===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1997
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Registrant, State or other Jurisdiction
Commission of Incorporation or Organization, I.R.S. Employer
File Number Address and Telephone Number Identification No.
----------- ------------------------------------- -----------------
333-09033 Southern Investments UK plc None
Park Avenue
Aztec West
Almondsbury
Bristol
BS12 4SE, UK
(01144) 1454 201101
==============================================================================
<PAGE>
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
Aggregate market value of voting stock held by non-affiliates: $0
A description of the registrant's common stock follows:
Description of Shares Outstanding
Registrant Common Stock at May 31, 1997
- - ---------- --------------- ------------------
Southern Investments UK plc Par Value(pound)1 Per Share 500,400,587
<PAGE>
Table of Contents
PART I
<TABLE>
<CAPTION>
<S> <C> <C>
PAGE
Item 1 Business
General............................................................................ I-1
Overview of the Electric Utility Industry in Great Britain......................... I-2
SWEB's Main Businesses............................................................. I-3
SWEB's Other Business Activities................................................... I-7
Risk Management.................................................................... I-7
UK Environmental Regulation........................................................ I-8
Employees.......................................................................... I-8
Item 2 Properties............................................................................ I-9
Item 3 Legal Proceedings..................................................................... I-9
Item 4 Submission of Matters to a Vote of Security Holders................................... I-9
PART II
Item 5 Common Equity Market.................................................................. II-1
Item 6 Selected Financial Data............................................................... II-1
Item 7 Management's Discussion and Analysis of Results of Operations and Financial Condition
Introduction....................................................................... II-2
Results of Operations.............................................................. II-3
Financial Condition................................................................ II-7
Item 8 Financial Statements and Supplementary Data........................................... II-9
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................................ II-33
PART III
Item 10 Directors and Executive Officers of the Registrant.................................... III-1
Item 11 Executive Compensation................................................................ III-2
Item 12 Security Ownership of Certain Beneficial Owners and Management........................ III-3
Item 13 Certain Relationships and Related Transactions........................................ III-4
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K......................................................................... IV-1
</TABLE>
i
<PAGE>
SELECTED DEFINITIONS
When used in this report, the following terms will have the meanings
indicated.
"Accentacross" means Accentacross Limited, a Director of the Company.
"Calendar Year" means a year ended December 31.
"CFDs" means contracts for differences.
"Company" means Southern Investments UK plc.
"Distribution Price Control Formula" means a formula of P+RPI-Xd where
P reflects the previous maximum average price per unit of electricity
distributed, RPI reflects the percentage change in the Retail Price Index
between the previous year and the current year and the Xd factor is established
by the Regulator following review.
"Electricity Act" means the Electricity Act 1989.
"EMFs" means electromagnetic fields.
"Fiscal Year" means a year ended March 31.
"Fossil Fuel Levy" means a levy system instituted to reimburse the
generators and the RECs for the extra costs involved in generating electricity
from non-fossil fuel plants as compared to generating electricity from fossil
fuel plants.
"Franchise Area" means SWEB's service area as determined by its PES
license.
"Franchise Supply Customers" means customers with demand of not more
than 100kW.
"Holdings" means Southern Investments UK Holdings Limited, the direct
parent company of the Company.
"Mighteager" means Mighteager Limited, a Director of the Company.
"MMC" means the UK Monopolies and Mergers Commission.
"NFFOs" means obligations of RECs to obtain a specified amount of
generating capacity from non-fossil fuel sources.
"NGC" means the National Grid Company plc, which is wholly-owned by
NGG.
"NGG" means the National Grid Group plc.
"Non-Franchise Supply Customers" means customers with demand greater
than 100kW.
"Own-generation limits" means the limit imposed by the PES license on
the extent of generation capacity in which a REC may hold an interest.
ii
<PAGE>
"OFFER" means the Office of Electricity Regulation, the body appointed
by the Government of the UK to regulate the electricity industry in Great
Britain.
"Outage" means a disruption to the supply of electricity.
"PES" means public electricity supplier.
"PMDC" means Power Markets Development Company, an indirect shareholder
in Holdings and a subsidiary of PP&L Resources.
"PMDC Directors" means Accentacross and Mighteager.
"Pool" means the wholesale trading market for electricity in England
and Wales.
"Pooling and Settlement Agreement" means the agreement which governs
the constitution and operation of the Pool and the calculation of payments to
and from generators and suppliers.
"PP&L Resources" means PP&L Resources, Inc., a public stock
corporation, and parent of PMDC and the registered utility Pennsylvania Power
and Light.
"Predecessor Company" means South Western Electricity plc and its
subsidiaries prior to its acquisition by the Company.
"Pro Forma Fiscal Year 1996" means unaudited pro forma information for
the fiscal year ended March 31, 1996.
"PSB" means NGG's pumped storage electricity generation business.
"REC" means one of the 12 regional electricity companies in England and
Wales licensed to distribute, supply, and, to a limited extent, generate
electricity.
"Regulator" means The Director General of Electricity Supply in Great
Britain.
"SEC" means the Securities and Exchange Commission.
"SFAS" means US Statement of Financial Accounting Standards.
"Southern" means The Southern Company, the ultimate parent company of
the Southern Company system and the indirect owner of 75% of Holdings.
"Southern Company system" means Southern and its subsidiaries.
"Southern Energy" means Southern Energy Inc., an affiliate of the
Company and a wholly-owned subsidiary of Southern.
"Successor Company" means Southern Investments UK plc and its
subsidiaries.
"Supply Price Control Formula" means P+RPI-Xs+Y, where P reflects the
maximum average price unit of electricity supplied, RPI reflects the percentage
change in the Retail Price Index between the previous year and the current year,
the Xs factor is established by the Regulator following review and the Y term is
a pass through of certain costs.
"SWEB" means South Western Electricity plc, a subsidiary of the Company.
"UK" means the United Kingdom.
"UK GAAP" means accounting principles generally accepted in the UK.
"US" means the United States of America.
"US GAAP" means accounting principles generally accepted in the US.
iii
<PAGE>
PART I
Item 1. BUSINESS
General
The Company is a wholly-owned subsidiary of Holdings, of which 75% is
owned indirectly by Southern and 25% is owned indirectly by PP&L Resources. The
Company was incorporated as a public limited company under the laws of England
and Wales in June 1995 as a vehicle for the acquisition of SWEB, one of the 12
RECs in England and Wales licensed to distribute, supply and, to a limited
extent, generate electricity. In September 1995, the Company gained effective
control of SWEB. The Company subsequently acquired the remaining outstanding
shares of SWEB and replaced SWEB's board of directors and certain senior
managers with officers and employees of companies from within the Southern
Company system. The Company's sole investment and only significant asset is the
entire share capital of SWEB, which is headquartered in Bristol, England. At
March 31, 1997 the Company had consolidated assets of (pound)1.721 billion
($2.831 billion).
SWEB's two main business lines are the distribution of electricity and
supply of electricity to approximately 1.3 million customers in its Franchise
Area in southwest England. The distribution business and the supply business are
distinct business segments and produced operating income of (pound)108 million
($178 million) and (pound)12 million ($20 million), respectively, in fiscal year
1997, representing substantially all of the Company's consolidated operating
income in that fiscal year.
SWEB's Franchise Area covers approximately 5,560 square miles extending
from Bristol and Bath in the northeast, 188 miles southwest along the peninsula
to Land's End and 28 miles beyond to the Isles of Scilly, and has a resident
population of approximately 2.8 million. The south west of England, of which the
Franchise Area forms the greater part, has benefitted from economic growth (as
measured by Gross Domestic Product) which exceeded the UK average from 1991
through 1996 and has also benefitted from an average unemployment rate during
calendar year 1996 of approximately 6.3% which was below the UK average of 7.5%
according to a 1997 study by Cambridge Econometrics. The largest cities and
towns in SWEB's Franchise Area are Bath, Bristol, Exeter, Plymouth and Taunton.
Business activity is generally concentrated in the population centers around
Bristol, Bath and Plymouth. The Bristol and Bath area is served by the M4 and M5
motorways, a strong rail network including a link between Bristol and London,
and a commercial port at Avonmouth.
The Company and SWEB have undertaken to make SWEB a more focused and
competitive company concentrating on the main electricity businesses of
distribution and supply. Several businesses not related to distribution and
supply have been sold, and the remaining ancillary businesses have been
redirected to focus on support for the main electricity businesses.
The key goals which the Company and SWEB are pursuing include cost
savings and improved customer service. The objective of cost savings is to
increase profitability. Cost savings have been realized through programs of
staff reduction and working with the unions on a program of job redesign leading
to changes in work practices. The objective of improved customer service is to
prepare for the increasingly competitive aspects of the supply business by
building customer loyalty through responsiveness to customers' needs, and to
meet and exceed the performance criteria established by the Regulator.
Improvements in customer service are also being pursued in part through
improvements in system performance, as measured primarily by reductions in
customer minutes lost and overall number of outages.
I-1
<PAGE>
Change of Government in the UK
A possible significant change that could impact profitability relates to
the election of a new Labour government on May 1, 1997. The Labour Party's
election manifesto includes the commitment to introduce "a one-off windfall levy
on the excess profits of the privatised utilities". The total amount of
government revenue to be raised by the tax and the allocation of the tax between
utilities is scheduled to be announced as part of the government's budget in
early July, 1997. There can be no assurance that the introduction of a windfall
tax or other taxes or policies of the new government will not adversely affect
the Company.
Overview of the Electric Utility Industry in Great Britain
In 1990, the electric utility industry in Great Britain was privatized,
and SWEB was created along with the other 11 RECs. In connection with the
privatization, distribution assets in England and Wales, previously owned
indirectly by Her Majesty's Government, were allocated among the RECs, licensing
requirements were established for the RECs and price controls were implemented
in the areas of distribution and supply. In England and Wales, generation assets
(other than nuclear facilities) were allocated to two generating companies, and
the high voltage transmission assets were allocated to The National Grid Company
plc ("NGC", which is wholly owned by NGG).
The high voltage transmission system in England and Wales, which is
generally referred to as the "national grid," carries the generated
electricity in bulk from the power stations to the regional and local
distribution systems. This transmission system is owned and operated
by NGC.
Distributors transfer electricity over their networks, generally at lower
voltage than the national grid, from supply points on the national grid to final
consumers. The distribution systems in England and Wales are owned by the 12
RECs. Virtually all customers in England and Wales are connected to the
distribution system of the RECs and have no choice as to the distribution system
from which they receive their electricity. Distribution prices charged by the
RECs are regulated by the Distribution Price Control Formula.
Suppliers sell electricity to end users. Each REC is required to have a
PES license which authorizes it to supply electricity to any customers within
its Franchise Area. Electricity customers fall into two categories, Franchise
Supply Customers and Non-Franchise Supply Customers. Prices for supply of
electricity to Franchise Supply Customers are regulated by the Supply Price
Control Formula. Such price control is currently scheduled to expire on March
31, 1998, after which some form of price restraint is likely to apply for
smaller customers at least for a transitional period. The franchise supply
market is expected to be opened progressively over a six month period commencing
April 1, 1998 to any competitors who have obtained the necessary license, which
is generally referred to as a "second tier license." Non-Franchise Supply
Customers may already be supplied by anyone who has obtained a second tier
license. Such second tier suppliers, including SWEB, compete for business
nationally and at prices determined by competitive bids or negotiation.
At the time of privatization, the "Pool" was established for bulk trading
of electricity in England and Wales between generators and suppliers. The Pool
reflects two principal characteristics of the physical generation and supply of
electricity from a particular generator to a particular supplier. First, it is
not possible to trace electricity from a particular generator to a particular
supplier. Second, it is not practicable to store electricity in significant
quantities, creating the need for a constant matching of supply and demand.
Subject to certain exceptions, all electricity generated in England and Wales
must be sold and purchased through the Pool. All licensed generators and
suppliers must become signatories to a pooling and settlement agreement, which
governs the constitution and operation of the Pool and the calculation of
payments due to and from generators and suppliers (the "Pooling and Settlement
Agreement"). Prices for electricity are set by the Pool daily for each half hour
of the following day based on the bids of the generators and a complex set of
calculations matching supply and demand and taking account of system stability,
security and other costs.
I-2
<PAGE>
SWEB's Main Businesses
Distribution Business
SWEB's distribution business is the ownership, management and operation
of the electricity distribution network within SWEB's Franchise Area. The
primary activity of the distribution business is the receipt of electricity from
the national grid transmission system and its distribution to end users of
electricity that are connected to SWEB's power lines. Virtually all electricity
supplied (whether by SWEB's independent supply business or by other suppliers)
to consumers in SWEB's Franchise Area is transported through its distribution
network, thus providing SWEB with distribution volume that is stable from year
to year. As a holder of a PES license, SWEB is subject to a price cap regulatory
framework that provides economic incentives to increase the number of units of
electricity distributed and to operate in a more cost-efficient manner.
SWEB's distribution business has grown in both its customer base and in
the number of units distributed, primarily reflecting economic growth in
the south west of England. At March 31, 1997 SWEB had experienced a
5-year compound annual growth rate of 0.8% in customers and 1.5% in
units distributed, respectively.
Strategy
Since being acquired by the Company, SWEB has reviewed and refined its
distribution strategy and has established key goals of cost savings and improved
customer service.
Staff reductions play a key role in cost savings. SWEB has implemented a
plan of voluntary and other staff reductions to reduce the number of employees
by 667 (mainly in the distribution business and representing 20% of staff at the
time of the acquisition of SWEB by the Company), of which 603 net reductions
occurred prior to March 31, 1997. Part of these reductions were made possible
due to new work practices which SWEB has developed with the cooperation of
SWEB's unions. Team restructuring in the engineering department and the
establishment of multi-skilled independent field teams have been achieved. In
addition, management restructuring has produced a flatter organizational
structure by reducing management levels from seven to three.
Improvements in customer service in the distribution business are part of
SWEB's strategy and are expected to enable SWEB to meet or exceed the
performance criteria established by the Regulator who is responsible for setting
the performance standards of the RECs. SWEB believes that achieving these goals
is important both for improving customer satisfaction and for maintaining good
relations with the Regulator. Improvements in customer service are being
pursued, in part, through improvements in system performance, measured primarily
in terms of customer minutes lost and overall number of outages. To that end,
several initiatives are being pursued including:
eliminating the backlog of tree-trimming near distribution lines;
implementing a program of network improvements that will create more dual
routing;
reordering the priorities of SWEB's capital expenditure program to focus
on improving system reliability; and
introducing a single-number telephone call center supported by new
computerized information systems which allow employees at the call center
(including advisory engineers) to initiate engineering work orders to
satisfy customer needs for repairs or maintenance of the distribution
network (implemented during 1996).
I-3
<PAGE>
Customers
Most of SWEB's distribution customers are Franchise Supply Customers. This
customer group consists predominantly of residential and small commercial
consumers which provides SWEB a stable customer base. SWEB's fastest growing
category of distribution customers, in terms of units distributed and revenues,
is large commercial and small industrial customers. Commercial activity of
SWEB's customers is mostly service based and includes financial services,
electronics and technology-related businesses. SWEB also distributes electricity
to industrial concerns in its Franchise Area. The principal activities of SWEB's
largest distribution customers include china clay extraction, ship repair,
fertilizer production, aerospace, defense engineering, cement and paper
manufacturing and water supply. SWEB's 20 largest distribution customers in its
Franchise Area accounted for 10.5% of total electricity distributed by SWEB in
fiscal year 1997 in terms of units distributed, with no single customer
exceeding 2.3% of total electricity distributed. The following table sets out
details of SWEB's distribution customers, units distributed and distribution
revenues.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Distribution Business
- - --------------------------------------------------------------------------------------------------------------------
Distribution Customers Electricity Units Distributed Revenues(5)
5 year Volume % of 5 year
Number(1) % of Total CAGR(2) Twh(3) Total CAGR(4) % of Total
not more than 100kW............ 1,313,690 99.78 0.83% 8.4 62 0.65% 80
above 100kW to 1MW............. 2,625 0.20 4.52 2.2 16 4.07 11
above 1MW...................... 240 0.02 4.78 2.9 22 2.38 9
--------- ----- ---- ---- --- ---- --
Total 1,316,555 100.0 0.84 13.5 100 1.54 100
========= ===== ==== ==== === ==== ===
- - ---------------
(1) At March 31, 1997.
(2) Represents the compound annual growth rate ("CAGR") for the period from April 1, 1992 through March 31, 1997.
(3) In terawatt hours for fiscal year 1997.
(4) Represents the CAGR for the period from April 1, 1992 through March 31, 1997.
(5) For fiscal year 1997.
</TABLE>
Distribution Facilities
Electricity is transported across the national grid transmission system
at 400kv or 275kv to eight grid supply points within SWEB's distribution
network, where it is transformed to 132kv and enters SWEB's distribution system.
Electricity is also transported to two national grid supply points located in
neighboring RECs' franchise areas, which are connected to SWEB's distribution
system by overhead lines and underground cables. Substantially all electricity
which enters SWEB's system is received at these ten grid supply points.
At March 31, 1997, SWEB's electricity distribution network (excluding
service connections to consumers) included overhead lines and underground cables
at the operating voltage levels indicated in the table below:
<TABLE>
<CAPTION>
<S> <C> <C>
Overhead lines Underground cables
Operating voltage: (Circuit miles) (Circuit miles)
--------------- ---------------
132kv............................................................. 907 37
33kv.............................................................. 1,747 610
11kv.............................................................. 10,730 3,911
6.6kv............................................................. 15 77
480 or 415/240v................................................... 4,746 6,985
------ ------
Total........................................................ 18,145 11,620
====== ======
</TABLE>
I-4
<PAGE>
In addition to the circuits referred to above, SWEB's distribution
facilities also include approximately:
<TABLE>
<CAPTION>
<S> <C> <C>
Aggregate Capacity
(mega Volt-
Number Amperes)
------- -----------------
Transformers:
132kv/lower voltages 91 5,348
33kv/11kv or 6.6kv 551 7,510
11kv or 6.6kv/lower voltages (including 36,291 pole mounted transformers) 47,797 6,536
Substations:
132kv/33kv 40
33kv/11kv or 6.6kv 309
11kv or 6.6kv/415v or 240v 11,790
</TABLE>
Substantially all substations are owned in freehold, and most of the
balance are held on leases which will not expire within 10 years.
Electricity is received by customers at various voltages depending upon
their requirements. At March 31, 1997, SWEB's distribution system was connected
to over 1.3 million customers.
Operation and control of SWEB's distribution system is continuously
monitored and coordinated from a control center located in Exeter. A telecontrol
system has been implemented to provide remote information gathering and to
provide remote operation of 132kv and selected 33kv and 11kv switchgear.
Supply Business
SWEB's supply business is selling electricity to end users, purchasing
such electricity, primarily from the Pool, and arranging for its distribution to
those end users. SWEB's supply business is comprised predominantly of supplying
Franchise Supply Customers. In fiscal year 1997, these customers accounted for
approximately 67% of all units of electricity supplied by SWEB. SWEB's exclusive
right to supply these customers is scheduled to continue, subject to price
regulation, until March 31, 1998, at which time competition to supply Franchise
Supply Customers is scheduled to commence in phases over a six month period.
Supply prices for these customers are currently regulated, and SWEB's costs of
purchasing and delivering electricity and hedging the purchase price are
collected from them on an actual cost basis.
The market to supply Non-Franchise Supply Customers is fully competitive,
principally with other RECs and the major generators. Non-Franchise Supply
Customers are typically supplied through individual contracts with a duration of
from one to two years with competitively bid or negotiated prices.
Strategy
Since its acquisition by the Company, SWEB has completed a review of the
supply market, established new goals for its supply business and adopted new
strategies for achieving those goals. The key goals established are the
retention of its current Franchise Supply Customers as supply customers after
March 31, 1998 and the increase of SWEB's share of electricity supplied to
Non-Franchise Supply Customers both inside and outside SWEB's Franchise Area.
SWEB's strategy for retaining its Franchise Supply Customers is to build
customer loyalty and to offer competitive prices. SWEB seeks to build customer
loyalty by providing superior, responsive service in dealing with billing and
other matters and providing other service enhancements. SWEB is revamping its
marketing, sales and customer service operations under the direction of the
I-5
<PAGE>
Executive Directors of SWEB who transferred from other companies within the
Southern Company system, and are experienced in competitive electricity
marketing.
Initiatives in relation to the Franchise Supply Customers include:
a single-number, local rate, telephone service call center (which has
been in place since April 1996);
improvements and enhancements to the billing and customer service system
which will enable employees at the call center to act on or resolve
customer billing and account inquiries on line during their calls (which
has already begun and should be operational in 1998); and
a restructuring of meter reading operations which should enable almost all
meters to be read quarterly, thereby reducing estimated readings (which has
already begun and is expected to be completed in 1997). In Great Britain,
most meters are located within structures and meter readers are required to
obtain access from occupants in order to read meters. As a result, actual
readings are often obtained only on an annual or biennial basis.
SWEB's strategy for expanding its market share of electricity sold to
Non-Franchise Supply Customers both inside and outside its Franchise Area is to
offer competitive pricing and, with respect to its Non-Franchise Supply
Customers inside its Franchise Area, to build customer loyalty through the
measures described above. Additional initiatives to support growth in market
share in the Non-Franchise Supply Customer market include:
the expanded use of account managers for Non-Franchise Supply Customers;
increasing the number of proposals and bids made to customers and
potential customers;
development of an integrated contract customer sales, electronic
registration and marketing system with full customer life-cycle management
and tracking facilities (which was brought into service during February
1997); and
further enhancement of a competitive price setting system used to
determine appropriate contract supply prices (which was completed in March
1997).
Franchise Supply Market
Under the terms of its PES license, SWEB currently holds the right to
supply approximately 1.3 million Franchise Supply Customers within its Franchise
Area. See "Business-General." During fiscal year 1997, sales to Franchise Supply
Customers represented 67% of total units supplied by SWEB and produced 76% of
SWEB's total supply revenues.
The exclusive right to supply Franchise Supply Customers is scheduled to
be phased out over a six month period commencing April 1, 1998, after which all
supply customers will have the ability to choose their electricity supplier.
SWEB intends to maintain its market share of these customers by providing
superior customer service and competitive pricing. In fiscal year 1997, SWEB met
or exceeded the Regulator's standards of performance targets for all of the
services measured by the Regulator.
I-6
<PAGE>
Non-Franchise Supply Market
In addition to competing for Non-Franchise Supply Customers in its
Franchise Area, SWEB holds a second tier license to compete with the RECs and
other suppliers to provide electricity to Non-Franchise Supply Customers outside
its Franchise Area. At the end of fiscal year 1997, SWEB had approximately 2,700
Non-Franchise Supply Customers, consisting primarily of large commercial and
industrial accounts. Revenue from these customers during fiscal year 1997
accounted for 24% of total supply revenues. SWEB has achieved a significant
increase in the number of Non-Franchise Supply Customers since the Company
acquired SWEB.
SWEB's Other Business Activities
SWEB also has ancillary business activities that support its main
electricity distribution and supply businesses, including electricity generation
and gas supply. SWEB owns generating assets with 24 MW of capacity used to back
up the distribution network as well as minority investments in windfarms and a
7.7% interest in Teesside Power Limited, owner of a 1,875 MW combined cycle
plant. SWEB has a 75% joint venture interest in a supplier of gas and derives
small amounts of revenue from the lease of fibers within the fiber optic cables
carried on its distribution network. SWEB also markets and develops property no
longer used in the main electricity businesses.
Risk Management
Because SWEB's distribution business does not involve the purchase and
sale of electricity, SWEB's risk management efforts are focused on the supply
business which is exposed to Pool price volatility.
Regulations governing the franchise supply market permit the pass-through
to customers of prudent costs which include the cost of arrangements such as
contracts for differences ("CFDs") to hedge against Pool price volatility. CFDs
are contracts predominantly between generators and suppliers which fix the price
of electricity for a contracted quantity of electricity over a specific time
period. Differences between the actual price set by the Pool and the agreed
prices give rise to difference payments between the parties to the particular
CFD. At the present time, SWEB's forecast franchise supply market demand for
fiscal year 1998 is substantially hedged through various types of agreements
including CFDs.
The most common contracts for supply to Non-Franchise Supply Customers
are for a twelve-month term and contain fixed rates. SWEB is exposed to two
principal risks associated with such contracts: load shape risk (the risk
associated with a shift in the customer's usage pattern, including absolute
amounts demanded and timing of amounts demanded) and purchasing price risk (the
cost of purchased electricity relative to the price received from the supply
customer). SWEB employs risk management methods to maximize its return
consistent with an acceptable level of risk. Generally load shape risk decreases
as SWEB's portfolio of supply customers in the non-franchise supply market
increases. SWEB hedges purchasing price risk by employing a variety of risk
management tools, including management of its supply contract portfolio, hedging
contracts and other means which mitigate risk of future Pool price volatility.
SWEB's ability to manage its purchasing price risk depends, in part, on
the future availability of properly priced risk management mechanisms such as
CFDs. No assurance can be given that an adequate, transparent market for such
products will in fact be available.
SWEB is also investigating whether owning its own source of generation or
contracting for such source or sources would be an appropriate method for
partially managing purchase price risk, but no assurance can be given that such
methods would be available to, or economically appropriate for, SWEB.
I-7
<PAGE>
The Company and SWEB utilize certain financial derivative contracts for
the sole purpose of hedging business exposure in connection with fluctuations in
interest rates and currency rates. Interest rate swaps are used to assure the
stability of future interest charges, by effectively converting a portion of
outstanding variable-rate debt into fixed rates. In addition, the US dollar
liabilities associated with certain of the Company's and SWEB's debt are
converted into pounds sterling by entering into foreign currency hedging
contracts.
UK Environmental Regulation
SWEB's businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The Electricity Act obligates the
President of the Board of Trade and Secretary of State for Trade and Industry to
take into account the effect of electricity generation, transmission and supply
activities upon the physical environment in approving applications for the
construction of generating facilities and the location of overhead power lines.
The Electricity Act requires SWEB to have regard to the desirability of
preserving natural beauty and the conservation of natural and man-made features
of particular interest, when it formulates proposals for development in
connection with certain of its activities. The Company mitigates the effects its
proposals have on natural and man-made features and is required to carry out an
environmental assessment when it intends to lay cables, construct overhead lines
or carry out any other development in connection with its licensed activities.
SWEB also has produced an Environmental Policy Statement which sets out the
manner in which it intends to comply with its obligations under the Electricity
Act.
The Environmental Protection Act 1990 addresses waste management issues
and imposes certain obligations and duties on companies which handle and dispose
of waste. Some of SWEB's distribution activities produce waste, but SWEB
believes that it is in compliance with the applicable standards in such regard.
Possible adverse health effects of EMFs from various sources, including
transmission and distribution lines, have been the subject of a number of
studies and increasing public discussion. The scientific research is currently
inconclusive as to whether EMFs may cause adverse health effects. The only UK
standards for exposure to power frequency EMFs are those promulgated by the
National Radiological Protection Board and relate to the levels above which
non-reversible physiological effects may be observed. SWEB fully complies with
these standards. However, there is the possibility that the introduction and
passage of legislation and change of regulatory standards would require measures
to mitigate EMFs, with resulting increases in capital and operating costs. In
addition, the potential exists for public liability with respect to lawsuits
brought by plaintiffs claiming damages for adverse health effects caused by
EMFs.
SWEB believes that it has taken and continues to take measures to comply
with the applicable laws and governmental regulations for the protection of the
environment. There are no material legal or administrative proceedings pending
against SWEB or the Company with respect to any environmental matter.
Employees
At March 31, 1997, SWEB had 2,737 employees (2,647 full time equivalent)
and the Company had no employees. Of SWEB's employees, 96% are represented by
labor unions. All SWEB employees who are not party to a personal employment
contract are subject to one of two collective bargaining agreements. One is
called The Electricity Business Agreement, which covered 2,581 employees at
March 31, 1997 (2,492 full time equivalent); it may be amended by agreement
between SWEB and the unions and is terminable with 12 months notice by either
side. The other is called the SWEB Data Collection Services Agreement, which
covered 56 employees at March 31, 1997 (55 full time equivalent); it may be
amended by agreement between SWEB and the unions and is terminable by written
notice (with no period specified) by either side. SWEB believes that its
relations with its employees are favorable. Legal proceedings concerning the
I-8
<PAGE>
Electricity Supply Pension Scheme involving a company other than SWEB were
taken. These proceedings may affect SWEB in the future. See "Item 3 - Legal
Proceedings".
Item 2. PROPERTIES
The Company through a subsidiary of SWEB owns the freehold of its
principal executive offices in Bristol. SWEB has both network and non-network
land and buildings.
Network Land and Buildings
At March 31, 1997 SWEB had freehold and leasehold interests in
approximately 12,000 network properties, comprising principally substation
sites. The recorded cost of total network land and buildings at March 31, 1997
was (pound)67 million.
Non-Network Land and Buildings
At March 31, 1997 SWEB had freehold and leasehold interests in
non-network properties comprising chiefly offices, former retail outlets,
depots, warehouses and workshops. The recorded cost of total non-network land
and buildings at March 31, 1997 was (pound)36 million.
The number of properties in each category is:
Freehold or
Long Leasehold Leasehold
-------------- ---------
Depots.................................. 35 1
Offices................................. 8 -
Surplus property(1)..................... 83 19
- - ---------
(1) Largely unused retail sites. The number of freeholds is approximated.
For a discussion of other properties and other assets of SWEB, see Item
1-"Business-SWEB's Main Businesses-Distribution Facilities."
Item 3. LEGAL PROCEEDINGS
The Company and SWEB are routinely party to legal proceedings arising in
the ordinary course of business which are not material, either individually or
in the aggregate. The Company is not a party to any material legal proceedings
nor is it currently aware of any threatened material legal proceedings, except
as described below.
The Pensions Ombudsman (a UK statutorily appointed independent
arbitrator) has issued a determination in favor of complaints made by members of
the Electricity Supply Pension Scheme ("ESPS") relating to another employer's
use of ESPS surplus to offset the employer's costs of providing early pensions
on redundancies and certain other items. Under that determination the Pensions
Ombudsman directed the employer to pay into ESPS the amount of that use of the
surplus plus interest. The determination was challenged in the High Court by the
employer, and the High Court upheld the employer's appeal in a judgment
delivered on June 10, 1997. The High Court also granted the complainants leave
to appeal to a higher court. No date has yet been set for any hearing in the
higher court. If the complainants' appeal is successful either at the higher
court or on a subsequent appeal to the House of Lords, it will have an adverse
effect on SWEB. No payments are required until such challenge has been heard. It
is not practical to make an estimate of the exposure at the present time.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
I-9
<PAGE>
PART II
Item 5. COMMON EQUITY MARKET
There is no established public trading market for the Company's common
stock, all of which is owned indirectly by Southern and PP&L Resources.
Item 6. SELECTED FINANCIAL DATA
(In Millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Period from|
inception | Period from
(June 23, | April 1,
Fiscal Fiscal 1995) to | 1995 to Fiscal Fiscal Fiscal
Year Year March 31, | September Year Year Year
1997 (3) 1997 (3) 1996 (3) | 17, 1995 1995 1994 1993
Successor Successor Successor | Predecessor Predecessor Predecessor Predecessor
--------- --------- --------- | ---------- ----------- ----------- -----------
(pound) $ (pound) | (pound) (pound) (pound) (pound)
|
Operating Revenues 848 1,395 481 | 299 776 808 892 (1)
Net Income 55 90 59 | 24 94 88 78 (1)
Total Assets 1,721 2,831 1,686 | 795 820 831 708
Long-term Debt 301 495 - | 95 95 92 87
Preferred Securities (2) 50 82 - | - - - -
Common Dividend Declared 37 60 191 | 75 30 29 24
</TABLE>
- - -------------
(1) Operating revenues and net income for Fiscal Year 1993 have been
determined under UK GAAP.
(2) Company Obligated Mandatorily Redeemable Preferred Securities of Southern
Investments UK Capital Trust I Holding Company Junior Subordinated
Debentures. See Note 10 in the "Notes to the Financial Statements".
(3) Successor periods are not comparable to predecessor periods due to
acquisition related adjustments (including the revaluation of assets and
liabilities) and to increases in debt as a result of the acquisition.
II-1
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
consolidated financial statements and the notes thereto. The consolidated
financial statements discussed in this Section are presented in accordance with
US GAAP. Solely for the convenience of the reader, pounds sterling amounts have
been translated into US dollars at the Noon Buying Rate on March 31, 1997 of
$1.6448 = (pound)1.00; see Note 1 in the "Notes to the Financial Statements".
INTRODUCTION
Background
The Company was incorporated as a public limited company under the laws
of England and Wales in June 1995, as a vehicle for the acquisition of SWEB. In
September 1995, the Company gained effective control of SWEB. The Company
subsequently replaced SWEB's board of directors and certain senior managers with
officers and employees of companies from within the Southern Company system.
Total consideration for the acquisition was (pound)1.065 billion ($1.752
billion) excluding a special dividend of (pound)52 million ($85 million) paid by
SWEB to its former shareholders (other than those whose shares the Company had
purchased in the open market). Such dividend, when considered in aggregate with
the final dividend of (pound)23 million ($38 million) paid in October 1995 in
respect of fiscal year 1995, yields the (pound)75 million ($123 million) payment
of pre-acquisition dividends disclosed in the financial statements located
elsewhere in this document.
Accounting for the Acquisition
The recorded assets and liabilities of SWEB immediately prior to the time
the Company gained effective control of SWEB were (pound)855 million ($1,406
million) and (pound)515 million ($847 million), respectively. As a result of the
purchase method of accounting, the amount of SWEB's assets recorded on the books
of the Company was increased by (pound)927 million ($1,525 million) to their
fair value of (pound)1.782 billion ($2.931 billion), and the amount of SWEB's
liabilities recorded on the books of the Company was increased by (pound)385
million ($633 million) to their fair value of (pound)900 million ($1.480
billion). The increase in liabilities included the establishment of reserves
totalling (pound)44 million ($72 million) related principally to staff
reductions and the disposition of ancillary businesses. The resulting difference
between the purchase price of (pound)1.065 billion ($1.752 billion) and the
difference between the fair value of the assets acquired and the fair value of
the liabilities assumed as well as the reserves established resulted in goodwill
of (pound)183 million ($301 million).
The unaudited pro forma information presented for fiscal year 1996 ("Pro
Forma Fiscal Year 1996") consists of the historical results of operations of the
Predecessor Company prior to the acquisition and the results of operations of
the Successor Company subsequent to the acquisition, both of which have been
adjusted for the effects of the acquisition as though it had taken place on
April 1, 1995. The effects of the acquisition that are reflected in Pro Forma
Fiscal Year 1996 include: (i) depreciation expense based on property, plant and
equipment valued according to the purchase method of accounting as if the
acquisition had occurred on April 1, 1995, (ii) amortization of goodwill valued
according to the purchase method of accounting as if the acquisition had
occurred on April 1, 1995, (iii) fair valuation of existing liabilities and the
related interest expense as if the acquisition had occurred on April 1, 1995,
(iv) debt issued to finance the acquisition and the related interest expense as
if the acquisition had occurred on April 1, 1995 and (v) recognition of pension
fund surplus and the reduction of pension expense in the accounts of the
Company.
The information for Pro Forma Fiscal Year 1996 has been prepared for
illustrative purposes only and, because of its nature, cannot give a complete
picture of the Company's results of operations for that year had the
transactions been consummated on the date assumed and does not project the
II-2
<PAGE>
Company's financial position or results of operations for any future date or
period. Unaudited amounts have been prepared based upon the audited consolidated
financial statements of the Company, which have been prepared in accordance with
US GAAP.
Significant Events
During fiscal year 1996, the sale by SWEB of its shares in NGG and
related actions produced a nonrecurring pre-tax gain of (pound)14 million over
the fair value established at the time of the Company's acquisition of effective
control of SWEB and resulted in net pre-tax cash flow of (pound)241 million.
This followed a listing for the NGG shares on the London Stock Exchange. The
listing was conditional upon the prior demerger of NGG's pumped storage
electricity generation business ("PSB") in order for NGG to sell that business.
PSB was sold in December 1995. SWEB had received (pound)36 million of its share
of the total proceeds from that sale by the end of fiscal year 1996 and a
further (pound)7 million by the end of fiscal year 1997. The fair value of this
asset at acquisition was assessed at (pound)39 million. In fiscal year 1996 SWEB
paid to the Company and the Company paid to Holdings a dividend of (pound)191
million which was made possible because of the proceeds from the sale of SWEB's
interest in NGG. See Note 11 in the "Notes to the Financial Statements".
SWEB has progressively withdrawn from its involvement in non-core
businesses. Neither the contribution to SWEB's or the Company's operating income
from the disposed businesses nor the effect of the dispositions on SWEB's or the
Company's net income was material after taking into account the reserves
established in connection with the acquisition. SWEB sold its appliance
retailing business in June 1995; its appliance servicing business in February
1996; its creditor and warranty insurance business and electrical installation
and contracting business in March 1996; and its interest in a cable television
and telecommunications company in July 1996.
