<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1997.
REGISTRATION NO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
SOUTHERN INVESTMENTS UK PLC SOUTHERN INVESTMENTS UK CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER)
<TABLE>
<CAPTION>
ENGLAND AND WALES 4911 NONE DELAWARE 6733 52-2032200
<S> <C> <C> <C> <C> <C>
(STATE OR OTHER (PRIMARY (I.R.S. (STATE OR OTHER (PRIMARY STANDARD (I.R.S.
JURISDICTION OF STANDARD EMPLOYER JURISDICTION OF INDUSTRIAL CLASSIFICATION EMPLOYER
INCORPORATION INDUSTRIAL IDENTIFICATION INCORPORATION OR CODE NUMBER) IDENTIFICATION
OR ORGANIZATION) CLASSIFICATION NO.) ORGANIZATION) NO.)
CODE NUMBER)
</TABLE>
-------------
800 PARK AVENUE C/O BANKERS TRUST (DELAWARE)
AZTEC WEST 1001 JEFFERSON STREET, SUITE 550
ALMONDSBURY WILMINGTON, DELAWARE 19801-1457
BRISTOL BS12 4SE, ENGLAND (302) 576-3305
44-1454-201-101 (ADDRESS,INCLUDING ZIP CODE, AND TELEPHONE
(ADDRESS, INCLUDING ZIP CODE, NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
AND TELEPHONE NUMBER, INCLUDING PRINCIPAL EXECUTIVE OFFICES)
AREA CODE, OF REGISTRANT'S JAMES A. WARD
PRINCIPAL EXECUTIVE OFFICES) SOUTHERN ENERGY, INC.
JAMES A. WARD 900 ASHWOOD PARKWAY
SOUTHERN ENERGY, INC. SUITE 500
900 ASHWOOD PARKWAY ATLANTA, GEORGIA 30338-4780
SUITE 500 (770) 379-7000
ATLANTA, GEORGIA 30338-4780 (NAME, ADDRESS, INCLUDING ZIP CODE, AND
(770) 379-7000 TELEPHONE NUMBER, INCLUDING AREA CODE, OF
(NAME, ADDRESS, INCLUDING ZIP AGENT FOR SERVICE)
CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT
FOR SERVICE) -------------
PLEASE SEND COPIES OF ALL CORRESPONDENCE TO:
THOMAS J. HARTLAND, JR.
TROUTMAN SANDERS LLP
600 PEACHTREE STREET, N.E., SUITE 5200
ATLANTA, GEORGIA 30308
(404) 885-3000
-------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
-------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
-------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exchange Capital
Securities, Liquidation
Amount $1000 per
Capital Security, of
Southern Investments UK
Capital Trust I....... $82,000,000 100% $82,000,000 $24,849
- --------------------------------------------------------------------------------------
Exchange Subordinated
Debentures of Southern
Investments
UK plc(2).............
- --------------------------------------------------------------------------------------
Southern Investments UK
plc Exchange Guarantee
with respect to
Exchange Capital
Securities(3)(4).......
- --------------------------------------------------------------------------------------
Total(5)................ $82,000,000 100% $82,000,000 $24,849
- --------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated for the sole purpose of computing the registration fee. Pursuant
to Rule 547(n) under the Securities Act, no separate fee is payable with
respect to the Exchange Capital Securities Guarantee (the "Exchange
Guarantee").
(2) No separate consideration will be received for the Exchange Subordinated
Deferrable Interest Debentures (the "Exchange Subordinated Debentures")
distributed upon any liquidation of Southern Investments UK Capital Trust
I.
(3) No separate consideration will be received for the Southern Investments UK
plc Exchange Guarantee.
(4) This Registration Statement (as the same may be amended from time to time
(the "Registration Statement")) is deemed to cover rights of holders of
Exchange Capital Securities of Southern Investments UK Capital Trust I
under the Amended and Restated Declaration of Trust (the "Declaration of
Trust"), the rights of holders of Exchange Subordinated Debentures under
the Indenture, the rights of the holders of such Exchange Capital
Securities under the Exchange Guarantee and certain backup undertakings as
described herein.
(5) Such amount represents the liquidation amount of the Southern Investments
UK Capital Trust I Exchange Capital Securities to be exchanged hereunder
and the principal amount of Exchange Subordinated Debentures that may be
distributed to holders of such Exchange Capital Securities upon any
liquidation of Southern Investments UK Capital Trust I.
-------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated May 12, 1997
$82,000,000
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.23% EXCHANGE SUBORDINATED CAPITAL INCOME SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.23% ORIGINAL SUBORDINATED CAPITAL INCOME SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
------------
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
SOUTHERN INVESTMENTS UK PLC
------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997, UNLESS EXTENDED.
------------
Southern Investments UK Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus (as the same
may be amended or supplemented from time to time, the "Prospectus") and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $82,000,000 aggregate liquidation amount of its
8.23% Exchange Subordinated Capital Income Securities (the "Exchange Capital
Securities") which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for a like
liquidation amount of its outstanding 8.23% Subordinated Capital Income
Securities (the "Original Capital Securities"), of which $82,000,000 aggregate
liquidation amount are issued and outstanding. Pursuant to the Exchange Offer,
Southern Investments UK plc, a public limited company incorporated under the
laws of England and Wales (the "Company"), is also offering to exchange (i) its
guarantee of payments of cash distributions and payments on liquidation of the
Trust or redemption of the Original Capital Securities (the "Original
Guarantee") for a like guarantee in respect of the Exchange Capital Securities
(the "Exchange Guarantee") and (ii) $84,537,000 aggregate principal amount of
its 8.23% Subordinated Debentures due February 1, 2027 (the "Original
Subordinated Debentures") for a like aggregate principal amount of its 8.23%
Exchange Subordinated Debentures due February 1, 2027 (the "Exchange
Subordinated Debentures"), which Exchange Guarantee and Exchange Subordinated
Debentures also have been registered under the Securities Act. The Original
Capital Securities, the Original Guarantee and the Original Subordinated
Debentures are collectively referred to herein as the "Original Securities" and
the Exchange Capital Securities, the Exchange Guarantee and the Exchange
Subordinated Debentures are collectively referred to herein as the "Exchange
Securities."
(Continued on next page)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Original Capital Securities on , 1997.
------------
SEE "RISK FACTORS" COMMENCING ON PAGE 22 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE>
(Continued from the previous page)
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Original Securities, except that (i) the
Exchange Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Original Securities, (ii) the Exchange Capital Securities will not
contain the $100,000 minimum liquidation amount transfer restriction, (iii)
the Exchange Capital Securities will not provide for any increase in the
distribution rate thereon and (iv) the Exchange Subordinated Debentures will
not provide for any increase in the interest rate thereon. See "Description of
the Exchange Capital Securities", "Description of the Exchange Subordinated
Debentures" and "Description of the Original Securities." The Exchange Capital
Securities are being offered for exchange in order to satisfy certain
obligations of the Company and the Trust under the Registration Rights
Agreement dated as of January 29, 1997 (the "Registration Rights Agreement")
among the Company, the Trust and the Initial Purchasers (as defined herein).
