Standards, AU (S) 622 for a discussion of reports related to the
accountant's performance of agreed-upon procedures. Any question as to whether a
review in
2
<PAGE>
[description of relevant periods]/6/ and such other inquiries
and procedures as may be specified in such letter, nothing came to our
attention that caused us to believe that:
(A) the 10-Q Financials included or incorporated by reference in the
Registration Statement and the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the 1934 Act and the 1934 Act Regulations
applicable to unaudited financial statements included in Form 10-
Q or any material modifications should be made to the 10-Q
Financials included or incorporated by reference in the
Registration Statement and the Prospectus for them to be in
conformity with generally accepted accounting principles;
[(B) the _____-month financials included or incorporated by reference
in the Registration Statement and the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations
applicable to unaudited interim financial statements included in
registration statements or any material modifications should be
made to the _____-month financials included in the Registration
Statement and the Prospectus
--------------------------------------------------------------------------------
accordance with SAS 71 will be performed by the accountants should be
resolved early.
/6/ The relevant periods include all interim unaudited consolidated financial
statements included or incorporated by reference in the Registration Statement
and the Prospectus.
3
<PAGE>
for them to be in conformity with generally accepted accounting
principles;]/7/
(C) at [_________, 19___ and at]/8/ a specified date not more than
five days/9/ prior to the date hereof, there was any change in
the ___________ of the Company and its subsidiaries, any decrease
in the __________ of the Company and its subsidiaries or any
increase in the __________ of the Company and its
subsidiaries/10/, in each case as compared with amounts shown in
the latest balance sheet included or incorporated by reference in
the Registration Statement and the Prospectus, except in each
case for any changes, decreases or increases that the
Registration Statement and the Prospectus disclose have occurred
or may occur; or
------------
/7/ Include if unaudited financial statements, not just selected unaudited
data, are included or incorporated by reference in the Registration Statement
and the Prospectus.
/8/ If the latest available unaudited financial statements are more recent than
the unaudited financial statements included or incorporated by reference in the
Registration Statement and the Prospectus, include and insert the date of the
latest available financial statements of the Company.
/9/ According to Example A of SAS No. 72, the specified date should be five
calendar days prior to the date of the comfort letter. However, in unusual
circumstances, five business days may be used.
/10/ The blanks should be filled in with significant balance sheet items,
selected by the banker and tailored to the issuer's industry in general and
operations in particular. While the ultimate decision of which items should be
included rests with the banker, comfort is routinely requested for certain
balance sheet items, including long-term debt, stockholders' equity, capital
stock and net current assets.
4
<PAGE>
(D) for the period from [_________, 19__ to _________, 19__ and for
the period from]/11/ _________, 19__ to a specified date not more
than five days prior to the date hereof, there was any decrease
in _________, __________ or ___________,/12/ in each case as
compared with the comparable period in the preceding year, except
in each case for any decreases that the Registration Statement
and the Prospectus discloses have occurred or may occur;
[(iii) based upon the procedures set forth in clause (ii) above
and a reading of the Selected Financial Data included or incorporated by
reference in the Registration Statement and the Prospectus [and a reading
of the financial statements from which such data were derived],/13/ nothing
came to our attention that caused us to believe that the
------------
/11/ If the latest available unaudited financial statements are more recent than
the unaudited financial statements included or incorporated by reference in the
Registration Statement and the Prospectus, include and insert the period from
the end of the period of the unaudited financial statements included or
incorporated by reference in the Registration Statement and the Prospectus to
the date of the latest available financial statements of the Company. Even if
this first period is applicable, the second period should run from the date of
the most recent financial statements included or incorporated by reference in
the Registration Statement and the Prospectus, not from the latest available
financial statements of the Company.
/12/ The blanks should be filled in with significant income statement items,
selected by the banker and tailored to the issuer's industry in general and
operations in particular. While the ultimate decision of which items should be
included rests with the banker, comfort is routinely requested for certain
income statement items, including net sales, total and per share amounts of
income before extraordinary items and of net income.
/13/ Include only if there are selected financial data that have been derived
from financial statements not included or incorporated by reference in the
Registration Statement and the Prospectus.
5
<PAGE>
Selected Financial Data included or incorporated by reference in the
Registration Statement and the Prospectus do not comply as to form in all
material respects with the disclosure requirements of Item 301 of
Regulation S-K of the 1933 Act [, that the amounts included in the Selected
Financial Data are not in agreement with the corresponding amounts in the
audited consolidated financial statements for the respective periods or
that the financial statements not included or incorporated by reference in
the Registration Statement and the Prospectus from which certain of such
data were derived are not in conformity with generally accepted accounting
principles;]/14/
(iv) we have compared the information included or incorporated by
reference in the Registration Statement and the Prospectus under selected
captions with the disclosure requirements of Regulation S-K of the 1933 Act
and on the basis of limited procedures specified herein, nothing came to
our attention that caused us to believe that such information does not
comply as to form in all material respects with the disclosure requirements
of Items 302, 402 and 503(d), respectively, of Regulation S-K;
------------
/14/ In unusual circumstances, the accountants may report on "Selected Financial
Data" as described in SAS No. 42, Reporting on Condensed Financial Statements
and Selected Financial Data, and include in their report in the Registration
Statement and the Prospectus the paragraph contemplated by SAS No. 42.9. This
situation may arise only if the Selected Financial Data do not include interim
period data and the five-year selected data are derived entirely from financial
statements audited by the auditors whose report is included in the Registration
Statement and the Prospectus. If the guidelines set forth in SAS No. 42 are
followed and the accountant's report as included in the Registration Statement
and the Prospectus includes the additional language prescribed by SAS No. 42.9,
the bracketed language may be eliminated.