RESULTS OF OPERATIONS
SWEB was acquired on September 18, 1995. Since that time the new
management has undertaken certain restructuring and the level and cost of
financing has changed significantly. The results for fiscal year 1996 have been
presented on a pro forma basis to provide a comparison with fiscal year 1997.
Fiscal Year 1997 Compared with Pro Forma Fiscal Year 1996 Compared with Fiscal
Year 1995
Earnings
Operating income decreased by (pound)4 million (3%) from (pound)129
million in the Pro Forma Fiscal Year 1996 to (pound)125 million in the fiscal
year 1997. This decrease was due to a (pound)4 million decrease in operating
income from the distribution business, a (pound)3 million decrease in operating
income from the supply business, partly offset by a (pound)3 million increase in
operating income from the ancillary businesses. Operating income decreased by
(pound)10 million (7%) from (pound)139 million in fiscal year 1995 to (pound)129
million in Pro Forma Fiscal Year 1996. This decrease was due to a (pound)24
million increase in cost of sales, partially offset by a (pound)4 million
increase in operating revenues and a (pound)10 million decrease in operating
expenses.
Net income increased by (pound)6 million (12%) from (pound)49 million in
the Pro Forma Fiscal Year 1996 to (pound)55 million in the fiscal year 1997.
This increase was primarily attributable to reduced after-tax interest expense
of (pound)9 million resulting from the repayment during the second half of
fiscal year 1996 of debt issued to finance the acquisition and increased gains
on the sale of investments, offset by decreased operating income as described
above. Net income decreased by (pound)45 million (48%) from (pound)94 million in
fiscal year 1995 to (pound)49 million in Pro Forma Fiscal Year 1996. In addition
to the factors discussed in the previous paragraph which reduced operating
income, the decrease in net income was primarily due to increased after-tax
interest expense of (pound)37 million principally due to debt issued for
acquisition.
II-3
<PAGE>
Revenues
Operating revenues increased by (pound)68 million (9%) from (pound)780
million in Pro Forma Fiscal Year 1996 to (pound)848 million in the fiscal year
1997 and increased by (pound)4 million (1%) from (pound)776 million in fiscal
year 1995 as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Operating Revenues Operating Revenues
Increase (Decrease) from the Increase (Decrease) from Fiscal
Pro Forma Fiscal Year 1996 Year 1995 to Pro Forma Fiscal
to the Fiscal Year 1997 Year 1996
------------------------- --------------------------------
((pound) millions, except %) ((pound) millions, except %)
Electricity distribution (21) (22)
Electricity supply 62 1
Other 9 (3)
Intra-business(1) 18 28
--- ---
Total operating revenues 68 4
=== ===
Percentage change 9% 1%
</TABLE>
- - -------------
(1) Intra-business revenues relate to the elimination of intra-business revenues
in consolidation, principally distribution sales to the supply business.
Two factors determine the amount of revenues produced by the main
electricity distribution business: the unit price of the electricity distributed
(which is controlled by the Distribution Price Control Formula) and the number
of electricity units distributed. Following the Regulator's distribution price
review in 1994, the Regulator reduced SWEB's allowable expected distribution
revenues, effective beginning fiscal year 1996, by 14%, before an allowed
increase for inflation. Subsequently, the Regulator announced a further
distribution price reduction which has had and will continue to have the effect
of reducing SWEB's allowable expected distribution revenues, effective beginning
fiscal year 1997, by a further 11%, before an allowed increase for inflation. In
the fiscal year 1997, application of the Distribution Price Control Formula
resulted in a reduction in SWEB's distribution revenues as compared to the Pro
Forma Fiscal Year 1996. The number of units distributed depends on the demands
of SWEB's customers for electricity. That demand varies based in part upon
weather conditions and economic activity. Revenues from the distribution
business decreased by (pound)21 million (8%) from (pound)252 million for the Pro
Forma Fiscal Year 1996 to (pound)231 million for the fiscal year 1997 and also
decreased by (pound)22 million (8%) from fiscal year 1995 as a result of the
following factors:
<TABLE>
<CAPTION>
<S> <C> <C>
Operating Revenues from Operating Revenues from
Electricity Distribution Electricity Distribution
Increase (Decrease) from the Pro Increase (Decrease) from Fiscal
Forma Fiscal Year 1996 Year 1995 to Pro Forma
to the Fiscal Year 1997 Fiscal Year 1996
------------------------------ ----------------------------------
((pound) millions, except %) ((pound) millions, except %)
Application of Distribution Price Control Formula. (19) (20)
Sales growth 1 9
Other revenue attributable to distribution business (3) (11)
-- ----
Total distribution revenues (21) (22)
=== ====
Percentage change (8%) (8%)
</TABLE>
Two factors determine the amount of revenues produced by the supply
business: the unit price of the electricity supplied (which, in the case of the
Franchise Supply Customers, is controlled by the Supply Price Control Formula)
II-4
<PAGE>
and the number of electricity units supplied. Until April 1998, SWEB is expected
to have the exclusive right to supply all Franchise Supply Customers in its
Franchise Area.
Franchise Supply Customers are generally residential/domestic and small
commercial customers. The volume of unit sales of electricity for Franchise
Supply Customers is influenced largely by the number of customers in the
Franchise Area, weather conditions and prevailing economic conditions. Unit
sales to Non-Franchise Supply Customers are determined primarily by the success
of the supply business in entering into contracts to supply customers with
electricity.
Revenues from the supply business increased by (pound)62 million (9%)
from (pound)726 million for the Pro Forma Fiscal Year 1996 to (pound)788 million
for the fiscal year 1997. In the fiscal year 1997, the number of electricity
units supplied increased by 23% but total revenues produced by the supply
business increased by only 9%, because a majority of the increase in total units
supplied was to Non-Franchise Supply Customers, who are the larger energy users
charged at generally lower average unit prices than those charged to Franchise
Supply Customers. Within the franchise market, the number of electricity units
increased by 1%, offset by a reduction in allowable income as set by the Supply
Price Control Formula. Revenues from the supply business increased by (pound)1
million from (pound)725 million in fiscal year 1995 to (pound)726 million in Pro
Forma Fiscal Year 1996. This increase reflects an increase of (pound)11 million
in revenues from the franchise supply market which offset a (pound)10 million
reduction in revenues from the non-franchise supply market which was primarily
due to lower unit sales. The (pound)11 million increase was the result of an
overall increase in unit sales to supply customers and application of the Supply
Price Control Formula which resulted in an upward inflation adjustment that
exceeded the downward regulatory factor adjustment.
Intra-business eliminations for fiscal year 1997 decreased by (pound)18
million (7%) from Pro Forma Fiscal Year 1996 which decreased by (pound)28
million (10%) from fiscal year 1995 primarily as the result of the decrease in
revenues from the distribution business described above.
Cost of Sales
Cost of sales increased by (pound)90 million (18%) from (pound)504
million in the Pro Forma Fiscal Year 1996 to (pound)594 million in the fiscal
year 1997. This increase was principally the result of an increase in the supply
business cost of sales of (pound)68 million reflecting an increase in purchases
of electricity to supply the increase in unit sales as discussed above. Cost of
sales increased by (pound)24 million (5%) from (pound)480 million in fiscal year
1995 to (pound)504 million in Pro Forma Fiscal Year 1996. This increase is
principally the result of an increase in the supply business energy purchase
costs of (pound)20 million.
Operating Expenses
Operating expenses decreased by (pound)18 million (12%) from (pound)147
million in the Pro Forma Fiscal Year 1996 to (pound)129 million in the fiscal
year 1997. This decrease was primarily due to a (pound)4 million decrease in
maintenance costs and a (pound)15 million decrease in selling, general and
administrative costs, which were partially offset by a (pound)1 million increase
in depreciation and amortization resulting from the application of the purchase
method of accounting.
The decrease in selling, general and administrative costs included a
decrease in certain classes of computer software development costs which were
expensed during the first half of Pro Forma Fiscal Year 1996 but which were
capitalized subsequently, having satisfied the criteria for capitalization under
the Company's accounting policy (see Note 1 to the "Notes to the Financial
Statements"). The decrease in selling, general and administrative costs also
included a decrease in labor costs resulting from a reduction in personnel.
II-5
<PAGE>
Operating expenses decreased by (pound)10 million (6%) from (pound)157
million in fiscal year 1995 to (pound)147 million in Pro Forma Fiscal Year 1996.
This decrease was principally due to a reduction in severance costs of (pound)6
million as a result of providing for severance costs under the purchase method
of accounting at the acquisition date and a net decrease in certain classes of
computer software development costs which were expensed during fiscal year 1995
but were capitalized in Pro Forma Fiscal Year 1996, partially offset by an
increase in net pension costs and an increase in depreciation and amortization
expense.
Interest Expense
Interest expense decreased by (pound)14 million from (pound)66 million in
the Pro Forma Fiscal Year 1996 to (pound)52 million in the fiscal year 1997,
principally as a result of the financing costs associated with the amount of
debt issued for the acquisition. Interest expense for Pro Forma Fiscal Year 1996
reflects interest expense recorded in connection with the acquisition as if the
acquisition had occurred on April 1, 1995, and had been 100% financed with
short-term borrowings at an interest rate of 6% per year. However, in the fiscal
year 1997, the Company benefitted from the retirement of (pound)96 million of
debt and the conversion of (pound)500 million of debt to equity during the
second half of fiscal year 1996. The weighted average balance of debt
outstanding during the fiscal year 1997 was (pound)623 million at a weighted
average interest rate of 8.3% compared to (pound)876 million at 7.5% during the
Pro Forma Fiscal Year 1996.
Interest expense increased by (pound)55 million from (pound)11 million in
fiscal year 1995 to (pound)66 million in Pro Forma Fiscal Year 1996 principally
as a result of the financing costs associated with the increased amounts of debt
issued for acquisition. Interest expense for Pro Forma Fiscal Year 1996 reflects
interest expense recorded in connection with the acquisition as if the
acquisition had occurred on April 1, 1995 and had initially been 100% financed
with short term borrowings at an interest rate of 6% per year. In the second
half of Pro Forma Fiscal Year 1996, the Company converted (pound)500 million of
debt to equity. The weighted average balance of debt outstanding during the Pro
Forma Fiscal Year 1996 was (pound)876 million at a weighted average interest
rate of 7.5% compared to (pound)93 million at 11.9% during fiscal year 1995.
Gain on Sale of Investments
Gains on the sale of investments increased by (pound)6 million from no
gain in the Pro Forma Fiscal Year 1996 to (pound)6 million in the fiscal year
1997. This increase was principally attributable to additional proceeds of
(pound)4 million relating to the demerger of the PSB associated with the sale of
NGG. See "Significant Events".
Income Taxes
Income taxes increased by (pound)6 million from (pound)26 million in the
Pro Forma Fiscal Year 1996 to (pound)32 million in the fiscal year 1997. Income
taxes decreased by (pound)24 million from (pound)50 million in fiscal year 1995
to (pound)26 million in Pro Forma Fiscal Year 1996. The increase and decrease,
respectively, were primarily attributable to an increase/decrease in pre-tax
income.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative
of future earnings potential. The level of future earnings depends on numerous
factors including the success of the implementation of reorganization plans,
future regulatory price reviews and the level of energy sales growth in the
electricity supply business.
The largest portion (approximately 86%) of SWEB's operating income is
derived from its distribution business essentially the operation and maintenance
of the electricity network in its Franchise Area in south west England. SWEB is
the only distributor of electricity in this area, and management believes that
economic, environmental and regulatory factors are likely to prevent competitors
from entering this business in SWEB's Franchise Area.
II-6
<PAGE>
The supply market is subject to change as it is currently partially open
to competition and competition is scheduled to be extended to the remaining
customers (largely domestic and small commercial) after March 31, 1998.
Two possible major impacts on future earnings are a court ruling related
to a pension matter and the windfall tax expected to be introduced by the Labour
government. See Notes 2 and 4, respectively, in the "Notes to the Financial
Statements" herein for discussion of these matters. Additionally, other
contingencies, including the possibility of changes in the valuation of the
Teesside contract, and other matters that may affect future earnings potential
are discussed in Notes 3 and 4.
FINANCIAL CONDITION
Overview
Substantial changes in the Company's financial condition during the
fiscal year 1997 were the addition by SWEB of approximately (pound)69 million in
property, plant, and equipment, largely in respect of the distribution network;
the issuance of $500 million of bonds; the issuance of $82 million of
mandatorily redeemable preferred securities; and the introduction of a
commercial paper program. The funds required for the plant additions were
derived primarily from operations. It is expected that SWEB's capital
requirements in the foreseeable future for investment in property will be
generated from operating activities. The funds from the issuance of debt were
used to retire short-term debt.
Demand for electricity in Great Britain, in general, and in SWEB's
Franchise Area, in particular, is seasonal, with demand being higher in the
winter months and lower in the summer months. SWEB balances the effect of this
and other cyclical influences on its working capital needs with drawings under
its available credit facilities.
The Company's sole investment and only significant asset is the entire
share capital of SWEB. The Company is therefore dependent upon dividends from
SWEB for its cash flow. SWEB can make distribution of dividends to the Company
under English law to the extent that it has distributable reserves, subject to
the retention of sufficient financial resources to conduct its supply and
distribution businesses as required by its regulatory license. The Company
believes that currently sufficient distributable reserves will exist at SWEB to
allow for any and all cash flow generated at SWEB through operations to be
distributed to the Company through dividends to the Company. In the UK, the
Accounting Standards Board currently has a discussion paper reviewing the
treatment of deferred income tax accounting to be required in the future; SWEB's
distributable reserves could be significantly reduced by this matter.
Financing Activities
In November 1996, the Company issued $500 million Senior Notes in the US,
the proceeds of which were used to reduce short-term bank loans in the UK. Some
$168 million of the Senior Notes are due for redemption in 2001 and $332 million
in 2006; the Senior Notes are at rates of 6.375% and 6.8%, respectively. The
Company entered into currency swap transactions that effectively convert the US
dollar obligations of the Senior Notes into pounds sterling obligations, with a
nominal value of (pound)300 million.
SWEB has established a commercial paper program in the US, first utilized
in February 1997 to reduce short-term bank loans. The maximum available under
the program, which is fully supported by a swingline facility provided by a
syndicate of banks, is $520 million. The amount not utilized at March 31, 1997
was $117 million. SWEB enters into foreign currency contracts to hedge the
currency risk associated with the interest and principal of each issue under
this program.
II-7
<PAGE>
The Company and SWEB have entered into agreements that effectively swap
into fixed rates, (pound)150 million of SWEB's variable-rate debt, for periods
of between 7 and 15 years.
In January 1997, Southern Investments UK Capital Trust I (the "Trust"), a
statutory business trust formed under the laws of the State of Delaware and
established for the sole purpose of issuing its own securities and investing the
proceeds thereof in the 8.23% subordinated debentures issued by the Company and
scheduled to mature on February 1, 2027, sold $82 million of its 8.23% preferred
securities. The Company guarantees the Trust's obligations under the preferred
securities. The proceeds received by the Company from the sale of the preferred
securities were used in part to repay short-term bank loans. The Company has
also entered into foreign currency swap contracts to hedge the currency risk
associated with the interest and principal on the preferred securities, by
swapping the US dollar liabilities back to pounds sterling for the period to
February 2007. The nominal value of the swapped liabilities is (pound)50
million.
Sources of Capital
To meet short-term cash needs and contingencies, the Company and SWEB
together had at March 31, 1997 approximately (pound)3 million of cash and cash
equivalents, $520 million of unused committed lines of credit (as standby for
the commercial paper program) and (pound)120 million of other unused committed
lines of credit with banks. Subsequent to March 31, 1997, SWEB has increased the
amount of committed lines of credit with banks. At March 31, 1997 the Company
and SWEB together had short-term debt of (pound)284 million largely payable to
investors in the commercial paper program in the US.
II-8
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Southern Investments UK plc and Subsidiaries (Successor Company) and South
Western Electricity plc and Subsidiaries (Predecessor Company)
<S> <C>
Index to the Consolidated Financial Statements
Page
Management's Report........................................................................... II-10
Report of Independent Public Accountants*..................................................... II-11
Report of Independent Auditors *.............................................................. II-12
Consolidated Statements of Income............................................................. II-13
Consolidated Statement of Changes in Stockholder's Equity..................................... II-14
Consolidated Statements of Cash Flows......................................................... II-15
Consolidated Balance Sheets................................................................... II-16
Notes to the Consolidated Financial Statements................................................ II-18
</TABLE>
*Change of Auditors.
Following acquisition, there was a change in the auditors of SWEB. See Item 9.
II-9
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
MANAGEMENT'S REPORT
1997 Annual Report
The management of the Company has prepared -- and is responsible for --
the financial statements and related information included in this report. These
statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are the best estimates and judgments of management. Financial information
throughout this annual report is consistent with the financial statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the Company's internal audit staff. The Company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations, and cash flows
of the Company in conformity with generally accepted accounting principles in
the United States.
/s/ Richard J. Pershing /s/ Carson B. Harreld
Richard J. Pershing Carson B. Harreld
Chief Executive Officer Chief Financial and Accounting Officer
June 24, 1997
II-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Southern Investments UK plc:
We have audited the accompanying consolidated balance sheets of SOUTHERN
INVESTMENTS UK plc and SUBSIDIARIES (the "Company" being a company incorporated
in England and Wales) as of March 31, 1997 and 1996, the related consolidated
statements of income, changes in stockholder`s equity and cash flows for the
year ended March 31, 1997 and from inception (June 23, 1995) to March 31, 1996.
In addition we have audited the accompanying consolidated statements of income,
changes in stockholder's equity, and cash flows of SOUTH WESTERN ELECTRICITY plc
and SUBSIDIARIES for the period from April 1, 1995 to September 17, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Southern Investments UK plc as of March 31, 1997 and 1996 and the consolidated
results of its operations, changes in stockholder's equity and cash flows for
the year ended March 31, 1997 and for the period from inception (June 23, 1995)
to March 31, 1996, and the consolidated results of the operations, changes in
stockholder's equity, and cash flows of South Western Electricity plc for the
period from April 1, 1995 to September 17, 1995, in conformity with generally
accepted accounting principles in the United States.
/s/ Arthur Andersen
ARTHUR ANDERSEN
Bristol, England
June 24, 1997
II-11
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of South Western Electricity plc:
We have audited the accompanying consolidated statements of income,
changes in stockholder's equity and cash flows of SOUTH WESTERN ELECTRICITY plc
AND SUBSIDIARIES (Predecessor Company) for the year ended March 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with United Kingdom auditing
standards which do not differ in any significant respect from those generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
consolidated cash flows of South Western Electricity plc and subsidiaries for
the year ended March 31, 1995 in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young
ERNST & YOUNG
Chartered Accountants
Bristol, England
August 27, 1996
II-12
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
FOR THE YEAR ENDED MARCH 31, 1997, AND FOR THE PERIOD FROM INCEPTION
(JUNE 23, 1995) TO MARCH 31, 1996
SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
FOR THE PERIOD ENDED APRIL 1, 1995 TO SEPTEMBER 17, 1995 AND FOR THE YEAR ENDED
MARCH 31, 1995
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENTS
<S> <C> <C> <C> <C> <C>
(In Millions)
1997 1997 1995
Inception | April 1,
(June 23, | 1995
1995) to | to September
March 31, | 17, 1995
1996 (1) | (1)
Successor Successor Successor | Predecessor Predecessor
--------- --------- --------- | ----------- -----------
(pound) $ (pound) | (pound) (pound)
|
OPERATING REVENUES 848 1,395 481 | 299 776
COST OF SALES 594 977 318 | 186 480
------- ------- ------- | ------- -------
GROSS MARGIN 254 418 163 | 113 296
------- ------- ------- | ------- -------
OPERATING EXPENSES: |
Maintenance 35 57 21 | 18 45
Depreciation and amortization 43 71 22 | 15 31
Selling, general and administrative 51 84 34 | 40 81
------- ------- ------- | ------- -------
Total operating expenses 129 212 77 | 73 157
------- ------- ------- | ------- -------
Operating income 125 206 86 | 40 139
------- ------- ------- | ------- -------
OTHER INCOME (EXPENSE): |
Interest income 2 3 7 | 2 7
Interest expense (52) (86) (28) | (5) (11)
Gain on sale of investments 6 10 14 | - -
Investment income 6 10 - | - 16
Other, net - - 2 | 1 -
------- ------- ------- | ------- -------
Total other income(expense) (38) (63) (5) | (2) 12
------- ------- ------- | ------- -------
|
INCOME BEFORE INCOME TAXES 87 143 81 | 38 151
PROVISION FOR INCOME TAXES 32 53 28 | 13 50
------- ------- ------- | ------- -------
|
INCOME FROM CONTINUING OPERATIONS 55 90 53 | 25 101
|
INCOME FROM DISCONTINUED OPERATIONS, net of income |
tax effect of (pound)0 - - - | (1) 1
LOSS ON DISPOSAL OF DISCONTINUED |
OPERATIONS, net of income tax effect of |
(pound) 4 - - - | - (8)
EXTRAORDINARY GAIN ON EARLY |
EXTINGUISHMENT OF DEBT, net of income tax |
effect of (pound)3 - - 6 | - -
------- ------- ------- | ------- -------
NET INCOME (pound) 55 $ 90 (pound)59 | (pound) 24 (pound) 94
========== ======= ========= | ========== ==========
- - -------------
(1) See Note 14 for Details of Pro Forma Fiscal Year 1996.
The accompanying notes are an integral part of these statements.
</TABLE>
II-13
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
FOR THE YEAR ENDED MARCH 31, 1997, AND FOR THE PERIOD FROM INCEPTION
(JUNE 23, 1995) TO MARCH 31, 1996
SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
FOR THE PERIOD ENDED APRIL 1, 1995 TO SEPTEMBER 17, 1995 AND FOR THE YEAR ENDED
MARCH 31, 1995
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Ordinary Share Retained Total
Ordinary Share Shares of Premium Earnings/ Stockholders'
Shares Capital 50p Each Account (Deficit) Equity
(pound) (pound) (pound) (pound) (pound) (pound)
--------------------------------------------------------------------------------
PREDECESSOR COMPANY
Balance, March 31, 1994 123 62 - - 351 413
Repurchase of own shares (12) (6) - 6 (103) (103)
Issue of share capital - - - - - -
Dividends (25p per share) - - - - (30) (30)
Net income - - - - 94 94
---- --- --- --- ----- -----
Balance, March 31, 1995 111 56 - 6 312 374
Issue of share capital 1 - 2 - - 2
Dividends:
20p per share for 111 million shares - - - - (23) (23)
65p per share for 81 million shares - - - - (52) (52)
Net income - - - - 24 24
----- ----- --- ----- ----- -----
Balance, September 17, 1995 112 56 2 6 261 325
===== ===== === ===== ===== =====
SUCCESSOR COMPANY
Balance, June 23, 1995 - - - - - -
Net income - - - - 59 59
Proceeds from sale of National Grid
Holdings reflected as dividends
(Note 12) - - - - (191) (191)
Conversion of advances to equity
(Note 12) 315 315 - - - 315
Equity contribution (Note 12) 185 185 - - - 185
---- ---- --- --- ----- -----
Balance, March 31, 1996 500 500 - - (132) 368
Net income - - - - 55 55
Dividends declared on common stock - - - - (37) (37)
---- ---- --- --- ----- ----
Balance, March 31, 1997 500 500 - - (114) 386
==== ==== === === ===== =====
</TABLE>
The accompanying notes are an integral part of this statement.
II-14
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY) FOR THE YEAR
ENDED MARCH 31, 1997, AND FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995)
TO MARCH 31, 1996
SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
FOR THE PERIOD ENDED APRIL 1, 1995 TO SEPTEMBER 17, 1995 AND FOR THE YEAR ENDED
MARCH 31, 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 1997 Inception | April 1, 1995
(June 23, | 1995 to
1995) to | September
March 31, | 17, 1995
1996 |
Successor Successor Successor | Predecessor Predecessor
--------- ---------- --------- | ----------- -----------
(pound) $ (pound) | (pound) (pound)
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net income 55 90 59 | 24 94
----- ----- ----- | ----- ------
Adjustments to reconcile net income to net cash |
provided by operating activities: |
Depreciation and amortization 43 71 22 | 15 31
Gain on sale of investments (6) (10) (14) | - -
Gain on early extinguishment of debt - - (9) | - -
Changes in assets and liabilities: |
Receivables, net (22) (36) 6 | 32 (5)
Accounts payable (29) (48) (39) | (7) 1
Accrued income taxes 50 82 5 | (3) (5)
Other, net (32) (52) (5) | 8 (16)
----- ----- ------ | ----- ------
Total adjustments 4 7 (34) | 45 6
----- ----- ------ | ----- ------
Net cash provided by operating activities 59 97 25 | 69 100
----- ----- ----- | ----- ------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Consideration for purchase of SWEB paid to former |
shareholders - - (1,023) | - -
Capital expenditures (70) (115) (37) | (22) (68)
Loans to related parties (2) (3) - | (3) -
Proceeds from property, plant and equipment sales 7 11 - | 5 1
Purchases of investments - - - | (28) (66)
Proceeds from sales of investments 17 28 270 | 26 66
----- ----- ----- | ----- ------
Net cash used in investing activities (48) (79) (790) | (22) (67)
----- ----- ------ | ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Proceeds from advances from parent - - 315 | - -
Capital contribution received - - 185 | - -
Proceeds from issuance of notes - - 650 | - -
Proceeds from issuance of bonds 300 494 597 | - -
Repayment of notes and bonds - - (696) | - -
Change in short term borrowings (366) (602) - | (23) 24
Common shares purchased - - - | - (103)
Issue of share capital - - - | 2 -
Issue of mandatorily redeemable preferred securities 50 82 - | - -
Payment of preacquisition dividends - - (75) | - -
Payment of dividends (12) (20) (191) | - (30)
------ ---- ----- | ----- ------
Net cash (used in) provided by financing activities (28) (46) 785 | (21) (109)
------ ---- ----- | ------ ------
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (17) (28) 20 | 26 (76)
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20 33 - | 27 103
----- ----- ----- | ----- ------
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD (pound) 3 $ 5 (pound) 20 | (pound)53 (pound) 27
============ ===== ============ | ======== ==========
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
Cash paid for interest (pound) 48 $ 79 (pound) 21 | (pound) 5 (pound) 11
============ ===== ========== | ======== ==========
Cash (received from) paid for income tax (pound) (14) $ (23) (pound) 26 | (pound) 6 (pound) 33
============= ===== ============ | ======== ==========
Conversion of debt to equity (pound) - $ - (pound) 315 | (pound) - (pound) -
============ ===== ============ | ========= ==========
The accompanying notes are an integral part of these statements.
</TABLE>
II-15
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
(In Millions)
<S> <C> <C> <C>
ASSETS 1997 1997 1996
-------------------------------------------------------------------- ---------- --------- ---------
(pound) $ (pound)
PROPERTY, PLANT, AND EQUIPMENT 1,312 2,158 1,227
Less accumulated depreciation 59 97 20
----- ------ -----
Property, plant, and equipment, net 1,253 2,061 1,207
----- ------ -----
OTHER ASSETS
Investments 19 31 22
Prepaid pension cost 105 173 95
Goodwill, net of accumulated amortization of (pound)7 ($12) at
March 31, 1997 and(pound)2 at March 31, 1996 176 289 173
------ ----- -----
Total other assets 300 493 290
------ ----- -----
CURRENT ASSETS:
Cash and cash equivalents 3 5 20
Investments 18 30 26
Receivables :
Customer accounts, less provision for uncollectables of (pound)12
($20) at March 31, 1997 and(pound)17 at March 31, 1996 120 197 95
Other 12 20 20
------ ------ -----
Receivables, net 132 217 115
Materials and supplies 3 5 3
Prepaid expenses 12 20 25
------ ------ -----
Total current assets 168 277 189
------ ------ -----
Total assets (pound)1,721 $2,831 (pound)1,686
============ ====== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
II-16
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
(In Millions)
<S> <C> <C> <C>
STOCKHOLDER'S EQUITY AND LIABILITIES 1997 1997 1996
---- ---- ----
- - ----------------------------------------------------------------------------- (pound) $ (pound)
STOCKHOLDER'S EQUITY
Common stock, (pound)1 par value, 500,400,587 shares authorized, issued and
outstanding 500 822 500
Retained earnings (deficit) (114) (187) (132)
------ ------ -----
Total stockholder's equity 386 635 368
------ ------ -----
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SOUTHERN
INVESTMENTS UK CAPITAL TRUST I HOLDING COMPANY JUNIOR SUBORDINATED DEBENTURES
(Note 10)
50 82 -
NON-CURRENT LIABILITIES
Long-term debt 301 495 -
Deferred income taxes 377 620 352
Provision for loss contracts (Note 4) 69 114 62
Other 59 97 66
------ ------ -----
Total non-current liabilities 806 1,326 480
------ ------ -----
CURRENT LIABILITIES:
Commercial paper 250 411 -
Short-term borrowings 34 56 650
Accounts payable 46 76 45
Accrued income taxes 31 51 19
Unearned revenue 5 8 10
Common dividend declared 25 41 -
Accrued interest 9 15 -
Other 79 130 114
------ ------ -----
Total current liabilities 479 788 838
------ ------ -----
COMMITMENTS AND CONTINGENT MATTERS
(NOTES 2, 3 and 4)
Total stockholder's equity and liabilities (pound)1,721 $2,831 (pound)1,686
============ ====== ===========
</TABLE>
II-17
The accompanying notes are an integral part of these balance sheets.
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Southern Investments UK plc (the "Company") is a wholly-owned subsidiary
of Southern Investments UK Holdings Limited ("Holdings") which is 75% owned
indirectly by The Southern Company ("Southern") and 25% owned indirectly by PP&L
Resources, Inc. The Company was incorporated as a public limited company under
the laws of England and Wales on June 23, 1995 as a vehicle for the acquisition
of South Western Electricity plc (together with its subsidiaries, "SWEB"). On
September 18, 1995, the Company gained effective control of SWEB, having
acquired approximately 84% of its shares (the "Acquisition"). Accordingly, the
Company has designated September 18, 1995 as the effective date of the
Acquisition (the "Acquisition Date"). Given that SWEB represents substantially
all of the current operations of the Company, SWEB is considered the Predecessor
Company (the "Predecessor Company"). All references in the financial statements
to the Successor Company represent the Company and its subsidiaries and to the
Predecessor Company represent South Western Electricity plc and its
subsidiaries. See Note 7 for a further discussion of the Acquisition. The pro
forma accounts for 1996 are based on the adjusted results for these two entities
for the 12 months to March 31, 1996, as set out in Note 14.
SWEB is one of the twelve regional electricity companies ("RECs") in
England and Wales licensed to distribute, supply, and, to a limited extent,
generate electricity. The RECs were created as a result of the privatization of
the electricity industry in 1990 after the state owned low voltage distribution
networks were allocated to the then existing twelve regional boards. SWEB's main
business, the distribution and supply of electricity to customers in the south
west of England, is regulated under the terms of SWEB's Public Electricity
Supply license by the Office of Electricity Regulation ("OFFER").
Basis of Presentation
The financial statements of the Company are presented in pounds sterling
((pound)) and in conformity with accounting principles generally accepted in the
United States. The accompanying financial statements have not been prepared in
accordance with the policies of Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS No. 71").
This pronouncement, under which most US electric utilities report financial
statements, applies to entities which are subject to cost-based rate regulation.
By contrast, SWEB is not subject to rate regulation, but, rather is subject to
price cap regulation (Note 3) and therefore the provisions of SFAS No. 71 do not
apply. Financial statements presented in accordance with SFAS No. 71 contain
deferred items which have not yet been included in rates charged to customers in
compliance with the respective regulatory authorities, but which would have been
included in the income statement of enterprises in general under US GAAP. The
accompanying financial statements of the Company do not contain such deferrals.
The consolidated financial statements include the accounts of the Company
and its wholly owned and majority-owned subsidiaries and have been prepared from
records maintained by SWEB in the United Kingdom. All significant intercompany
accounts and transactions have been eliminated in consolidation. Investments in
companies in which the Company's ownership interests range from 20% to 50% and
the Company exercises significant influence over operating and financial
policies are accounted for using the equity method. Other investments are
accounted for using the cost method (Note 11).
II-18
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Solely for the convenience of the reader, pounds sterling amounts have
been translated into US dollars at the exchange rate of $1.6448 = (pound)1.00,
the noon buying rate in New York City for cable transfers in pounds sterling as
certified for customs purposes by the Federal Reserve Bank of New York on March
31, 1997. The following table sets out this rate for previous periods:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal Year Period end Average (1) High Low
----------- ---------- ----------- ---- ---
($ per (pound)1.00)
1992..................................... 1.51 1.77 2.00 1.51
1993..................................... 1.48 1.50 1.59 1.42
1994..................................... 1.57 1.53 1.64 1.46
1995..................................... 1.55 1.58 1.64 1.53
1996..................................... 1.53 1.53 1.56 1.50
1997..................................... 1.64 1.59 1.71 1.49
</TABLE>
- - -------------
(1) The average of the Noon Buying Rates in effect on the last business day
of each month during the relevant period.
Use of Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition
SWEB records revenue net of value added tax ("VAT") and accrues revenues
for services provided but unbilled at the end of each reporting period. SWEB
purchases power primarily from a market for the bulk trading of electricity (the
"Pool").
The Company has a diversified base of customers. No single customer or
industry comprises 10% or more of revenues.
Cash and Cash Equivalents
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at fair market value as
adjusted at the acquisition date in accordance with Accounting Principles Board
Opinion No. 16, "Accounting for Business Combinations" ("APB No. 16"). Items
capitalized subsequent to the Acquisition are recorded at original cost, which
includes materials, labor, appropriate administrative and general costs, and the
II-19
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
estimated cost of funds used during construction. The cost of maintenance,
repairs, and replacement of minor items of property is charged to maintenance
expense.
Depreciation of the recorded cost of depreciable property, plant, and
equipment is provided by using primarily composite straight-line rates, which
approximate 3.1% per year (2.5% per year for depreciable utility plant in
service). Upon the retirement or sale of assets, the costs of such assets and
the related accumulated depreciation are removed from the balance sheet and the
gain or loss, if any, is included in income.
II-20
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Information Technology Consultancy and Development Costs
Significant information technology ("IT") consultancy and development
costs are capitalized when they become technologically feasible and are
amortized over their estimated useful economic life from the date of first use.
Other IT consultancy and development costs are charged to income in the period
in which they are incurred. This policy was adopted effective October 1, 1995 as
the Company embarked on a significant program of investment and will be
incurring significant development costs which are fundamental to the future
performance of the business and which will benefit the business for a number of
years. The Directors are of the opinion that in relation to the planned
development costs to be incurred in the future, the policy followed by the
Predecessor Company of writing off such costs to the Statement of Income does
not give a fair reflection of the period over which the benefits will accrue.
Prior to this change in accounting policy the Company expensed all IT
consultancy and development costs as incurred. The effect of adopting this
policy has resulted in the capitalization of (pound)5 million of costs in the
year ended March 31, 1996 and (pound)11 million of costs in the year ended March
31, 1997.
Goodwill
The Company amortizes costs in excess of fair value of net assets of the
business acquired using the straight-line method over a period of 40 years.
Recoverability (performed on the basis of undiscounted operating cash flow
analysis) is reviewed annually or sooner if events or changes in circumstances
indicate that the carrying amount may exceed fair value, in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". Goodwill shown in the accompanying consolidated financial
statements relates to the acquisition of SWEB.
Investments
The Company accounts for its current investments in accordance with SFAS
No. 115, "Accounting for Investments for Certain Debt and Equity Securities."
These investments represent investments in debt securities, which management
classifies as available-for-sale securities in accordance with SFAS No. 115. The
Company's long-term investments consist of investments accounted for using the
cost method (See Note 11).
Income Taxes
SFAS No. 109, "Accounting for Income Taxes," requires the asset and
liability approach for financial accounting and reporting for deferred income
taxes. The Company uses the liability method of accounting for deferred income
taxes and provides deferred income taxes for all significant income tax
temporary differences.
Financial Instruments
The Company uses financial instruments primarily to mitigate the risk of
exposure to volatility in electricity prices and fluctuations in interest and
foreign currency rates. Such instruments are accounted for as hedges, and
accordingly, gains and losses are deferred and recognized over the same period
as the item hedged (Note 8).
The Company's carrying amount of financial instruments at both March 31,
1997 and March 31, 1996 was zero (Note 8).
II-21
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. RETIREMENT BENEFITS
Pension Plans
SWEB has two pension plans, a defined benefit plan and a defined
contribution plan.