In the event that the Exchange Offer is consummated, any Original Capital
Securities which remain outstanding after consummation of the Exchange Offer
and the Exchange Capital Securities issued in the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding liquidation amount thereof have taken
certain actions or exercised certain rights under the Declaration of (as
defined herein).
The Exchange Capital Securities and the Original Capital Securities
(collectively, the "Capital Securities") represent preferred undivided
beneficial interests in the assets of the Trust. The Company is the owner of
all of the undivided beneficial interests represented by common securities of
the Trust (the "Common Securities," and together with the Capital Securities,
the "Trust Securities"). Bankers Trust Company is the Institutional Trustee
(the "Institutional Trustee") of the Trust. The Trust exists for the sole
purpose of issuing the Trust Securities and investing the proceeds thereof in
the Subordinated Debentures (as defined herein). The Subordinated Debentures
will mature on February 1, 2027 (the "Stated Maturity Date"). The Capital
Securities will have a preference over the Common Securities under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise. See "Description of the Exchange Capital
Securities."
Except as described herein, the Capital Securities will be represented by
global Capital Securities in fully registered form, deposited with a custodian
for and registered in the name of a nominee of The Depository Trust Company
("DTC"). Beneficial interests in such Capital Securities will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. Beneficial interests in such Capital Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity
in such interests will therefore settle in immediately available funds.
Holders of the Exchange Capital Securities will be entitled to receive
preferential cumulative cash distributions arising from the payment of
interest on the Subordinated Debentures, accruing from January 29, 1997 and
payable semi-annually in arrears on February 1 and August 1 of each year,
commencing August 1, 1997, at the annual rate of 8.23% of the liquidation
amount of $1,000 per Capital Security. The Company will have the right to
defer payments of interest on the Subordinated Debentures at any time and from
time to time for a period not exceeding 10 consecutive semi-annual periods
with respect to each deferral period (each, an "Extension Period"), provided
that no Extension Period may extend beyond the Stated Maturity Date. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period, subject to the
requirements set forth herein. If and for so long as interest payments on the
Subordinated Debentures are so deferred, semi-annual distributions on the
Trust Securities will also be deferred and the Company will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the Company's capital stock (which includes
common and preferred stock) or to make any payment with respect to debt
securities of the Company that rank pari passu with or junior to the
Subordinated Debentures. During an Extension Period, interest on the
Subordinated Debentures will continue to accrue (and the amount of
distributions to which holders of the Trust Securities are entitled will
continue to accumulate) at the rate of 8.23% per annum, compounded semi-
annually, to the extent permitted by applicable law, and holders of Trust
Securities will be required to accrue interest income for United States
federal income tax purposes. See "Description of the Exchange Subordinated
Debentures--Option to Extend Interest Payment
2
<PAGE>
Period" and "Certain Income Tax Considerations--US Federal Income Tax
Considerations--Interest Income and Original Issue Discount."
The Company will, through the Capital Securities Guarantee, the Declaration,
the Subordinated Debentures and the Indenture (each as defined herein), taken
together, fully, irrevocably and unconditionally guarantee all of the Trust's
obligations under the Trust Securities. See "Relationship Among the Capital
Securities, the Subordinated Debentures and the Capital Securities Guarantee--
Full and Unconditional Guarantee." The Capital Securities Guarantee will
guarantee payments of distributions and payments on liquidation or redemption
of the Trust Securities, but in each case only to the extent that the Trust
holds funds on hand legally available therefor and has failed to make such
payments, as described herein. See "Description of the Exchange Guarantee." If
the Company fails to make a required payment on the Subordinated Debentures,
the Trust will not have sufficient funds to make the related payments,
including any semi-annual distributions, on the Trust Securities. The Capital
Securities Guarantee will not cover any such payment when the Trust does not
have sufficient funds on hand legally available therefor. In such event, a
holder of Capital Securities may institute a legal proceeding directly against
the Company to enforce its rights in respect of such payment. The obligations
of the Company under the Capital Securities Guarantee and the Subordinated
Debentures will be subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of the Exchange Subordinated
Debentures--Subordination").
The Trust Securities will be subject to mandatory redemption at the
applicable Redemption Price (as defined herein), (a) in whole but not in part,
(i) on the Stated Maturity Date upon repayment of the Subordinated Debentures,
or (ii) at any time, contemporaneously with the optional prepayment of the
Subordinated Debentures by the Company in the event that it has or will become
obligated to pay Additional Amounts (as defined herein) or upon the occurrence
and continuation of a Special Event (as defined herein), and (b) in whole or
in part, contemporaneously with the optional prepayment by the Company of the
Subordinated Debentures on or after February 1, 2007. See "Description of the
Exchange Capital Securities--Special Event Redemption or Distribution" and
"Description of the Exchange Capital Securities--Mandatory Redemption."
The Company will have the right at any time to terminate the Trust and cause
a distribution of the Subordinated Debentures to the holders of the Trust
Securities in liquidation of the Trust. Unless the Subordinated Debentures are
distributed to the holders of the Trust Securities, in the event of a
termination of the Trust as described herein, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the
holders of the Capital Securities generally will be entitled to receive a
liquidation amount of $1,000 per Capital Security plus accumulated
distributions thereon to the date of payment. See "Description of the Exchange
Capital Securities--Liquidation Distribution Upon Dissolution."
The Trust is making the Exchange Offer of the Exchange Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Company nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Company and the Trust believe that Exchange Capital
Securities issued pursuant to this Exchange Offer in exchange for Original
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange Capital Securities are
acquired in the ordinary course of such holder's business and that such holder
is not participating, and has no arrangement or understanding with any person
to participate, in a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. However, any holder of Original Capital
Securities who is an "affiliate" of the Company or the Trust or who intends to
participate in the Exchange Offer for the purpose of distributing Exchange
Capital Securities, or any broker-dealer who purchased Original Capital
3
<PAGE>
Securities from the Trust to resell pursuant to Rule 144A under the Securities
Act ("Rule 144A") or any other available exemption under the Securities Act,
(a) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (b) will not be permitted or entitled to
tender such Original Capital Securities in the Exchange Offer and (c) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Original
Capital Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds
Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of the Company or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv)
if such holder is not a broker-dealer, such holder is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. In addition, the Company and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Company and the Trust (or
an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) on behalf of whom such holder holds the
Original Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Original
Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in the interpretive letters
referred to above, the Company and the Trust believe that broker-dealers who
acquired Original Capital Securities for their own accounts, as a result of
market-making activities or other trading activities ("Participating Broker-
Dealers"), may fulfill their prospectus delivery requirements with respect to
the Exchange Capital Securities received upon exchange of such Original
Capital Securities (other than Original Capital Securities which represent an
unsold allotment from the initial sale of the Original Capital Securities)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
Exchange Capital Securities. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer
during the period referred to below in connection with resales of Exchange
Capital Securities received in exchange for Original Capital Securities
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Trust and the Company have agreed that, for a
period not exceeding 90 days after the Expiration Date (as defined herein),
they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Capital Securities received in exchange for
Original Capital Securities pursuant to the Exchange Offer must notify the
Company or the Trust, or cause the Company or the Trust to be notified, on or
prior to the Expiration Date, that it is a Participating Broker-Dealer. Such
notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth herein under "The Exchange Offer--Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Company or the Trust may not rely
on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. See "The Exchange Offer--Resales of Exchange Capital
Securities."