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[(v) based upon the procedures set forth in clause (ii) above, a
reading of the latest available unaudited financial statements of the
Company that have not been included or incorporated by reference in the
Registration Statement and the Prospectus and a review of such financial
statements in accordance with SAS 71, nothing came to our attention that
caused us to believe that the unaudited amounts for ________ for the [most
recent period] do not agree with the amounts set forth in the unaudited
consolidated financial statements for those periods or that such unaudited
amounts were not determined on a basis substantially consistent with that
of the corresponding amounts in the audited consolidated financial
statements;]/15/
[(vi) we are unable to and do not express any opinion on the [Pro
Forma Combined Balance Sheet and Statement of Operations] (collectively,
the "Pro Forma Statements") included or incorporated by reference in the
Registration Statement and the Prospectus or on the pro forma adjustments
applied to the historical amounts included in the Pro Forma Statements;
however, for purposes of this letter we have:
(A) read the Pro Forma Statements;
(B) performed [an audit] [a review in accordance with SAS 71] of
the financial statements to which the pro forma adjustments
were applied ;
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/15/ This language should be included when the Registration Statement and the
Prospectus include earnings or other data for a period after the date of the
most recent financial statements included or incorporated by reference in the
Registration Statement and the Prospectus. The blank should be filled in with a
description of the financial statement item(s) included.
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(C) made inquiries of certain officials of the Company who have
responsibility for financial and accounting matters about
the basis for their determination of the pro forma
adjustments and whether the Pro Forma Statements comply as
to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X; and
(D) proved the arithmetic accuracy of the application of the pro
forma adjustments to the historical amounts in the Pro Forma
Statements; and
on the basis of such procedures and such other inquiries and procedures as
specified herein, nothing came to our attention that caused us to believe
that the Pro Forma Statements included or incorporated by reference in the
Registration Statement and the Prospectus do not comply as to form in all
material respects with the applicable requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;]/16/
(vii) in addition to the procedures referred to in clause (ii)
above, we have performed other procedures, not constituting an audit, with
respect to certain amounts, percentages, numerical data and financial
information included or incorporated by reference in the Registration
Statement and the Prospectus, which are specified herein, and have
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/16/ If an audit or a review in accordance with SAS 71 has not been performed by
the accountants with respect to the underlying historical financial statements,
or if negative assurance on the Company's pro forma financial statements is not
otherwise available, the accountants should be requested to perform certain
other procedures with respect to such pro forma financial statements. See
Example O of SAS No. 72.
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compared certain of such items with, and have found such items to be in
agreement with, the accounting and financial records of the Company;/17/
and
[(viii) in addition, we [add comfort on any financial forecast
that is included or incorporated by reference in the Registration Statement
and the Prospectus]/18/.
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/17/ This language is intended to encompass all other financial/numerical
information included or incorporated by reference in the Registration Statement
and the Prospectus for which comfort may be given, including (but not limited
to) narrative and other summary financial data appearing in tabular form (e.g.
the capitalization table).
/18/ Accountants' services with respect to a financial forecast may take one of
three forms: an examination of the forecast, a compilation of the forecast or
the application of agreed-upon procedures to the forecast. If the accountant is
to perform an examination of the forecast included or incorporated by reference
in the Registration Statement and the Prospectus, text should state that, in
their opinion, the forecasted financial statements for the [relevant period or
periods] included or incorporated by reference in the Registration Statement and
the Prospectus are presented in conformity with guidelines for presentation of a
forecast established by the AICPA, and that the underlying assumptions provide a
reasonable basis for management's forecast. If the accountant is to perform a
compilation of the forecasted financial statements included or incorporated by
reference in the Registration Statement and the Prospectus, text should state
that they have compiled the forecasted financial statements for the [relevant
period or periods] included or incorporated by reference in the Registration
Statement and the Prospectus in accordance with the guidelines established by
the AICPA. Finally, if the accountant is to perform agreed-upon procedures on a
forecast included or incorporated by reference in the Registration Statement and
the Prospectus, SAS No. 72 requires that the accountant first prepare a
compilation report with respect to the forecast and attach such report to the
comfort letter, after which the accountant may report on specific procedures
performed and findings obtained.
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