Defined Contribution Plan
The defined contribution plan was established in fiscal year 1994. The
assets of the defined contribution plan are held and administered by an
independent trustee. Contributions to the plan by SWEB on behalf of its
employees were (pound)0.1 million ($0.2 million) for fiscal year 1997.
Contributions in prior periods were not material.
Defined Benefit Plan
SWEB participates in the Electricity Supply Pension Scheme, which
provides pension and other related defined benefits, based on final pensionable
pay, to substantially all employees throughout the Electricity Supply Industry
in the United Kingdom. Contributions to the plan by SWEB on behalf of its
employees were (pound)0.6 million ($1.0 million) for fiscal year 1997,
(pound)4.8 million for the period from inception (June 23, 1995) through March
31, 1996, (pound)3.7 million for the period from April 1, 1995 to September 17,
1995 and (pound)9.8 million for fiscal year 1995.
In accordance with SFAS No. 87, as of the date of the Acquisition, the
assignment of the purchase price to individual assets acquired and liabilities
assumed includes the plan assets in excess of the projected benefit obligation.
SWEB uses the "entry age normal method with a frozen initial liability"
actuarial method for funding purposes. Amounts funded to the pension trust(s)
are primarily invested in equity and fixed-income securities. SFAS No. 87
requires use of the "projected unit credit" actuarial method for financial
reporting purposes.
II-22
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The following table shows the actuarial results and assumptions for pension
benefits as computed under SFAS No. 87 (in millions):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
March 31, March 31, March 31,
1997 1997 1996
------ -------- --------
Successor Company pound) $ (pound)
Actuarial present value of benefit obligation
Vested benefits ............................. (493) (811) (488)
Nonvested benefits............................ - - -
---- ----- ----
Accumulated benefit obligations ................ (493) (811) (488)
Effect of future benefit obligations............ (37) (61) (37)
---- ----- ----
Projected benefit obligations..................... (530) (872) (525)
Less:
Fair value of plan assets.................. 641 1,055 642
Prior service costs ..................... 3 5 -
Unrecognized net gain .................. (9) (15) (22)
---- ----- ----
Prepaid asset recognized in the consolidated
balance sheets................................ 105 173 95
==== ===== ====
</TABLE>
The weighted average rates assumed in the actuarial calculations were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 | 1995
---- ---- | ----
Successor Successor | Predecessor
Discount rate........................................... 8.50% 8.75% | 8.75%
|
Annual salary rate increase............................. 5.75% 6.00% | 6.00%
|
Long term rate of return on plan assets................. 9.50% 9.50% | 9.50%
</TABLE>
II-23
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The components of the plan's net pension income are shown below (in millions):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Period from | Period from
inception | April 1,
(June 23, | 1995 to
1995) to | September Fiscal
Fiscal Year March 31, | 17, 1995 Year
1997 1996 | 1995
Successor Successor | Predecessor Predecessor
--------- ------------ | ------------ -----------
|
|
|
(pound) $ (pound) | (pound) (pound)
Benefits earned during the period................... 9 15 2 | 3 5
Interest cost on projected benefit obligation....... 44 72 22 | 20 37
Actual return on plan assets........................ (66) (109) (50) | (69) -
Net amortization and deferral....................... 9 15 22 | 42 (56)
-- --- -- | --- ----
Net pension income.................................. (4) (7) (4) | (4) (14)
=== === === | === ====
</TABLE>
Pensions Contingency
The Pensions Ombudsman (a UK statutorily appointed independent
arbitrator) has issued a determination in favor of complaints made by members of
the Electricity Supply Pension Scheme ("ESPS") relating to another employer's
use of ESPS surplus to offset the employer's costs of providing early pensions
on redundancies and certain other items. Under that determination the Pensions
Ombudsman directed the employer to pay into ESPS the amount of
that use of the surplus plus interest. The determination was challenged in the
High Court by the employer, and the High Court upheld the employer's appeal in a
judgment delivered on June 10, 1997. The High Court also granted the
complainants leave to appeal to a higher court. No date has yet been set for any
hearing in the higher court. If the complainants' appeal is successful either at
the higher court or on a subsequent appeal to the House of Lords, it will have
an adverse effect on SWEB. No payments are required until such challenge has
been heard. It is not practical to make an estimate of the exposure at the
present time.
3. REGULATORY MATTERS
OFFER controls the revenues generated by SWEB in its distribution and
supply businesses by applying a price control formula, P + RPI -X (where X is
currently 3% for distribution and 2% for supply), where P is the price level at
the beginning of each new regulatory period, RPI is the change in the Retail
Price Index and X is an adjustment factor determined by OFFER.
In the distribution business, the Distribution Price Control Formula
("DPCR") is usually set for a five-year period, subject to more frequent
adjustments as determined necessary by the Director General of Electricity
Supply (the "Regulator"). At each review, the Regulator can require a one-time
price reduction. An initial review by the Regulator of allowable income in the
distribution business led to a reduction of the price level by 14% for SWEB
starting April 1, 1995, followed by efficiency factors of X = 2% for each year
until March 2000. On July 6, 1995, the Regulator announced the result of a
further distribution price review which was precipitated by certain market
events in the UK electric utility industry. For SWEB, such announcement meant a
further real reduction of 11% in allowable distribution income for the twelve
months from April 1, 1996, followed by an efficiency factor of X = 3% for each
year until March 31, 2000, before an allowed increase for inflation.
In the supply business, which is progressively being opened to
competition, price regulation still applies to the market for customers with a
demand of not more than 100kW. The calculation of the maximum supply charge is
based on a Supply Price Control Formula, similar to the DPCR and is set for a
four-year period. In 1993, OFFER announced the supply franchise market (i.e.
with demand of not more than 100kW) income entitlement for the four-year period
ending March 1998. A relatively small efficiency factor of X = 2% was applied to
SWEB and is being offset by an allowance for both unit and customer growth. The
non-franchise markets (above 1MW) were opened to full competition during
II-24
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
privatization in 1990; the non-franchise markets above 100kW were opened to full
competition starting in April 1994. OFFER is currently undertaking a further
Supply Price Control Formula review, effective from April 1, 1998; the result of
their review is not expected to be announced before October, 1997.
4. COMMITMENTS AND CONTINGENT MATTERS
Power Purchase Agreements
SWEB has entered into a contract relating to the purchase of 200
megawatts of capacity from a 7.69% owned related party, Teesside Power Limited
("Teesside"), for a period of 15 years beginning April 1, 1993. The contract
sets escalating electricity purchase prices at predetermined levels. The Company
has recognized an accrual at the acquisition date for the excess of these
Teesside power purchase costs in each year over an estimate of the equivalent
pool costs in that respective year. These costs have been discounted at an
appropriate rate to their present value of (pound)69 million ($114 million) at
March 31, 1997 and (pound)62 million at March 31, 1996. Over the past two years,
the pool prices have been less than anticipated when the accrual was recognized.
The Company is continuing to review the trend of pool prices and an adjustment
to the provision may be required in the future.
The Company has additional contracts with unaffiliated parties relating
to the purchase of electricity, which expire by March 31, 1998, and contracts
relating to the purchase of gas which expire by September 30, 1998, the terms of
which are immaterial with respect to quantity and price, both annually and in
the aggregate.
Operating Leases
SWEB has commitments under operating leases with various terms and
expiration dates. Expenses associated with these commitments totalled (pound)4
million ($7 million) for the 1997 fiscal year, (pound)3 million for the period
from inception (June 23, 1995) to March 31, 1996, (pound)3 million for the
period from April 1, 1995 to September 17, 1995 and (pound)6 million for fiscal
year 1995. Estimated minimum rental commitments for noncancelable operating
leases were as follows at March 31, 1997 (in millions):
Fiscal year
(pound) ($)
1998....................................... 3 5
1999....................................... 2 3
2000....................................... 1 2
2001....................................... 1 2
2002....................................... 1 2
Thereafter................................. 7 11
-- --
Total minimum payment....................... 15 25
== ==
Labor Subject to Collective Bargaining Agreements
Substantially all of SWEB's employees are subject to one of two
collective bargaining agreements. Such agreements are ongoing in nature, and
SWEB's employee participation level is consistent with that of the electric
utility industry in Great Britain.
Change of Government in the UK
On May 1, 1997 a new Labour government in the UK was elected. The Labour
Party's election manifesto includes the commitment to introduce "a one-off
windfall levy on the excess profits of privatised utilities". The total amount
of government revenue to be raised by the tax and the allocation of the tax
between utilities is scheduled to be announced as part of the government's
budget in early July, 1997. There can be no assurance that the introduction of a
windfall tax or other taxes or policies of the new government will not adversely
affect the Company.
II-25
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
5. SEGMENT REPORTING
The Company is primarily engaged in two electric industry segments:
distribution, which involves the transmission of electricity across its network
and its transfer and delivery to its customers, and supply, which involves bulk
purchase of electricity from the Pool and arranging for its sale and transfer to
its customers. Intersegment sales primarily represent sales from distribution to
supply for the use of the distribution network. Information about the Company's
operations in these individual segments is detailed below (in millions):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fiscal Year
1997 (Successor) Distribution Supply Other Eliminations Consolidated
- - ---------------- -------------- ---------- ----------- ------------- --------------
(pound) $ (pound) $ (pound) $ (pound) $ (pound) $
Operating revenues 231 380 788 1,296 63 104 (234) (385) 848 1,395
Operating income 108 178 12 20 6 10 (1) (2) 125 206
Total assets employed at period-end 1,481 2,436 133 219 107 176 - - 1,721 2,831
Capital expenditures 64 106 3 5 3 5 (1) (2) 69 114
Inception (June 23, 1995) to
March 31, 1996 (Successor) Distribution Supply Other Eliminations Consolidated
- - ----------------------------- -------------- ---------- ----------- ------------- -------------
(pound) (pound) (pound) (pound) (pound)
Operating revenues 147 450 33 (149) 481
Operating income 72 13 1 - 86
Total assets employed at period-end 1,422 102 162 - 1,686
Capital expenditures 32 1 4 - 37
April 1, 1995 to September 17, 1995
(Predecessor) Distribution Supply Other Eliminations Consolidated
- - ------------------------------------ -------------- ---------- ----------- ------------- ------------
(pound) (pound) (pound) (pound) (pound)
Operating revenues 105 276 23 (105) 299
Operating income 42 2 (4) - 40
Total assets employed at period-end 537 54 289 (45) 835
Capital expenditures 19 - 2 - 21
Fiscal Year
1995 (Predecessor) Distribution Supply Other Eliminations Consolidated
- - ---------------- -------------- ---------- ----------- ------------- --------------
(pound) (pound) (pound) (pound) (pound)
Operating revenues 274 725 57 (280) 776
Operating income 112 18 10 (1) 139
Total assets employed at period-end 531 93 294 (49) 869
Capital expenditures 54 - 13 - 67
</TABLE>
Included in "Other" above are insignificant operating subsidiaries of
SWEB, as well as corporate activities and assets not allocated to specific
segments (i.e. dividends, taxes, investments, and financing). With the exception
of total assets employed, the values above exclude discontinued operations. The
eliminations above primarily relate to internal sales from the distribution
business to the supply business for the use of the network. Such sales are
priced at rates applicable to SWEB and other suppliers operating in the SWEB
Franchise Area.
II-26
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
6. INCOME TAXES
Details of the income tax provisions are as follows (in millions):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Period from | Period from
inception (June | April 1, 1995 to
Fiscal Year 23, 1995) | September 17, Fiscal Year
1997 March 31, 1996 | 1995 1995
Successor Successor | Predecessor Predecessor
---------- ------------- | --------------- ------------
(pound) $ (pound) | (pound) (pound)
Provision for income taxes: |
Currently payable 21 35 12 | 10 33
Deferred 11 18 19 | 3 13
-- -- -- | -- --
Total provisions 32 53 31 | 13 46
== == == | == ==
</TABLE>
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows
(in millions):
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, March 31,
1997 1996
--------- -----------
(pound) $ (pound)
Deferred tax liabilities:
Property, plant, and equipment basis differences.................... 363 597 341
Pensions............................................................ 35 58 32
--- --- ---
Total....................................................... 398 655 373
Deferred tax assets:
Acquisition related accruals............................... 21 35 21
--- --- ---
Net deferred tax liabilities in consolidated balance sheet............ 377 620 352
=== === ===
</TABLE>
Reconciliations of the UK statutory rate to the effective income tax rate
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Period from |
inception (June | Period from
Fiscal 23, 1995) to | April 1, 1995 to
Year March 31, 1996 | September 17, Fiscal Year
1997 1996 | 1995 1995
Successor Successor | Predecessor Predecessor
--------- --------------- | ------------- ------------
|
UK statutory rate 33% 33% | 33% 33%
Nondeductible amortization of goodwill. 2 1 | - -
Other permanent differences 1 - | 2 -
--- --- | --- ---
Effective income tax rate 36% 34% | 35% 33%
=== === | === ===
</TABLE>
II-27
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
7. ACQUISITION
The acquisition of SWEB in the amount of (pound)1.065 ($1.752) billion
was accomplished through the purchase of shares via both cash and non-cash
consideration (see accompanying consolidated statement of cash flows) between
July and November 1995. The Company purchased 30% of SWEB through open market
purchases during July and August 1995. On August 31, 1995, the Company's offer
to purchase all shares of SWEB was endorsed by its Directors. By September 18,
1995, the Company had gained effective control of approximately 84% of its
shares, and, therefore, effective control of SWEB. It subsequently acquired the
remaining shares.
The acquisition was accounted for using the purchase method of accounting
in accordance with APB No. 16. The purchase price of SWEB has been allocated to
the underlying assets and liabilities based on estimated fair values at the
acquisition date. The acquisition cost exceeded the fair market value of net
assets acquired, including (pound)28 million ($46 million) of acquisition
related costs, by (pound)183 million ($301 million) and is considered goodwill.
The operating results of SWEB have been included in the Company's financial
statements from the effective date of the acquisition. These values include
revisions to the fair value estimates following review in September 1996.
Provisional goodwill was stated at (pound)175 million at March 31, 1996.
The following unaudited pro forma information has been prepared assuming
that the acquisition had occurred at the beginning of the respective periods.
This pro forma information includes adjustments for depreciation expense
resulting from the fair valuation of the assets upon acquisition, amortization
of goodwill resulting from the excess of the fair values of the assets minus
liabilities over the purchase price, incremental interest expense resulting from
the fair valuation of debt obligations upon acquisition, interest expense that
would have been incurred to finance the acquisition as if they were incurred at
the beginning of the period, and the exclusion of the Company's gain on sale of
its investment in NGG and its acquisition bid defense costs. The pro forma
information is presented for informational purposes only and may not be
indicative of the results of operations as they would have been had the
acquisition occurred at the beginning of the respective periods, nor is the
information necessarily indicative of the results of operations which may occur
in the future.
Pro Forma
Fiscal Year Ended March 31
--------------------------
1996 1995
------- ------
(pound) $ (pound) $
Operating Revenues (in millions) 780 1,283 776 1,276
Net income (in millions) 49 81 47 77
8. FINANCIAL INSTRUMENTS
SWEB utilizes contracts for differences ("CFDs") to mitigate its exposure
to volatility in the prices of electricity purchased through the Pool. Such
contracts allow the Company to effectively convert the majority of its
anticipated Pool purchases from market prices to fixed prices. CFDs are in place
to hedge a portion of electricity purchases on approximately 33,000 GWh through
the year 2008. Accordingly, the gains and losses on such contracts are deferred
and recognized as electricity is purchased. It is not possible to estimate the
fair value of these contracts at present as the contract prices are based on
future events, the effects of which currently are not estimable. Current CFD's
have been entered into with UK Power Generators.
II-28
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Interest rate swaps are used by the Company to hedge its exposure to
fluctuations in interest rates by allowing the Company to effectively convert
its outstanding variable-rate debt into fixed rates. At March 31, 1997, sterling
interest rate swaps expiring between 2001 and 2012 with notional amounts
totalling (pound)500 million ($822 million), resulted in an unrealized loss of
(pound)2 million ($3 million).
Foreign currency swaps contracts are used by the Company to hedge
exposure to US dollar liabilities in respect of outstanding debt. At March 31,
1997, currency hedging swaps expiring between 2001 and 2007 with notional
amounts totalling (pound)350/$582 million, resulted in an unrealized loss of
(pound)11 million ($18 million).
The cash flows relating to interest rate and foreign currency swaps are
included within the cost of the related debt on the cash flow statement.
The fair value of the swaps is estimated using pricing models which
provide the present value of the difference between the contracted swap rates
and market interest rates over the remaining life of the swaps and represent the
amounts payable to terminate the swaps at March 31, 1997. Should the Company
terminate the swaps, the gain or loss on termination would be deferred and
amortized to interest expense over the period of the related debt.
The Company is exposed to losses in the event of nonperformance by
counterparties to its CFDs, interest rate swaps and currency hedging contracts.
To manage this credit risk, the Company selects counterparties based on their
credit ratings, limits its exposure to any one counterparty under defined
guidelines, and monitors the market position of the programs and its relative
market position with each counterparty
9. CAPITAL BUDGET
The Company's capital expenditure for fiscal year 1997 was (pound)69
million ($114 million); for fiscal years 1998 and 1999 capital expenditures are
estimated to be (pound)67 million ($110 million) and (pound)69 million ($114
million) respectively. The capital budget is subject to periodic review and
revision, and actual capital cost incurred may vary from the above statement
because of numerous factors. The factors include: changes in business
conditions; revised load growth projections; change in regulatory requirements;
and increasing costs of labor, equipment, and materials.
10. FINANCING
In November 1996, the Company issued $500 million Senior Notes in the US,
the proceeds of which were used to reduce short-term bank loans in the UK. Some
$168 million of the Senior Notes are due for redemption in 2001 and $332 million
in 2006; the Senior Notes are at rates of 6.375% and 6.8% respectively. The
Company entered into currency swap transactions that effectively convert the US
dollar obligations of the Senior Notes into pounds sterling obligations, with a
nominal value of (pound)300 million.
SWEB has established a commercial paper program in the US, first utilized
in February 1997 to reduce short-term bank loans. The maximum available under
the program, which is fully supported by a swingline facility provided by a
syndicate of banks, is $520 million. The amount not utilized at March 31, 1997
was $117 million. SWEB enters into foreign currency contracts to hedge the
currency risk associated with the interest and principal of each issue under
this program.
II-29
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The Company and SWEB have entered into agreements that effectively swap
into fixed rates, (pound)150 million of SWEB's variable-rate debt, for periods
of between 7 and 15 years.
In January 1997, Southern Investments UK Capital Trust I (the "Trust"), a
statutory business trust formed under the laws of the State of Delaware and
established for the sole purpose of issuing its own securities and investing the
proceeds thereof in the 8.23% subordinated debentures issued by the Company and
scheduled to mature on February 1, 2027, sold $82 million of its 8.23% preferred
securities. The Company guarantees the Trust's obligations under the preferred
securities. The proceeds received by the Company from the sale of the preferred
securities were used in part to repay short-term bank loans. The Company has
also entered into foreign currency swap contracts to hedge the currency risk
associated with the interest and principal on the preferred securities, by
swapping the US dollar liabilities back to pounds sterling for the period to
February 2007. The nominal value of the swapped liabilities is (pound)50
million. The Company owns all of the common securities of the Trust, all of the
assets of which are the aforementioned subordinated debentures of the Company in
the aggregate principal amount of $84.5 million. The Company considers that the
mechanisms and obligations relating to the preferred securities, taken together,
constitute a full and unconditional guarantee by the Company of the Trust's
payment obligations with respect to the preferred securities.
During the period from inception (June 23, 1995) to March 31, 1996, the
Company recorded an extraordinary gain of (pound)6 million ($10
million), net of taxes, on the early extinguishment of UK government
debt; this debt had been allocated to SWEB at privatization. At the
acquisition date, a fair value had been allocated to this debt. The
Company subsequently had opportunity to make an offer to redeem the
debt below its fair value as a result of changes in circumstances not
anticipated by SWEB.
11. SALE OF INVESTMENTS
The Company's long-term investments accounted for under the cost method
consist of its 7.69% ownership of Teesside (Note 4), the fair value of which is
not readily determinable. The Company's short-term investments are classified as
available-for-sale under SFAS No. 115, the fair value of which approximated cost
at March 31, 1997.
During fiscal year 1996, SWEB sold its share of The National Grid Holding
plc ("NGH") into the market, following the listing of the NGH shares on the
London Stock Exchange on December 11, 1995. At the Acquisition Date, the
eventual listing of shares in NGH was not certain as it required numerous
actions by the 12 RECs, NGH and the UK government followed by the consent of the
shareholders given at meetings of each of the 12 RECs on the terms of a listing.
Regardless of the outcome of the above uncertainties, the Company intended to
retain its investment even if such listing did ultimately occur. Accordingly,
management determined that it had all the facts necessary to complete a
calculation of the fair value of its long term investment in NGH, and it
utilized a discounted cash flow methodology to determine the asset's fair value
shortly after the Acquisition Date in accordance with APB No. 16. The Company's
valuation of (pound)199 million ($327 million) was within the range of
independent appraisals of NGH performed during the same period.
Subsequent to the Acquisition Date, certain facts and circumstances
changed which increased the value of the Company's investment in NGH. First, the
listing of shares was structured in a manner found acceptable by the
shareholders of each of the RECs, thereby transforming the Company's illiquid
investment into a liquid investment. Additionally, while the Company viewed its
investment in NGH as long-term in nature at the Acquisition Date, the
acquisition of SWEB and the acquisition of several RECs subsequent to the
Acquisition Date caused the UK government to be concerned that the listing of
NGH would not result in NGH being broadly held by the public and that the NGH
would be controlled by the holding companies that had acquired, or announced
plans to acquire, RECs. As such, at the insistence of the UK government, each
REC, including SWEB, agreed to dispose of its investment in NGH within one year
of the listing and that such shares could not be retained by a REC's parent
holding company, such as the Company.
II-30
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
SWEB disposed of its shares over a period of approximately two months
through a series of market transactions. The net proceeds of such sales were
(pound)201 million ($331 million) resulting in a pretax gain of (pound)14
million ($23 million). Further proceeds of (pound)12 million were received from
the sale of shares transferred to SWEB's former shareholders and brought the
total proceeds received to (pound)213 million. This gain is nonrecurring in
nature as it is the result of changes in circumstances after the fair valuation
of the investment in NGH resulting from the application of APB No. 16 which
valuation was finalized shortly after the Acquisition Date.
The offering of NGH was conditional on the prior demerger of NGH's Pumped
Storage Business ("PSB") which was completed in November 1995. The fair value of
SWEB's holdings at acquisition in PSB was assessed at (pound)39 million ($64
million). PSB was subsequently sold. At March 31, 1997, proceeds of (pound)43
million ($71 million) had been received; a gain of (pound)4 million ($7 million)
has been recognized in fiscal year 1997.
12. COMMON STOCKHOLDER'S EQUITY
As discussed in Note 7, the Company obtained effective control of SWEB on
September 18, 1995. During October 1995, (pound)315 million ($518 million) of
advances from the parent of the Company were converted to share capital, an
equity contribution of (pound)185 million ($304 million) was received from the
parent of the Company, and a combination of short-term and long-term debt
financing was obtained to facilitate the payment of the former shareholders.
These transactions are reflected in the consolidated statements of cash flows.
Dividends in the amount of (pound)191 million ($314 million) were
declared and paid by the Company during the period ending March 31, 1996 as
proceeds from the sale of the Company's shares in NGH (Note 11) provided cash in
addition to that provided from operations during the period.
The Company's sole investment and only significant asset is the entire
share capital of SWEB. The Company is therefore dependent upon dividends from
SWEB for its cash flow. SWEB can make distribution of dividends to the Company
under English law to the extent that it has distributable reserves, subject to
the retention of sufficient financial resources to conduct its supply and
distribution businesses as required by its regulatory license. The Company
believes that currently sufficient distributable reserves will exist at SWEB to
allow for any and all cash flow generated at SWEB through operations to be
distributed to the Company through dividends to the Company. In the UK, the
Accounting Standards Board currently has a discussion paper reviewing this
treatment of deferred income tax accounting to be required in the future; SWEB's
distributable reserves could be significantly reduced by this matter.
13. SUBSEQUENT EVENTS
On May 1, 1997 a new Labour government in the UK was elected and on June
10, 1997 a UK Court ruling on a pensions matter was announced. See Notes 4 and 2
respectively.
II-31
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
14. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE 12
MONTHS ENDED MARCH 31, 1996
The following unaudited pro forma statement of income from continuing
operations is based upon the audited consolidated statement of income for the
period from inception (June 23, 1995) to March 31, 1996 of the Successor Company
and the audited consolidated statement of income of the Predecessor Company for
the period from April 1, 1995 to September 17, 1995, adjusted to reflect the
items described in notes (1) to (5) below as if the purchase business
combination had occurred at the beginning of the period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(In Millions)
---------------------------------------------------------------------------------------------------
|
Successor Period | Predecessor Period Pro forma for
Inception (June 23, 1995) | April 1, 1995 to the Year Ended
to March 31, 1996 | September 17, 1995 March 31, 1996
(audited) | (audited)
US GAAP | US GAAP Adjustments US GAAP
---------------------------|--------------- -------------------------------- ---------------
|
(pound) | (pound) 1 2 3 4 5 (pound)
|
OPERATING REVENUES 481 | 299 - - - - - 780
COST OF SALES 318 | 186 - - - - - 504
--- | ---- -- -- -- --- --- ---
GROSS MARGIN 163 | 113 - - - - - 276
--- | ---- -- -- -- --- --- ---
OPERATING EXPENSES: |
Maintenance 21 | 18 - - - - - 39
Depreciation and amortization 22 | 15 3 2 - - - 42
Selling, general, and administrative 34 | 40 - - - - (8) 66
---- | ---- -- -- -- --- --- ---
Total operating expenses 77 | 73 3 2 - - (8) 147
---- | ---- -- -- -- --- --- ---
Operating income 86 | 40 (3) (2) - - 8 129
---- | ---- -- -- -- --- --- ---
OTHER INCOME (EXPENSE): |
Interest income 7 | 2 - - - - - 9
Interest expense (28) | (5) - - (1) (32) - (66)
Gain on sale of investments 14 | - - - - - (14) -
Other, net 2 | 1 - - - - - 3
---- | ---- -- -- -- --- -- ---
Total other income (expense) (5) | (2) - - (1) (32) (14) (54)
---- | ---- -- -- -- --- --- ---
INCOME BEFORE INCOME TAXES 81 | 38 (3) (2) (1) (32) (6) 75
|
PROVISION FOR INCOME TAXES 28 | 13 (1) (1) - (11) (2) 26
---- | ---- -- -- -- --- --- ---
INCOME FROM CONTINUING |
OPERATIONS 53 | 25 (2) (1) (1) (21) (4) 49
---- | ---- -- --- --- --- --- ---
</TABLE>
(1) Depreciation expense which would have been recorded based on the valuation
of property, plant, and equipment recorded in connection with the purchase
business combination, as if such combination had occurred on April 1,
1995. It has been provided using composite straight line rates which
approximate 3.1% on an asset value of (pound)1,190 million for 170 days,
less depreciation already charged to the Predecessor Company's
consolidated statement of income.
(2) Amortization of goodwill recorded in connection with the purchase business
combination as if the combination had occurred on April 1, 1995.
(3) Reflect the fair value of long-term debt obligations and associated
interest expense recorded in connection with the purchase business
combination as if the combination had occurred on April 1, 1995. The
charge relates to notional interest ((pound)2 million) on a discounted
provision for onerous purchase contracts (`Teesside'), partly offset by a
reduction in interest to market rates on the HM Government debt put in
place at privatization ((pound)1 million).
II-32
<PAGE>
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES (PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(4) Reflect the interest expense recorded in connection with the purchase
business combination as if the combination had occurred on April 1, 1995
and had been 100% financed with short-term borrowings at an interest rate
of 6% per year. The impact of a 1/8% change in the assumed interest rate
would change income from continuing operations by (pound)0.4 million.
(5) Remove gain on sale of investment in NGG and costs incurred by the
Predecessor Company relating to bid defense associated with the
Acquisition. An extraordinary gain of (pound)6 million ($10 million) on
early extinguishment of debt during the successor period above, normally
shown after income from continuing operations, has also been removed.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
At the request of the board of directors of SWEB, Ernst & Young,
Chartered Accountants, tendered their resignation, which was accepted effective
September 18, 1995, as independent auditors of SWEB, the reports of which did
not contain an adverse opinion or disclaimer of opinion for fiscal years 1995 or
1994. Nor were such reports modified as to uncertainty, audit scope, or
accounting principles. During fiscal years 1995 and 1994, and during the interim
period of fiscal year 1996 preceding September 18, 1995, there were no
unresolved disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which would have warranted reference to the subject matter of such
disagreement(s) in connection with its reports.
On September 18, 1995, the board of directors of the Company approved the
engagement of Arthur Andersen, Independent Public Accountants, as independent
auditors of SWEB. Arthur Andersen has been the independent auditor of the
Company since its inception (June 23, 1995), and is the independent auditor of
Southern, the ultimate parent of SWEB.
II-33
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of March 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
---- --- ------------------------------------------------
Richard J. Pershing.............................. 50 Director, Chief Executive Officer
C. B. (Mike) Harreld............................. 52 Director, Chief Financial and Accounting Officer
Thomas G. Boren.................................. 47 Director
Alan W. Harrelson................................ 48 Director
Gale E. Klappa................................... 46 Director
C. Philip Saunders............................... 44 Director
Charles W. Whitney............................... 50 Director
Accentacross Limited............................. Director
Mighteager Limited............................... Director
</TABLE>
Richard J. Pershing has been a Director of the Company since June 1995
and Chief Executive Officer since July 1996. From February 1994 to the present,
Mr. Pershing has served as Senior Vice President and International Executive
Officer of Southern Energy, an indirect wholly-owned subsidiary of Southern.
From June 1992 to February 1994, he served as Vice President of International
Business Development at Southern Energy. From January 1991 to June 1992, he
served as Vice President of Human Resources at Georgia Power Company ("Georgia
Power"), also a subsidiary of Southern.
C.B. (Mike) Harreld has been a Director of the Company since September
1995 and Chief Financial and Accounting Officer of the Company since July 1996.
He has also been the Finance Director of SWEB since September 1995. From
February 1986 to August 1995, he served as Vice President, Comptroller and Chief
Accounting Officer of Georgia Power.
Thomas G. Boren has been a Director of the Company since July 1995 and
President and Chief Executive Officer of Southern Energy since February 1992.
From May 1989 to February 1992, Mr. Boren served as Senior Vice President of
Administration at Georgia Power.
Alan W. Harrelson has been a Director of the Company since September
1995. From January 1994 to September 1995, Mr. Harrelson served as General
Manager, Northern Region Power Delivery of Georgia Power. From June 1991 to
December 1993, he served as Network Underground Manager, Power Delivery of
Georgia Power.
Gale E. Klappa has been a Director of the Company since September 1995.
From February 1992 to September 1995 he served as Senior Vice President of
Marketing for Georgia Power.
C. Philip Saunders has been a Director of the Company since September
1995. From February 1994 to September 1995, he served as Western Region and
Power Marketing Director for US business development at Southern Energy. From
May 1992 to February 1994, Mr. Saunders was Assistant to the Senior Vice
President of Marketing at Georgia Power.
Charles W. Whitney has been a Director of the Company since July 1995.
From November 1995 to the present, Mr. Whitney has served as Vice President of
SEI Holdings, Inc., also a subsidiary of Southern. From June 1994 to November
III-1
<PAGE>
1995, he served as Vice President of Southern Energy. From January 1991 to June
1994, he served as Vice President of Georgia Power.
Accentacross Limited ("Accentacross") has been a Director of the
Company since July 1996. Robert D. Fagan represents Accentacross at meetings
of the Directors of the Company. Mr. Fagan has represented Accentacross at
meetings of the Directors of the Company since July 1996. From November 1994
to the present, Mr. Fagan has served as President of PMDC. From April 1989 to
November 1994, he served as Vice President and General Manager of Mission
Energy Company ("Mission Energy"). Mr. Fagan is also currently a Director
of PMDC.
Mighteager Limited ("Mighteager") has been a Director of the Company
since July 1996. Roger L. Petersen represents Mighteager at meetings of the
Directors of the Company. Mr. Petersen has represented Mighteager at
meetings of the Directors of the Company since July 1996. From January 1995 to
the present, Mr. Petersen has served as Vice President of PMDC. From October
1986 to December 1994, Mr. Petersen served as Vice President of Mission Energy.
Accentacross and Mighteager were elected by PMDC UK as members of the
board of directors of the Company pursuant to a Shareholders' Agreement dated
July 1, 1996 (the "Shareholders' Agreement") among Southern Electric
International-Europe Inc. ("SEI-Europe"), PMDC UK and Holdings. The
Shareholders' Agreement provides that each shareholder of Holdings owning 10
percent or more of the shares of Holdings has the right to elect one director
for every 10 percent held. This right applies not only to the board of directors
of Holdings but also extends to the board of directors of the Company as a
wholly-owned subsidiary of Holdings. Thus, PMDC UK, as holder of 25 percent of
the shares of Holdings, has the right to elect two directors to the board of the
Company. Accentacross and Mighteager are represented on the board of directors
of the Company by Messrs. Fagan and Petersen, respectively.
Item 11. EXECUTIVE COMPENSATION
Accentacross and Mighteager (the "PMDC Directors") do not receive
compensation for their services as Directors of the Company. The other officers
and directors listed in Item 10 above (such officers and directors, with the
exception of the PMDC Directors, each a "Southern Company system Officer or
Director," as applicable) have received, and will continue to receive,
compensation in respect of services performed by such persons in their
capacities as Southern Company system Officers or Directors of the Company from
Southern Energy, their primary employer and an affiliate of the Company. The
Company is charged by Southern Energy for the time spent by those Southern
Company system Officers and Directors who do not devote their full time to the
affairs of the Company and for a portion of the overhead costs associated with
each such Southern Company system Officer and Director. The salaries of all
Southern Company system Officers and Directors are paid by Southern Energy, and
Southern Energy is reimbursed by the Company, in accordance with a services
agreement between the Company and Southern Energy. Southern Company system
Officers and Directors receive no cash or non-cash compensation as a result of
these arrangements beyond that which they would otherwise receive from Southern
Energy for the services performed by them for Southern Energy.
III-2
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners. The authorized share capital of
the Company consists of 500,400,587 ordinary shares of (pound)1 each, all of
which have been issued fully paid and are held by Holdings. The following table
sets forth, as of March 31, 1997, certain information regarding beneficial
ownership of Holdings' common stock held by each person known by the Company to
own beneficially more than 10% of Holdings' outstanding common stock.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Title of Class Owner Ownership Class
- - ------------------------------------------------------------------------------------------
A Ordinary The Southern Company 150,000 (1) 100%
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
B Ordinary PP&L Resources, Inc 50,000 (2) 100%
11350 Random Hills Road
Suite 800
Fairfax, Virginia 22030
</TABLE>
(1) Such shares are owned by SEI-Europe, an indirect wholly-owned subsidiary of
Southern.
(2) Such shares are owned by PMDC UK, an indirect wholly-owned subsidiary of
PP&L Resources, Inc.
The A Ordinary shares and the B Ordinary shares have the same voting rights, and
the only material difference between the A Ordinary shares and the B Ordinary
shares is that the holders of the B Ordinary shares are entitled to a smaller
proportion of dividends paid in respect of earnings during calendar year ending
December 31, 1996 than the holders of the A Ordinary shares.
Security ownership of management. The following table shows the number of shares
of Southern common stock owned by the directors, nominees and executive officers
as of March 31, 1997. It is based on information furnished by the directors,
nominees and executive officers. The shares owned by all directors, nominees and
executive officers as a group constitute less than one percent of the total
number of shares outstanding on March 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned 1,2
- - ---------------------- -------------- ---------------------
Carson B. Harreld Southern Common 3,925
Alan W. Harrelson Southern Common 14,641
Gale E. Klappa Southern Common 32,207
C. Philip Saunders Southern Common 8,392
Charles W. Whitney Southern Common 7,608
Thomas G. Boren. Southern Common 28,629
Richard J. Pershing Southern Common 20,536
The directors, nominees, and
executive officers as a group
(9 persons) Southern Common 115,938
</TABLE>
1 As used in this table, "beneficial ownership" means the sole or shared power
to vote, or to direct the voting of, a security and/or investment power with
respect to a security (i.e., the power to dispose of, or to direct the
disposition of, a security).
2 The shares shown include shares of Southern common stock of which certain
directors and executive officers have the right to acquire beneficial
ownership within 60 days pursuant to the Executive Stock Plan, as follows:
Mr. Klappa, 15,012 shares; Mr. Boren, 16,987 shares; and Mr. Harreld, 1,510
shares.
III-3
<PAGE>
The two corporate directors, Accentacross Limited and Mighteager Limited, do not
own any equity securities of the Company or any of its parents or subsidiaries.