4
<PAGE>
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal or delivery of an Agent's
Message (as defined herein), that upon receipt of notice from the Company or
the Trust of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or which causes this Prospectus to omit to
state a material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Company or the Trust has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating Broker-
Dealer, or the Company or the Trust has given notice that the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Company or the Trust gives such notice to suspend the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Subordinated
Debentures, as applicable), it shall extend the 90-day period referred to
above during which Participating Broker-Dealers are entitled to use this
Prospectus in connection with the resale of Exchange Capital Securities by the
number of days during the period from and including the date of the giving of
such notice to and including the date when Participating Broker-Dealers shall
have received copies of the amended or supplemented Prospectus necessary to
permit resales of the Exchange Capital Securities or to and including the date
on which the Company or the Trust has given notice that the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Subordinated
Debentures, as applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Original Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Although Lehman Brothers Inc. and J.P. Morgan Securities Inc., the
initial purchasers of the Original Capital Securities (the "Initial
Purchasers"), have informed the Company and the Trust that they each currently
intend to make a market in the Exchange Capital Securities, they are not
obligated to do so, and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development
or liquidity of any market for the Exchange Capital Securities. The Company
and the Trust currently do not intend to apply for listing of the Exchange
Capital Securities on any securities exchange or for quotation through the
NASD Automated Quotation System.
Any Original Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the
Declaration (except for those rights which terminate upon consummation of the
Exchange Offer). Following consummation of the Exchange Offer, the holders of
Original Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Company nor the Trust will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the
Original Capital Securities held by them. To the extent that Original Capital
Securities are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Original Capital Securities could be adversely affected.
See "Risk Factors--Consequences of a Failure to Exchange Original Capital
Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on , 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange
5
<PAGE>
Offer is extended by the Company or the Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended). Tenders of Original Capital Securities may be withdrawn at
any time on or prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum liquidation amount of Original Capital Securities
being tendered for exchange. However, the Exchange Offer is subject to certain
events and conditions which may be waived by the Company or the Trust and to
the terms and provisions of the Registration Rights Agreement. Original
Capital Securities may be tendered in whole or in part having an aggregate
liquidation amount of not less than $100,000 (100 Original Capital Securities)
or any integral multiple of $1,000 liquidation amount (one Original Capital
Security) in excess thereof. The Company has agreed to pay all expenses of the
Exchange Offer. See "The Exchange Offer--Fees and Expenses." Holders of the
Original Capital Securities whose Original Capital Securities are accepted for
exchange will not receive distributions on such Original Capital Securities
and will be deemed to have waived the right to receive any distributions on
such Original Capital Securities accumulated from and after January 29, 1997.
Accordingly, holders of Exchange Capital Securities as of the record date for
the payment of distributions on August 1, 1997 will be entitled to receive
distributions accumulated from and after January 29, 1997. See "The Exchange
Offer--Distributions on Exchange Capital Securities."
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities offered hereby. No dealer-manager
is being used in connection with this Exchange Offer. See "Use of Proceeds"
and "Plan of Distribution."
As used herein, (i) the "Indenture" means the Indenture, dated as of January
29, 1997, as supplemented from time to time, among the Company, Bankers Trust
Company, as trustee (the "Indenture Trustee"), and Bankers Trust Luxembourg
S.A., as paying and transfer agent, relating to the Subordinated Debentures,
(ii) the "Declaration" means the Amended and Restated Declaration of Trust
relating to the Trust among the Company, as sponsor, Bankers Trust Company, as
Institutional Trustee (the "Institutional Trustee"), Bankers Trust (Delaware),
as Delaware Trustee (the "Delaware Trustee"), and the Regular Trustees named
therein, and (iii) the "Capital Securities Guarantee" means the Guarantee
Agreement relating to the Capital Securities between the Company and Bankers
Trust Company, as trustee (the "Guarantee Trustee"). In addition, as the
context may require, (i) "Capital Securities" and "Trust Securities" include
the Original Capital Securities and the Exchange Capital Securities, (ii)
"Subordinated Debentures" includes the Original Subordinated Debentures and
the Exchange Subordinated Debentures and (iii) "Capital Securities Guarantee"
includes the Original Guarantee and the Exchange Guarantee.
6
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material may also be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov).
No separate financial statements of the Trust have been included herein. The
Company and the Trust do not consider that such financial statements would be
material to holders of the Capital Securities because the Trust is a newly
formed special purpose entity, has no significant operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Subordinated Debentures,
issuing the Trust Securities and engaging in other activities as are
necessary, advisable or incidental thereto. See "Southern Investments UK
Capital Trust I," "Description of the Exchange Capital Securities,"
"Description of the Exchange Subordinated Debentures" and "Description of the
Exchange Guarantee." In addition, the Company does not expect that the Trust
will file reports, proxy statements and other information under the Exchange
Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company, the
Trust and the Exchange Securities. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
7
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a public limited company incorporated under the laws of
England and Wales. Several of the directors and executive officers of the
Company (and certain experts named in this Prospectus) are citizens or
residents of the United Kingdom (the "UK"). All or a substantial portion of
the assets of such persons and substantially all the assets of the Company are
located outside the United States of America (the "US"). As a result, it may
not be possible for investors to effect service of process within the US upon
such persons or the Company or to enforce against them judgments of US courts
predicated upon civil liabilities under US federal securities laws. There is
doubt as to the enforceability in England and Wales, in original actions or in
actions for enforcement of judgments of US courts, of civil liabilities
predicated upon US federal securities laws.
The Declaration and the Trust Securities will be governed by, and construed
in accordance with, the laws of the State of Delaware. The Capital Securities
Guarantee, the Indenture and the Subordinated Debentures will be governed by,
and construed in accordance with, the laws of the State of New York. The
Company has submitted to the non-exclusive jurisdiction of the Supreme Court
of New York, New York County and the United States District Court for the
Southern District of New York and any appellate court from either thereof for
any suit, legal action or proceeding against the Company or its properties,
assets or revenues with respect to its obligations, liabilities or any other
matter arising out of or in connection with the Capital Securities Guarantee,
the Indenture and the Subordinated Debentures. See "Description of the
Exchange Subordinated Debentures--Governing Law; Submission to Jurisdiction."
----------------
The Company accepts responsibility for the information contained in this
document. To the best of the knowledge and belief of the Company (which has
taken all reasonable care to ensure that such is the case), the information
contained in this document is in accordance with the facts and does not omit
anything likely to affect the import of such information.