Changes in control. The Company knows of no arrangements which may at a
subsequent date result in any change in control.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with management and others.
None.
Certain business relationships.
See Item 11 herein.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-4
<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report on this Form
10-K:
(1) Financial Statements:
The financial statements and the related reports of independent
public accountants and auditors filed as a part of this annual
report are listed under Item 8 herein.
(2) Financial Statement Schedules:
Reports of Independent Public Accountants and Independent
Auditors as to Schedules for SOUTHERN INVESTMENTS UK plc and
Subsidiaries (Successor Company) and SOUTH WESTERN ELECTRICITY
plc and Subsidiaries (Predecessor Company) are included herein
on pages S-1 through S-3.
Financial Statement Schedules for the Company are included
herein on page S-4.
(3) Exhibits:
Exhibits are listed in the Exhibit Index on page E-1 and E-2.
(b) Reports on Form 8-K:
The registrant has not filed any reports on Form 8-K during the last
quarter of the fiscal year ended March 31, 1997.
IV-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant, Southern Investments UK plc, a public limited
company incorporated and existing under the laws of England and Wales, has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on the 27th day of June,
1997.
SOUTHERN INVESTMENTS UK plc
By: Richard J.Pershing
Director and Chief Executive Officer
By:/s/ WAYNE BOSTON
Wayne Boston
Attorney-in-Fact
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following directors and officers of Southern
Investments UK plc in the capacities and on the date indicated:
Signature Title Date
RICHARD J. PERSHING Chairman and Chief
Executive Officer
CARSON B. HARRELD Chief Financial and
Accounting Officer
THOMAS G. BOREN |
|
ALAN W. HARRELSON |
|
GALE E. KLAPPA |
|
C. PHILIP SAUNDERS |
|
CHARLES W. WHITNEY | Directors
|
ACCENTACROSS LIMITED |
|
By: Robert D. Fagan |
Director |
|
MIGHTEAGER LIMITED |
|
By: Roger L. Petersen |
Director |
/s/ WAYNE BOSTON June 27, 1997
Wayne Boston
Attorney-in-Fact
IV-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To the Board of Directors of Southern Investments UK plc:
We have audited in accordance with generally accepted auditing standards, the
financial statements of SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES (Successor
Company) included in this report and have issued our report thereon dated June
24, 1997. Our audit was made for the purposes of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14 (a) (2) is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen
ARTHUR ANDERSEN
Bristol, England
June 24, 1997
S-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE
To the Board of Directors of South Western Electricity plc:
We have audited the consolidated financial statements of SOUTH WESTERN
ELECTRICITY plc AND SUBSIDIARIES (Predecessor Company) for the year ended March
31, 1995, and have issued our report thereon dated August 27, 1996. Our audit
also included the financial statement schedule listed in Item 14 (a) (2). This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/ Ernst & Young
ERNST & YOUNG
Chartered Accountants
Bristol, England
August 27, 1996
S-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To the Board of Directors of South Western Electricity plc:
We have audited in accordance with generally accepted auditing standards, the
financial statements of SOUTH WESTERN ELECTRICITY plc AND SUBSIDIARIES
(Predecessor Company) included in this report and have issued our report thereon
dated August 27, 1996. Our audit was made for the purposes of forming an opinion
on the basic financial statements taken as a whole. The schedule listed in Item
14 (a) (2) is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. The schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen
ARTHUR ANDERSEN
Bristol, England
June 24, 1997
S-3
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED MARCH 31, 1997, AND 1995 AND FOR THE PERIODS FROM INCEPTION
(JUNE 23, 1995) TO MARCH 31, 1996 AND FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
(In Millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additions
-----------------------------
Charged
Balance at to Costs Charged Balance at
Beginning and to Other End of
of Period Expenses Accounts Deductions Period
(pound) (pound) (pound) (pound) (pound)
---------- --------- ---------- ---------- ----------
Provision for Uncollectable Accounts
Predecessor Company
Year-Ended March 31, 1995................... 13 7 (8) 12
== = == ==
Period from April 1, 1995 to September 17,
1995..................................... 12 2 (3) 11
== = == ==
Successor Company
Period from Inception (June 23, 1995) to
March 31, 1996 .......................... 15 (1) 3 (1) 17
== = == ==
Year-Ended March 31, 1997................... 17 (1) (2) (3) 12
== == == ==
</TABLE>
- - -------------
(1) In the period from inception (June 23, 1995) to March 31, 1996, the value
shown includes an additional (pound)4 million of provision created
resulting from application of purchase accounting at the acquisition. In
the year ended March 31, 1997, (pound)2 million of this provision was
reversed as part of the review of the purchasing accounting adjustments.
S-4
<PAGE>
The following exhibits indicated by an asterisk preceding the exhibit
number are filed herewith. The balance of the exhibits have heretofore been
filed with the SEC, respectively, as the exhibits and in the file numbers
indicated and are incorporated herein by reference.
3.1 -- Memorandum of Association of the Company. (Designated in Registration
No. 333-09033 as Exhibit 3.1.)
3.2 -- Articles of Association of the Company. (Designated in Registration No.
333-09033 as Exhibit 3.2.)
4.1 -- Trust Indenture dated as of November 21, 1996, between the Company and
Bankers Trust Company, as trustee.
4.2 -- First Supplemental Indenture dated as of November 21, 1996 between the
Company and Bankers Trust Company, as trustee.
4.3 -- Deposit Agreement dated as of November 21, 1996 between the Company and
Bankers Trust Company, as book-entry depositary.
4.4 -- Subordinated Debenture Indenture dated as of January 29, 1997,
among the Company, Bankers Trust Company, as trustee, and Bankers
Trust Luxembourg S.A., as paying agent and transfer agent. (Designated
in Registration No. 333-26939 as Exhibit 4.1.)
4.5 -- Certificate of Trust of Southern Investments UK Capital Trust I
(Designated in Registration No. 333-26939 as Exhibit 4.3.)
4.6 -- Amended and Restated Declaration of Trust dated as of January 29,
1997 of Southern Investments UK Capital Trust I. (Designated in
Registration No. 333-26939 as Exhibit 4.4.)
4.7 -- Form of Exchange Guarantee of the Company relating to the
Exchange Capital Securities. (Designated in Registration No.
333-28939 as Exhibit 4.6.)
4.8 -- Capital Securities Guarantee dated as of January 29, 1997 of the
Company relating to the Original Capital Securities. (Designated in
Registration No. 333-26939 as Exhibit 4.8.)
4.9 -- Common Securities Guarantee dated as of January 29, 1997 of the
Company relating to the Common Securities. (Designated in Registration
No. 333-26939 as Exhibit 4.9.)
4.10 -- Deposit Agreement dated as of January 29, 1997 between the Company
and Bankers Trust Company, as book-entry depositary. (Designated in
Registration No. 333-26939 as Exhibit 4.10.)
E-1
<PAGE>
10.1 -- SWEB Public Electricity Supply License dated January 31, 1996.
(Designated in Registration No. 333-09033 as Exhibit 10.1.)
10.2 -- Modifications of License Conditions dated March 31, 1994, March 30,
1994, June 30, 1993, June 15, 1992, and April 22, 1992. (Designated in
Registration No. 333-09033 as Exhibit 10.2.)
10.3 -- Pooling and Settlement Agreement as amended and restated at
December 2, 1994 between SWEB, Energy Settlements and Information
Services (as Settlement System Administrator), Energy Pool Funds
Administration Limited (as Pool Funds Administrator), NGC (as Grid
Operator and Ancillary Services Provider) and Other Parties.
(Designated in Registration No. 333-09033 as Exhibit 10.3.)
10.4 -- Master Connection and Use of System Agreement dated as of March 30,
1990 among NGC and its users (including SWEB). (Designated in
Registration No. 333-09033 as Exhibit 10.4.)
10.5 -- Form of Supplemental Agreement between NGC and SWEB. (Designated in
Registration No. 333-09033 as Exhibit 10.5.)
10.6 -- Master Agreement dated as of October 25, 1995 among The National
Grid Holding plc, NGC, SWEB and the other RECs. (Designated in
Registration No. 333-09033 as Exhibit 10.6.)
10.7 -- Memorandum of Understanding between The National Grid Group plc,
SWEB and each of the RECs, dated November 17, 1995. (Designated in
Registration No. 333-09033 as Exhibit 10.7.)
10.8 -- Form of SWEB Use of Distribution System Agreement. (Designated in
Registration No. 333-09033 as Exhibit 10.8.)
10.9 -- Form of Agreement for the Connection of an Exit Point. (Designated
in Registration No. 333-09033 as Exhibit 10.9.)
10.10-- Services Agreement dated as of January 1, 1996 between Southern
Electric International, Inc. (now Southern Energy, Inc.) and the
Company. (Designated in Registration No. 333-09033 as Exhibit 10.10.)
10.11-- Services Agreement dated as of January 1, 1996 between Southern
Electric International, Inc. (now Southern Energy, Inc.) and SWEB.
(Designated in Registration No. 333-09033 as Exhibit 10.11.)
10.12 -- Services Agreement dated as of January 1, 1996 between SWEB and
Holdings. (Designated in Registration No. 333-09033 as Exhibit 10.12.)
10.13-- Services Agreement dated as of January 1, 1996 between the Company
and SWEB. (Designated in Registration No. 333-09033 as Exhibit 10.13.)
21.1 -- Subsidiaries of Registrant. (Designated in Registration No. 333-26939
as Exhibit 21.1.)
24.1 -- Power of Attorney and Resolution.
27.1 -- Financial Data Schedule.
E-2
EXHIBIT 4.1
===========================================
SOUTHERN INVESTMENTS UK plc
and
BANKERS TRUST COMPANY, as Trustee,
Principal Paying Agent, Registrar and Transfer Agent
and
BANKERS TRUST LUXEMBOURG S.A.,
as Paying and Transfer Agent
INDENTURE
Dated as of November 21, 1996
Debt Securities
===========================================
<PAGE>
<TABLE>
<CAPTION>
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of November 21, 1996
Trust Indenture Act Section Indenture Section
<S> <C>
ss. 310(a)(1)........................................................................................609
(a)(2)......................................................................................609
(a)(3)......................................................................................Not Applicable
(a)(4)......................................................................................Not Applicable
(b).........................................................................................608
610
ss. 311(a) 613(a)
(b).........................................................................................613(b)
(b)(2)......................................................................................703(a)(2)
703(b)
ss. 312(a).............................................................................................701
702(a)
(b).........................................................................................702(b)
(c).........................................................................................702(c)
ss. 313(a).............................................................................................703(a)
(b)(1)......................................................................................Not Applicable
(b)(2)......................................................................................703(b)
(c).........................................................................................703(a), 703(b)
(d).........................................................................................703(c)
ss. 314(a).............................................................................................704
(a)(4)......................................................................................704
(b).........................................................................................Not Applicable
(c)(1)......................................................................................102
(c)(2)......................................................................................102
(c)(3)......................................................................................Not Applicable
(d).........................................................................................Not Applicable
(e).........................................................................................102
ss. 315(a).............................................................................................601(a)
(b).........................................................................................602
703(a)(7)
(c).........................................................................................601(b)
(d).........................................................................................601(c)
(d)(1)......................................................................................601(a)(1)
(d)(2)......................................................................................601(c)(1)
(d)(3)......................................................................................601(c)(3)
(e).........................................................................................514
ss. 316(a)(1)(A).......................................................................................502
512
(a).........................................................................................513
(a)(2)......................................................................................Not Applicable
(b).........................................................................................508
(c).........................................................................................105
ss. 317(a)(1)..........................................................................................503
(a)(2)......................................................................................504
(b).........................................................................................100
ss. 318(a).............................................................................................107
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS*
Page
<S> <C>
RECITALS OF THE COMPANY...........................................................................................1
ARTICLE ONE.......................................................................................................1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...........................................................1
SECTION 101. Definitions.................................................................................1
Act .......................................................................................2
Additional Amounts..............................................................................2
Affiliate.......................................................................................2
Authenticating Agent............................................................................2
Bearer Security.................................................................................2
Board of Directors..............................................................................2
Board Resolution................................................................................2
Book-Entry Depositary...........................................................................2
Book-Entry Interest.............................................................................3
Business Day....................................................................................3
Cedel Bank......................................................................................3
Commission......................................................................................3
Company 3
Company Request or Company Order................................................................3
Consolidated Net Tangible Assets................................................................3
Corporate Trust Office..........................................................................3
Corporation.....................................................................................4
Debt .......................................................................................4
Default .......................................................................................4
Defaulted Interest..............................................................................4
Deposit Agreement...............................................................................4
Director 4
Discharged......................................................................................4
Dollar or $.....................................................................................4
DTC .......................................................................................4
Euroclear Operator..............................................................................4
Event of Default................................................................................5
Exchange Act....................................................................................5
Global Security.................................................................................5
Holder .......................................................................................5
Indenture.......................................................................................5
Indirect participant............................................................................5
interest .......................................................................................5
Interest Payment Date...........................................................................5
Letter of Representations.......................................................................5
Lien .......................................................................................5
Maturity 5
Officers' Certificate...........................................................................6
Opinion of Counsel..............................................................................6
Original Issue Discount Security................................................................6
Outstanding.....................................................................................6
Participant.....................................................................................7
Paying Agent....................................................................................7
Permanent Global Security.......................................................................7
Person .......................................................................................7
Place of Payment................................................................................7
Predecessor Security............................................................................7
Principal Paying Agent..........................................................................7
Redemption Date.................................................................................8
Redemption Price................................................................................8
Registered Security.............................................................................8
Regular Record Date.............................................................................8
Relevant Date...................................................................................8
Responsible Officer.............................................................................8
Securities......................................................................................8
Securities Act..................................................................................8
Security Register and Security Registrar........................................................8
Significant Subsidiary..........................................................................8
Special Record Date.............................................................................9
Stated Maturity.................................................................................9
Subsidiary......................................................................................9
Transfer Agent..................................................................................9
Trustee .......................................................................................9
Trust Indenture Act.............................................................................9
United Kingdom..................................................................................9
United Kingdom Taxes............................................................................9
United States...................................................................................9
U.S. Government Obligations.....................................................................9
Voting Stock...................................................................................10
SECTION 102. Compliance Certificates and Opinions.......................................................10
SECTION 103. Form of Documents Delivered to Trustee.....................................................11
SECTION 104. Acts of Holders............................................................................11
SECTION 105. Notices, Etc., to Trustee and Company......................................................14
SECTION 106. Notice to Holders; Waiver..................................................................14
SECTION 107. Conflict with Trust Indenture Act..........................................................15
SECTION 108. Effect of Headings and Table of Contents...................................................15
SECTION 109. Successors and Assigns.....................................................................16
SECTION 110. Separability Clause........................................................................16
SECTION 111. Benefits of Indenture......................................................................16
SECTION 112. Governing Law..............................................................................16
SECTION 113. Legal Holidays.............................................................................16
ARTICLE TWO......................................................................................................16
SECURITY FORMS...................................................................................................16
SECTION 201. Forms Generally............................................................................17
SECTION 202. Form of Face of Security...................................................................17
SECTION 203. Form of Reverse of Security................................................................20
SECTION 204. Form of Trustee's Certificate of Authentication............................................28
SECTION 205. Form of Trustee's Certificate of Authentication by an Authenticating Agent.................28
ARTICLE THREE....................................................................................................28
THE SECURITIES...................................................................................................29
SECTION 301. Amount Unlimited; Issuable in Series.......................................................29
SECTION 302. Denominations..............................................................................31
SECTION 303. Execution, Authentication, Delivery and Dating.............................................31
SECTION 304. Transfer Agent and Paying Agent............................................................33
SECTION 305. Temporary Securities.......................................................................33
SECTION 306. Registration, Registration of Transfer and Exchange........................................34
SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities...........................................36
SECTION 308. Payment of Interest; Interest Rights Reserved..............................................37
SECTION 309. Persons Deemed Owners......................................................................38
SECTION 310. Cancellation...............................................................................39
SECTION 311. Computation of Interest....................................................................39
SECTION 312. Global Securities..........................................................................39
ARTICLE FOUR.....................................................................................................41
SATISFACTION AND DISCHARGE.......................................................................................41
SECTION 401. Satisfaction and Discharge of Indenture....................................................41
SECTION 402. Application of Trust Money.................................................................42
SECTION 403. Satisfaction, Discharge and Defiance of Securities of any Series...........................43
ARTICLE FIVE.....................................................................................................44
REMEDIES 44
SECTION 501. Events of Default..........................................................................44
SECTION 502. Acceleration of Maturity; Rescission and Annulment.........................................46
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................47
SECTION 504. Trustee May File Proofs of Claim...........................................................47
SECTION 505. Trustee May Enforce Claims Without Possession of Securities................................48
SECTION 506. Application of Money Collected.............................................................48
SECTION 507. Limitation on Suits........................................................................49
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and...........................50
SECTION 509. Restoration of Rights and Remedies.........................................................50
SECTION 510. Rights and Remedies Cumulative.............................................................51
SECTION 511. Delay or Omission Not Waiver...............................................................51
SECTION 512. Control by Holders.........................................................................51
SECTION 513. Waiver of Past Defaults....................................................................51
SECTION 514. Undertaking for Costs......................................................................52
ARTICLE SIX......................................................................................................52
THE TRUSTEE......................................................................................................52
SECTION 601. Certain Duties and Responsibilities........................................................52
SECTION 602. Notice of Defaults.........................................................................54
SECTION 603. Certain Rights of Trustee..................................................................54
SECTION 604. Not Responsible for Recitals or Issuance of Securities.....................................55
SECTION 605. May Hold Securities........................................................................55
SECTION 606. Money Held in Trust........................................................................55
SECTION 607. Compensation and Reimbursement.............................................................56
SECTION 608. Disqualification; Conflicting Interests....................................................56
SECTION 609. Corporate Trustee Required; Eligibility....................................................56
SECTION 610. Resignation and Removal; Appointment of Successor Trustee..................................57
SECTION 611. Acceptance of Appointment by Successor.....................................................58
SECTION 612. Merger, Conversion, Consolidation or Succession to Business................................59
SECTION 613. Preferential Collecting of Claims Against Company..........................................60
SECTION 614. Authenticating Agents......................................................................63
ARTICLE SEVEN....................................................................................................65
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY................................................................65
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders..................................65
SECTION 702. Preservation of Information; Communications to Holders.....................................66
SECTION 703. Reports by Trustee.........................................................................67
SECTION 704. Reports by Company.........................................................................68
ARTICLE EIGHT....................................................................................................69
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE.................................................................69
SECTION 801. Company May Consolidate Etc., Only on Certain Terms........................................69
SECTION 802. Successor Corporation to be Substituted....................................................70
ARTICLE NINE.....................................................................................................70
SUPPLEMENTAL INDENTURES..........................................................................................70
SECTION 901. Supplemental Indentures without Consent of Holders.........................................70
SECTION 902. Supplemental Indentures with Consent of Holders............................................72
SECTION 903. Execution of Supplemental Indentures.......................................................73
SECTION 904. Effect of Supplemental Indentures..........................................................73
SECTION 905. Conformity with Trust Indenture Act........................................................73
SECTION 906. Reference in Securities to Supplemental Indentures.........................................73
ARTICLE TEN......................................................................................................74
COVENANTS........................................................................................................74
SECTION 1001. Payment of Principal, Premium, if any, and Interest.......................................74
SECTION 1002. Maintenance of Office or Agency...........................................................74
SECTION 1003. Money for Securities Payments to Be Held in Trust.........................................75
SECTION 1004. Limitation on Liens.......................................................................76
SECTION 1005. Limitation on Sale and Lease-Back Transactions............................................79
SECTION 1006. Statement by Officers as to Default.......................................................80
SECTION 1007. Modification or Waiver of Certain Covenants...............................................80
SECTION 1008. Further Assurances........................................................................80
SECTION 1009. Payment of Additional Amounts.............................................................81
SECTION 1010. Copies Available to Holders...............................................................82
ARTICLE ELEVEN...................................................................................................83
REDEMPTION OF SECURITIES.........................................................................................83
SECTION 1101. Applicability of Article..................................................................83
SECTION 1102. Election to Redeem; Notice to Trustee.....................................................83
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.........................................83
SECTION 1104. Notice of Redemption......................................................................84
SECTION 1105. Deposit of Redemption Price...............................................................85
SECTION 1106. Securities Payable on Redemption Date.....................................................85
SECTION 1107. Securities Redeemed in Part...............................................................85
SECTION 1108. Optional Redemption in the Event of Change in United Kingdom Tax Treatment................86
ARTICLE TWELVE...................................................................................................86
SINKING FUNDS....................................................................................................86
SECTION 1201. Applicability of Article..................................................................86
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.....................................87
SECTION 1203. Redemption of Securities for Sinking Fund.................................................87
ARTICLE THIRTEEN.................................................................................................88
MEETINGS OF HOLDERS OF SECURITIES................................................................................88
SECTION 1301 Purposes of Meetings:......................................................................88
SECTION 1302 Place of Meetings..........................................................................89
SECTION 1303 Voting at Meetings.........................................................................89
SECTION 1304 Voting Rights, Conduct and Adjournment.....................................................89
SECTION 1305 Revocation of Consent by Holders...........................................................90
ARTICLE FOURTEEN.................................................................................................91
MISCELLANEOUS....................................................................................................91
SECTION 1401. Consent to Jurisdiction; Appointment of Agent to Accept Service of Process................91
SECTION 1402 Counterparts...............................................................................92
</TABLE>
<PAGE>
INDENTURE, dated as of November 21, 1996, among SOUTHERN
INVESTMENTS UK PLC, a company duly organized and existing under the laws of
England and Wales (the "Company"), having its principal office at 800 Park
Avenue, Aztec West, Almondsbury, Bristol B512 4SE, England and BANKERS TRUST
COMPANY, a New York banking corporation , as trustee (the "Trustee") and BANKERS
TRUST LUXEMBOURG S.A., as Paying and Transfer Agent.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of certain of its
unsecured debentures, notes or other evidences of indebtedness (herein called
the "Securities"), to be issued in one or more series as provided in this
Indenture.
All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the
respective meanings assigned to them in
this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United Kingdom and, except as otherwise
herein expressly provided, the term "generally accepted accounting
principles", with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally
accepted in the United Kingdom at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in
that Article.
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Amounts" has the meaning specified in Section
1009.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling", and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized to
authenticate and deliver Securities on behalf of the Trustee pursuant to Section
614.
"Bearer Security" means any Security that is payable to
bearer.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification.
"Book-Entry Depositary" means, with respect to the Securities
of any series issuable or issued in whole or in part in the form of one or more
Global Securities, the Person designated as Book-Entry Depositary by the Company
pursuant to Section 301, and, if so provided pursuant to Section 301 with
respect to the Securities of a series, any successor to such Person. If at any
time there is more than one such Person, "Book-Entry Depositary" shall mean,
with respect to any series of Securities, the qualifying entity which has been
appointed with respect to the Securities of that series.
"Book-Entry Interest" means a certificateless depositary
interest to be issued by the Book-Entry Depositary to DTC.
"Business Day", when used with respect to the Place of Payment
of the Securities of any series, means each day which is not a Saturday, a
Sunday or a day on which banking institutions in any Place of Payment for the
Securities of that series are authorized or obligated by law to remain closed.
"Cedel Bank" means Cedel Bank, societe anonyme, or its
successor.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by any Director of the Company and by
any other Director of the Company or the Treasurer, Secretary, any Assistant
Treasurer or Assistant Secretary or any other officer so authorized and
delivered to the Trustee.
"Consolidated Net Tangible Assets" shall mean the total of all
assets (including revaluations thereof as a result of commercial appraisals,
price level restatement or otherwise) appearing on a consolidated balance sheet
of the Company, net of applicable reserves and deductions, but excluding
goodwill, trade names, trademarks, patents, unamortized debt discount and all
other like intangible assets (which term shall not be construed to include such
revaluations), less the aggregate of the consolidated current liabilities of the
Company appearing on such balance sheet.
"Corporate Trust Office" means the principal office of the
Trustee in The City of New York, at which at any particular time its corporate
trust business shall be administered, which at the date hereof is Four Albany
Street, New York, New York, 10006, Attention: Corporate Trust and Agency
Group-Public Utilities Group.
"corporation" includes corporations, associations, companies
and b usiness trusts.
"Debt" has the meaning specified in Section 1004.
"Default" for purposes of Section 601 of this Indenture is
defined to mean an "Event of Default" as specified in Section 501 hereof, and
for purposes of Section 310(b) of the Trust Indenture Act, "default" shall mean
an "Event of Default" as specified in Section 501 hereof but exclusive of any
period of grace or requirement of notice.
"Defaulted Interest" has the meaning specified in Section 307.
"Deposit Agreement" means the deposit agreement among the
Company, the Book-Entry Depositary and the holders and beneficial owners from
time to time of interests in the Book-Entry Interest.
"Director" means any member of the Board of Directors.
"Discharged" means, with respect to the Securities of any
series, the discharge of the entire indebtedness represented by, and obligations
of the Company under, the Securities of such series and the satisfaction of all
the obligations of the Company under the Indenture relating to the Securities of
such series, except (A) the rights of Holders of the Securities of such series
to receive, from the trust fund described in Section 403 hereof, payment of the
principal of and interest and premium, if any, on the Securities of such series
when such payments are due, (B) the Company's obligations with respect to the
Securities of such series with respect to registration, transfer, exchange and
maintenance of a Place of Payment and (C) the rights, powers, trusts, duties,
protections and immunities of the Trustee under this Indenture.
"Dollar" or "$" means a dollar or other equivalent unit in
such coin or currency of the United States of America as at the time shall be
legal tender for the payment of public and private debt.
"DTC" means The Depository Trust Company or its successors.
"Euroclear Operator" means Morgan Guaranty Trust Company of
New York, Brussels office, or its
successor as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Global Security" means a Registered or Bearer Security
evidencing all or part of a series of Securities, issued to the Book-Entry
Depositary for such series or its nominee.
"Holder" means, in the case of a Registered Security, the
Person in whose name a Security is registered in the Security Register and, in
the case of a Global Bearer Security, the Book-Entry Depositary therefor.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of particular series of Securities established as
contemplated by Section 301.
"Indirect Participant" means a Person that holds interests in
the Book-Entry Interest through a Person that has an account with DTC.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, means
interest payable after Maturity at the rate prescribed in such Original Issue
Discount Security.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
"Letter of Representations" means, with respect to the
Securities of any series, the representation from the Company and the Trustee to
DTC with respect to the Securities of that series.
"Lien" means any mortgage, lien, pledge, security interest or
other encumbrance; provided however, that the term "Lien" shall not mean any
easements, rights-of-way, restrictions and other similar encumbrances and
encumbrances consisting of zoning restrictions, leases, subleases, licenses,
sublicenses, restrictions on the use of property or defects in title thereto.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by any
Director of the Company and by any other Director of the Company or the
Treasurer, Secretary, any Assistant Treasurer or Assistant Secretary or any
other officer so authorized and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who,
unless otherwise required by the Trust Indenture Act, may be an employee of or
regular counsel for the Company, or may be other counsel reasonably acceptable
to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee
or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money or U.S. Governmental Obligations in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities
are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (a) the principal
amount of an Original Issue Discount Security that shall be deemed to be
outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the Maturity thereof pursuant to Section 502, and (b)
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned as described in (b) above which have been pledged in good
faith may be regarded as Outstanding if the pledgee certifies to the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"Participant" means a Person that has an account with DTC.
"Paying Agent" means Bankers Trust Luxembourg S.A. and
any other Person authorized by the Company to pay the principal of (and
premium, if any) or interest on any Securities on behalf of the Company
hereunder, including, without limitation, the Principal Paying Agent.
"Permanent Global Security" means a Global Security that is,
at the time of the initial issuance of the related series of Securities, issued
in permanent form.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities
of any series, means the place or places where the principal of (and premium, if
any) and interest, if any, on the Securities of that series are payable as
specified in or as contemplated by Section 301.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purpose of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen security.
"Principal Paying Agent" means Bankers Trust Company until a
successor Principal Paying Agent shall have become such pursuant to the
applicable provisions of this Indenture and, thereafter, "Principal Paying
Agent" shall mean such successor Principal Paying Agent.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture, exclusive of accrued and unpaid interest.
"Registered Security" means any Security that is payable to a
registered owner or registered assigns thereof as registered in the Security
Register.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 301.
"Relevant Date" for any payment made with respect to the
Securities of any series means whichever is the later of (i) the date on which
the relevant payment first becomes due and (ii) if the full amount payable has
not been received in The City of New York by the Book-Entry Depositary or the
Trustee on or prior to such due date, the date on which, the full amount having
been so received, notice to that effect shall have been given to the Holders in
accordance with this Indenture.
"Responsible Officer", when used with respect to the Trustee,
means any officer within the Corporate Trust Office including any vice
president, managing director, the secretary, assistant vice president, assistant
secretary, or any other officer of the Trustee, customarily performing functions
similar to those performed by any of the above-designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Significant Subsidiary" means, at any particular time, any
Subsidiary whose gross assets or gross revenues (having regard to the Company's
direct and/or indirect beneficial interest in the shares, or the like, of that
Subsidiary) represent at least 25% of the consolidated gross assets or, as the
case may be, consolidated gross revenues of the Company.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
"Transfer Agent" means any Person authorized by the Company to
effectuate the exchange or transfer of any Security on behalf of the Company
hereunder.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed, except as
provided in Section 905.
"United Kingdom" means the United Kingdom of Great Britain and
Northern Ireland, its territories, its possessions and other areas subject to
its jurisdiction.
"United Kingdom Taxes" has the meaning specified in Section
1009.
"United States" means the United States of America (including
the States and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
"U.S. Government Obligations" means direct obligations of the
United States for the payment of which its full faith and credit is pledged, or
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States and the payment of which is unconditionally
guaranteed by the United States, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of a
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" of any corporation means stock of the class or
classes having general voting power under ordinary circumstances to elect at
least a majority of the board of directors of a corporation (irrespective of
whether or not at the time stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
SECTION 102. Compliance Certificates and Opinions
Except as otherwise expressly provided by this Indenture, upon
any application or request by the Company to the Trustee to take any action
under any provision of this Indenture, the Company shall furnish to the Trustee
an Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer or Director of the
Company may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer or Director
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers or
Director or Directors of the Company stating that the information with respect
to such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in Person or by agent duly
appointed in writing, and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section 103.
Without limiting the generality of the foregoing, unless
otherwise established in or pursuant to a Board Resolution or set forth or
determined in an Officers' Certificate, or established in one or more indentures
supplemental hereto, pursuant to Section 301, a Holder, including a Book-Entry
Depositary that is a Holder of a Global Security, may make, give or take, by a
proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided in
this Indenture to be made, given or taken by Holders, and a Book-Entry
Depositary that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interests in any such Global Security
through such Book-Entry Depositary's standing instructions and customary
practices.
(b) The fact and date of the execution by any Person of any
such instrument, writing or proxy may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument, writing or proxy acknowledged to him the
execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument, writing or proxy, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Registered Securities shall be
proved by the Security Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(e) The principal or face amount and serial numbers of Bearer
Securities of any series held by any Person, and the date of holding the same,
may be proved by the production of such Bearer Securities or by a certificate
executed by the Book-Entry Depositary for such Bearer Securities.
(f) If the Company shall solicit from the Holders of
Securities of any series any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, by Board
Resolution, fix in advance a record date for purposes of determining the
identity of Holders of Securities entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Any such record date shall be fixed at the
Company's discretion. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be sought or
given before or after the record date, but only the Holders of Securities of
record at the close of business on such record date shall be deemed to be
Holders of Securities for the purpose of determining whether Holders of the
requisite proportion of Securities of such series Outstanding have authorized or
agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the Securities of such series
Outstanding shall be computed as of such record date.
With regard to any record date set pursuant to this
subsection, the Holders of Outstanding Securities of the relevant series on such
record date (or their duly appointed agents), and only such Persons, shall be
entitled to take relevant action, whether or not such Holders remain Holders
after such record date. With regard to any action that may be taken hereunder
only by Holders of a requisite principal amount of Outstanding Securities of any
series (or their duly appointed agents) and for which a record date is set
pursuant to this subsection, the Company may, at its option, set an expiration
date after which no such action purported to be taken by any Holder shall be
effective hereunder unless taken on or prior to such expiration date by Holders
of the requisite principal amount of Outstanding Securities of such series on
such record date (or their duly appointed agents).
On or prior to any expiration date set pursuant to this subsection, the
Company may, on one or more occasions at its option, extend such expiration date
to any later date. Nothing in this subsection shall prevent any Holder (or any
duly appointed agent thereof) from taking, at any time, any action contrary to
or different from, any action previously taken, or purported to have been taken,
hereunder by such Holder, in which event the Company may set a record date in
respect thereof pursuant to this subsection. Notwithstanding the foregoing or
the Trust Indenture Act, the Company shall not set a record date for, and the
provisions of this paragraph shall not apply with respect to, any action to be
taken by Holders pursuant to Section 501, 502 or 512.
Upon receipt by the Trustee of written notice of any default
described in Section 501, any declaration of acceleration, or any rescission and
annulment of any such declaration, pursuant to Section 502 or of any direction
in accordance with Section 512, a record date shall automatically and without
any other action by any Person be set for the purpose of determining the Holders
of outstanding Securities of the series entitled to join in such notice,
declaration, or rescission and annulment, or direction, as the case may be,
which record date shall be the close of business on the day the Trustee receives
such notice, declaration, rescission and annulment or direction, as the case may
be. The Holders of Outstanding Securities of such series on such record date (or
their duly appointed agent), and only such Persons, shall be entitled to join in
such notice, declaration, rescission and annulment, or direction, as the case
may be, whether or not such Holders remain Holders after such record date;
provided that, unless such notice, declaration, rescission and annulment, or
direction, as the case may be, shall have become effective by virtue of Holders
of the requisite principal amount of outstanding Securities of such series on
such record date (or their duly appointed agents) having joined therein on or
prior to the 90th day after such record date, such notice of default,
declaration, or rescission and annulment or direction given or made by the
Holders, as the case may be, shall automatically and without any action by any
Person be canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder (or a duly appointed agent thereof) from giving, before or
after the expiration of such 90-day period, a notice of default, a declaration
of acceleration, a rescission and annulment of a declaration of acceleration or
a direction in accordance with Section 512, contrary to or different from, or,
after the expiration of such period, identical to, a previously given notice,
declaration, rescission and annulment, or direction, as the case may be, that
has been canceled pursuant to the proviso to the preceding sentence, in which
event a new record date in respect thereof shall be set pursuant to this
paragraph.
SECTION 105. Notices, Etc., to Trustee and Company
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, (i) in the case of a Holder of Registered
Securities, at his address as it appears in the Security Register, and (ii) in
the case of a Holder of Global Bearer Securities, at the address provided in or
pursuant to the relevant Deposit Agreement of the relevant Book-Entry Depositary
or Depositaries therefor, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders.
If, by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to give such notice by
mail, then such notification as shall be made at the direction of the Company in
a manner reasonably calculated, to the extent practicable under the
circumstances, to provide prompt notice shall constitute a sufficient
notification for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise
specified with respect to any Securities pursuant to Section 301, where this
Indenture provides for notice to Holders of Bearer Securities of any event and
the rules of any securities exchange on which such Bearer Securities are listed
so require, such notice shall be sufficiently given to Holders of such Bearer
Securities if published in such newspaper or newspapers as may be specified in
such Securities on a Business Day at least twice, the first such publication to
be not earlier than the earliest date, and not later than the latest date,
prescribed for the giving of such notice. Any such notice by publication shall
be deemed to have been given on the date of the first such publication. In
addition, notice to the Holder of any Global Bearer Security shall be given by
mail in the manner provided above.
If by reason of any cause it shall be impracticable to publish
any notice to Holders of Bearer Securities as provided above, then such
notification to Holders of Bearer Securities as shall be given with the approval
of the Trustee shall constitute sufficient notice to such Holders for every
purpose hereunder. Neither the failure to give notice by publication to Holders
of Bearer Securities as provided above, nor any defect in any notice so
published, shall affect the sufficiency of such notice with respect to other
Holders of Bearer Securities or the sufficiency of any notice to Holders of
Registered Securities given as provided herein.
Any request, demand, authorization, direction, notice,
consent, waiver or Act required or permitted under this Indenture shall be in
the English language, except that any published notice may be in an official
language of the country of publication.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. Conflict with Trust Indenture Act
If any provision hereof limits, qualifies or conflicts with
any provision of the Trust Indenture Act or another provision which is required
or deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or requirement of the Trust Indenture Act shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, such provision
of the Trust Indenture Act shall be deemed to apply to this Indenture as so
modified or excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 111. Benefits of Indenture
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 113. Legal Holidays
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest, if any, or principal (and premium, if any) need
not be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, and no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally
The Securities of each series shall be in substantially the
form set forth in this Article, or in such other form as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, a Board
Resolution or one or more indentures supplemental hereto, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Director or Directors executing such Securities, as evidenced by the Director's
or Directors' execution of the Securities. If the form of Securities of any
series is established by action taken pursuant to a Board Resolution, a copy of
an appropriate record of such action shall be certified by an authorized
Director or officer of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such securities.
The Trustee's certificates of authentication shall be in
substantially the form set forth in this Article.
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the Director or Directors executing such Securities, as
evidenced by the Director's or Directors' execution of such Securities.
SECTION 202. Form of Face of Security
[If the Security is to be a Global Security, insert - This
Security is a Global Security within the meaning of the Indenture hereinafter
referred to and is [held by] [registered in the name] of a Book-Entry Depositary
or a nominee of a Book-Entry Depositary. This Security is exchangeable for
Securities [held by] [registered in the name of] a person other than the
Book-Entry Depositary or its nominee only in the limited circumstances described
in the Indenture, and no transfer of this Security (other than a transfer of
this Security as a whole by the Book-Entry Depositary to a nominee of the
Book-Entry Depositary or by a nominee of the Book-Entry Depositary to the
Book-Entry Depositary or another nominee of the Book-Entry Depositary) may be
[made] [registered] except in limited circumstances.
Unless this Global Security is presented by an authorized
representative of the Book-Entry Depositary to the issuer or its agent for
[registration of transfer], exchange or payment, and any definitive Security is
issued in the name or names as directed in writing by the Book-Entry Depositary,
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL in as much as the [bearer] [registered owner] hereof, the
Book-Entry Depositary, has an interest herein.]
SOUTHERN INVESTMENTS UK plc
[Title of the Security]
No. $
SOUTHERN INVESTMENTS UK plc, a company duly organized and existing under
the laws of England and Wales (herein called the "Company", which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to [the bearer upon surrender hereof]
[name of registered owner or its registered assigns], the principal sum of
Dollars on , and to pay interest thereon from , or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on and in each year, commencing , at the rate per annum provided in the title
hereof, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to [the bearer on such Interest Payment Date,] [the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be the or
(whether or not a Business Day), as the case may be, immediately preceding such
Interest Payment Date.] Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to [the bearer on such Interest
Payment Date] [the Person in whose name this Security (or one or more
Predecessor Securities) is registered on such Regular Record Date] and may be
paid to [the bearer at the time of payment of such Defaulted Interest] [the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date], or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
[If the Security is not to bear interest prior to Maturity, insert -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of [yield to maturity] % per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue from
the date of such default in payment to the date payment of such principal has
been made or duly provided for. Interest on any overdue principal shall be
payable on demand. Any such interest on any overdue principal that is not so
paid on demand shall bear interest at the rate of [yield to maturity]% per annum
(to the extent that the payment of such interest shall be legally enforceable),
which shall accrue from the date of such demand for payment to the date payment
of such interest has been made or duly provided for, and such interest shall
also be payable on demand.]
Payment of the principal of (and premium, if any) and
interest, if any, on this Security will be made at the office or agency of the
Company maintained for that purpose in _______________ in such coin or currency
of the United States of America as at the time of payment is legal tender for
the payment of public and private debts; [If this Security is not a Global
Security, insert -- provided, however, that at the option of the Company payment
of interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register] [If this Security
is a Global Security, insert applicable manner of payment].
All payments of principal and interest (including payments of
discount and premium, if any) in respect of this Security shall be made free and
clear of, and without withholding or deduction for or on account of, any present
or future taxes, duties, assessments or governmental charges of whatever nature
imposed, levied, collected, withheld or assessed by or within the United Kingdom
or by or within any political subdivision thereof or any authority therein or
thereof having power to tax ("United Kingdom Taxes"), unless such withholding or
deduction is required by law. In the event of any such withholding or deduction
the Company shall pay to the Holder such additional amounts ("Additional
Amounts") as will result in the payment to such Holder of the amount that would
otherwise have been receivable by such Holder in the absence of such withholding
or deduction, except that no such Additional Amounts shall be payable:
(a) to, or to a Person on behalf of, a Holder who is liable
for such United Kingdom Taxes in respect of this Security, by reason of
such Holder having some connection with the United Kingdom (including
being a citizen or resident or national of, or carrying on a business
or maintaining a permanent establishment in, or being physically
present in, the United Kingdom) other than the mere holding of this
Security or the receipt of principal and interest (including payments
of discount and premium, if any) in respect thereof;
(b) to, or to a Person on behalf of, a Holder who presents
this Security (where presentation is required) for payment more than 30
days after the Relevant Date except to the extent that the Holder would
have been entitled to such Additional Amounts on presenting this
Security for payment on the last day of such period of 30 days;
(c) to, or to a Person on behalf of, a Holder who presents this
Security (where presentation is required) in the United Kingdom;
(d) to, or to a Person on behalf of, a Holder who
would not be liable or subject to the withholding or deduction by making a
declaration of non-residence or similar claim for exemption to the
relevant tax authority; or
(e) to, or to a Person on behalf of, a Holder of a definitive
Registered Security issued pursuant to the request of owners of
interests representing a majority in outstanding principal amount in
the Book-Entry Interest following and during the continuance of an
Event of Default if such Holder (or any predecessor Holder) was one of
such owners requesting that definitive Registered Securities be so
issued.
Such Additional Amounts will also not be payable where, had
the beneficial owner of the Security (or any interest therein) been the Holder
of the Security, he would not have been entitled to payment of Additional
Amounts by reason of any one or more of clauses (a) through (e) above. If the
Company shall determine that Additional Amounts will not be payable because of
the immediately preceding sentence, the Company will inform such Holder promptly
after making such determination setting forth the reason(s) therefor.
References to principal, interest, discount or premium in
respect of this Security shall be deemed also to refer to any Additional Amounts
which may be payable as set forth in the Indenture or in this Security.
The Company shall furnish to the Trustee the official receipts
(or a certified copy of the official receipts) evidencing payment of United
Kingdom Taxes. Copies of such receipts shall be made available by the Trustee to
the Holder of this Security upon request.
[Insert any special notice provisions required by any stock exchanges upon
which the Securities of a series are to be listed.]
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by an officer or director duly authorized.
Date:
SOUTHERN INVESTMENTS UK plc
By_____________________________________
[Title]
SECTION 203. Form of Reverse of Security
SOUTHERN INVESTMENTS UK plc
[Title of the Security]
This Security is one of a duly authorized issue of securities
of the Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of ________________ (herein called
the "Indenture"), among the Company and Bankers Trust Company, as trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture) and Bankers Trust Luxembourg S.A., as paying and transfer agent
(herein called the "Paying and Transfer Agent," which term includes any
successor paying and transfer agent under the Indenture), [insert -- particulars
with respect to any indentures supplemental thereto pursuant to which the
Securities of this series are being issued] to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. Terms
defined in the Indenture which are not defined herein are used with the meanings
assigned to them in the Indenture. This Security is one of the series designated
on the face hereof limited in aggregate principal amount to $___________.
[If applicable, insert -- This Security is not subject to
redemption prior to maturity.] [If applicable, insert -- The Securities of this
series are subject to redemption upon not less than 30 or more than 60 days'
notice to the Holders of such Securities as provided in the Indenture. [If
applicable, insert -- (1) on _______________ in any year commencing with the
year ____ and ending with the year ______ through operation of the sinking fund
for this series at a Redemption Price equal to 100% of the principal amount, and
(2)] at any time [on or after ____________, 19__], as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount):
If redeemed [if applicable, insert - - on or before ________,
_____%, and if redeemed] during the 12-month period beginning ______________, of
the years indicated:
Year Redemption Price Year Redemption Price
and thereafter at a Redemption Price equal to ____% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued and unpaid
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, all as provided in the
Indenture.]
[If applicable, insert -- The Securities of this series are
subject to redemption upon not less than 30 or more than 60 days' notice to the
Holders of such Securities, as provided in the Indenture (1) on _______________
in any year commencing with the year ______ and ending with the year _______
through operation of the sinking fund for this series at the Redemption Prices
for redemption through operation of the sinking fund (expressed as percentages
of the principal amount) set forth in the table below, and (2) at any time [on
or after __________________], as a whole or in part, at the election of the
Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below:
If redeemed during the 12-month period beginning __________ of
the years indicated:
Redemption Price Redemption Price For
for Redemption Redemption Otherwise
Through Operation Than Through
of Operation
Sinking Fund Year of the Sinking Fund
and thereafter at a Redemption Price equal to ____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued and unpaid interest to the Redemption
Date, but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, all as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the
Company may not, prior to ____________, redeem any Securities of this series as
contemplated by [Clause (2) of] the preceding paragraph as a part of, or in
anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than ___% per annum.]
[The sinking fund for this series provides for the redemption
on ___________ in each year beginning with the year ______ and ending with the
year _____ of [not less than] ______________ [("mandatory sinking fund") and, at
the option of the Company, not more than _____________] aggregate principal
amount of Securities of this series. [Securities of this series acquired or
redeemed by the Company otherwise than through [mandatory] sinking fund payments
may be credited against subsequent [mandatory] sinking fund payments otherwise
required to be made in the order in which they become due.]]
[If applicable, insert --
The Securities of this series will be redeemable in whole or
in part, at the option of the Company at any time, at a redemption price equal
to the greater of (i) 100% of the principal amount of the Securities of this
series being redeemed or (ii) the sum of the present values of the remaining
scheduled payments of principal of and interest on the Securities of this series
being redeemed discounted to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at a discount rate
equal to the Treasury Yield plus ___ basis points, plus, for (i) or (ii) above,
whichever is applicable, accrued interest on the Securities of this series to
the date of redemption.
"Treasury Yield" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of Securities of this series to be redeemed
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Securities of this series.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
on the third Business Day in New York City preceding such redemption date, as
set forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for US Government Securities" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
Business Day, the Reference Treasury Dealer Quotation for such redemption date.
"Independent Investment Banker" means an independent
investment banking institution of national standing appointed by the Company and
reasonably acceptable to the Trustee.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any redemption date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00
p.m. on the third Business Day in New York City preceding such redemption date).
"Reference Treasury Dealer" means a primary US Government
securities dealer in New York City appointed by the Company and reasonably
acceptable to the Trustee.
Notice of redemption shall be given as provided for in the
Indenture not less than 15 days nor more than 30 days prior to the date fixed
for redemption.
If fewer than all the Securities of this series are to be
redeemed, selection of Securities of this series for redemption will be made by
the Trustee in any manner the Trustee deems fair and appropriate and that
complies with applicable legal and securities exchange requirements.
Unless the Company defaults in payment of the redemption
price, from and after the redemption date, the Securities of this series or
portions thereof called for redemption will cease to bear interest, and the
Holders thereof will have no right in respect to such Securities of this series
except the right to receive the redemption price thereof.]
[In the event of redemption of this Security in part only, a
new Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued to the Holder hereof upon the cancellation
hereof.]
The Indenture contains provisions for defeasance of (a) the
entire indebtedness of this security and (b) certain restrictive covenants upon
compliance by the Company with certain conditions set forth therein.
If an Event of Default with respect to Securities of this
series shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture. At any time after such declaration of acceleration
with respect to Securities of this series has been made, but before a judgment
or decree for payment of money has been obtained by the Trustee as provided in
the Indenture, if all Events of Default with respect to Securities of this
series have been cured or waived (other than the non-payment of principal of the
Securities of this series which has become due solely by reason of such
declaration of acceleration) then such declaration of acceleration and its
consequences shall be automatically annulled and rescinded.
[If the Security is an Original Issue Discount Security,
insert -- If an Event of Default with respect to Securities of this series shall
occur and be continuing, an amount of principal of the Securities of this series
(the "Acceleration Amount") may be declared due and payable in the manner and
with the effect provided in the Indenture. In case of a declaration of
acceleration on or before ________________ in any year, the Acceleration Amount
per ____________ principal amount at Stated Maturity of the Securities shall be
equal to the amount set forth in respect of such date below:
Acceleration
Amount
per ______
principal amount
Date of declaration at Stated Maturity
and in case of a declaration of acceleration on any other date, the Acceleration
Amount shall be equal to the Acceleration Amount as of the immediately preceding
date set forth in the table above, plus accrued original issue discount
(computed in accordance with the method used for calculating the amount of
original issue discount that accrues for Federal income tax purposes) from such
next preceding date to the date of declaration at the yield to maturity. For the
purpose of this computation the yield to maturity is ____%. Upon payment (i) of
the Acceleration Amount so declared due and payable and (ii) of interest on any
overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on the Securities of this series shall terminate.]
The Securities of this series are subject to redemption in
whole but not in part upon not less than 15 nor more than 30 days' notice given
as provided in the Indenture to the Holders of Securities of this series at a
price equal to the outstanding principal amount thereof together with Additional
Amounts, if any, and accrued interest, to the Redemption Date if (a) the Company
satisfies the Trustee prior to the giving of such notice that it has or will
become obliged to pay Additional Amounts as a result of either (x) any change
in, or amendment to, the laws or regulations of the United Kingdom or any
political subdivision or any authority or agency thereof or therein having power
to tax or levy duties, or any change in the application or interpretation of
such laws or regulations, which change or amendment becomes effective on or
after the [date of the underwriting agreement with respect to the Securities of
this series,] or (y) the issuance of definitive Registered Securities pursuant
to any of clauses (a), (b) or (d) of the third following paragraph and (b) such
obligation cannot be avoided by the Company taking reasonable measures available
to it, subject, as provided in the Indenture, to the delivery by the Company of
an Officers' Certificate stating that the obligation referred to in (a) above
cannot be avoided by the Company taking reasonable measures available to it.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the Indenture or any
supplemental indenture or the rights and obligations of the Company and rights
of the Holders of the Securities of each series to be affected under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding of all series to be affected (voting as a class). The Indenture
also contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest, if any, on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.
[If this Security is a Global Security, insert -- This
Security shall be exchangeable, in whole but not in part, for Securities of this
series registered in the names of Persons other than the Book-Entry Depositary
with respect to such series or its nominee only as provided in this paragraph.
This Security shall be so exchangeable if (a) DTC notifies the Company and the
Book-Entry Depositary that it is unwilling or unable to continue to hold the
Book-Entry Interest or at any time it ceases to be a "clearing agency"
registered under the Exchange Act, and, in either case, a successor is not
appointed by the Company within 120 days, (b) the Book-Entry Depositary notifies
the Company that it is unwilling or unable to continue as Book-Entry Depositary
with respect to this Security and no successor is appointed within 120 days, (c)
the Company executes and delivers to the Trustee an Officers' Certificate
providing that this Security shall be so exchangeable or (d) there shall have
occurred and be continuing an Event of Default with respect to the Securities of
this series and the Holder, in such circumstance, shall have requested in
writing that this Security be exchanged for one or more definitive Registered
Securities. Securities so issued in exchange for this Security shall be of the
same series, having the same interest rate, if any, and maturity and having the
same terms as this Security, in authorized denominations and in the aggregate
having the same principal amount as this Security and registered in such names
as the Book-Entry Depositary for this Security shall direct.]
[If this Security is a Registered Security, insert - - As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of [if this Security is a Registered Global Security, insert -- a
Security of the series of which this Security is a part] [If this Security is a
Registered Security but not a Global Security, insert -- this Security] is
registrable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of (and premium, if any) and interest, if any, on this
Security are payable, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.]
The Securities of the series of which this Security is a part
and which are not Global Securities are issuable only in registered form without
coupons in denominations of $__________ and any integral multiple thereof. [If
this Security is a Global Bearer Security, insert -- The bearer of this Security
shall be treated as the owner of it for all purposes, subject to the terms of
the Indenture.] As provided in the Indenture and subject to certain limitations
therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of this series and of like tenor of a
different authorized denomination as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
[If this Security is a Registered Security, insert -- Prior to
due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.]
When a successor assumes all the obligations of its
predecessor under the Securities of this series and the Indenture in accordance
with the terms of the Indenture, the predecessor will be released from those
obligations.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities of this series and
may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
No stockholder, director, officer, employee, incorporator or
Affiliate of the Company shall have any liability for any obligation of the
Company under the Securities of this series or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of the Securities of this series by accepting a Security of this
series waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Securities of this series.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
[Customary abbreviations may be used in the name of a Holder
of a Registered Security of this series or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).]
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP numbers
to be printed on the Securities of this series as a convenience to the Holders
of the Securities of this series. No representation is made as to the accuracy
of such numbers as printed on the Securities of this series and reliance may be
placed only on the other identification numbers printed hereon.
This Security shall be governed by and construed in accordance
with the laws of the State of New York.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication
This is one of the Securities of the series designated herein
and referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By:___________________________
Authorized Signatory
SECTION 205. Form of Trustee's Certificate of Authentication by an
Authenticating Agent
If at any time there shall be an Authenticating Agent
appointed with respect to any series of Securities, then the Trustee's
Certificate of Authentication by such Authenticating Agent to be borne by the
Securities of each such series shall be substantially as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
and referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By: [NAME OF AUTHENTICATING
AGENT]
Authenticating Agent
By:
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There
shall be established in or pursuant to a Board Resolution and, subject to
Section 303, set forth or determined in the manner provided in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series:
(1) the title of the Securities of the series (which
shall distinguish the Securities of the series from all other
Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Sections 305, 306, 307 or 906, and
except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the
series shall be payable, if other than the bearer (in the case of a
Global Bearer Security) or the Person in whose name the Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest (in the case of a
Registered Security);
(4) the date or dates on which the principal of the
Securities of the series is payable;
(5) the rate or rates at which the Securities of the series
shall bear interest, if any, the date or dates from which such interest
shall accrue, the Interest Payment Dates on which such interest shall
be payable and the Regular Record Date for the interest payable on any
Interest Payment Date;
(6) the place or places, if any, in addition to or in the
place of the Corporate Trust Office, where the principal of (and
premium, if any) and interest, if any, on Securities of the series
shall be payable and (in the case of the Registered Securities) where
such Securities may be registered or transferred;
(7) the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the series
may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof, and the
period or periods within which, the price or prices at which and the
terms and conditions upon which Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(9) if other than denominations of $1,000 and any
integral multiple thereof, the
denominations in which Securities of the series shall be issuable;
(10) if other than the principal amount thereof, the portion
of the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502;
(11) if other than such coin or currency of the United States
of America as at the time of payment is legal tender for payment of
public or private debts, the coin or currency, including composite
currencies such as the European Currency Unit, in which payment of the
principal of (and premium, if any) and interest, if any, on the
Securities of the series shall be payable;
(12) if the principal of (and premium, if any) or interest, if
any, on the Securities of the series are to be payable, at the election
of the Company or a Holder thereof, in a coin or currency other than
that in which the Securities are stated to be payable, the period or
periods within which, and the terms and conditions upon which, such
election may be made;
(13) if the amount of payments of principal of (and premium,
if any) or interest, if any, on the Securities of the series may be
determined with reference to an index based on a coin or currency other
than that in which the Securities are stated to be payable, the manner
in which such amounts shall be determined;
(14) any provisions permitted by this Indenture relating
to Events of Default or covenants of the Company with respect to such
series of Securities;
(15) if the Securities of the series shall be issued in whole
or in part in the form of one or more Global Securities, (i) whether
beneficial owners of interests in any such Global Security may exchange
such interests for Securities of such series of like tenor and of
authorized form and denomination and the circumstances under which any
such changes may occur, if other than in the manner provided in Section
306 and (ii) the Book-Entry Depositary for such Global Security or
Securities;
(16) if the Company ever wishes to issue definitive Bearer
Securities then all provisions relating to or governing such Bearer
Securities will be set forth in an indenture supplemental hereto; and
(17) any other terms of the series (which terms shall not
be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially
identical except as to denomination and except as may otherwise be provided in
or pursuant to the Board Resolution referred to above and set forth in the
Officers' Certificate referred to above or in any indenture supplemental hereto
referred to above.
If any of the terms of the Securities of a series, including
the form of Security of such series, are established by action taken pursuant to
a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary or other authorized officer
or Director of the Company, and delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 303 for the authentication
and delivery of such series of Securities.
SECTION 302. Denominations
The Securities of each series shall be issuable in bearer form
or in registered form without coupons, except as otherwise expressly provided in
a supplemental indenture hereto, in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such provisions with respect
to the Securities of any series, the Securities of such series shall be issuable
in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating
The Securities shall be executed on behalf of the Company by
any Director, the Secretary or any other officer of the Company so authorized
and need not be attested. Definitive Registered Securities of any series may
have the Company's seal reproduced thereon which need not be attested. The
Securities of any series shall be executed by such additional Director or
officer, if any, as shall be specified pursuant to Section 301. The signature of
any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signature of any
individual who was at any time the proper Director or officer of the Company
shall bind the Company, notwithstanding that such individual has ceased to hold
such office prior to the authentication and delivery of such Securities or did
not hold such office at the date of authentication of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver such
Securities. If the form or terms of the Securities of the series have been
established in or pursuant to one or more Board Resolutions as permitted by
Sections 201 and 301, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such
form has been established in conformity with the provisions of this
Indenture;
(b) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(c) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such opinion of Counsel, will constitute valid
and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting the enforcement of creditors' rights and to general
principles of equity.
Notwithstanding the provisions of Section 301 and of the
preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officers'
Certificate otherwise required pursuant to Section 301 or the Company Order and
Opinion of Counsel otherwise required pursuant to such preceding paragraph at or
prior to the time of authentication of each Security of such series if such
documents are delivered at or prior to the time of authentication upon original
issuance of the first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee or an Authenticating Agent by manual signature,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 310 together
with a written statement (which need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
SECTION 304. Transfer Agent and Paying Agent
For so long as the Securities are listed on the Luxembourg
Stock Exchange and such stock exchange shall so require, the Company shall
maintain a Paying Agent and Transfer Agent in Luxembourg.
The Company shall enter into an appropriate agency agreement
with any Registrar, Transfer Agent or Paying Agent not a party to this
Indenture, which shall implement the provisions of this Indenture that relate to
such Person. The Company shall notify the Trustee of the name and address of any
such Person. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 607. The Company initially appoints the Trustee as
Registrar, Transfer Agent and Principal Paying Agent in The City of New York and
Bankers Trust Luxembourg S.A. as Paying Agent and Transfer Agent in Luxembourg
in connection with the Securities.
SECTION 305. Temporary Securities
Pending the preparation of a permanent Global Security or
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee or the Authenticating Agent shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued, in
registered form or, if authorized, in bearer form, and with such appropriate
insertions, omissions, substitutions and other variations as the [officer or
officers] executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities of any series are issued, the Company
will cause definitive Securities of that series to be prepared without
unreasonable delay. After the preparation of definitive Securities of such
series, the temporary Securities of such series shall be exchangeable for
definitive Securities of such series upon surrender of the temporary securities
of such series at the office or agency of the Company in a Place of Payment for
that series, without charge to the Holder except as provided in Section 306 in
connection with a transfer and except that a Person receiving Definitive Bearer
Securities shall bear the cost of insurance, postage, transportation and the
like. Upon surrender for cancellation of any one or more temporary Securities of
any series the Company shall execute and the Trustee or the Authenticating Agent
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series and of like tenor of authorized
denominations.
Upon any exchange of a portion of a temporary Global Security
for a definitive Global Security for the individual Securities represented
thereby pursuant to this Section 305 or Section 306, the temporary Global
Security shall be endorsed by the Trustee to reflect the reduction of the
principal amount of such temporary Global Security, and such principal amount
shall be reduced for all purposes by the amount so exchanged and endorsed.
SECTION 306. Registration, Registration of Transfer and Exchange
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency of the Company in a Place of Payment being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Registered Securities and of transfers of Registered
Securities. The Trustee is hereby appointed "Security Registrar" for the purpose
of registering Registered Securities and transfers of Registered Securities as
herein provided. The Company may have one or more coregistrars and the term
"Security Registrar" includes any coregistrar.
Upon surrender for registration of transfer of any Registered
Security of any series at the office or agency in a Place of Payment for that
series, the Company shall execute, and the Trustee or the Authenticating Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, any Registered Security or
Registered Securities of any series, other than a Global Security, may be
exchanged for other Registered Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Registered Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
upon receipt of a Company Order the Trustee or the Authenticating Agent shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive. Bearer Securities may not be delivered by the
Trustee, the Authenticating Agent or the Security Registrar in exchange for
Registered Securities.
All Securities issued upon any registration of transfer or
exchange of Registered Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Registered Securities surrendered upon such registration of
transfer or exchange.
Every Registered Security presented or surrendered for
registration of transfer or for exchange shall (if so required by the Company or
the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
Upon the exchange in whole of a Global Security for the
definitive Securities represented thereby, such Global Security shall be
canceled by the Trustee or delivered to the Trustee for cancellation. Registered
Securities issued in exchange for a Global Security or any portion thereof
pursuant to this Section shall be registered in such names and in such
authorized denominations as the Book-Entry Depositary for such Global Security
shall instruct in writing the Trustee and the Security Registrar. The Trustee or
the Security Registrar shall deliver such Registered Securities to the Persons
in whose names such Registered Securities are so registered.
Interests in a Permanent Global Security may be exchanged for
definitive Registered Securities of the same series only under the circumstances
provided in this Indenture or in an indenture supplemental hereto pursuant to
which Securities of that series are issued or in the Securities of that Series.
In such event the Company will execute, and the Trustee or the Authenticating
Agent, upon receipt of a Company Order for the authentication and delivery of
definitive Registered Securities of such series will authenticate and deliver
such definitive Registered Securities. Any such definitive Registered Securities
so issued shall be registered in the name of such Person or Persons as the
Book-Entry Depositary shall instruct the Trustee and the Security Registrar in
writing. Upon the exchange in whole of a Permanent Global Security for
definitive Registered Securities in equal aggregate principal amount, such
Permanent Global Security shall be delivered to the Trustee for cancellation.
Interests in a Permanent Global Security may not be exchanged for definitive
Bearer Securities. Notwithstanding the foregoing, interests in a Global Security
may not be exchanged for definitive Registered Securities during the sixteen day
period immediately prior to and including each Interest Payment Date.
No service charge shall be made to the Holder for any
registration of transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Sections 305, 906 or 1107 not
involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any series during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption under Section 1103 and ending at the close of business on the day of
such mailing, (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part or (iii) to exchange any Bearer Security so
selected for redemption except that such a Bearer Security may be exchanged for
a Registered Security of the series (but only if and under the circumstances for
which the Securities of such series are issuable as Registered Securities),
provided that such Registered Security shall be immediately surrendered for
redemption with written instructions for payment consistent with the provisions
of this Indenture.
The provisions of this Section 306 are, with respect to any
Global Security, subject to Section 312 hereof.
SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such Security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its written request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 307,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this
Section 307 in lieu of any destroyed, lost or stolen Security shall constitute
an original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series duly issued
hereunder.
The provisions of this Section 307 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 308. Payment of Interest; Interest Rights Reserved
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid (in the
case of a Bearer Security) to the bearer thereof and (in the case of a
Registered Security) to the Person in whose name that Registered Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest.
Payment of interest, if any, in respect of any Registered
Security will be made by check mailed to the address of the Person entitled
thereto as such person's address appearing in the Security Register. Payment of
interest, if any, in respect of any Registered Security may also be made, in the
case of a Holder of at least U.S. $1,000,000 aggregate principal amount of
Registered Securities, and payment of interest, if any, in respect of a
Permanent Global Security shall be made, by wire transfer to a U.S. Dollar
account maintained by the Holder with a bank in the United States; provided that
such Holder elects payment by wire transfer by giving written notice to the
Trustee or a Paying Agent to such effect designating such account no later than
15 days immediately preceding the relevant due date for payment (or such other
date as the Trustee may accept in its discretion).
Any interest on any Security of any series which is payable
but is not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall, in the case of Registered
Securities, forthwith cease to be payable to the Holder thereof on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of
such series (or their respective Predecessor Securities) are registered
at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Registered Security of
such series and the date of the proposed payment, and at the same time
the Company shall deposit with the Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. Unless the Trustee is acting as the Security
Registrar, promptly after such Special Record Date, the Company shall
furnish the Trustee with a list, or shall make arrangements
satisfactory to the Trustee with respect thereto, of the names and
addresses of, and respective principal amounts of such Registered
Securities held by, the Holders appearing on the Security Register at
the close of business on such Special Record Date. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities of such series at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities of
such series (or their respective Predecessor Securities) are registered
at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on
the Registered Securities of any series or any Permanent Global
Security in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Registered
Securities may be listed, and upon such notice as may be required by
such exchange.
Defaulted Interest on Global Bearer Securities shall be payable to the
bearer thereof at the time of payment of such Defaulted Interest by the Company.
Subject to the foregoing provisions of this Section 308, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security, shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 309. Persons Deemed Owners
Prior to due presentment of a Registered Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Registered Security is
registered as the owner of such Registered Security for the purpose of receiving
payment of principal of (and premium, if any) and (subject to Section 308)
interest, if any, on such Registered Security and for all other purposes
whatsoever, whether or not such Registered Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary. All such payments so made to any such
person, or upon such person's order, shall be valid, and, to the extent of the
sums so paid, effectual to satisfy and discharge the liability for monies
payable upon any such Security.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Book-Entry Depositary for a Global Bearer Security as the
absolute owner of such Bearer Security for the purpose of receiving payment
thereof or on account thereof and for all other purposes whatsoever, whether or
not such Global Bearer Security or coupon be overdue, and neither the Company or
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
No holder of any beneficial interest in any Global Security
held on its behalf by a Book-Entry Depositary shall have any rights under this
Indenture with respect to such Global Security, and such Book-Entry Depositary
may be treated by the Company, the Trustee, and any agent of the Company or the
Trustee as the owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall impair, as between a
Book-Entry Depositary and such holders of beneficial interests, the operation of
customary practices governing the exercise of the rights of the Book-Entry
Depositary as holder of any Security.
SECTION 310. Cancellation
All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly canceled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 310, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee shall
be disposed of as directed by a Company Order.
SECTION 311. Computation of Interest
Except as otherwise specified as contemplated by Section 301
for Securities of any series, interest, if any, on the Securities of each series
shall be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 312. Global Securities
If the Company shall establish pursuant to Section 301 that
the Securities of a particular series are to be issued in the form of a Global
Security, then the Company shall execute and the Trustee shall, in accordance
with Section 303, authenticate and deliver, a Global Security or Securities
which (i) shall represent, and shall be denominated in an aggregate amount equal
to the aggregate principal amount of, all of the Outstanding Securities of such
series, (ii) shall be in bearer form or, if in registered form, registered in
the name of the Book-Entry Depositary or its nominee, (iii) shall be delivered
by the Trustee to the Book-Entry Depositary or pursuant to the Book-Entry
Depositary's instruction and (iv) shall bear a legend substantially to the
following effect:
"This Security is a Global Security within the
meaning of the Indenture hereinafter referred to and if this Security
is in bearer form, is held by a Book-Entry Depositary or, if this
Security is in registered form, is registered in the name of a
Book-Entry Depositary or a nominee of a Book-Entry Depositary. This
Security is exchangeable for Securities registered in the name of a
person other than the Book-Entry Depositary or its nominee only in the
limited circumstances described in the Indenture, and no transfer of
this Security (other than a transfer of this Security as a whole by the
Book-Entry Depositary to a nominee of the Book-Entry Depositary or by a
nominee of the Book-Entry Depositary to the Book-Entry Depositary or
another nominee of the Book-Entry Depositary) may be made or
registered, as the case may be, except in limited circumstances.
Unless this Global Security is presented by an
authorized representative of the Book-Entry Depositary to the Company
or its agent for registration of transfer, exchange or payment, and any
definitive Security is issued in the name or names as directed in
writing by the Book-Entry Depositary, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as
much as the bearer or, if in registered form, the registered owner
hereof, the Book-Entry Depositary, has an interest herein."
Notwithstanding the provisions of Section 306, the Global
Security of a series may be transferred, in whole but not in part and in the
manner provided in Section 306, only to another nominee of the Book-Entry
Depositary for such series, or to a successor Book-Entry Depositary for such
series selected or approved by the Company or to a nominee of such successor
Book-Entry Depositary.
The circumstances, if any, under which the Global Security of
a series may be exchanged for definitive Registered Securities of such series
shall be as specified in an indenture supplemental hereto pursuant to which the
Securities of such series are issued. In such event the Company will execute,
and, subject to Section 306, the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Company, will authenticate and
deliver Securities of such series in definitive registered form without coupons,
in authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Securities of such series in exchange for such
Global Securities. Upon the exchange of the Global Securities for such
Securities in definitive registered form without coupons, in authorized
denominations, the Global Securities shall be canceled by the Trustee. Such
Securities in definitive registered form issued in exchange for the Global
Securities pursuant to this Section 312, shall be registered in such names and
in such authorized denominations as the Book-Entry Depositary, pursuant to the
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver Securities to the Book-Entry
Depositary for delivery to the persons in whose names such Securities are so
registered.
No Security that is not a Global Security may be payable to
bearer (except as otherwise provided in an indenture supplemental hereto
pursuant to Section 301(16).
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture
This Indenture shall upon Company Request cease to be of
further effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and rights to receive
payments of any principal, premium or interest in respect thereof and any right
to receive any Additional Amount as provided in Section 1009), and the Trustee
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either (A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 307
and (ii) Securities for whose payment money has theretofore been
deposited in trust with the trustee or any paying agent or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the Company,
or
(iv) are deemed paid and discharged pursuant to
Section 403, as applicable.
and the Company, in the case of (i) or (ii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount of (a) money in the currency or units of currency in
which such Securities are payable, or (b) U.S. Government Obligations
(denominated in the same currency or units of currency in which such
Securities are payable) which through the payment of interest and
principal in respect thereof in accordance with their terms will
provide not later than one day before the Stated Maturity or Redemption
Date, as the case may be, money in an amount, or (c) a combination of
money or U.S. Government Obligations as provided in (d) above, in each
case, sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest, if any, to the date
of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under Section 614 and, if
money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section 401 or if money or U.S. Government Obligations shall
have been deposited with or received by the Trustee pursuant to Section 403, the
obligations of the Trustee under Section 402 and the last paragraph of Section
1003 shall survive.
SECTION 402. Application of Trust Money
(a) Subject to the provisions of the last paragraph of Section
1003, all money or U.S. Government Obligations deposited with the Trustee
pursuant to Sections 401 or 403 and all money received by the Trustee in respect
of U.S. Government Obligations deposited with the Trustee pursuant to Sections
401 or 403, shall be held in trust and applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, to the persons
entitled thereto, of the principal of (and premium, if any) and interest, if
any, on the Securities for whose payment such money has been deposited with or
received by the Trustee or to make mandatory sinking fund payments or analogous
payments as provided by Sections 401 or 403.
(b) The Company shall pay and shall indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against U.S.
Government Obligations deposited pursuant to Sections 401 or 403 or the interest
and principal received in respect of such obligations other than any payable by
or on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time
to time upon Company Request any U.S. Government Obligations or money held by it
as provided in Sections 401 or 403 which, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, are then in excess of
the amount thereof which then would have been required to be deposited for the
purpose for which such U.S. Government Obligations or money was deposited or
received. This provision shall not authorize the sale by the Trustee of any U.S.
Government Obligations held under this Indenture.
(d) Any monies paid by the Company to the Trustee or any
Paying Agent, or held by the Company in trust, for the payment of the principal
of or any interest or Additional Amounts on any Securities and remaining
unclaimed at the end of two years after such principal, interest or Additional
Amounts become due and payable will be repaid to the Company, or released from
the trust, upon its written request, and upon such repayment or release all
liability of the company, the Trustee and such Paying Agent with respect thereto
will cease.
SECTION 403. Satisfaction, Discharge and Defiance of Securities of any
Series
The Company, at its option, (a) will be discharged from any
and all obligations in respect of the Securities of a series (except in each
case for the obligations to register the transfer or exchange of the Securities
of that series, replace stolen, lost or mutilated Securities of that series,
maintain paying agencies and hold moneys for payment in trust); or (b) omit to
comply with any term, provision or condition set forth in Sections 801, 1004 and
1005 with respect to the Securities of any series, provided that the following
conditions shall have been satisfied:
(1) The Company has deposited or caused to be irrevocably
deposited (except as provided in Section [607], [402(c)] and the last
paragraph of Section [1003]) with the Trustee (specifying that each
deposit is pursuant to this Section 403) as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Securities of such series, (i) money or
(ii) U.S. Government Obligations which through the payment of interest
and principal in respect thereof in accordance with their terms will
provide money in an amount, or (iii) a combination thereof, in each
case, sufficient to pay and discharge the principal and interest on the
outstanding Securities of such series on the dates such payments are
due in accordance with the terms of the Securities of such series, (or
if the Company has designated a redemption date pursuant to the final
sentence of this paragraph, to and including the redemption date so
designated by the Company), and no Event of Default or event which with
notice or lapse of time would become an Event of Default (including by
reason of such deposit) with respect to the Securities of such series
shall have occurred and be continuing on the date of such deposit. To
exercise any such option, the Company is required to deliver to the
Trustee (x) an Opinion of Counsel to the effect that the Holders of the
Securities of such series will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge of certain obligations, which in the case of (a) must be
based on a change in law or a ruling by the U.S. Internal Revenue
Service and (y) an Officers' Certificate as to compliance with all
conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of the Securities of such series. If the
Company shall wish to deposit or cause to be deposited money or U.S.