----------------
The Company publishes its consolidated financial statements in pounds
sterling. In this Prospectus, references to "pounds sterling," "(Pounds),"
"pence" or "p" are to UK currency and references to "US dollars," "US$" or "$"
are to US currency. For the convenience of the reader, this Prospectus
contains translations of certain pounds sterling amounts into US dollars at
specified rates, or, if not so specified, 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 (the "Noon Buying Rate") on December
31, 1996 of $1.7123 = (Pounds)1.00. No representation is made that the pounds
sterling amounts have been, could have been or could be converted into US
dollars at the rates indicated or at any other rates. See "Exchange Rates" for
historical information regarding Noon Buying Rates.
8
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed financial and other information contained
elsewhere in this Prospectus. References herein to the "Predecessor Company"
mean SWEB (as defined below) prior to its acquisition by the Company. All
references to a "fiscal" year mean a year ended March 31 and all references to
a "calendar" year mean a year ended December 31. References to Pro Forma Fiscal
Year 1996 mean the unaudited pro forma financial information of the Company
presented for fiscal year 1996 as if the acquisition of SWEB by the Company had
occurred as of April 1, 1995.
THE COMPANY
The Company is a wholly-owned subsidiary of Southern Investments UK Holdings
Limited ("Holdings"), of which 75% is owned indirectly by The Southern Company
("Southern," and, together with its subsidiaries, the "Southern Company
system") and 25% is owned indirectly by PP&L Resources, Inc. ("PP&L
Resources"). 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 ("SWEB"), one of the 12 regional electricity
companies ("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, having acquired approximately 84% of its shares. 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. In November 1995, the Company acquired the remaining shares of
SWEB. The Company's sole investment and only significant asset is the entire
share capital of SWEB, which is headquartered in Bristol, England. At December
31, 1996, the Company had consolidated assets of (Pounds)1.711 billion ($2.930
billion). See "The Company."
SWEB's two main business lines are the distribution of electricity and the
supply of electricity to approximately 1.3 million customers primarily in its
franchise area in southwest England (the "Franchise Area"). This area covers
approximately 5,560 square miles and has a resident population of approximately
2.8 million. The distribution business and the supply business are distinct
business segments and produced operating income of (Pounds)112 million ($192
million) and (Pounds)15 million ($26 million), respectively, in Pro Forma
Fiscal Year 1996, representing substantially all of the Company's consolidated
operating income in that pro forma fiscal year. See "Business--SWEB's Main
Businesses."
SWEB is the only distributor of electricity in its Franchise Area, and
management believes that economic, environmental and regulatory factors are
likely to prevent competitors from entering this business in SWEB's Franchise
Area. SWEB has an exclusive right to supply electricity to customers in its
Franchise Area with demand of not more than 100kW, which is scheduled to
continue until at least March 31, 1998. The supply business to consumers with
demand above 100kW, both inside and outside SWEB's Franchise Area, is open to
competition, and SWEB is able to competitively bid or negotiate to supply
electricity to such customers. See "The Electric Utility Industry in Great
Britain."
The operations of SWEB are regulated under its Public Electricity Supply
license ("PES license") pursuant to which the distribution business, and the
supply business to consumers with demand of not more than 100kW, are subject to
a price cap regulatory framework that provides economic incentives to SWEB to
increase the number of units of electricity distributed and supplied and to
operate in a more cost-efficient manner.
SWEB also has ancillary business activities that support the main businesses,
including power generation and gas supply. See "Business--SWEB's Other Business
Activities."
9
<PAGE>
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
The Trust is a statutory business trust formed under the Delaware Business
Trust Act pursuant to (i) the Declaration executed by the Company, as Sponsor,
Bankers Trust Company, as Institutional Trustee, Bankers Trust (Delaware), as
Delaware Trustee, and the two individual Regular Trustees named therein, and
(ii) the filing of a certificate of trust with the Delaware Secretary of State
on January 21, 1997. The Trust's business and affairs are conducted by the
Institutional Trustee, the Delaware Trustee, and the two individual Regular
Trustees, who are employees or officers of or affiliated with the Company. The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities and effecting the Exchange Offer, (ii) using the proceeds from the
sale of the Trust Securities to acquire the Original Subordinated Debentures
issued by the Company, (iii) exchanging the Original Subordinated Debentures
for Exchange Subordinated Debentures in the Exchange Offer, and (iv) engaging
in only those other activities necessary, advisable or incidental thereto (such
as registering the transfer of the Trust Securities). Accordingly, the
Subordinated Debentures are now and will be the sole assets of the Trust, and
payments under the Subordinated Debentures will be the sole revenue of the
Trust. All of the Common Securities are owned by the Company.
THE EXCHANGE OFFER
The Exchange Offer.......... Up to $82,000,000 aggregate liquidation amount of
Exchange Capital Securities are being offered in
exchange for a like aggregate liquidation amount
of Original Capital Securities. Original Capital
Securities may be tendered for exchange in whole
or in part in a liquidation amount of $100,000
(100 Original Capital Securities) or any integral
multiple of $1,000 (one Original Capital Securi-
ty) in excess thereof. The Company and the Trust
are making the Exchange Offer in order to satisfy
their obligations under the Registration Rights
Agreement relating to the Original Capital Secu-
rities. For a description of the procedures for
tendering Original Capital Securities, see "The
Exchange Offer--Procedures for Tendering Original
Capital Securities."
Expiration Date............. 5:00 p.m., New York City time, on , 1997, un-
less the Exchange Offer is extended by the Com-
pany or the Trust (in which case the Expiration
Date will be the latest date and time to which
the Exchange Offer is extended). See "The Ex-
change Offer--Terms of the Exchange Offer."
Conditions to the Exchange The Exchange Offer is subject to certain condi-
Offer...................... tions, which may be waived by the Company and the
Trust in their sole discretion. The Exchange Of-
fer is not conditioned upon any minimum liquida-
tion amount of Original Capital Securities being
tendered. See "The Exchange Offer--Conditions to
the Exchange Offer." The Company and the Trust
reserve the right in their sole and absolute dis-
cretion, subject to applicable law, at any time
and from time to time, (i) to delay the accept-
ance of the Original Capital Securities for ex-
change, (ii) to terminate the Exchange Offer if
certain specified conditions have not been satis-
fied, (iii) to extend the Expiration Date of the
Exchange Offer and retain all Original Capital
Securities tendered pursuant to the Exchange Of-
fer, subject, however, to the right
10
<PAGE>
of holders of Original Capital Securities to
withdraw their tendered Original Capital Securi-
ties, or (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any re-
spect. See "The Exchange Offer--Terms of the Ex-
change Offer."