Government Obligations to pay or discharge the principal of (and
premium, if any) and interest, if any, on the outstanding Securities of
such series to and including a Redemption Date on which all of the
outstanding Securities of such series are to be redeemed, such
Redemption Date shall be irrevocably designated by a Board Resolution
delivered to the Trustee on or prior to the date of deposit of such
money or U.S. Government Obligations, and such Board Resolution shall
be accompanied by an irrevocable Company Request that the Trustee give
notice of such redemption in the name and at the expense of the Company
not less than 15 nor more than 30 days prior to such Redemption Date in
accordance with this Indenture.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default
"Event of Default", wherever used herein with respect to
Securities of any series, means any one of the following events:
(1) default in the payment of any interest or any Additional
Amounts upon any Security of that series when it becomes due and
payable and continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium,
if any, on) any Security of that series at its Maturity; or
(3) default in the payment of any sinking fund installment,
when and as due by the terms of a Security of that series and
continuance of such default for a period of 15 days; or
(4) material default in the performance, or material breach,
of any covenant or obligation of the Company in this Indenture (other
than a covenant a default in whose performance or whose breach is
elsewhere in this Section 501 specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of a
series of Securities other than that series) and continuance of such
material default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities of that series
a written notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) if this event shall be made to constitute an Event of
Default with respect to the Securities of a particular series, a
default in the payment of the principal of any bond, debenture, note or
other evidence of indebtedness, in each case for money borrowed by the
Company or any Significant Subsidiary, or in the payment of principal
under any mortgage, indenture (including this Indenture) or instrument
under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company or any
Significant Subsidiary, which default for payment of principal is in an
aggregate principal amount exceeding $50,000,000 (or its equivalent in
any other currency or currencies) when such indebtedness becomes due
and payable (whether at maturity, upon redemption or acceleration or
otherwise), if such default shall continue unremedied or unwaived for
more than 30 Business Days and the time for payment of such amount has
not been expressly extended; provided, however, that, subject to the
provisions of Sections 601 and 602, the Trustee shall not be deemed to
have knowledge of such default unless either (A) a Responsible Officer
of the Trustee shall have actual knowledge of such default or (B) the
Trustee shall have received written notice thereof from the Company,
from any Holder, from the holder of any such indebtedness or from the
trustee under any such mortgage, indenture or other instrument; and
provided, further, that if such default under such indenture or
instrument shall be remedied or cured by the Company or such
Significant Subsidiary or waived by the holders of such indebtedness,
then the Event of Default hereunder by reason thereof shall be deemed
likewise to have been remedied, cured or waived without further action
upon the part of the Trustee or any of the Holders; or
(6) The failure of the Company or a Significant Subsidiary
generally to pay its debts as they become due, or the admission in
writing of its inability to pay its debts generally, or the making of a
general assignment for the benefit of its creditors, or the institution
of any proceeding by or against the Company or a Significant Subsidiary
(other than any such proceeding brought against the Company or a
Significant Subsidiary that is dismissed within 180 days from the
commencement thereof) seeking to adjudicate it bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition (in each case, other than
a solvent liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition) of it or its debts under
any law relating to bankruptcy, insolvency, reorganization, moratorium
or relief of debtors, or seeking the entry of an order for relief or
appointment of an administrator, receiver, trustee, intervenor or other
similar official for it or for any substantial part of its property, or
the taking of any action by the Company or a Significant Subsidiary to
authorize any of the actions set forth in this subparagraph (6); or
(7) Any other Event of Default provided in the supplemental
indenture or provided in or pursuant to the Board Resolution under
which such series of Securities is issued or in the form of Security
for such series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment
If an Event of Default with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every such case
the Trustee or the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities of that series may declare the principal amount (or,
if any of the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such Securities as may be specified in
the terms thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable.
At any time after such declaration of acceleration with
respect to Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee as hereinafter in
this Article provided, if all Events of Default with respect to Securities of
that series have been cured or waived (other than the non-payment of principal
of the Securities which has become due solely by reason of such declaration of
acceleration) then such declaration of acceleration and its consequences shall
be automatically annulled and rescinded.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
For all purposes under this Indenture, if a portion of the
principal of any Original Issue Discount Securities shall have been accelerated
and declared due and payable pursuant to the provisions hereof, then, from and
after such declaration, unless such declaration has been rescinded and annulled,
the principal amount of such Original Issue Discount Securities shall be deemed,
for all purposes hereunder, to be such portion of the principal thereof as shall
be due and payable as a result of such acceleration, and payment of such portion
of the principal thereof as shall be due and payable as a result of such
acceleration, together with interest, if any, thereon and all other amounts
owing thereunder, shall constitute payment in full of such Original Issue
Discount Securities.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee
The Company covenants that if
(1) default is made in the payment of any interest on any
Security of a series when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of
(or premium, if any, on) any Security of a series at the Stated
Maturity thereof,
the Company will, upon written demand of the Trustee, pay to it, for the benefit
of the Holders of such Securities of such series, the whole amount then due and
payable on such Securities of such series for principal (and premium, if any)
and interest, if any, and, to the extent that payment of such interest shall be
legally enforceable, interest on any overdue principal (and premium, if any) and
any overdue interest, at the rate or rates prescribed therefor in such
Securities of such series, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon such Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon such
Securities, wherever situated.
If any Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights.
SECTION 504. Trustee May File Proofs of Claim
In case of the pendency of any receivership, insolvency,
liquidation (other than a solvent liquidation), bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order with respect to the Securities of any
series, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: In case the principal and premium, if any, of the
Securities of such series in respect of which moneys have been
collected shall not have become and be then due and payable, to the
payment of interest, if any, on the Securities of such a series in
default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee and to the extent permitted by law) upon the
overdue installments of interest at the rate prescribed therefor in
such Securities, such payments to be made ratably to the Persons
entitled thereto, without discrimination or preference;
THIRD: In case the principal or premium, if any, of the
Securities of such series in respect of which moneys have been
collected shall have become and shall be then due and payable, to the
payment of the whole amount then owing and unpaid upon all the
Securities of such series for principal and premium, if any, and
interest, if any, with interest upon the overdue principal and premium,
if any, and (to the extent that such interest has been collected by the
Trustee and to the extent permitted by law) upon overdue installments
of interest at the rate prescribed therefor in the Securities of such
series; and in case such moneys shall be insufficient to pay in full
the whole amount so due and unpaid upon the Securities of such series,
then to the payment of such principal and any premium and interest,
without preference or priority of principal over interest, or of
interest over principal or premium, or of any installment of interest
over any other installment of interest, or of any Security of such
series over any other Security of such series, ratably to the aggregate
of such principal and any premium and accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the
Company or any other Person lawfully entitled thereto.
SECTION 507. Limitation on Suits
No Holder of any Security of any series shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event
of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of Indemnity has failed to institute any
such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest
Subject to Section 507, the Holder of any Security shall have
the right, which is absolute and unconditional, to receive payment of the
principal of (and premium, if any) and (subject to Section 307) interest, if
any, on such Security on the Stated Maturity or Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Company, the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient by the Trustee or by the Holders,
as the case may be.
SECTION 512. Control by Holders
The Holders of a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Securities of such series, provided that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture,
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction, and
(3) the Trustee shall not determine that the action so
directed would be prejudicial to Holders not taking part in such
action.
SECTION 513. Waiver of Past Defaults
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities of any series may on behalf of the Holders
of all the Securities of such series waive any past default hereunder with
respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if
any) or interest, if any, on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant in such
suit, but the provisions of this Section 514 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of or interest, if any, on
any Security on or after the Stated Maturity or Maturities expressed in such
Security.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities
(a) Except during the continuance of a default with
Respect to the Securities of any series,
(1) the Trustee undertakes to perform, such duties
and only such duties as are specifically set forth in this Indenture,
and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall examine the same to determine whether
or not they conform to the requirements of this Indenture.
(b) In case a default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except
that
(1) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless the
Trustee was negligent in ascertaining the pertinent facts; and
(2) no provision of this Indenture shall require the
Trustee to spend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if repayment of such funds or
adequate indemnity against such risk or liability satisfactory to the
Trustee has not been assured to it.
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in principal amount of the outstanding Securities of any
series, determined as provided in Section 512, relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture with respect to the Securities of such
series; and
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to
the provisions of this Section 601.
SECTION 602. Notice of Defaults
Within 90 days after the occurrence of any default hereunder
with respect to the Securities of any series, the Trustee shall transmit by mail
to all Holders of Securities of such series notice of such default hereunder
known to the Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the payment of the
principal of (or premium, if any) or interest, if any, on any Security of such
series or in the payment of any sinking fund installment with respect to
Securities of such series, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors or a Responsible Officer of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
Holders of Securities of such series; and provided, further, that in the case of
any default of the character specified in Section 501(4) with respect to
Securities of such series, no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section 602,
the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
SECTION 603. Certain Rights of Trustee
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order or as otherwise
expressly provided herein and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to expend or risk its own
funds or to exercise, at the request or direction of any of the Holders, any of
the rights or powers vested in it by this Indenture pursuant to this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled upon reasonable
prior request and during normal business hours to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and shall not be liable for the actions or omissions of such agents
appointed and supervised by it with due care.
SECTION 604. Not Responsible for Recitals or Issuance of Securities
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 606. Money Held in Trust
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement
The Company agrees
(1) to pay to the Trustee from time to time such
compensation as is agreed upon in writing;
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel, which compensation, expenses and disbursements
shall be set forth in sufficient written detail to the satisfaction of
the Company), except any such expense, disbursement or advance as may
be attributable to its or their negligence or bad faith; and
(3) to indemnify the Trustee, its officers, directors and
employees for, and to hold it harmless against, any loss, liability or
expense incurred without negligence, bad faith, or willful misconduct
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder. Obligations under this Section 607(3) will survive
the satisfaction and discharge of this Indenture pursuant to Section
401 hereof.
SECTION 608. Disqualification; Conflicting Interests
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility
There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under the Trust Indenture Act and which shall have a
combined capital and surplus of at least $50,000,000. If the Trustee does not
have an office in The City of New York, the Trustee may appoint an agent in The
City of New York reasonably acceptable to the Company to conduct any activities
which the Trustee may be required under this Indenture to conduct in The City of
New York. If the Trustee does not have an office in The City of New York or has
not appointed an agent in The City of New York, the Trustee shall be a
participant in The Depository Trust Company and FAST distribution systems. If
such corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of a United States federal, state, territorial or
District of Columbia supervising or examining authority, then for the purposes
of this Section 609, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 609, the Trustee
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor Trustee
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with section 310(b) of
the Trust Indenture Act pursuant to Section 608 with respect to any
series of Securities after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, with respect to the Securities of one or more series, the Company, by
a Board Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series) and shall comply with
the applicable requirements of Section 611. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company and
accepted appointment in the manner required by Section 611, any Holder who has
been a bona fide Holder of a Security of such series for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid, to
all Holders of Securities of such series as their names and addresses appear in
the Security Register. Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a successor
Trustee with respect to all Securities, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such appointment
and which (1) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but on request of the company or any successor
trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or those series to which the appointment
of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section 611, as the case may be.
(d) No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collecting of Claims Against Company
(a) Subject to Subsection (b) of this Section 613, if the
Trustee shall be or shall become a creditor, directly or indirectly, secured or
unsecured, of the Company within three months prior to a default, as defined in
Subsection (c) of this Section 613, or subsequent to such a default, then,
unless and until such default shall be cured, the Trustee shall set apart and
hold in a special account for the benefit of the Trustee individually, the
Holders of the Securities and the holders of other indenture securities, as
defined in Subsection (c) of this Section 613:
(1) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of principal
or interest effected after the beginning of such three months' period
and valid as against the Company and its other creditors, except any
such reduction resulting from the receipt or disposition of any
property described in paragraph (2) of this Subsection, or from the
exercise of any right of set-off which the Trustee could have exercised
if a petition in bankruptcy had been applied by or against the Company
upon the date of such default; and
(2) all property received by the Trustee in respect of any
claims as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the beginning
of such three months' period, or an amount equal to the proceeds of any
such property, if disposed of, subject, however, to the rights, if any,
of the Company and its other creditors in such property or such
proceeds.
Nothing herein contained, however, shall affect the right of
the Trustee:
(A) to retain for its own account (i) payments made on account
of any such claim by any Person (other than the Company) who is liable
thereon, and (ii) the proceeds of the bona fide sale of any such claim
by the Trustee to a third Person, and (iii) distributions made in cash,
securities or other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable
State law;
(B) to realize, for its own account, upon any property held by
it as security for any such claim, if such property was so held prior
to the beginning of such three months' period;
(C) to realize, for its own account, but only to extent of the
claim hereinafter mentioned, upon any property held by it as security
for any such claim, if such claim was created after the beginning of
such three months' period and such property was received as security
therefor simultaneously with the creation thereof, and if the Trustee
shall sustain the burden of proving that at the time such property was
so received the Trustee had no reasonable cause to believe that a
default, as defined in Subsection (c) of this Section 613, would occur
within three months; or
(D) to receive payment on any claim referred to in paragraph
(B) or (C) , against the release of any property held as security for
such claim as provided in paragraph (B) or (C) , as the case may be, to
the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property
substituted after the beginning of such three months' period for property held
as security at the time of such substitution shall, to the extent of the fair
value of the property released, have the same status as the property released,
and, to the extent that any claim referred to in any of such paragraphs is
created in renewal of or in substitution for or for the purpose of repaying or
refunding any pre-existing claim of the Trustee as such creditor, such claim
shall have the same status as such pre-existing claim.
If the Trustee shall be required to account for the funds and
property held in such special account, the proceeds thereof shall be apportioned
among the Trustee, the Holders and the holders of other indenture securities in
such manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law or winding up or administration pursuant
to the insolvency laws of the United Kingdom, as applicable, the same percentage
of their respective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Company of the funds and
property in such special account and before crediting to the respective claims
of the Trustee and the Holders and the holders of other indenture securities
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law or winding up or administration pursuant to the insolvency
laws of the United Kingdom, as applicable, but after crediting thereon receipts
on account of the indebtedness represented by their respective claims from all
sources other than from such dividends and from the funds and property so held
in such special account. As used in this paragraph, with respect to any claim,
the term "dividends" shall include any distribution with respect to such claim,
in bankruptcy or receivership or proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable State law or winding up or administration
pursuant to the insolvency laws of the United Kingdom, as applicable, whether
such distribution is made in cash, securities or other property, but shall not
include any such distribution with respect to the secured portion, if any, of
such claim.
Any Trustee which has resigned or been removed after the
beginning of such three months' period shall be subject to the provisions of
this Subsection as though such resignation or removal had not occurred. If any
Trustee has resigned or been removed prior to the beginning of such three
months' period, it shall be subject to the provisions of this Subsection if and
only if the following conditions exist:
(i) the receipt of property or reduction of claim, which would
have given rise to the obligation to account, if such Trustee had
continued as Trustee, occurred after the beginning of such three
months' period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection
(a) of this Section 613 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued
under any indenture, or any security or securities having a maturity
of one year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court
of competent jurisdiction or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advances and of the
circumstances surrounding the making thereof is given to the Holders at
the time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depository, or other similar
capacity;
(4) an indebtedness created as a result of services rendered
or premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of
this Section 613;
(5) the ownership of stock or of other securities of a
corporation organized under the provisions of Section 25 (a) of the
Federal Reserve Act, as amended, which is directly or indirectly a
creditor of the Company; and
(6) the acquisition, ownership, acceptance or negotiation of
any drafts, bills of exchange, acceptances or obligations which fall
within the classification of self-liquidating paper, as defined in
Subsection (c) of this Section 613.
(c) For the purposes of this Section 613 only:
(1) the term "default" means any failure to make
payment in full of the principal of or interest on any of the
Securities or upon the other indenture securities when and as
such principal or interest becomes due and payable;
(2) the term "other indenture securities" means
securities upon which the Company is an obligor (as defined in
the Trust Indenture Act) outstanding under any other indenture
(i) under which the Trustee is also trustee, (ii) which
contains provisions substantially similar to the provisions of
this Section 613, and (iii) under which a default exists at
the time of the apportionment of the funds and property held
in such special account;
(3) the term "cash transaction" means any transaction
in which full payment for goods or securities sold is made
within seven days after delivery of the goods or securities in
currency or in checks or other orders drawn upon banks or
bankers and payable upon demand;
(4) the term "self-liquidating paper" means any
draft, bill of exchange, acceptance or obligation which is
made, drawn, negotiated or incurred by the Company for the
purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and
which is secured by documents evidencing title to, possession
of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods,
wares or merchandise previously constituting the security,
provided the security is received by the Trustee
simultaneously with the creation of the creditor relationship
with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or
obligation;
(5) the term "Company" means any obligor upon
the Securities; and
(6) the term "Federal Bankruptcy Act" means the
Bankruptcy Code or Title 11 of the United States
Code.
SECTION 614. Authenticating Agents
From time to time the Trustee, with the prior written approval
of the Company, may appoint one or more Authenticating Agents with respect to
one or more series of Securities with power to act on the Trustee's behalf and
subject to its direction in the authentication and delivery of Securities of
such series or in connection with transfers and exchanges under Sections 304,
305, 306, and 1104 as fully to all intents and purposes as though the
Authenticating Agent had been expressly authorized by those Sections of this
Indenture to authenticate and deliver Securities of such series. For all
purposes of this Indenture, the authentication and delivery of Securities by an
Authenticating Agent pursuant to this Section 614 shall be deemed to be
authentication and delivery of such Securities "by the Trustee". Each such
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by Federal,
State or District of Columbia authority. If such corporation publishes reports
of condition at leant annually pursuant to law or the requirements of such
authority, then for the purposes of this Section 614 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section 614, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 614.
Any corporation into which any Authenticating Agent may be
merged or with which it may be consolidated, or any corporation resulting from,
any merger or consolidation or to which any Authenticating Agent shall be a
party, or any corporation succeeding to the corporate trust business of any
Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 614, without the execution or filing of any paper or any further act on
the part of the parties hereto or the Authenticating Agent or such successor
corporation.
An Authenticating Agent may resign at any time by giving
written notice of resignation to the Trustee and to the Company. The Trustee may
at any time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any Authenticating Agent shall cease to be eligible under this Section
614, the Trustee may appoint a successor Authenticating Agent with the prior
written approval of the Company and shall mail notice of such appointment to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve, as the names and addresses of such Holders appear on the
Security Register. Any successor Authenticating Agent, upon acceptance of its
appointment hereunder, shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section 614.
The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section 614 as
may be agreed in a separate writing among the Company, the Trustee and such
Authenticating Agent, and the Trustee shall be entitled to be reimbursed for
such payments pursuant to Section 607.
If an appointment with respect to one or more series of
Securities is made pursuant to this Section 614, the Securities of such series
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Securities of the series designated herein
referred to in the within mentioned Indenture.
BANKERS TRUST COMPANY
As Trustee
[NAME OF AUTHENTICATING AGENT]
Authenticating Agent
By:
Authorized Signatory
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders
The Company will furnish or cause to be furnished to the
Trustee with respect to the Registered Securities of each series
(a) semi-annually, not later than 15 days after each Regular
Record Date, or, in the case of any series of Registered Securities on
which semi-annual interest is not payable, not more than 15 days after
such semi-annual dates as may be specified by the Trustee, a list, in
such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date or semi-annual
date, as the case may be, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
provided, however, that if and so long as the Trustee is Security Registrar for
any series of Registered Securities, no such list shall be required to be
furnished with respect to any such series.
SECTION 702. Preservation of Information; Communications to Holders
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders with respect
to their rights under this Indenture or under the Securities and is accompanied
by a copy of the form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall, within five business days after the
receipt of such application, at its election, either
(i) afford such applicants access to the information
preserved at the time by the Trustee in accordance with Section
702(a), or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with Section 702(a), and as to
the approximate cost of mailing to such Holders the form of proxy or
other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 702(a) a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the beat interest of the Holders
or would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter an
order refusing to sustain any of such objections or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all the objections so sustained
have been met and shall enter an order so declaring, the Trustee shall mail
copies of such material to all such Holders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable, by reason of
the disclosure of any such information as to the names and addresses of the
Holders in accordance with Section 702(b), regardless of the source from which
such information was derived, and that the Trustee shall not be held accountable
by reason of mailing any material pursuant to a request made under Section
702(b).
SECTION 703. Reports by Trustee
(a) Within 60 days after ____ 1 of each year, commencing
____1, 1997, the Trustee shall transmit by mail to all Holders of Securities a
brief report dated as of such ____ 1, of such year with respect to any of the
following events which may have occurred within the previous 12 months (but if
no such event has occurred within such period no report need be transmitted):
(1) any change to its eligibility under Section 609 and
its qualifications under Section 608;
(2) the creation of or any material change to a
relationship specified in Section 608;
(3) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report, and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities, on any
property or funds held or collected by it as Trustee, except that the
Trustee shall not be required (but may elect) to report such advances
if such advances so remaining unpaid aggregate not more than one-half
of one percentum of the principal amount of the Securities outstanding
on the date of such report;
(4) any change to the amount, interest rate and maturity date
of all other indebtedness owing by the Company (or by any other obligor
on the Securities) to the Trustee in its individual capacity, on the
date of such report, with a brief description of any property held as
collateral security therefor, except an indebtedness based upon a
creditor relationship arising in any manner described in Sections
613(b)(2), (3), (4) or (6);
(5) any change to the property and funds, if any,
physically in the possession of the Trustee as such on the date of
such report;
(6) any additional issue of Securities which the Trustee
has not previously reported; and
(7) any action taken by the Trustee in the performance of its
duties hereunder which it has not previously reported and which in its
opinion materially affects the Securities, except action in respect of
a default, notice of which has been or is to be withheld by the Trustee
in accordance with Section 602.
(b) The Trustee shall transmit by mail to all Holders of
Securities a brief report with respect to the character and amount of any
advances (and if the Trustee elects so to state, the circumstances surrounding
the making thereof) made by the Trustee (as such) since the date of the last
report transmitted pursuant to Subsection (a) of this Section 703 (or if no such
report has yet been so transmitted, since the date of execution of this
instrument) for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Securities, on property or funds held or collected
by it as Trustee and which it has not previously reported pursuant to this
Subsection, except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any time aggregate 10%
or less of the principal amount of the securities outstanding at such time, such
report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Trustee with each U.S. stock
exchange upon which any Securities are listed, with the Commission and
with the Company. The Company will notify the Trustee when any Securities are
listed on any U.S. stock exchange.
SECTION 704. Reports by Company
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections and one or more series of the
Securities is listed on a U.S. national securities exchange, then it
shall file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered on
a U.S. national securities exchange as may be prescribed from time to
time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as way be required from time to time by such rules
and regulations; and
(3) transmit by mail to all Holders of Securities within 30
days after the filing thereof with the Trustee, such summaries of any
information, documents and reports required to be filed by the Company
pursuant to paragraphs (1) and (2) of this Section 704 as may be
required by rules and regulations prescribed from time to time by the
Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE
SECTION 801. Company May Consolidate Etc., Only on Certain Terms
Nothing contained in this Indenture shall prevent the Company
from consolidating with or merging into another corporation or conveying,
transferring or leasing its properties and assets substantially as an entirety
to any person, provided that (a) the successor entity assumes the Company's
applicable obligations on the Securities and (b) immediately after giving effect
to such transaction no Event of Default and; no event which, after notice or
lapse of time or both, would become an Event of Default, shall have happened and
be continuing. In addition, the Company may assign and delegate all of its
rights and obligations under this Indenture, the Securities, any supplemental
indenture relating to the Securities, the Deposit Agreement and all other
documents, agreements and instruments related thereto to any Person that owns
all of the ordinary shares of the Company or to any Person that owns all of the
ordinary shares of a Person that owns all of the ordinary shares of the Company,
and upon any such Person assuming such rights and obligations the Company shall
be automatically released from such obligations, provided that immediately after
giving effect to such transaction no Event of Default and no event which, after
notice or lapse of time or both, would become an Event of Default shall have
happened and be continuing.
In the event that any such successor entity is organized under
the laws of a country located outside of the United Kingdom and withholding or
deduction is required by law for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by or within such country in which the successor
entity is organized or by or within any political subdivision thereof or any
authority therein or thereof having power to tax, the successor entity shall pay
to the relevant Holder of the Global Securities or to the relevant Holders of
the Definitive Registered Securities, as the case may be, such additional
amounts, under the same circumstances and subject to the same limitations as are
specified for "United Kingdom Taxes," as is set forth under Section 1009 herein,
but substituting for the United Kingdom in each place the name of the country
under the laws of which such successor entity is organized. In addition such
successor entity shall be entitled to effect optional tax redemptions under the
same circumstances and subject to the same limitations as are set forth under
Section 1108 herein, but substituting for the United Kingdom in each place the
name of the country under the laws of which such successor entity is organized.
SECTION 802. Successor Corporation to be Substituted
Upon any consolidation by the Company with or merger by the
Company into any other corporation or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor corporation formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company herein, and thereafter the
predecessor corporation shall be relieved of all obligations and covenants under
this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures without Consent of Holders
Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to evidence the succession of another corporation to
the Company and the assumption by any such successor of the covenants
of the Company herein and in the Securities;
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company;
(3) to add any additional Events of Default (and if such
Events of Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are expressly being
included solely for the benefit of such series);
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to facilitate the issuance of Securities in uncertificated form, or to
permit or facilitate the issuance of extendible Securities;
(5) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only as to the Securities of any series created by such
supplemental indenture and Securities of any series subsequently
created to which such change or elimination is made applicable by the
subsequent supplemental indenture creating such series;
(6) to secure the Securities;
(7) to establish the form or terms of Securities of any
series as permitted by Sections 201 and 301;
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611(b);
(9) to provide for any rights of the Holders of
Securities of any series to require the
repurchase of Securities of such series by the Company;
(10) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein to evidence the merger of the Company or the replacement of the
Trustee, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such action shall not
materially and adversely affect the interests of the Holders of
Securities of any series; or
(11) to modify, alter, amend or supplement this Indenture in
any other respect which is not materially adverse to Holders, which
does not involve a change described in clauses (1), (2) or (3) of
Section 902 hereof and which, in the judgment of the Trustee, is not to
the prejudice of the Trustee, or in order to provide for the duties,
responsibilities and compensation of the Trustee as a transfer agent in
the event one registered Security of any series is issued in the
aggregate principal amount of all outstanding Securities of such series
in which Holders will hold an interest.
SECTION 902. Supplemental Indentures with Consent of Holders
With the consent of the Holders of a majority in aggregate
principal amount of the outstanding Securities of all series affected by such
supplemental indenture (voting as one class), by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by or pursuant to a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest, if any, on, any Security, or
reduce the principal amount thereof or the rate of interest thereon
(including Additional Amounts) or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an
original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to Section
502, or change any Place of Payment where, or the coin or currency in
which, any Security or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the
outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences provided for in this Indenture, or
(3) modify any of the provisions of this Section 902 or
Section 513, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, provided, however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section
902, or the deletion of this proviso, in accordance with the
requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section 902 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 903. Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. Effect of Supplemental Indentures
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act
Every supplemental indenture executed pursuant to this Article
shall, if so required by the Trust Indenture Act, conform to the requirements of
the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest
The Company covenants and agrees for the benefit of each
series of Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest and Additional Amounts, if any, on the Securities
of that series in accordance with the terms of the Securities and this
Indenture. An installment of principal of or interest on the Securities of a
series shall be considered paid on the date it is due if the Trustee or Paying
Agent holds at 11:00 a.m. New York City time on that date money deposited by the
Company in immediately available funds and designated for, and sufficient to
pay, the installment in full.
Neither the Company nor any agent of the Company will have any
responsibility or liability for any aspect relating to payments made or to be
made by the Book-Entry Depositary to DTC in respect of the Securities of a
series or the Book-Entry Interests. None of the Company, the Trustee, the
Book-entry Depositary or any agent of any of the foregoing will have any
responsibility or liability for any aspect relating to payments made or to be
made by DTC on account of a Participant's or Indirect Participant's ownership of
an interest in the Book-Entry Interest or for maintaining, supervising or
reviewing any records relating to a Participant's interests in the Book-Entry
Interest.
SECTION 1002. Maintenance of Office or Agency
The Company will maintain (i) in the Borough of Manhattan, The
City of New York, an office or agency where Securities of any series may be
presented or surrendered for payment, and where notices and demands to or upon
the Company in respect of the Securities of such series and this Indenture may
be served and if definitive Registered Securities have been issued, an office or
agency of a Transfer Agent where Securities may be surrendered for registration
of transfer or exchange, and (ii) an office or agency of a Paying Agent where
the Securities may be paid in Luxembourg so long as the Securities are listed on
the Luxembourg Stock Exchange and the rules of such exchange so require. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, except that Bearer Securities of that series pursuant to Section 1001
may be presented at the place specified for the purpose pursuant to Section 301,
and the Company hereby appoints the Paying Agent as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of such Place of Payment) where the
Securities of one or more series and any appurtenant coupons (subject to Section
1001) may be presented or surrendered for any or all of such purposes, and may
from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for any
series of Securities for such purposes. The Company will give prompt written
notice to the Trustee of any such designation and any change in the location of
any such other office or agency. The Company will at all time maintain at least
one Paying Agent which is located outside the United Kingdom for each series of
Securities.
SECTION 1003. Money for Securities Payments to Be Held in Trust
If the Company shall at any time act as its own Paying Agent
with respect to any series of Securities, it will, on or before each due date of
the principal of (and premium, if any) or interest, if any, on any of the
Securities of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest, if any, so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
any series of Securities, it will, no later than 10:00 a.m., New York Time, on
or prior to each due date of the principal of (and premium, if any) or interest,
if any, on any Securities of that series, deposit with a Paying Agent a sum in
immediately available funds sufficient to pay the principal and premium, if any)
or interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section 1003, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest, if any, on Securities of that
series in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities of that series) in the making of
any payment of principal (and premium, if any) or interest, if any, on
the Securities of that series; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or by any Paying Agent
to the Trustee, the Company or such Paying Agent, as the case may be, shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest, if any, on any Security of any series and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease. SECTION 1004.
Limitation on Liens
If this covenant shall be made applicable to the Securities of a
particular series, neither the Company nor any Significant Subsidiary shall
issue, assume or guarantee any notes, bonds, debentures or other similar
evidences of indebtedness, in each case for money borrowed ("Debt"), secured by
a Lien upon any property or assets (other than cash) without effectively
providing that the outstanding Securities (together with, if the Company so
determines, any other indebtedness or obligation then existing or thereafter
created ranking equally with such Securities) shall be secured equally and
ratably with (or prior to) such Debt so long as such Debt shall be so secured.
The foregoing restriction on Liens will not, however, apply to:
(a) Liens in existence on the date of original issue of
such Securities;
(b) (i) any Lien created or arising over any property which is
acquired, constructed or created by the Company or any of its
Significant Subsidiaries, but only if (A) such Lien secures only
principal amounts (not exceeding the cost of such acquisition,
construction or creation) raised for the purposes of such acquisition,
construction or creation, together with any costs, expenses, interest
and fees incurred in relation thereto or a guarantee given in respect
thereof, (B) such Lien is created or arises on or before 90 days after
the completion of such acquisition, construction or creation and (C)
such Lien is confined solely to the property so acquired, constructed
or created; or (ii) any Lien to secure indebtedness for borrowed money
incurred in connection with a specifically identifiable project where
the Lien relates to a property (including, without limitation, shares
or other rights of ownership in the entity(ies) which own such property
or project) involved in such project and acquired by the Company or a
Significant Subsidiary after the date of original issue of the
Securities and the recourse of the creditors in respect of such
indebtedness is limited to any or all of such project and property
(including as aforesaid);
(c) any Lien securing amounts not more than 90 days
overdue or otherwise being contested in good faith;
(d) (i) rights of financial institutions to offset credit
balances in connection with the operation of cash management programs
established for the benefit of the Company and/or a Significant
Subsidiary or in connection with the issuance of letters of credit for
the benefit of the Company and/or a Significant Subsidiary; (ii) any
Lien securing indebtedness of the Company and/or a Significant
Subsidiary for borrowed money incurred in connection with the financing
of accounts receivable; (iii) any Lien incurred or deposits made in the
ordinary course of business, including, but not limited to, (A) any
mechanics', materialmens', carriers', workmens', vendors' or other like
Liens and (B) any Liens securing amounts in connection with workers'
compensation, unemployment insurance and other types of social
security; (iv) any Lien upon specific items of inventory or other goods
and proceeds of the Company and/or a Significant Subsidiary securing
obligations of the Company and/or a Significant Subsidiary in respect
of bankers' acceptances issued or created for the account of such
person to facilitate the purchase, shipment or storage of such
inventory or other goods; (v) any Lien incurred or deposits made
securing the performance of tenders, bids, leases, trade contracts
(other than for borrowed money), statutory obligations, surety bonds,
appeal bonds, government contracts, performance bonds, return-of-money
bonds and other obligations of like nature incurred in the ordinary
course of business; (vi) any Lien created by the Company or a
Significant Subsidiary under or in connection with or arising out of
any pooling and settlement agreements or pooling and settlement
arrangements of the electricity industry or any transactions or
arrangements entered into in connection with hedging or management of
risks relating to the electricity industry; (vii) any Lien constituted
by a right of set off or right over a margin call account or any form
of cash or cash collateral or any similar arrangement for obligations
incurred in respect of the hedging or management of risks under
transactions involving any currency or interest rate swap, cap or
collar arrangements, forward exchange transaction, option, warrant,
forward rate agreement, futures contract or other derivative instrument
of any kind; (viii) any Lien arising out of title retention or like
provisions in connection with the purchase of goods and equipment in
the ordinary course of business; and (ix) any Lien securing
reimbursement obligations under letters of credit, guaranties and other
forms of credit enhancement given in connection with the purchase of
goods and equipment in the ordinary course of business;
(e) Liens in favor of the Company or a Significant
Subsidiary;
(f) (i) Liens on any property or assets acquired from a
corporation which is merged with or into the Company or a Significant
Subsidiary, or any Liens on the property or assets of any corporation
or other entity existing at the time such corporation or other entity
becomes a Subsidiary of the Company and, in either such case, is not
created in anticipation of any such transaction (unless such Lien is
created to secure or provide for the payment of any part of the
purchase price of such corporation); (ii) any Lien on any property or
assets existing at the time of acquisition thereof and which is not
created in anticipation of such acquisition (unless such Lien was
created to secure or provide for the payment of any part of the
purchase price of such property or assets); and (iii) any Lien created
or outstanding on or over any asset of any company which becomes a
Significant Subsidiary on or after the date of the issuance of such
Securities where such Lien is created prior to the date on which such
company becomes a Significant Subsidiary;
(g) Liens required by any contract or statute in order to
permit the Company or a Significant Subsidiary to perform any contract
or subcontract made by it with or at the request of a governmental
entity or any department, agency or instrumentality thereof, or to
secure partial, progress, advance or any other payments by the Company
or a Significant Subsidiary to such governmental unit pursuant to the
provisions of any contract or statute; (ii) any Lien securing
industrial revenue, development or similar bonds issued by or for the
benefit of the Company or a Significant Subsidiary, provided that such
industrial revenue, development or similar bonds are nonrecourse to the
Company and/or such Significant Subsidiary; and (iii) any Lien securing
taxes or assessments or other applicable governmental charges or
levies;
(h) (i) any Lien which arises pursuant to any order of
attachment, distraint or similar legal process arising in connection
with court proceedings and any Lien which secures the reimbursement
obligation for any bond obtained in connection with an appeal taken in
any court proceeding, so long as the execution or other enforcement of
such Lien arising pursuant to such legal process is effectively stayed
and the claims secured thereby are being contested in good faith and,
if appropriate, by appropriate legal proceedings, or any Lien in favor
of a plaintiff or defendant in any action before a court or tribunal as
security for costs and/or other expenses; or (ii) any Lien arising by
operation of law or by order of a court or tribunal or any Lien arising
by an agreement of similar effect, including, without limitation,
judgment liens; or
(i) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of any
Liens referred to in the foregoing clauses, for amounts not exceeding
the principal amount of the Debt secured by the Lien so extended,
renewed or replaced, provided that such extension, renewal or
replacement Lien is limited to all or a part of the same property or
assets that were covered by the Lien extended, renewed or replaced
(plus improvements on such property or assets).