Withdrawal Rights........... Tenders of Original Capital Securities may be
withdrawn at any time on or prior to the Expira-
tion Date by delivering a written notice of such
withdrawal to the Exchange Agent in conformity
with certain procedures set forth below under
"The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Original Capital Tendering holders of Original Capital Securities
Securities................. must complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile
or hand delivery, together with any other re-
quired documents, to the Exchange Agent, either
with the Original Capital Securities to be ten-
dered or in compliance with the specified proce-
dures for guaranteed delivery of Original Capital
Securities. Certain brokers, dealers, commercial
banks, trust companies and other nominees may
also effect tenders by book-entry transfer. Hold-
ers of Original Capital Securities registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee are urged to con-
tact such person promptly if they wish to tender
Original Capital Securities pursuant to the Ex-
change Offer. See "The Exchange Offer--Procedures
for Tendering Original Capital Securities."
Letters of Transmittal and certificates repre-
senting Original Capital Securities should not be
sent to the Company or the Trust. Such documents
should only be sent to the Exchange Agent.
Resales of Exchange Capital
Securities................. The Company and the Trust are making the Exchange
Offer in reliance on the position of the staff of
the Division of Corporation Finance of the Com-
mission as set forth in certain interpretive let-
ters addressed to third parties in other transac-
tions. However, neither the Company nor the Trust
has sought its own interpretive letter and there
can be no assurance that the staff of the Divi-
sion of Corporation Finance of the Commission
would make a similar determination with respect
to the Exchange Offer as it has in such
interpretive letters to third parties. Based on
these interpretations by the staff of the Divi-
sion of Corporation Finance of the Commission,
and subject to the two immediately following sen-
tences, the Company and the Trust believe that
Exchange Capital Securities issued pursuant to
this Exchange Offer in exchange for Original Cap-
ital Securities may be offered for resale, resold
and otherwise transferred by a holder thereof
(other than a holder who is a broker-dealer)
without further compliance with the registration
and prospectus delivery require-
11
<PAGE>
ments of the Securities Act, provided that such
Exchange Capital Securities are acquired in the
ordinary course of such holder's business and
that such holder is not participating, and has no
arrangement or understanding with any person to
participate, in a distribution (within the mean-
ing of the Securities Act) of such Exchange Capi-
tal Securities. However, any holder of Original
Capital Securities who is an "affiliate" of the
Company or the Trust or who intends to partici-
pate in the Exchange Offer for the purpose of
distributing the Exchange Capital Securities, or
any broker-dealer who purchased the Original Cap-
ital Securities from the Trust to resell pursuant
to Rule 144A or any other available exemption un-
der the Securities Act, (a) will not be able to
rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission
set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to
tender such Original Capital Securities in the
Exchange Offer and (c) must comply with the reg-
istration and prospectus delivery requirements of
the Securities Act in connection with any sale or
other transfer of such Original Capital Securi-
ties unless such sale is made pursuant to an ex-
emption from such requirements. In addition, as
described below, if any broker-dealer holds Orig-
inal Capital Securities acquired for its own ac-
count as a result of market-making or other trad-
ing activities and exchanges such Original Capi-
tal Securities for Exchange Capital Securities,
then such broker-dealer must deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resales of such Exchange Cap-
ital Securities.
Each holder of Original Capital Securities who
wishes to exchange Original Capital Securities
for Exchange Capital Securities in the Exchange
Offer will be required to represent that (i) it
is not an "affiliate" of the Company or the
Trust, (ii) any Exchange Capital Securities to be
received by it are being acquired in the ordinary
course of its business, (iii) it has no arrange-
ment or understanding with any person to partici-
pate in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securi-
ties, and (iv) if such holder is not a broker-
dealer, such holder is not engaged in, and does
not intend to engage in, a distribution (within
the meaning of the Securities Act) of such Ex-
change Capital Securities. Each broker-dealer
that receives Exchange Capital Securities for its
own account in exchange for Original Capital Se-
curities must acknowledge that such Original Cap-
ital Securities were acquired by such broker-
dealer as a result of market-making activities or
other trading activities and must agree that it
will deliver a prospectus in connection with any
resale of such Exchange Capital Securities. See
"Plan of Distribution." The Letter of Transmittal
states that, by so acknowledging and by deliver-
ing a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. Based
on the position taken by the staff of the Divi-
sion of Corporation Finance of the Commission in
the interpretive letters referred to above, the
Company and the Trust
12
<PAGE>
believe that Participating Broker-Dealers who ac-
quired Original Capital Securities for their own
accounts as a result of market-making activities
or other trading activities may fulfill their
prospectus delivery requirements with respect to
the Exchange Capital Securities received upon ex-
change of such Original Capital Securities (other
than Original Capital Securities which represent
an unsold allotment from the initial sale of the
Original Capital Securities) with a prospectus
meeting the requirements of the Securities Act,
which may be the prospectus prepared for an ex-
change offer so long as it contains a description
of the plan of distribution with respect to the
resale of such Exchange Capital Securities. Ac-
cordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by
a Participating Broker-Dealer in connection with
resales of Exchange Capital Securities received
in exchange for Original Capital Securities where
such Original Capital Securities were acquired by
such Participating Broker-Dealer for its own ac-
count as a result of market-making or other trad-
ing activities. Subject to certain provisions set
forth in the Registration Rights Agreement and to
the limitations described below under "The Ex-
change Offer--Resales of Exchange Capital Securi-
ties," the Company and the Trust have agreed that
this Prospectus, as it may be amended or supple-
mented from time to time, may be used by a Par-
ticipating Broker-Dealer in connection with re-
sales of such Exchange Capital Securities for a
period not exceeding 90 days after the Expiration
Date (subject to extension under certain limited
circumstances). See "Plan of Distribution." Any
Participating Broker-Dealer who is an "affiliate"
of the Company or the Trust may not rely on such
interpretive letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any re-
sale transaction. See "The Exchange Offer--Re-
sales of Exchange Capital Securities."
Exchange Agent.............. The exchange agent with respect to the Exchange
Offer is Bankers Trust Company (the "Exchange
Agent"). The addresses, and telephone and facsim-
ile numbers, of the Exchange Agent are set forth
in "The Exchange Offer--Exchange Agent" and in
the Letter of Transmittal.
Use of Proceeds............. Neither the Company nor the Trust will receive
any cash proceeds from the issuance of the Ex-
change Capital Securities offered hereby. See
"Use of Proceeds."
Certain United States
Federal Income Tax
Consequences; ERISA
Considerations.............
Holders of Original Capital Securities should re-
view the information set forth under "Certain In-
come Tax Considerations--US Federal Income Tax
Considerations" and "Certain ERISA Considera-
tions" prior to tendering Original Capital Secu-
rities in the Exchange Offer.