Notwithstanding the foregoing, the Company and/or a Significant
Subsidiary may create or permit to subsist Liens over any property or assets ,
so long as the aggregate amount of Debt secured by all such Liens (excluding
therefrom the amount of Debt secured by Liens set forth in clauses (a) through
(i), inclusive, above) does not exceed 10% of the Consolidated Net Tangible
Assets.
Nothing contained in this Indenture in any way restricts or prevents
the Company or any Subsidiary from incurring any indebtedness.
SECTION 1005. Limitation on Sale and Lease-Back Transactions
If this covenant shall be made applicable to the Securities of
a particular series, the Company covenants and agrees that so long as any
Securities of such series remains outstanding neither it nor any Significant
Subsidiary will enter into any arrangement with any person (other than the
Company or a Significant Subsidiary), providing for the leasing to the Company
or a Significant Subsidiary of any assets which have been or are to be sold or
transferred by the Company or such Significant Subsidiary to such person (a
"Sale and Lease-Back Transaction") unless; (i) such transaction involves a lease
for a temporary period not to exceed three years; (ii) such transaction is
between the Company or a Significant Subsidiary and an affiliate of the Company;
(iii) the Company would be entitled to incur indebtedness secured by a Lien on
the assets or property involved in such transaction at least equal in amount to
the attributable debt with respect to such Sale and Lease-Back Transaction,
without equally and ratably securing the Securities, pursuant to the limitation
on Liens described above other than pursuant to the penultimate paragraph
thereof; (iv) such transaction is entered into within 60 days after the initial
acquisition by the Company of the assets or property subject to such
transaction; (v) after giving effect thereto, the aggregate amount of all
attributable debt with respect to all such Sale and Lease-Back Transactions does
not exceed 10% of Consolidated Net Tangible Assets; or (vi) the Company or a
Significant Subsidiary within the twelve months preceding the sale or transfer
or the twelve months following the sale or transfer, regardless of whether such
sale or transfer may have been made by the Company or such Significant
Subsidiary, applies in the case of a sale or transfer for cash, an amount equal
to the net proceeds thereof and, in the case of a sale or transfer otherwise
than for cash, an amount equal to the fair value of the assets so leased at the
time of entering into such arrangement (as determined by the Board of Directors
of the Company or such Significant Subsidiary), (a) to the retirement of
indebtedness for money borrowed, incurred or assumed by the Company or a
Significant Subsidiary, which by its terms matures at, or is extendible or
renewable at the option of the obligor to, a date more than twelve months after
the date of incurring, assuming or guaranteeing such debt or (b) to investment
in any assets of the Company or any Significant Subsidiary.
SECTION 1006. Statement by Officers as to Default
The Company will deliver to the Trustee within 120 days after
the end of each fiscal year of the Company a certificate from the principal
executive, financial or accounting officer of the Company, stating that in the
course of the performance by such signer of his duties as an officer of the
Company he would normally have knowledge of any default by the Company in the
performance and observance of any of the covenants contained in Sections 1001 to
1008, stating whether or not he has knowledge of any such default without regard
to any period of grace or requirement of notice and, if so, specifying each such
default of which such signer has knowledge and the nature thereof.
SECTION 1007. Modification or Waiver of Certain Covenants
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in this Indenture with respect to the
Securities of any series if before the time for such compliance the Holders of
at least a majority in aggregate principal amount of the Outstanding Securities
of such series shall, by Act of such Holders, either modify the covenant or
waive such compliance in such instance or generally waive compliance with such
term, provision or condition, provided that no such modification shall without
the consent of each Holder (a) change the stated maturity upon which the
principal of or the interest on the Securities is due and payable, (b) reduce
the principal amount thereof or the rate of interest thereon, (c) change any
obligation of the Company to pay Additional Amounts, (d) change any place of
payment or the currency in which, the Securities or any premium or the interest
thereon is payable, (e) impair the right to institute suit for the enforcement
of any such payment on or after the stated maturity thereof (or, in the case of
redemption, on or after redemption date) or (f) reduce the percentage in
principal amount of the outstanding Securities, the consent of whose Holders is
required for any waiver of compliance with certain provisions of the Indenture
or certain defaults hereunder and their consequences provided for in the
Indenture. The Securities owned by the Company or any of its Affiliates shall be
deemed not to be outstanding for, among other purposes, consenting to any such
modification.
SECTION 1008. Further Assurances.
The Company and the Trustee shall execute and deliver all such
other documents, instruments and agreements and do all such other acts and
things as may be reasonably required to enable the Trustee to exercise and
enforce its rights under this Indenture and under the documents, instruments and
agreements required under this Indenture and to carry out the intent of this
Indenture.
SECTION 1009. Payment of Additional Amounts
If the Securities of a particular series provide for payment
of Additional Amounts, all payments of principal and interest (including
payments of discount and premium, if any) in respect of the Securities of such
series shall be made free and clear of, and without withholding or deduction for
or on account, of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or
assessed by or within the United Kingdom or by or within any political
subdivision thereof or any authority therein or thereof having power to tax
("United Kingdom Taxes"), unless such withholding or deduction is required by
law. In that event the Company shall pay to the Holder such additional amounts
("Additional Amounts") as will result in the payment to such Holder of the
amount that would otherwise have been receivable by such Holder in the absence
of such withholding or deduction, except that no such Additional Amounts shall
be payable:
(a) to, or to a Person on behalf of, a Holder who is liable
for such United Kingdom Taxes in respect of Securities, by reason of
such Holder having some connection with the United Kingdom (including
being a citizen or resident or national of, or carrying on a business
or maintaining a permanent establishment in, or being physically
present in, the United Kingdom) other than the mere holding of a
Security or the receipt of principal and interest (including payments
of discount and premium, if any) in respect thereof; or
(b) to, or to a Person on behalf of, a Holder who presents a
Security (where presentation is required) for payment more than 30 days
after the Relevant Date except to the extent that such Holder would
have been entitled to such Additional Amounts on presenting such
Security for payment on the last day of such period of 30 days;
(c) to, or to a Person on behalf of, a Holder who
presents a Security (where presentation
is required) in the United Kingdom;
(d) to, or to a Person on behalf of, a Holder who would
not be liable or subject to the withholding or deduction by making a
declaration of non-residence or similar claim for exemption to the
relevant tax authority; or
(e) to, or to a Person on behalf of, a Holder of a definitive
Registered Security issued pursuant to the request of owners
representing a majority in outstanding principal amount in the
Book-Entry Interest following and during the continuance of an Event of
Default if such Holder (or any predecessor Holder) was one of such
owners requesting that definitive Registered Securities be so issued.
Such Additional Amounts will also not be payable where, had
the beneficial owner of the Security (or any interest therein) been the Holder
of the Security, he would not have been entitled to payment of Additional
Amounts by reason of any one or more of clauses (a) through (e) above. If the
Company shall determine that Additional Amounts will not be payable because of
the immediately preceding sentence, the Company will inform such Holder promptly
after making such determination setting forth the reason(s) therefor.
Reference to principal, interest, discount or premium in
respect of the Securities shall be deemed also to refer to any Additional
Amounts which may be payable as set forth in this Indenture or in the
Securities.
At least 10 Business Days prior to the first Interest Payment
Date (and at least 10 Business Days prior to each succeeding Interest Payment
Date if there has been any change with respect to the matters set forth in the
below-mentioned Officers' Certificate) the Company will furnish to the Trustee
and the Paying Agents an Officers' Certificate instructing the Trustee and the
Paying Agents whether payments of principal of or interest on the Securities due
on such Interest Payment Date shall be without deduction or withholding for or
on account of any United Kingdom Taxes. If any such deduction or withholding
shall be required, prior to such Interest Payment Date the Company will furnish
the Trustee and the Paying Agents with an Officers' Certificate which specifies
the amount, if any, required to be withheld on such payment to Holders and
certifies that the Company shall pay such withholding or deduction. The Company
covenants to indemnify the Trustee for, and to hold the Trustee harmless
against, any loss, liability or expense reasonably incurred without negligence,
willful misconduct or bad faith on their part, arising out of or in connection
with actions taken or omitted by the Trustee in reliance on any Officers'
Certificate furnished pursuant to this paragraph. Any Officers' Certificate
required by this Section 1009 to be provided to the Trustee and any Paying Agent
shall be deemed to be duly provided if telecopied to the Trustee and such Paying
Agent.
The Company shall furnish to the Trustee the official receipts
(or a certified copy of the official receipts) evidencing payment of United
Kingdom Taxes. Copies of such receipts shall be made available to the Holders of
the Securities upon request.
SECTION 1010. Copies Available to Holders.
Copies of this Indenture shall be available for inspection by
the Holders on a Business Day during normal business hours at the principal
office of the Company and at the Corporate Trust Office. In addition, if the
Securities of any series are listed on the London Stock Exchange, the Luxembourg
Stock Exchange or any other stock exchange located outside the United States and
such stock exchange shall so require, copies of this Indenture, the Deposit
Agreement, the Letter of Representations, the memorandum and articles of
association of the Company and the most recent publicly available annual report
of the Company shall be made available for inspection by the Holders of such
Securities on a Business Day during normal business hours at the offices of the
paying agents and at the office of the listing agent required to be maintained
by such exchange for so long as the Securities of such series are outstanding
and are listed on such stock exchange.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article
Securities of any series which are redeemable before their
Stated Maturity shall be redeemable in accordance with their terms and (except
as otherwise specified in or contemplated by Section 301 for Securities of any
series) in accordance with this Article Eleven.
SECTION 1102. Election to Redeem; Notice to Trustee
The election of the Company to redeem any Securities shall be
authorized by a Board of Directors resolution and evidenced by an Officers'
Certificate. In case of any redemption at the election of the Company of less
than all the Securities of any series, the Company shall, at least 15 days prior
to the Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities of such series to be redeemed. In the case of
any redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere in this
Indenture, or pursuant to an election by the Company which is subject to a
condition specified in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction or condition.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed
If less than all the Securities of any series are to be
redeemed, the particular securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions equal to the minimum authorized
denomination for Securities of that series (or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series.
Securities shall be excluded from eligibility for selection
for redemption if they are identified by certificate number in a written
statement signed by an authorized officer of the Company and delivered to the
Security Registrar at least 30 days prior to the Redemption Date as being owned
of record and beneficially by, and not pledged or hypothecated by either (a) the
Company or (b) an entity specifically identified in such written statement which
is an Affiliate of the Company.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
SECTION 1104. Notice of Redemption
Notice of redemption shall be given not less than 15 days nor
more than 30 days prior to the Redemption Date to each Holder of Securities to
be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such
is the case.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price
On or prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Principal Paying Agent (or, if the Company is acting
as its own Paying Agent, segregate and hold in trust as provided in Section
1003) an amount of money sufficient to pay the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment Date) accrued interest on,
all the Securities which are to be redeemed on that date (to the extent that
such amounts are not already on deposit at such time in accordance with the
provisions of Sections 401, 403 or 1007).
SECTION 1106. Securities Payable on Redemption Date
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued and unpaid interest) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption Price, together
with accrued and unpaid interest to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, and in the case of Registered Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
SECTION 1107. Securities Redeemed in Part
Any Security (including any Global Security) which is to be
redeemed only in part shall be surrendered at a Place of Payment therefor (with,
if the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute, and the Trustee upon written direction shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities of the same series, of any authorized denomination
as requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the security so
surrendered; provided, that if a Global Security is so surrendered, the new
Global Security shall be in a denomination equal to the unredeemed portion of
the principal of the Global Security so surrendered.
SECTION 1108. Optional Redemption in the Event of Change in United Kingdom
Tax Treatment
The Securities of any series may be redeemed at the election
of the Company, as a whole, but not in part, by the giving of notice as provided
in Section 1104, at a price equal to the outstanding principal amount thereof,
together with Additional Amounts, if any, and accrued interest, if any, to the
Redemption Date, if (a) the Company satisfies the Trustee that it has or will
become obligated to pay Additional Amounts on the Securities of such series, as
a result of either (x) any change in, or amendment to, the laws or regulations
of the United Kingdom or any political subdivision or any authority or agency
thereof or therein having power to tax or levy duties, or any change in the
application or interpretation of such laws or regulations, which change or
amendment becomes effective on or after the date of the relevant underwriting
agreement for the Securities of such series, or (y) the issuance of definitive
Registered Securities as the result of DTC having notified the Company and the
Book-Entry Depositary that it is unable or unwilling to continue to hold the
Book-Entry Interest or at any time ceasing to be a "clearing agency" registered
as such under the Exchange Act and, in either case, a successor not being
appointed by the Company within 120 days or the Book-entry Depositary notifying
the Company that it is unwilling or unable to continue as Book-Entry Depositary
with respect to the Securities of such series and a successor Book-Entry
Depositary not being appointed being within 120 days or there having occurred
and being continuing an Event of Default with respect to the Securities of such
series and the Holder, in such circumstances, having requested in writing a
definitive Registered Security, and (b) such obligation cannot be avoided by the
Company taking reasonable measures available to it; provided, however, that no
such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which the Company would be obligated to pay such Additional
Amounts, were a payment in respect of the Securities then due. Prior to the
giving of notice of redemption of such Securities pursuant to this Indenture,
the Company will deliver to the Trustee an Officers' Certificate stating that
the obligation to pay such Additional Amounts cannot be avoided by the Company
taking reasonable measures available to it, and the Trustee shall accept such
certificate as sufficient evidence of such condition, and such certificate shall
be conclusive and binding on the Holders of the Securities of such series.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article
The provisions of this Article shall be applicable to any
sinking fund for the retirement of Securities of a series except as otherwise
specified as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by
the terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount provided
for by the terms of Securities of any series is herein referred to as an
"optional sinking fund payment". If provided for by the terms of Securities of
any series, the cash amount of any sinking fund payment may be subject to
reduction as provided in Section 1202. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities
In lieu of making all or any part of any mandatory sinking
fund payment with respect to any series of Securities in cash, the Company may
at its option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except upon redemption pursuant to the
mandatory sinking fund) by the Company or receive credit for Securities of such
series (not previously so credited) theretofore purchased or otherwise acquired
(except as aforesaid) by the Company and delivered to the Trustee for
cancellation pursuant to Section 310, (b) receive credit for optional sinking
fund payments (not previously so credited) made pursuant to this Section 1202,
or (c) receive credit for Securities of such series (not previously so credited)
redeemed by the Company through any optional redemption provision contained in
the terms of such series. Securities so delivered or credited shall be received
or credited by the Trustee at the sinking fund Redemption Price specified in
such Securities.
SECTION 1203. Redemption of Securities for Sinking Fund
Not less than 30 days prior to each sinking fund payment date
for any series of Securities, the Company will deliver to the Trustee an
Officers' Certificate specifying (a) the amount of the next ensuing sinking fund
payment for that series pursuant to the terms of that series, (b) whether or not
the Company intends to exercise its right, if any, to make an optional sinking
fund payment with respect to such series on the next ensuing sinking fund
payment date and, if so, the amount of such optional sinking fund payment, and
(c) the portion thereof, if any, which is to be satisfied by payment of cash and
the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities of that series pursuant to Section 1202, and will also
deliver to the Trustee any Securities to be so delivered. Such written statement
shall be irrevocable and upon its receipt by the Trustee the Company shall
become unconditionally obligated to make all the cash payments or payments
therein referred to, if any, on or before the next succeeding sinking fund
payment date. Failure of the Company, on or before any such 30th day, to deliver
such written statement and Securities specified in this paragraph, if any, shall
not constitute a default but shall constitute, on and as of such date, the
irrevocable election of the Company (i) that the mandatory sinking fund payment
for such series due on the next succeeding sinking fund payment date shall be
paid entirely in cash without the option to deliver or credit Securities of such
series in respect therefor and (ii) that the Company will make no optional
sinking fund payment with respect to such series as provided in this Section
1203.
Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1105, 1106 and 1107.
The Trustee shall not redeem or cause to be redeemed any
Security of a series with sinking fund moneys or mail any notice of redemption
of Securities of such series by operation of the sinking fund during the
continuance of a default in payment of interest with respect to Securities of
that series or an Event of Default with respect to the Securities of that series
except that, where the mailing of notice of redemption of any Securities shall
theretofore have been made, the Trustee shall redeem or cause to be redeemed
such Securities, provided that it shall have received from the Company a sum
sufficient for such redemption. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default,
shall occur, and any moneys thereafter paid into the sinking fund, shall, during
the continuance of such default or Event of Default, be deemed to have been
collected under Article Five and held for the payment of all such Securities. In
case such Event of Default shall have been waived as provided in Section 513 or
the default or Event of Default cured on or before the 30th day preceding the
sinking fund payment date, such moneys shall thereafter be applied on the next
succeeding sinking fund payment date in accordance with this Section 1203 to the
redemption of such Securities.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1301 Purposes of Meetings:
A meeting of the Holders may be called at any time from time
to time pursuant to this Article Thirteen for any of the following purposes.
(1) to give any notice to the Company or to the Trustee, or to
consent to the waiving of any Default hereunder and its consequence, or
to take any other action authorized to be taken by Holders pursuant to
Article Nine hereof;
(2) to remove the Trustee and appoint a successor
trustee pursuant to Article Six hereof;
(3) to consent to the execution of an indenture
supplemental hereto pursuant to Section 902 hereof.
SECTION 1302 Place of Meetings
(a) The Trustee may at any time (upon not less than 21 days'
notice) call a meeting of Holders to be held at such time and at such place in
the location determined by the Trustee pursuant to Section 1302 hereof. Notice
of every meeting of Holders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be mailed to each Holder and published in the manner contemplated by
Section 106 hereof.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 10% in aggregate principal amount of the
Securities then outstanding, shall have requested the Trustee to call a meeting
of the Holders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have made the
first giving of the notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders in the amount above specified may
determine the time (not less than 21 days after notice is given) and the place
in the location determined by the Company or the Holders pursuant to this
Section 1302 for such meeting and may call such meeting to take any action
authorized in Section 1301 hereof by giving notice thereof as provided in
Section 1302(a) hereof.
SECTION 1303 Voting at Meetings.
To be entitled to vote at any meeting of Holders, a Person
shall be (i) a Holder or (ii) a Person appointed by an instrument in writing as
proxy for a Holder or Holders by such Holder or Holders. The only Persons who
shall be entitled to be present or to speak at any meeting of Holders shall be
the Persons so entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel, any representatives of the
Company and its counsel.
SECTION 1304 Voting Rights, Conduct and Adjournment.
(a) Notwithstanding any other provisions of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders in regard to proof of the holding of Securities of a
series and of the appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Securities of a series shall be proved in the manner specified in Article Two
hereof and the appointment of any proxy shall be proved in such manner as is
deemed appropriate by the Trustee or by having the signature of the person
executing the proxy witnessed or guaranteed by any bank, banker or trust company
customarily authorized to certify to the holding of a security such as a Global
Note.
(b) At any meeting of Holders, the representative of Persons
holding or representing Securities of a series in an aggregate principal amount
sufficient under the appropriate provision of this Indenture to take action upon
the business for the transaction of which such meeting was called shall
constitute a quorum. Any meetings of Holders duly called pursuant to Section
1303 hereof may be adjourned form time to time by vote of the Holders (or
proxies for the Holders) of a majority of the Securities of a series represented
at the meeting and entitled to vote, whether or not a quorum shall be present;
and the meeting may be held as so adjourned without further notice. No action at
a meeting of Holders shall be effective unless approved by Persons holding or
representing Securities of a series in the aggregate principal amount required
by the provision of this Indenture pursuant to which such action is being taken.
(c) At any meeting of Holders, each Holder or proxy shall be
entitled to one vote for each $1,000 principal amount of outstanding Securities
of a series held or represented.
SECTION 1305 Revocation of Consent by Holders.
At any time prior to (but not after) the evidencing the Trustee of the
taking of any action at a meeting of Holders by the Holders of the percentage in
aggregate principal amount of the Securities specified in this Indenture in
connection with such action, any Holder of a Security the serial number of which
is included in the Securities the Holders of which have consented to such action
may, by filing written notice with the Trustee at its principal corporate trust
office and upon proof of holding as provided herein, revoke such consent so far
as concerns such Securities. Except as aforesaid any such consent given by the
Holder of any Securities shall be conclusive and binding upon such Holder and
upon all future Holders and owners of such Securities and of any Securities
issued in exchange therefore, in lieu thereof or upon transfer thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Securities. Any action taken by the Holders of the percentage in aggregate
principal amount of the Holders specified in this Indenture in connection with
such action shall be conclusively binding upon the Company, the Trustee and the
Holders of all the Securities.
ARTICLE FOURTEEN
MISCELLANEOUS
SECTION 1401. Consent to Jurisdiction; Appointment of Agent to Accept
Service of Process
(a) The Company irrevocably consents and agrees, for the
benefit of the Holders from time to time of the Securities and the Trustee, that
any legal action, suit or proceeding against it with respect to its obligations,
liabilities or any other matter arising out of or in connection with this
Indenture or the Securities may be brought in the Supreme Court of New York, New
York County or the United States District Court for the Southern District of New
York and any appellate court from either thereof and, until amounts due and to
become due in respect of the Securities have been paid, hereby irrevocably
consents and submits to the nonexclusive jurisdiction of each such court in
personam, generally and unconditionally with respect to any action, suit or
proceeding for itself and in respect of its properties, assets and revenues.
(b) The Company has irrevocably designated, appointed, and
empowered CT Corporation System, as its designee, appointee and agent to
receive, accept and acknowledge for and on its behalf, and its properties,
assets and revenues, service of any and all legal process, summons, notices and
documents which may be served in any action, suit or proceeding brought against
the Company in any United States or State court. If for any reason such
designee, appointee and agent hereunder shall cease to be available to act as
such, the Company agrees to designate a new designee, appointee and agent in the
Borough of Manhattan, The City of New York on the terms and for the purposes of
this Section 1301 satisfactory to the Trustee. The Company further hereby
irrevocably consents and agrees to the service of any and all legal process,
summons, notices and documents in any action, suit or proceeding against the
Company by serving a copy thereof upon the relevant agent for service of process
referred to in this Section 1301 (whether or not the appointment of such agent
shall for any reason prove to be ineffective or such agent shall accept or
acknowledge such service) or by mailing copies thereof by registered or
certified air mail, postage prepaid, to the Company at its address specified in
or designated pursuant to this Indenture. The Company agrees that the failure of
any such designee, appointee and agent to give any notice of such service to it
shall not impair or affect in any way the validity of such service or any
judgment rendered in any action or proceeding based thereon. Nothing herein
shall in any way be deemed to limit the ability of the holders of the Securities
and the Trustee, to serve any such legal process, summons, notices and documents
in any other manner permitted by applicable law or to obtain jurisdiction over
the Company or bring actions, suits or proceedings against the Company in such
other jurisdictions, and in such manner, as may be permitted by applicable law.
The Company irrevocably and unconditionally waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any of the aforesaid actions, suits or proceedings arising out of or
in connection with this Indenture brought in the Supreme Court of New York, New
York County or the United States District Court for the Southern District of New
York and any appellate court from either thereof and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
If for the purpose of obtaining judgment in any court it is
necessary to convert a sum due hereunder to the holder of any Security from U.S.
dollars into another currency, the Company has agreed, and each holder by
holding such Security will be deemed to have agreed, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures such Holder could purchase
U.S. dollars with such other currency in The City of New York on the Business
Day preceding the day on which final judgment is given.
The obligation of the Company in respect of any sum payable by
it to the holder of a Security shall, notwithstanding any judgment in a currency
(the "judgment currency") other than U.S. dollars, be discharged only to the
extent that on the Business Day following receipt by the Holder of such security
of any sum, adjudged to be so due in the judgment currency, the Holder of such
Security may in accordance with normal banking procedures purchase U.S. dollars
with the judgment currency; if the amount of U.S. dollars so purchased is less
than the sum originally due to the holder of such Security in the judgment
currency (determined in the manner set forth in the preceding paragraph), the
Company agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify the Holder of such Security against such loss, and if the amount of
the U.S. dollars so purchased exceeds the sum originally due to the Holder of
such Security, such Holder agrees to remit to the Company such excess, provided
that such Holder shall have no obligation to remit any such excess as long as
the Company shall have failed to pay such Holder any obligations due and payable
under such Security, in which case such excess may be applied to such
obligations of the Company under such Security in accordance with the terms
thereof.
SECTION 1402 Counterparts
This instrument may be executed in any number of Counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers or directors duly authorized thereto,
all as of the day and year first above written.
SOUTHERN INVESTMENTS UK plc
By______________________________
Title:
Attest:
- - ------------------------------
BANKERS TRUST COMPANY, as
Trustee, Principal Paying Agent,
Security Registrar and Transfer Agent
By______________________________
Title:
Attest:
- - ------------------------------
BANKERS TRUST LUXEMBOURG S.A.
as Paying Agent and Transfer Agent
By______________________________
Title:
<PAGE>
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
On the 21 day of November 1996, before me personally came
Edwin H. Adams, to me known, who, being by me duly sworn, did depose and say
that he is a of Southern Investments UK plc, one of the corporations described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
------------------------------
*NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
EXHIBIT 4.2
SOUTHERN INVESTMENTS UK plc
and
BANKERS TRUST COMPANY
as Trustee, Principal Paying Agent,
Registrar and Transfer Agent
and
BANKERS TRUST LUXEMBOURG S.A.,
as Paying Agent and Transfer Agent
6.375% Senior Notes Due 2001
6.800% Senior Notes Due 2006
First Supplemental Indenture
Dated as of November 21, 1996
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of November 21, 1996 (herein
called the "First Supplemental Indenture"), among Southern Investments UK plc, a
corporation duly organized and existing under the laws of England and Wales
(hereinafter called the "Company"), and BANKERS TRUST COMPANY, as Trustee
Principal Paying Agent, Registrar and Transfer Agent under the Original
Indenture referred to below (hereinafter called the "Trustee") and BANKERS TRUST
LUXEMBOURG S.A., as Paying and Transfer Agent under the Original Indenture.
WITNESSETH:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture dated as of November 21, 1996 (hereinafter called the
"Original Indenture"), to provide for the issuance from time to time of its
unsecured debentures, notes or other evidences of indebtedness (herein called
the "Securities"), the form and terms of which are to be established as set
forth in Sections 201 and 301 of the Original Indenture;
WHEREAS, Section 901 of the Original Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Original Indenture for, among other things, the purpose of establishing
the form and terms of the Securities of any series as permitted in Sections 201
and 301 of the Original Indenture and of appointing an Authenticating Agent with
respect to the Securities of any series;
WHEREAS, the Company desires to create two series of the Securities,
one series of Securities in an aggregate principal amount of one hundred and
sixty-eight million dollars ($168,000,000) to be designated the "6.375% Senior
Notes Due 2001" and one series of the Securities in an aggregate principal
amount of three hundred and thirty-two million dollars ($332,000,000) to be
designated the "6.800% Senior Notes Due 2006" (collectively the "Senior Notes"),
and all action on the part of the Company necessary to authorize the issuance of
the Senior Notes under the Original Indenture and this First Supplemental
Indenture has been duly taken; and
WHEREAS, all acts and things necessary to make the Senior Notes, when
executed by the Company and authenticated and delivered by the Trustee as in the
Original Indenture provided, the valid and binding obligations of the Company
and to constitute these presents a valid and binding supplemental indenture and
agreement according to its terms, have been done and performed;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
That in consideration of the premises and of the acceptance and
purchase of the Senior Notes by the holders thereof and of the acceptance of
this trust by the Trustee, the Company covenants and agrees with the Trustee,
for the equal benefit of holders of the Senior Notes, as follows:
ARTICLE ONE
Definitions
The use of the terms and expressions herein is in accordance with the
definitions, uses and constructions contained in the Original Indenture and the
forms of Senior Notes attached hereto as Exhibits A, B, C, and D, respectively.
In addition, for all purposes of this First Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise expressly requires,
the following terms shall have the respective meanings assigned to them as
follows and shall be construed as if defined in Article One of the Original
Indenture:
"Book-Entry Depositary" means the Book-Entry Depositary or its nominee
or the custodian of either, designated by the Company in the Deposit Agreement
until a successor Book-Entry Depositary shall have become such pursuant to the
applicable provisions of the Deposit Agreement, and thereafter "Book-Entry
Depositary" shall mean such successor Book-Entry Depositary or its nominee or
the custodian of either.
"Definitive Registered Senior Note" means a registered Senior Note
substantially in the form of Exhibits B and D to this First Supplemental
Indenture.
"Deposit Agreement" means the Deposit Agreement, dated as of the date
of this First Supplemental Indenture, between the Company and Bankers Trust
Company.
"DTC" means The Depository Trust Company or its successors.
"Global Senior Note" means a bearer Global Senior Note substantially in
the form of Exhibits A and C to this First Supplemental Indenture.
ARTICLE TWO
Terms and Issuance of 6.375% Senior Notes Due 2001
and 6.800% Senior Notes Due 2006
Section 201. Issue of Senior Notes. Two series of Securities, which
shall be designated the 6.375% Senior Notes Due 2001" and the "6.800% Senior
Notes Due 2006" (collectively the "Senior Notes") shall be executed,
authenticated and delivered in accordance with the provisions of, and shall in
all respects be subject to, the terms, conditions and covenants of the Original
Indenture and this First Supplemental Indenture (including the forms of Senior
Notes set forth in Exhibits A, B, C and D hereto). The aggregate principal
amount of the 6.375% Senior Notes Due 2001 and the aggregate principal amount of
6.800% Senior Notes Due 2006 which may be authenticated and delivered under the
First Supplemental Indenture shall not, except as permitted by the provisions of
the Original Indenture, exceed $168,000,000 and $332,000,000 respectively.
Section 202. Form of Senior Notes; Incorporation of Terms. The form of
the Senior Notes shall be substantially in the forms of Exhibits A, B, C and D
attached hereto, the terms of which are herein incorporated by reference and
which are part of this First Supplemental Indenture.
Section 203. Limitation on Liens. The covenant provided by Section
1004 of the Original Indenture shall be applicable to the Senior Notes.
Section 204. Limitation on Sale and Lease-Back Transactions. The
covenant provided by Section 1005 of the Original Indenture shall be applicable
to the Senior Notes.
Section 205. Additional Amounts. The terms provided by Section 1009
of the Original Indenture shall be applicable to the Senior Notes.
Section 206. Event of Default. The event specified in Section 501(5) of
the Original Indenture shall constitute an Event of Default with respect to the
Senior Notes.
Section 207. Place of Payment. The Place of Payment in respect of the
Senior Notes will be in The City of New York, initially the Corporate Trust
Office of Bankers Trust Company, and, for so long as the Senior Notes are listed
on the Luxembourg Stock Exchange, in Luxembourg, initially the corporate trust
office of Bankers Trust Luxembourg S.A. which at the date hereof, is located at
14 Boulevard F.D. Roosevelt, L-2450 Luxembourg.
Section 208. Issuance of Global Senior Notes. The 6.375% Senior Notes
Due 2001 shall be issued as one Bearer Global Senior Note and the 6.800% Senior
Notes Due 2006 shall be issued as one Bearer Global Senior Note (each a "Global
Senior Note" and collectively the "Global Senior Notes") and delivered by the
Trustee to the Book-Entry Depositary, as the Holder thereof, or a nominee or
custodian therefor, to be held by the Book-Entry Depositary pursuant to the
Deposit Agreement.
Section 209. Exchange of the Global Senior Notes. Each of the Global
Senior Notes shall be exchangeable, in whole but not in part, for definitive
Registered Notes only as provided in this paragraph. A Global Senior Note shall
be so exchangeable if (a) DTC notifies the Company and the Book-Entry Depositary
that it is unwilling or unable to continue to hold the relevant Book-Entry
Interest or at any time it ceases to be a "clearing agency" registered as such
under the Exchange Act, and, in either case, a successor is not appointed by the
Company within 120 days, (b) the Book-Entry Depositary notifies the Company that
it is unwilling or unable to continue as Book-Entry Depositary with respect to
such Global Senior Note and no successor is appointed within 120 days, (c) the
Company executes and delivers to the Trustee an Officers' Certificate providing
that such Global Senior Note shall be so exchangeable, or (d) there shall have
occurred and be continuing an Event of Default with respect to the Senior Notes
of the series represented by such Global Note and the Holder, in such
circumstance, shall have requested in writing that such Global Senior Note be
exchanged for one or more definitive Registered Notes. Definitive Registered
Notes so issued in exchange for such Global Senior Note shall be of the same
series, having the same interest rate, if any, and maturity and having the same
terms as such Global Senior Note, in authorized denominations of $1,000 and any
integral multiple thereof and in the aggregate having the same principal amount
as such Global Senior Note and registered in such names as the Book-Entry
Depositary for such Global Senior Note shall direct.
Section 210. Regular Record Date for the Senior Notes. The Regular
Record Date for the Senior Notes shall be 15 calendar days immediately prior to
each Interest Payment Date.
ARTICLE THREE
Authenticating Agent; Book-Entry Depositary
Section 301. Authenticating Agent; Book-Entry Depositary. Bankers Trust
Company, a New York banking corporation, and its successors are hereby appointed
Authenticating Agent and Book-Entry Depositary with respect to the Senior Notes.
ARTICLE FOUR
Miscellaneous
Section 401. Execution as Supplemental Indenture. This First
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Original Indenture and, as provided in the Original
Indenture, this First Supplemental Indenture forms a part thereof.
Section 402. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in this First Supplemental Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
Section 403. Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
Section 404. Successors and Assigns. All covenants and agreements in
this First Supplemental Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
Section 405. Separability Clause. In case any provision in this First
Supplemental Indenture or in the Senior Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 406. Benefits of First Supplemental Indenture. Nothing in this
First Supplemental Indenture or in the Senior Notes, express or implied, shall
give to any person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this First Supplemental Indenture.
Section 407. Execution and Counterparts. This First Supplemental
Indenture may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties hereof have caused this First
Supplemental Indenture to be duly executed by their respective officers or
directors duly authorized thereto, all as of the day and year first above
written.
SOUTHERN INVESTMENTS UK plc
By
BANKERS TRUST COMPANY
AS TRUSTEE
By
BANKERS TRUST LUXEMBOURG S.A.
AS PAYING AND TRANSFER AGENT
By
Attest:
- - ------------------------
<PAGE>
STATE OF GEORGIA
:SS
COUNTY OF FULTON
On this 21st day of November, 1996, before me personally came Edwin H.
Adams to me known, who, being by me duly sworn, did depose and say that he is an
Authorized Agent of Southern Investments UK plc, one of the companies described
in and which executed the foregoing instrument; and that he signed his name
thereto by like authority.
EXHIBIT 4.3
===========================================
DEPOSIT AGREEMENT
BETWEEN
BANKERS TRUST COMPANY
and
SOUTHERN INVESTMENTS UK PLC
Dated as of November 21, 1996
===========================================
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I.........................................................................................................1
SECTION 1.01. Definitions...............................................................................1
SECTION 1.02. Rules of Construction.....................................................................2
ARTICLE II........................................................................................................3
SECTION 2.01. Deposit of the Global Notes...............................................................3
SECTION 2.02. Book-Entry System.........................................................................3
SECTION 2.03. Registration of Transfer of the Book-Entry Interests......................................3
SECTION 2.04. Transfer of a Global Note.................................................................4
SECTION 2.05. Cancellation..............................................................................4
SECTION 2.06. Payments in Respect of a Book-Entry Interest and Global Note..............................4
SECTION 2.07. Change in Principal Amount of a Global Note...............................................5
SECTION 2.08. Record Date...............................................................................5
SECTION 2.09. Action in Respect of a Book-Entry Interest or a Global Note...............................5
SECTION 2.10. Surrender of a Global Note................................................................6
SECTION 2.11. Reports...................................................................................6
SECTION 2.12. Additional Amounts........................................................................6
ARTICLE III.......................................................................................................7
SECTION 3.01. Certain Duties and Responsibilities.......................................................7
SECTION 3.02. Notice of Default.........................................................................8
SECTION 3.03. Certain Rights of Book-Entry Depositary...................................................8
SECTION 3.04. Not Responsible for Recitals or Issuance of Senior Notes..................................9
SECTION 3.05. Money Held in Trust.......................................................................9
SECTION 3.06. Compensation and Reimbursement............................................................9
SECTION 3.07. Book-Entry Depositary Required; Eligibility..............................................10
SECTION 3.08. Resignation and Removal; Appointment of Successor........................................10
SECTION 3.09. Acceptance of Appointment by Successor...................................................12
SECTION 3.10. Merger, Conversion, Consolidation or Succession to Business..............................12
ARTICLE IV.......................................................................................................13
SECTION 4.01. Notices to Book-Entry Depositary or Company..............................................13
SECTION 4.02. Notice to Depositary; Waiver.............................................................13
SECTION 4.03. Effect of Headings and Table of Contents.................................................14
SECTION 4.04. Successors and Assigns...................................................................14
SECTION 4.05. Separability Clause......................................................................14
SECTION 4.06. Benefits of Agreement....................................................................14
SECTION 4.07. Governing Law............................................................................14
SECTION 4.08. Jurisdiction.............................................................................14
SECTION 4.09. Counterparts.............................................................................15
SECTION 4.10. Inspection of Agreement..................................................................15
SECTION 4.11. Satisfaction and Discharge...............................................................15
SECTION 4.12. Amendments...............................................................................15
SECTION 4.13. Book-Entry Depositary To Sign Amendments.................................................16
</TABLE>
<PAGE>
DEPOSIT AGREEMENT
This Deposit Agreement (as the same may be amended from time
to time in accordance with the provisions hereof, the "Deposit Agreement"),
dated as of November 21, 1996, is between Bankers Trust Company, a New York
banking corporation, as book-entry depositary hereunder (the "Book-Entry
Depositary") and Southern Investments UK plc, a public limited company organized
under the laws of England and Wales (the "Company").