13
<PAGE>
THE EXCHANGE CAPITAL SECURITIES
Securities Offered.......... Up to $82,000,000 aggregate liquidation amount of
the Trust's Exchange Capital Securities which
have been registered under the Securities Act
(liquidation amount $1,000 per Exchange Capital
Security). The Exchange Capital Securities will
be issued and the Original Capital Securities
were issued under the Declaration. The Exchange
Capital Securities and any Original Capital Secu-
rities which remain outstanding after consumma-
tion of the Exchange Offer will vote together as
a single class for purposes of determining
whether holders of the requisite percentage in
outstanding liquidation amount thereof have taken
certain actions or exercised certain rights under
the Declaration. See "Description of the Exchange
Capital Securities--Voting Rights; Modification
and Amendment of the Declaration." The terms of
the Exchange Capital Securities are identical in
all material respects to the terms of the Origi-
nal Capital Securities, except that the Exchange
Capital Securities have been registered under the
Securities Act and will not be subject to certain
restrictions on transfer applicable to the Origi-
nal Capital Securities and will not provide for
any increase in the distribution rate thereon.
See "The Exchange Offer--Purpose of the Exchange
Offer," "Description of the Exchange Capital Se-
curities" and "Description of the Original Secu-
rities."
Distribution Dates.......... February 1 and August 1 of each year, commencing
August 1, 1997.
Extension Periods........... Distributions on Capital Securities will be de-
ferred for the duration of any Extension Period
elected by the Company with respect to the pay-
ment of interest on the Subordinated Debentures.
No Extension Period will exceed 10 consecutive
semi-annual periods or extend beyond the Stated
Maturity Date. See "Description of the Exchange
Subordinated Debentures--Option to Extend Inter-
est Payment Period" and "Certain Income Tax Con-
siderations--US Federal Income Tax Considera-
tions--Interest Income and Original Issue Dis-
count."
Ranking..................... The Exchange Capital Securities will rank pari
passu, and payments thereon will be made pro ra-
ta, with the Original Capital Securities and the
Common Securities except as described under "De-
scription of the Exchange Capital Securities."
The Exchange Subordinated Debentures will consti-
tute unsecured obligations of the Company and
will rank junior in right of payment to all Se-
nior Indebtedness of the Company to the extent
and in the manner set forth in the Indenture. See
"Description of the Exchange Subordinated Deben-
tures--Subordination." The Company's obligation
under the Exchange Capital Securities Guarantee
to make any Guarantee Payments will rank pari
passu with the Original Guarantee and will con-
stitute an unsecured obligation of the Company
and will rank subordinate and junior in right of
payment to all other liabilities of the Company,
including the Subordinated Debentures, except for
liabilities made pari passu or subordinate by
their terms. See "Description of the Exchange
Capital Securities Guarantee--Status of the Capi-
tal Securities Guarantee."
14
<PAGE>
Redemption.................. The Trust Securities will be subject to mandatory
redemption (a) in whole but not in part (i) on
the Stated Maturity Date upon repayment of the
Subordinated Debentures or (ii) upon the optional
prepayment by the Company of the Subordinated De-
bentures in the event the Company has or will be-
come obligated to pay Additional Amounts (as de-
fined herein) or upon the occurrence and continu-
ation of a Special Event and (b) in whole or in
part, at any time contemporaneously with the op-
tional prepayment of the Subordinated Debentures
by the Company on or after February 1, 2007, in
each case at the applicable Redemption Price. See
"Description of the Exchange Capital Securities--
Mandatory Redemption" and "Description of the Ex-
change Capital Securities--Special Event Redemp-
tion or Distribution."
Distribution of
Subordinated Debentures.... The Company will have the right at any time to
terminate the Trust and cause the Subordinated
Debentures to be distributed to the holders of
Capital Securities in liquidation of the Trust.
See "Description of the Exchange Capital Securi-
ties--Special Event Redemption or Distribution."
Ratings..................... The Capital Securities are rated "A-" by Standard
& Poor's Ratings Services, "A-" by Duff & Phelps
Credit Rating Company and "Baa2" by Moody's In-
vestors Service, Inc.
ERISA Considerations........ Prospective purchasers must carefully consider
the restrictions on purchases set forth under
"Certain ERISA Considerations."
Transfer Restrictions ...... The Exchange Capital Securities will be issued,
and may be transferred, only in minimum denomina-
tions of not less than $1,000. See "Description
of the Exchange Capital Securities--Restrictions
on Transfer." Any such transfer of Exchange Capi-
tal Securities in denominations of less than
$1,000 shall be deemed to be void and of no legal
effect whatsoever.
Absence of Market for the
Exchange Capital The Exchange Capital Securities will be a new is-
Securities................. sue of securities for which there currently is no
market. Although the Initial Purchasers have in-
formed the Trust and the Company that they each
currently intend to make a market in the Exchange
Capital Securities, the Initial Purchasers are
not obligated to do so, and any such market mak-
ing may be discontinued at any time without no-
tice. Accordingly, there can be no assurance as
to the development or liquidity of any market for
the Exchange Capital Securities. If an active
market does not develop, the market price and li-
quidity of the Exchange Capital Securities may be
adversely affected. The Trust and the Company do
not intend to apply for listing of the Exchange
Capital Securities on any securities exchange or
for quotation through the NASD Automated Quota-
tion System. See "Plan of Distribution."
Governing Law............... The Declaration and the Trust Securities will be
governed by, and construed in accordance with,
the laws of the State of Delaware. The Capital
Securities Guarantee, the Indenture and the Sub-
ordinated Debentures will be governed by, and
construed in accordance with, the laws of the
State of New York.
15
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary consolidated financial data for the
Company (the "Successor Company" or the "Company") and the Predecessor Company.
For a description of the financial statements and records from which the
following financial data have been derived, see "Selected Financial Data." This
information should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto of the Successor
Company and the Predecessor Company included elsewhere in this Prospectus.
The unaudited pro forma condensed consolidated income statement and other
data presented below for fiscal year 1996 reflect the acquisition by the
Company of SWEB as if it had occurred as of April 1, 1995. Such unaudited pro
forma condensed consolidated income statement and other data have been prepared
by the Successor Company based upon assumptions deemed proper by it and reflect
a preliminary allocation of the purchase price paid for the Predecessor
Company. The unaudited pro forma condensed consolidated income statement and
other data presented herein are shown for illustrative purposes only and are
not necessarily indicative of the future results of operations of the Successor
Company or of the results of operations of the Successor Company that would
have actually occurred had the transaction been in effect for the period
presented.
PREDECESSOR COMPANY
UK GAAP(1)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1992 1993 1994 1995
------------ ------------ ------------ ------------
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Turnover............... (Pounds) 847 (Pounds) 892 (Pounds) 900 (Pounds) 875
Operating costs........ (759) (790) (791) (755)
------------ ------------ ------------ ------------
Operating profit....... 88 102 109 120
Exceptional item(2).... -- -- -- (20)
Other income........... 10 11 15 17
Interest, net.......... (15) (12) (7) (5)
Tax on profit.......... (21) (23) (24) (26)
------------ ------------ ------------ ------------
Profit for financial
period(3)............. (Pounds) 62 (Pounds) 78 (Pounds) 93 (Pounds) 86
============ ============ ============ ============
Dividends declared per
share................. (Pounds)0.17 (Pounds)0.20 (Pounds)0.24 (Pounds)0.27
============ ============ ============ ============
<CAPTION>
MARCH 31,
------------------------------------------------------
1992 1993 1994 1995
------------ ------------ ------------ ------------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Fixed assets........... (Pounds) 490 (Pounds) 544 (Pounds) 579 (Pounds) 615
Current assets......... 212 213 301 254
Creditors: Amounts
falling due within one
year.................. (179) (176) (205) (243)
------------ ------------ ------------ ------------
Total assets less cur-
rent liabilities...... 523 581 675 626
Creditors: Amounts
falling due in more
than one year......... (85) (87) (92) (95)
Total shareholders'
funds................. 425 479 543 494
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1992 1993 1994 1995
------------ ------------ ------------ ------------
(AMOUNTS IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT(4)................ (Pounds) 99 (Pounds) 115 (Pounds) 126 (Pounds) 142
EBITDA(5).............. 123 141 154 173
Cash flow from opera-
tions(6).............. 128 140 245 124
Ratio of earnings to
fixed charges(7)...... 6 8 12 13
</TABLE>
16
<PAGE>
PREDECESSOR COMPANY
US GAAP(1)
<TABLE>
<CAPTION>
PERIOD FROM PRO FORMA
YEAR ENDED MARCH 31, APRIL 1, 1995 NINE MONTHS ENDED
-------------------------- TO SEPTEMBER 17, DECEMBER 31, 1995
1994 1995 1995(8) (UNAUDITED)(9)
------------ ------------ ---------------- -----------------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating revenues..... (Pounds) 808 (Pounds) 776 (Pounds) 299 (Pounds) 541
Operating income....... 122 139 40 80
Interest, net.......... (7) (4) (3) (48)
Gain on Sale of invest-
ment.................. -- -- -- 7
Other, net............. 16 16 1 3
Provision for income
taxes................. (43) (50) (13) (15)
------------ ------------ ------------ -------------
Income from continuing
operations............ 88 101 25 27
Discontinued opera-
tions................. -- (7) (1) --
------------ ------------ ------------ -------------
Net income............. (Pounds) 88 (Pounds) 94 (Pounds) 24 (Pounds) 27
============ ============ ============ =============
Dividends declared per
share ................ (Pounds)0.21 (Pounds)0.25 (Pounds)0.85 (Pounds) 0.85
============ ============ ============ =============
<CAPTION>
MARCH 31,
1995
------------
(AMOUNTS
IN MILLIONS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Property, plant and
equipment, net........ (Pounds) 541
Total assets........... 869
Total stockholder's eq-
uity.................. 374
Long-term debt......... 95
Short-term debt........ 24
<CAPTION>
PERIOD FROM PRO FORMA
YEAR ENDED MARCH 31, APRIL 1, 1995 NINE MONTHS ENDED
-------------------------- TO SEPTEMBER 17, DECEMBER 31, 1995
1994 1995 1995(8) (UNAUDITED)(9)
------------ ------------ ---------------- -----------------
(AMOUNTS IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT(4)................ (Pounds) 142 (Pounds) 162 (Pounds) 43 (Pounds) 97
EBITDA(5).............. 170 193 58 128
Cash flow from opera-
tions(6).............. 236 100 69 142
Ratio of earnings to
fixed charges(7)...... 13 15 9 2
</TABLE>
17
<PAGE>
SUCCESSOR COMPANY
US GAAP
<TABLE>
<CAPTION>
PERIOD FROM PRO FORMA NINE MONTHS
INCEPTION FISCAL YEAR ENDED ENDED
(JUNE 23, 1995) MARCH 31, 1996 DECEMBER 31, 1996
TO MARCH 31, 1996(8) (UNAUDITED)(9) (UNAUDITED)
---------------------------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10) (Pounds) $(10)
-------------- ---------------------- ------ -------------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating revenues..... (Pounds) 481 $ 823 (Pounds) 780 $1,336 (Pounds) 602 $ 1,031
Operating income....... 86 147 129 221 90 154
Interest, net.......... (21) (36) (57) (98) (38) (65)
Gain on sale of invest-
ments................. 14 24 -- -- 1 2
Other, net............. 2 3 3 5 4 7
Provision for income
taxes................. (28) (48) (26) (44) (22) (38)
-------------- ------- ------------- ------ -------------- -------
Income from continuing
operations............ 53 90 (Pounds) 49 $ 84 35 60
============= ======
Extraordinary gain on
early
extinguishment of
debt.................. 6 10 -- --
-------------- ------- -------------- -------
Net income............. (Pounds) 59 $ 100 (Pounds) 35 $ 60
============== ======= ============== =======
Dividends declared per
share................. (Pounds) 3.82 $ 6.54 (Pounds) 4.67 $ 8.00 (Pounds) 0.02 $ 0.03
============== ======= ============= ====== ============== =======
<CAPTION>
DECEMBER 31, 1996
MARCH 31, 1996 (UNAUDITED)
------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10)
-------------- --------- -------------- ---------
(AMOUNTS IN MILLIONS) (AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Property, plant and
equipment, net........ (Pounds) 1,207 $ 2,067 (Pounds) 1,249 $ 2,139
Total assets........... 1,686 2,887 1,711 2,930
Total stockholder's eq-
uity.................. 368 630 366 627
Short-term debt........ 650 1,113 332 568
<CAPTION>
PERIOD FROM PRO FORMA NINE MONTHS
INCEPTION FISCAL YEAR ENDED ENDED
(JUNE 23, 1995) MARCH 31, 1996 DECEMBER 31, 1996
TO MARCH 31, 1996(8) (UNAUDITED)(9) (UNAUDITED)
---------------------------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10) (Pounds) $(10)
-------------- ---------------------- ------ -------------- ---------
(AMOUNTS IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT(4)................ (Pounds) 95 $ 163 (Pounds) 141 $ 241 (Pounds) 96 $ 165
EBITDA(5).............. 117 200 182 311 128 220
Cash flow from opera-
tions(13)............. 25 43 94 161 52 89
Ratio of earnings to
fixed charges(7)...... 4 2 2
</TABLE>
18
<PAGE>
BUSINESS SEGMENTS
PREDECESSOR COMPANY
UK GAAP(1)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------
1992 1993 1994 1995
----------- ----------- ----------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TURNOVER:
Electricity distribu-
tion.................. (Pounds)230 (Pounds)235 (Pounds)250 (Pounds)274
Electricity supply..... 763 787 772 725
Retailing(2)........... 53 72 79 82
Other.................. 21 59 78 84
Less: Intra-busi-
ness(11).............. (220) (261) (279) (290)
----------- ----------- ----------- -----------
Total............... (Pounds)847 (Pounds)892 (Pounds)900 (Pounds)875