ARTICLE I
Definitions and Other General Provisions
SECTION 1.01. Definitions. Terms not defined herein have the
meanings ascribed to them in the Indenture. The following terms, as used
herein, have the following meanings:
"Book-Entry Depositary" means the party named as such in this Agreement
or its nominee or the custodian of either until a successor shall have become
such pursuant to Section 3.08 hereof, and thereafter "Book-Entry Depositary"
shall mean such successor or its nominee or the custodian of either.
"Book-Entry Interests" means the 6.375% certificateless depositary
interests and the 6.800% certificateless depositary interests that shall at all
times, prior to the issuance of Definitive Registered Notes in respect thereof,
represent the right to receive 100% of the principal, premium (if any), interest
and Additional Amounts (if any) of the underlying 6.375% Global Note due 2001
and the 6.800% Global Note due 2006, respectively, and that are issued to DTC or
its nominee by the Book-Entry Depositary.
"Book-Entry Register" has the meaning ascribed thereto in Section 2.03
hereof.
"Company" means the party named as such in this Agreement until a
successor replaces it pursuant to the applicable provisions of the Indenture
and, thereafter, means the successor.
"Corporate Trust Office" means the office of the Book-Entry Depositary
in the City of New York, at which any particular time its corporate trust
business shall be principally administered, which at the date hereof is located
at Bankers Trust Company, Four Albany Street, New York, NY 10006, Attn:
Corporate Trust Public Utilities Group and Agency Group.
"Definitive Registered Notes" means the 6.375% Senior Notes due 2001
and the 6.800% Senior Notes due 2006 issued pursuant to the Indenture and the
Supplemental Indenture in substantially the form of Exhibits B and D,
respectively, to the Supplemental Indenture.
"Depositary" means DTC or any successor, as the Depositary of the
Book-Entry Interests as recorded on the Book-Entry Register.
"DTC" means The Depository Trust Company or its nominee.
"Global Notes" means the 6.375% Global Note due 2001 and the 6.800%
Global Note due 2006 in bearer form issued pursuant to the Indenture and the
Supplemental Indenture in substantially the same form as of Exhibits A and C,
respectively, to the Supplemental Indenture.
"Indenture" means the Indenture dated as of November 21, 1996, between
the Company and Bankers Trust Company, as Trustee, and Bankers Trust Luxembourg
S.A., as paying and transfer agent relating to the Senior Notes as originally
executed or as it may from time to time be supplemented or amended by one or
more indentures supplemental thereto entered into pursuant to the applicable
provisions thereof, including for all purposes to the extent applicable, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
such instrument.
"Interests" means beneficial interests in the Book-Entry Interests that
will be shown on records maintained in book-entry form by DTC.
"Letter of Representations" means the Letter of Representations to DTC
dated November 21, 1996, from the Book-Entry Depositary and the Company.
"Opinion of Counsel" means a written opinion from legal counsel, who
may be an employee of or regular counsel for the Company or may be other counsel
reasonably acceptable to the Book-Entry Depositary.
"Responsible Officer", when used with respect to the Book-Entry
Depositary, means any authorized officer of the Book-Entry Depositary including
any vice president, assistant vice president, assistant secretary, treasurer,
assistant treasurer, or any other officer of the Book-Entry Depositary who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any depositary matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Senior Note" means any 6.375% Senior Note due 2001 or any 6.800%
Senior Note due 2006 of the Company issued under the Indenture and the
Supplemental Indenture.
"Supplemental Indenture" means the First Supplemental Indenture dated
as of November 21, 1996, between the Company and Bankers Trust Company, as
Trustee, and Bankers Trust Luxembourg S.A., as paying and transfer agent,
relating to the Senior Notes.
"Trustee" means Bankers Trust Company and its successors and assigns,
as trustee under the Indenture and the Supplemental Indenture.
SECTION 1.02. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) "including" means including without limitation; and
(d) words in the singular include the plural and words in the
plural include the singular.
ARTICLE II
Interests
SECTION 2.01. Deposit of the Global Notes. The Book-Entry Depositary
hereby accepts custody of the Global Notes from the Trustee and shall act as
Book-Entry Depositary in accordance with the terms of this Agreement. The
Book-Entry Depositary shall hold such Global Notes at its Corporate Trust Office
in the City of New York or at such place as it shall determine with the consent
of the Company and shall issue the Book-Entry Interests in accordance with the
Letter of Representations.
SECTION 2.02. Book-Entry System. (a) Upon acceptance by DTC of the
Book-Entry Interests for entry into its book-entry settlement system in
accordance with the terms of the Letter of Representations, Interests in the
Book-Entry Interests will be recorded on and traded through DTC's book-entry
system, and ownership of such Interests shall be shown in, and the transfer of
such ownership shall be effected only through, records maintained by (i) DTC or
its successors or (ii) institutions that have accounts with DTC or its
successors ("DTC Participants"). Interests shall be transferable only as units
representing authorized denominations of the Senior Notes.
(b) The Book-Entry Interests shall be issuable only to DTC, or
successors of DTC or their respective nominees. Except as provided in Section
2.07, no owner of Interests shall be entitled to receive a Senior Note on
account of such ownership, and such owner's Interests shall be shown only in
accordance with the procedures of DTC as set forth in the Letter of
Representations.
SECTION 2.03. Registration of Transfer of the Book-Entry Interests. The
Book-Entry Depositary agrees to maintain at the Book-Entry Depositary's
Corporate Trust Office the Book-Entry Register in which the Book-Entry
Depositary shall (i) record DTC as the initial registered owner of such
Book-Entry Interests and (ii) record the registration and transfer of the
Book-Entry Interests. Neither of the Book-Entry Interests can be transferred
unless such transfer is recorded on the Book-Entry Register. The Book-Entry
Depositary shall not constitute the agent of the Company for any other purpose
and, in particular, it shall not constitute the agent of the Company in relation
to any payments it may make to the owner of the Book-Entry Interests or be
authorized to undertake any obligations on behalf of the Company.
The foregoing paragraph shall not (i) impose an obligation on the
Book-Entry Depositary to record the ownership interests in or transfers of
Interests held by DTC Participants or its successors or Persons that may hold
Interests through such institutions or (ii) restrict transfers of such Interests
held by DTC Participants or such Persons. The Book-Entry Depositary shall treat
the Depositary or its nominee or their respective successors as the absolute
owner of the Book-Entry Interest for all purposes whatsoever and shall not be
bound or affected by any notice to the contrary, other than an order of a court
having jurisdiction over the Book-Entry Depositary.
SECTION 2.04. Transfer of a Global Note. The Book-Entry Depositary
shall hold the Global Notes in custody for the benefit of the Depositary. The
Book-Entry Depositary shall not transfer or lend either of the Global Notes or
any interest therein, except that the Book-Entry Depositary may transfer either
of the Global Notes as a whole to a successor Book-Entry Depositary with the
consent of the Company. Notwithstanding the foregoing, the Depositary may not
under any circumstances request the Book-Entry Depositary to surrender or
deliver either of the Global Notes to the Depositary. If (i) the Depositary
notifies the Company and the Book-Entry Depositary that it is unwilling or
unable to continue as Depositary with respect to either of the Book-Entry
Interests or if at any time it is unable to continue as, or ceases to be, a
"clearing agency" under the Exchange Act and a successor Depositary registered
as a "clearing agency" under the Exchange Act is not appointed by the Company
within 120 days; (ii) the Book-Entry Depositary notifies the Company under
Section 3.08 hereof that it is at any time unwilling or unable to continue as
Book-Entry Depositary and no successor Book-Entry Depositary has been appointed
by the Company within 120 days of such notification; (iii) the Company shall
request that Definitive Registered Notes be issued; or (iv) an Event of Default
(as defined in the Indenture) has occurred and is continuing and the holder of a
majority in outstanding principal amount of interests in either of the
Book-Entry Interests has requested that Definitive Registered Notes be issued in
accordance with Section 2.07 hereof and the Indenture, then the Book-Entry
Depositary will promptly notify the Trustee and request the Trustee to
authenticate Definitive Registered Notes in such names and denominations as the
Depositary shall specify in accordance with Section 209 of the Supplemental
Indenture, and the Book-Entry Depositary agrees that in such event it will
promptly surrender the Global Note held by it to the Trustee in connection with
such exchange and that such Global Note will be canceled upon issuance of such
Definitive Registered Notes. All costs (taxes, governmental charges or
otherwise) related to the issuance of Definitive Registered Notes will be borne
by the Company subject to any exceptions set forth in the Indenture.
SECTION 2.05. Cancellation. If a Global Note is surrendered for
payment, or for redemption of Senior Notes evidenced thereby or for exchange for
Definitive Registered Notes to any Person other than the Trustee, such Global
Note shall, subject to Section 2.07, be delivered to the Trustee for
cancellation.
SECTION 2.06. Payments in Respect of a Book-Entry Interest and Global
Note. (a) Whenever the Book-Entry Depositary shall receive from the Trustee (or
other paying agent under the Indenture) any payment on a Global Note, such
payments shall be distributed promptly to the Depositary on the payment date for
such Global Note. So long as DTC is the Depositary, such payments shall be made
in accordance with the Letter of Representations.
(b) The Book-Entry Depositary will forward to the Company or its agents
such information from its records as the Company may reasonably request in
writing to enable the Company or its agents to file necessary reports with
governmental agencies, and the Book-Entry Depositary, the Company or their
agents may (but shall not be required to) file any such reports necessary to
obtain benefits under any applicable tax treaties for the Depositary of, or the
beneficial owners of Interests in the Book-Entry Interests.
(c) Notwithstanding any other provisions of this Agreement, the
Book-Entry Depositary shall be required to pay to the Depositary only amounts
(including Additional Amounts (as defined in the Indenture)) received by the
Book-Entry Depositary under the Global Notes.
(d) Neither the Company nor any agent of the Company will have any
responsibility or liability for any aspect relating to payments made or to be
made by the Book-Entry Depositary to DTC in respect of the Global Notes or the
Book-Entry Interests. None of the Company, the Trustee, the Book-Entry
Depositary or any agent of any of the foregoing will have any responsibility or
liability for any aspect relating to payments made or to be made by DTC on
account of a Participant's or Indirect Participant's ownership of an Interest in
the Book-Entry Interests or for maintaining, supervising or reviewing any
records relating to a Participant's or an Indirect Participant's Interests in a
Book-Entry Interest.
SECTION 2.07. Change in Principal Amount of a Global Note. Whenever the
principal amount at maturity of a Global Note held by the Book-Entry Depositary
is changed by the Trustee, the Book-Entry Depositary shall notify the Depositary
of the corresponding change in the principal amount of the related Book-Entry
Interest.
SECTION 2.08. Record Date. Whenever any payment is to be made in
respect of a Global Note or the Book-Entry Depositary shall receive notice of
any action to be taken by the Depositary of a Global Note or Depositary of
interests therein, or whenever the Book-Entry Depositary otherwise deems it
appropriate in respect of any other matter, the Book-Entry Depositary shall fix
a record date for the determination of the Depositary who shall be entitled to
receive payment in respect of such Book-Entry Interest or to take any such
action or to act in respect of any such matter. Subject to the provisions of
this Agreement, only the Depositary who is registered on the Book-Entry Register
at the close of business on such record date shall be entitled to receive any
such payment, to give instructions as to such action or to act in respect of any
such matter.
SECTION 2.09. Action in Respect of a Book-Entry Interest or a Global
Note. (a) As soon as practicable after receipt by the Book-Entry Depositary of
notice of any solicitation of consents or request for a waiver or other action
by the Depositary or owners of Interests under this Agreement or the Indenture,
the Book-Entry Depositary shall mail to the Depositary a notice containing (i)
such information as is contained in such notice, (ii) a statement that the
Depositary at the close of business on a specified date will be entitled,
subject to the provisions of or governing such Book-Entry Interest or Global
Note, as the case may be, to instruct the Book-Entry Depositary as to the
consent, waiver or other action, if any, pertaining to such Book-Entry Interest
or Global Note, as the case may be, and (iii) a statement as to the manner in
which such instructions may be given. Upon the written request of the Depositary
received on or before the date established by the Book-Entry Depositary for such
purpose, the Book-Entry Depositary shall endeavor insofar as practicable and
permitted under the provisions of or governing such Book-Entry Interest or
Global Note, as the case may be, to take such action regarding the requested
consent, waiver or other action in respect of such Book-Entry Interest or Global
Note, as the case may be, in accordance with any instructions set forth in such
request. The Book-Entry Depositary shall not itself exercise any discretion in
the granting of consents or waivers or the taking of any other action in respect
of such Book-Entry Interest or Global Note.
(b) The Depositary may direct the time, method and place of
conducting any proceeding for any remedy available to the Book-Entry Depositary
or of exercising any trust or power conferred on the Book-Entry Depositary.
However, the Book-Entry Depositary may refuse to follow any direction that
conflicts with law or this Agreement or the Indenture or, subject to Section
3.01 hereof, that the Book-Entry Depositary determines would involve it in
Personal liability.
SECTION 2.10. Surrender of a Global Note. In the event of the
redemption, payment or purchase in full of all the Senior Notes represented by
either of the Global Notes, then such Global Note shall become void and the
Book-Entry Depositary shall surrender such Global Note to the Trustee for
cancellation.
SECTION 2.11. Reports. The Book-Entry Depositary shall immediately (and
in no event later than 10 days from receipt) send to the Depositary a copy of
any notices, reports and other communications received by it relating to the
Company, the Senior Notes or the Book-Entry Interests.
SECTION 2.12. Additional Amounts. All payments made by the Book-Entry
Depositary pursuant to this Agreement shall be made without deduction or
withholding for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "United
Kingdom Taxes") imposed or levied by or on behalf of the United Kingdom or any
political subdivision thereof or any authority therein or thereof having power
to tax therein (each a "U.K. Tax Authority"), unless the withholding or
deduction of such United Kingdom Taxes is then required by law.
At least 10 days prior to the first interest payment date, and at least
10 days prior to each succeeding interest payment date if there has been any
change with respect to the matters set forth in the below-mentioned Directors'
Certificate, the Company will furnish the Book-Entry Depositary with a
Directors' Certificate instructing the Book-Entry Depositary whether such
payment of principal of or interest on such Book-Entry Interest shall be made to
the Depositary without deduction or withholding for or on account of any United
Kingdom Taxes. If any such deduction or withholding shall be required, prior to
such interest payment date the Company will furnish the Book-Entry Depositary
with a Directors' Certificate which specifies the amount required to be deducted
or withheld on such payment. Neither the Company nor any agent of the Company
will have any responsibility or liability for any aspect relating to payments
made or to be made by the Book-Entry Depositary to DTC in respect of the Senior
Notes or the Book-Entry Interests. None of the Company, the Trustee, the
Book-Entry Depositary or any agent of any of the foregoing will have any
responsibility or liability for any aspect relating to payments made or to be
made by DTC on account of a Participant's or Indirect Participant's ownership of
an interest in the Book-Entry Interests or for maintaining, supervising or
reviewing any records relating to a Participant's or Indirect Participant's
interests in the Book-Entry Interests. The Company shall indemnify the
Book-Entry Depositary, its officers, directors and employees for, and hold it
harmless against, any loss, liability or expense reasonably incurred without
negligence, willful misconduct or bad faith on its part arising out of or in
connection with actions taken or omitted by it in reliance on any Directors'
Certificate furnished to it pursuant to this Section 2.12.
ARTICLE III
The Book-Entry Depositary
SECTION 3.01. Certain Duties and Responsibilities. (a) The Book-Entry
Depositary undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Book-Entry Depositary.
(b) In the absence of bad faith on its part, the Book-Entry
Depositary may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Book-Entry Depositary and conforming to the requirements of
this Agreement, but in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the Book-Entry
Depositary, the Book-Entry Depositary shall examine the same to determine
whether or not they conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to
relieve the Book-Entry Depositary from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that:
(i) the Book-Entry Depositary shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Book-Entry Depositary, unless the Book-Entry Depositary was
negligent in ascertaining the pertinent facts; and
(ii) no provision of this Agreement shall require the
Book-Entry Depositary to spend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
repayment of such funds or adequate indemnity against such risk or
liability satisfactory to the Book-Entry Depositary has not been
assured to it.
(d) The Book-Entry Depositary shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Depositary relating to the time, method and place of
conducting any proceeding for any remedy available to the Book-Entry Depositary,
or exercising any power conferred upon the Book-Entry depositary, under this
Agreement or the Indenture.
(e) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the liability
of or affording protection to the Book-Entry Depositary shall be subject to the
provisions of this Section 3.01.
SECTION 3.02. Notice of Default. Within 90 days after the occurrence of
any Event of Default with respect to a Global Note (a "Note Default") of which a
Responsible Officer of the Book-Entry Depositary assigned to its corporate trust
department has actual knowledge, the Book-Entry Depositary shall transmit by
mail to the Depositary in the manner provided in Section 4.02 hereof, notice of
such Note Default, unless such Note Default shall have been cured or waived.
SECTION 3.03. Certain Rights of Book-Entry Depositary. Subject to
the provisions of Section 3.01 hereof:
(a) the Book-Entry Depositary may rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Directors' Certificate or Company
Order or as otherwise expressly provided herein and any resolution of
the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) the Book-Entry Depositary may consult with counsel, and
the written advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(d) the Book-Entry Depositary shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Book-Entry Depositary,
in its discretion, may make further inquiry or investigation into such
facts or matters as it may see fit, and, if the Book-Entry Depositary
shall determine to make such further inquiry or investigation, it shall
be entitled upon reasonable prior request and during normal business
hours to examine the books, records and premises of the Company,
Personally or by agent or attorney;
(e) the Book-Entry Depositary may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys, but the Book-Entry Depositary shall be
responsible for any misconduct or negligence on the part of any such
agent or attorney appointed by it hereunder;
(f) the Book-Entry Depositary shall be under no obligation to
expend or risk its own funds or to exercise, at the request or
direction of the Depositary, any of the rights or powers vested in it
by this Agreement or the Indenture unless the Depositary shall have
offered to the Book-Entry Depositary security or indemnity satisfactory
to the Book-Entry Depositary against the costs, expenses and
liabilities that might be incurred by it in compliance with such
request or direction;
(g) whenever in the administration of its duties under this
Agreement the Book-Entry Depositary shall deem it desirable that a
matter be proved or established prior to taking or suffering or
omitting any action hereunder, the Book-Entry Depositary (unless other
evidence be herein specifically prescribed) may, in the absence of
negligence or bad faith on its part, rely upon a Directors'
Certificate.
SECTION 3.04. Not Responsible for Recitals or Issuance of Senior Notes.
The recitals contained in the Indenture and in the Senior Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Book-Entry Depositary assumes no responsibility for their
correctness. The Book-Entry Depositary makes no representations as to the
validity or sufficiency of this Agreement or of the Senior Notes. The Book-Entry
Depositary shall not be accountable for the use or application by the Company of
the proceeds with respect to the Senior Notes.
SECTION 3.05. Money Held in Trust. Money held by the Book-Entry
Depositary in trust hereunder need not be segregated from other funds held by
the Book-Entry Depositary, except to the extent required by law. The Book-Entry
Depositary shall be under no obligation to invest or pay interest on any money
received by it hereunder, except as otherwise agreed in writing with the
Company. Any interest accrued on funds deposited with the Book-Entry Depositary
under this Agreement shall be paid to the Company from time to time and the
Depositary shall have no claim to any such interest.
SECTION 3.06. Compensation and Reimbursement. The Company agrees:
(a) to pay to the Book-Entry Depositary from time to time
such compensation as is agreed upon in writing;
(b) except as otherwise expressly provided herein, to
reimburse the Book-Entry Depositary upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Book-Entry
Depositary in accordance with any provision of this Agreement
(including the reasonable compensation and the reasonable expenses and
disbursements of its agents and counsel, which compensation, expenses
and disbursements shall be set forth in sufficient written detail to
the satisfaction of the Company), except any such expense, disbursement
or advance as may be attributable to its or their negligence or bad
faith; and
(c) to indemnify the Book-Entry Depositary for, and to hold it
harmless against, any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on its part arising out of
or in connection with the acceptance or administration of this
Agreement and its duties hereunder, including the costs and expenses of
defending itself against any claim of liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
Indemnity provided by this Section 3.06(c) shall survive the
satisfaction and discharge of this Agreement pursuant to Section 4.11
hereof.
SECTION 3.07. Book-Entry Depositary Required; Eligibility. At all times
when there is a Book-Entry Depositary hereunder, such Book-Entry Depositary
shall be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, having,
together with its parents, a combined capital and surplus of at least
$50,000,000, subject to supervision or examination by Federal, state or District
of Columbia authority and willing to act on reasonable terms. Such corporation
shall have its principal place of business in the Borough of Manhattan, The City
of New York, if there be such a corporation in such location willing to act upon
reasonable and customary terms and conditions. If such corporation, or its
parent, publishes reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or examining authority, then for
the purposes of this Section 3.07, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Book-Entry Depositary
hereunder shall at all times be the Trustee under the Indenture, subject to
receipt of an Opinion of Counsel that the same Person is precluded by law from
acting in such capacities. If at any time the Book-Entry Depositary shall cease
to be eligible in accordance with the provisions of this Section 3.07, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 3.08. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary pursuant to this Article shall become effective
until (i) the acceptance of appointment by the successor Book-Entry Depositary
in accordance with the applicable requirements of Section 3.09 hereof or (ii)
the issuance of Definitive Registered Notes in accordance with Section 2.04 or
Section 2.07 hereof and the Indenture.
(b) The Book-Entry Depositary may resign with respect to a Global Note
by giving written notice thereof to the Company and the Depositary, in
accordance with Section 4.01 and Section 4.02 hereof, 60 days prior to the
effective date of such resignation. The Book-Entry Depositary may be removed at
any time upon 90 days' notice by the filing with it of an instrument in writing
signed on behalf of the Company and specifying such removal and the date when it
is intended to become effective. If the instrument of acceptance by a successor
Book-Entry Depositary required by Section 3.09 hereof shall not have been
delivered to the Book-Entry Depositary within 30 days after the giving of such
notice of resignation or removal, the resigning Book-Entry Depositary may
petition any court of competent jurisdiction for the appointment of a successor
Book-Entry Depositary.
(c) If at any time:
(i) the Book-Entry Depositary shall cease to be eligible under Section
3.07 hereof, or shall cease to be eligible as Trustee under the
Indenture, and shall fail to resign after written request therefor by
the Company or by the Depositary, or
(ii) the Book-Entry Depositary shall become incapable of acting with
respect to a Book-Entry Interest or shall be adjudged a bankrupt or
insolvent, or a receiver or liquidator of the Book-Entry Depositary or
of its property shall be appointed or any public officer shall take
charge or control of the Book-Entry Depositary or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation.
then, in any such case, (i) the Company, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary, and (ii) if
the Company shall fail to remove such Book-Entry Depositary and appoint a
successor Book-Entry Depositary, the Depositary may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Book-Entry Depositary or Book-Entry Depositaries and the
appointment of a successor Book-Entry Depositary, unless Definitive Registered
Notes have been issued in accordance with the Indenture.
(d) If the Book-Entry Depositary shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Company, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Company) and shall
comply with the applicable requirements of Section 3.09 hereof. If no successor
Book-Entry Depositary with respect to a Global Note shall have been so appointed
by the Company and accepted appointment in the manner required by Section 3.09,
the Depositary may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Book-Entry Depositary unless Definitive Registered Notes have been issued in
accordance with the Indenture.
(e) The Company shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the
Depositary in accordance with Section 4.02 hereof. Each notice shall include the
name of the successor Book-Entry Depositary and the address of its Corporate
Trust Office.
SECTION 3.09. Acceptance of Appointment by Successor. (a) In case of
the appointment hereunder of a successor Book-Entry Depositary, every such
successor Book-Entry Depositary so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Book-Entry Depositary an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Book-Entry Depositary shall become effective and such successor
Book-Entry Depositary, without any further act, deed or conveyance, shall become
vested with all the rights, powers, agencies and duties of the retiring
Book-Entry Depositary, with like effect as if originally named as Book-Entry
Depositary hereunder; but, on the request of the Company or the successor
Book-Entry Depositary, such retiring Book-Entry Depositary shall, upon payment
of all amounts due and payable to it pursuant to Section 3.06 hereof, execute
and deliver an instrument transferring to such successor Book-Entry Depositary
all the rights and powers of the retiring Book-Entry Depositary and shall duly
assign, transfer and deliver to such successor Book-Entry Depositary all
property and money held by such retiring Book-Entry Depositary hereunder. Any
retiring Book-Entry Depositary shall, nonetheless, retain a prior claim upon all
property or funds held or collected by such Book-Entry Depositary to secure any
amounts then due it pursuant to Section 3.06 hereof.
(b) Upon request of any such successor Book-Entry Depositary, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Book-Entry Depositary all such
rights, powers and agencies referred to in paragraph (a) of this Section 3.09.
(c) No successor Book-Entry Depositary shall accept its appointment
unless at the time of such acceptance such successor Book-Entry Depositary shall
be eligible under this Article.
(d) Upon acceptance of appointment by any successor Book-Entry
Depositary as provided in this Section 3.09, the Company shall give notice
thereof to the Depositary in accordance with Section 4.02 hereof. If the
acceptance of appointment is substantially contemporaneous with the resignation
of the Book-Entry Depositary, then the notice called for by the preceding
sentence may be combined with the notice called for by Section 3.08(b) hereof.
If the Company fails to give such notice within 10 days after acceptance of
appointment by the successor Book-Entry Depositary, the successor Book-Entry
Depositary shall cause such notice to be given at the expense of the Company.
SECTION 3.10. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Book-Entry Depositary may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Book-Entry Depositary
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of the Book-Entry Depositary, shall be the successor of
the Book-Entry Depositary hereunder, without the execution of filing of any
paper or any further act on the part of any of the parties hereto.
ARTICLE IV
Miscellaneous Provisions
SECTION 4.01. Notices to Book-Entry Depositary or Company. Any
request, demand, authorization, direction, notice, consent, or waiver or other
document provided or permitted by this Agreement to be made upon,
given or furnished to, or filed with,
(a) the Book-Entry Depositary by the Depositary, by the Trustee or the
Company shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if made, given, furnished or filed
in writing and Personally delivered or mailed, first-class postage
prepaid, to the Book-Entry Depositary at is Corporate Trust Office,
Attention: Corporate Trust Trustee Administration Department, or at any
other address previously furnished in writing by the Book-Entry
Depositary to the Depositary, the Trustee and the Company, or
(b) the Company, by the Book-Entry Depositary or by the Depositary
shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if made, given, furnished or filed in
writing and personally delivered or mailed, first-class postage prepaid
to Southern Investments UK plc, Attention: Chief Financial Officer,
Southern Energy, Inc., 900 Ashwood Parkway, Suite 500, Atlanta, Georgia
30338,or at any other address previously furnished in writing to the
Book-Entry Depositary by the Company.
SECTION 4.02. Notice to Depositary; Waiver. Where this Agreement
provides for notice to the Depositary of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided or as provided in
the Letter of Representations) if in writing and mailed, first-class postage
prepaid, to the Depositary at the address notified to the Book-Entry Depositary,
in each case not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. Where this Agreement provides
for notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by the
Depositary shall be filed with the Book-Entry Depositary, but such filing shall
not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Book-Entry
Depositary shall constitute a sufficient notification for every purpose
hereunder.
SECTION 4.03. Effect of Headings and Table of Contents. The Article
and Section headings herein are for convenience only and shall not affect the
construction hereof.
SECTION 4.04. Successors and Assigns. All covenants and agreements in
this Agreement and the Senior Notes by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 4.05. Separability Clause. In case any provision in this
Agreement or in the Senior Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions hereof and
thereof shall not in any way be affected or impaired thereby.
SECTION 4.06. Benefits of Agreement. Nothing in this Agreement, the
Senior Notes or the Indenture, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, any benefits or
any legal or equitable right, remedy or claim under this Agreement. The
Depositary and owners from time to time of Interests in the Book-Entry Interests
shall be parties to this Agreement and shall be bound by all of the terms and
conditions hereof and of the Indenture and the Senior Notes, by their acceptance
of delivery of the Interests.
SECTION 4.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 4.08. Jurisdiction. The Company agrees that any legal suit,
action or proceeding against the Company brought by the Book-Entry Depositary
arising out of or based upon this Agreement may be instituted in any state or
Federal court in the Borough of Manhattan, The City of New York, and waives any
objection which it may now or hereafter have to the laying of venue of any such
proceeding and irrevocably submits to the nonexclusive jurisdiction of such
courts in any suit, action or proceeding. The Company has appointed CT
Corporation System, 1633 Broadway, New York, New York 10019, as its authorized
agent (the "Authorized Agent") upon whom process may be served in any legal
suit, action or proceeding arising out of or based upon this Agreement which may
be instituted in the Supreme Court of New York, New York County of the United
States District Court for the Southern District of New York by the Depositary or
the Book-Entry Depositary, and expressly accepts the nonexclusive jurisdiction
of any such court in respect of any such action. Such appointment shall be
irrevocable. Service of process upon the Authorized Agent shall be deemed, in
every respect, effective service of process upon the Company. Notwithstanding
the foregoing, any action based on this Agreement may be instituted by the
Book-Entry Depositary in any competent court in England.
SECTION 4.09. Counterparts. This Agreement may be executed in any
number of counterparts by the parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
SECTION 4.10. Inspection of Agreement. A copy of this Agreement shall
be available at all reasonable times during normal business hours at the
Corporate Trust Office of the Book-Entry Depositary for inspection by any
Depositary.
SECTION 4.11. Satisfaction and Discharge. This Agreement upon Company
Order shall cease to be of further effect, and the Book-Entry Depositary, at the
expense of the Company shall execute proper instruments acknowledging
satisfaction and discharge of this Agreement, when (i) the Indenture has been
satisfied and discharged pursuant to the provisions thereof or Definitive
Registered Notes have been issued and the Global Notes have been canceled in
accordance with the provisions of Section 2.05 hereof and the Indenture, (ii)
the Company has paid or caused to be paid all sums payable hereunder by the
Company and (iii) the Company has delivered to the Book-Entry Depositary a
Directors' Certificate and an Opinion of Counsel, stating that all conditions
precedent herein provided relating to the satisfaction and discharge of this
Agreement have been complied with.
SECTION 4.12. Amendments. The Company and the Book-Entry Depositary
may amend this Agreement without the consent of the Depositary:
(a) to cure any formal defect, omission, inconsistency or
ambiguity;
(b) to add to the covenants and agreements of the Company or
the Book-Entry Depositary;
(c) to effect the assignment of the Book-Entry Depositary's
rights and duties to a qualified successor, as provided herein;
(d) to comply with any requirements of the Securities Act,
the Exchange Act or the U.S. Investment Company Act of 1940, as amended, and
the Trust Indenture Act;
(e) to modify this Agreement in connection with an amendment
to the Indenture that does not require the consent of the Depositary; or
(f) to modify, alter, amend or supplement this Agreement in
any other respect not inconsistent with this Agreement which, in the
opinion of counsel acceptable to the Company, is not materially adverse
to the Depositary.
Except as set forth in this Section 4.12, no amendment which materially
adversely affects any Depositary or beneficial owner of Interests may be made to
this Agreement without the consent of such Depositary or beneficial owner.
SECTION 4.13. Book-Entry Depositary To Sign Amendments. The Book-Entry
Depositary shall sign any amendment authorized pursuant to Section 4.12 if the
amendment does not materially adversely affect the rights, duties, liabilities
or immunities of the Book-Entry Depositary. If it does, the Book-Entry
Depositary may but need not sign it.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
SOUTHERN INVESTMENTS UK PLC
By:
Name:
Title:
BANKERS TRUST COMPANY, as
Book-Entry Depositary,
By:
Name:
Title:
May 30, 1997
Mark Ogle, Wayne Boston and Richard Childs
Dear Sirs:
Southern Investments UK plc (the "Company") proposes to file statements
under the Securities Act of 1934 with the Securities and Exchange Commission
with respect to the following: (1) the filing of its Annual Report on Form 10-K
for the fiscal year ended March 31, 1997, and (2) the filing of its quarterly
reports on Form 10-Q for the quarters ended June 30, 1997, September 30, 1997
and December 31, 1997.
The Company and the undersigned directors and officers of the Company,
individually as a director and/or as an officer of the Company, hereby make,
constitute and appoint each of you our true and lawful Attorney for each of us
and in each of our names, places and steads to sign and cause to be filed with
the Securities and Exchange Commission in connection with each of the foregoing
such Annual Report on Form 10-K, quarterly reports on Form 10-Q and any
appropriate amendment or amendments thereto and any necessary exhibits.
Yours very truly,
SOUTHERN INVESTMENTS UK plc
By /s/ Richard J. Pershing
Richard J. Pershing
Director and Chief Executive Officer
<PAGE>
- 2 -
/s/ Thomas G. Boren
Thomas G. Boren
/s/ C. B. Harreld
C. B. Harreld
/s/ Alan W. Harrelson
Alan W. Harrelson
/s/ Gale E. Klappa
Gale E. Klappa
/s/ C. Philip Saunders
C. Philip Saunders
/s/ Charles W. Whitney
Charles W. Whitney
Accentacross Limited
By: /s/ R. D. Fagan
Name:R. D. Fagan
Title: Director
Mighteager Limited
By: /s/ R. L.Petersen
Name:R. L. Petersen
Title: Director
<PAGE>
UNANIMOUS WRITTEN CONSENT OF THE
BOARD OF DIRECTORS OF
SOUTHERN INVESTMENTS UK plc
TO THE ADOPTION OF CERTAIN ACTIONS AND
RESOLUTIONS IN LIEU OF MEETING
The undersigned, being all of the members of the Board of Directors of
Southern Investments UK plc (the "Company"), do hereby approve and adopt as of
May 30, 1997, the following action and resolution:
Power of Attorney to Execute Documents Filed with the Securities and
Exchange Commission
RESOLVED, That for the purpose of signing reports under the Securities
Exchange Act of 1934 to be filed with the Securities and Exchange Commission
with respect to (a) the filing of the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1997, and (b) quarterly filings on Form 10-Q for
the quarters ended June 30, 1997, September 30, 1997 and December 31, 1997; and
of remedying any deficiencies with respect thereto by appropriate amendment or
amendments, this Company, the members of its Board of Directors, and its
officers are authorized to give their several powers of attorney to Mark R.
Ogle, Wayne Boston and Richard Childs.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this written consent
as of the date first written above.
/s/ Thomas G. Boren
Thomas G. Boren
/s/ C. B. Harreld
C. B. Harreld
/s/ Alan W. Harrelson
Alan W. Harrelson
/s/ Gale E. Klappa
Gale E. Klappa
/s/ Richard J. Pershing
Richard J. Pershing
/s/ C. Philip Saunders
C. Philip Saunders
/s/ Charles W. Whitney
Charles W. Whitney
Accentacross Limited
By:/s/ R. D. Fagan
Name:R. D. Fagan
Title: Director
Mighteager Limited
By:/s/ R. L. Petersen
Name:R. L. Petersen
Title: Director
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Southern
Investments UK plc Form 10-K for the twelve months ended March 31, 1997, and is
qualified in its entirety by reference to such financial statements. Values
are in (pound) sterling.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> British Pounds Sterling
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1.6448
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,235
<OTHER-PROPERTY-AND-INVEST> 318
<TOTAL-CURRENT-ASSETS> 168
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,721
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 500
<RETAINED-EARNINGS> (114)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 386
50
0
<LONG-TERM-DEBT-NET> 301
<SHORT-TERM-NOTES> 34
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 250
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 700
<TOT-CAPITALIZATION-AND-LIAB> 1,721
<GROSS-OPERATING-REVENUE> 848
<INCOME-TAX-EXPENSE> 32
<OTHER-OPERATING-EXPENSES> 723
<TOTAL-OPERATING-EXPENSES> 723
<OPERATING-INCOME-LOSS> 125
<OTHER-INCOME-NET> 14
<INCOME-BEFORE-INTEREST-EXPEN> 107
<TOTAL-INTEREST-EXPENSE> 52
<NET-INCOME> 55
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 37
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 59
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