OPERATING PROFIT (LOSS):
Electricity distribu-
tion.................. (Pounds) 90 (Pounds) 85 (Pounds) 77 (Pounds) 96
Electricity supply..... 4 16 25 15
Retailing(2)........... (1) (2) 1 1
Other.................. (5) 4 6 9
Less: Intra-busi-
ness(11).............. -- -- -- (1)
----------- ----------- ----------- -----------
Total............... (Pounds) 88 (Pounds)103 (Pounds)109 (Pounds)120
<CAPTION>
MARCH 31,
--------------------------------------------------
1992 1993 1994 1995
----------- ----------- ----------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Electricity distribu-
tion.................. (Pounds)449 (Pounds)454 (Pounds)472 (Pounds)504
Electricity supply..... 139 134 91 89
Retailing(2)........... 32 38 56 64
Other.................. 82 131 261 212
----------- ----------- ----------- -----------
Total............... (Pounds)702 (Pounds)757 (Pounds)880 (Pounds)869
</TABLE>
19
<PAGE>
BUSINESS SEGMENTS
PREDECESSOR COMPANY
US GAAP(1)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, PERIOD FROM
------------------------- APRIL 1, 1995 TO
1994 1995 SEPTEMBER 17, 1995
----------- ------------ ------------------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
OPERATING REVENUE:
Electricity distribution.......... (Pounds)250 (Pounds)274 (Pounds) 105
Electricity supply................ 772 725 276
Other............................. 54 57 23
Less: Intra-business(11).......... (268) (280) (105)
----------- ----------- ------------
Total.......................... (Pounds)808 (Pounds)776 (Pounds) 299
OPERATING INCOME (LOSS):
Electricity distribution.......... (Pounds) 84 (Pounds)112 (Pounds) 42
Electricity supply................ 27 18 2
Other............................. 11 10 (4)
Less: Intra-business(11).......... -- (1) --
----------- ----------- ------------
Total.......................... (Pounds)122 (Pounds)139 (Pounds) 40
<CAPTION>
MARCH 31,
1995
------------
(AMOUNTS
IN MILLIONS)
<S> <C> <C> <C>
ASSETS:
Electricity distribution.......... (Pounds)531
Electricity supply................ 93
Other............................. 245
-----------
Total.......................... (Pounds)869
</TABLE>
20
<PAGE>
BUSINESS SEGMENTS
SUCCESSOR COMPANY
US GAAP
<TABLE>
<CAPTION>
PRO FORMA
PERIOD FROM FISCAL YEAR ENDED NINE MONTHS ENDED
INCEPTION (JUNE 23, 1995) MARCH 31, 1996 DECEMBER 31, 1996
TO MARCH 31, 1996(8) (UNAUDITED)(9) (UNAUDITED)
------------------------------------------------ -------------------------
(Pounds) $(10) (Pounds) $(10) (Pounds) $(10)
---------------- ---------------------- ------ -------------- ---------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Electricity distribu-
tion.................. (Pounds) 147 $ 252 (Pounds)252 $ 431 (Pounds) 169 $ 289
Electricity supply..... 450 770 726 1,243 560 959
Other.................. 33 56 54 93 41 70
Less: Intra-busi-
ness(11).............. (149) (255) (252) (431) (168) (287)
---------------- --------- ----------- ------ -------------- -------
Total............... (Pounds) 481 $ 823 (Pounds)780 $1,336 (Pounds) 602 $ 1,031
OPERATING INCOME (LOSS):
Electricity distribu-
tion.................. (Pounds) 72 $ 123 (Pounds)112 $ 192 (Pounds) 76 $ 130
Electricity supply..... 13 22 15 26 12 21
Other.................. 1 2 3 5 3 5
Less: Intra-busi-
ness(11).............. -- -- (1) (2) (1) (2)
---------------- --------- ----------- ------ -------------- -------
Total............... (Pounds) 86 $ 147 (Pounds)129 $ 221 (Pounds) 90 $ 154
<CAPTION>
DECEMBER 31, 1996
MARCH 31, 1996 (UNAUDITED)
----------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10)
---------------- ----------- -------------- ---------
(AMOUNTS IN MILLIONS) (AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS(12):
Electricity distribu-
tion.................. (Pounds) 1,422 $ 2,435 (Pounds) 1,480 $ 2,534
Electricity supply..... 102 175 132 226
Other.................. 162 277 99 170
---------------- --------- -------------- -------
Total............... (Pounds) 1,686 $ 2,887 (Pounds) 1,711 $ 2,930
</TABLE>
- --------
(1) The financial data for the Predecessor Company shown on pages (i) 16 and
19 and (ii) 17 and 20 were derived from financial statements for the
Predecessor Company prepared, respectively, in accordance with UK GAAP and
US GAAP. The principal differences between US GAAP and UK GAAP as applied
to the Predecessor Company relate to the treatment of discontinued
operations, pension costs and deferred taxes.
(2) A provision for the disposition of the electrical appliance retailing
business resulted in an exceptional item for the fiscal year ended March
31, 1995. The actual disposition of this business segment occurred in June
1995.
(3) Excluding the exceptional item, profit for fiscal year 1995 would have
been (Pounds)98 million.
(4) EBIT equals income from continuing operations before the sum of interest
expense and income taxes. EBIT for the period from inception (June 23,
1995) to March 31, 1996 and for Pro Forma Fiscal Year 1996 excludes a
nonrecurring gain on sale of investment of (Pounds)14 million ($24
million). This information is provided for informational purposes only and
such measure should not be construed as an alternative to operating income
(as determined in accordance with US GAAP) as an indicator of operating
performance, or as an alternative to cash flows from operating activities
(as determined in accordance with US GAAP) as a measure of liquidity.
(5) EBITDA equals income from continuing operations before the sum of interest
expense, income taxes, depreciation and amortization. EBITDA for the
period from inception (June 23, 1995) to March 31, 1996 and for Pro Forma
Fiscal Year 1996 excludes a nonrecurring gain on sale of investment of
(Pounds)14 million ($24 million). This information is provided for
informational purposes only and such measure should not be construed as an
alternative to operating income (as determined in accordance with US GAAP)
as an indicator of operating performance, or as an alternative to cash
flows from operating activities (as determined in accordance with US GAAP)
as a measure of liquidity.
(6) Cash flow from operations increased in fiscal year 1994 as a result of
customers who paid bills in advance in order to avoid paying value added
taxes which were introduced by the British government.
(7) The ratio of earnings to fixed charges is computed as the sum of pretax
income from continuing operations and fixed charges divided by fixed
charges. Fixed charges consist of interest expensed.
(8) On September 18, 1995, the Successor Company obtained effective control of
the Predecessor Company pursuant to the Successor Company's offer to
acquire the Predecessor Company.
(9) Pro Forma Nine Months Ended December 31, 1995 and Pro Forma Fiscal Year
1996 financial information gives effect to the acquisition of the
Predecessor Company by the Successor Company as if it had occurred on
April 1, 1995. See pages F-42, F-43 and F-44 included in this Prospectus.
(10) Solely for the convenience of the reader, pounds sterling amounts have
been translated into US dollars at the Noon Buying Rate on December 31,
1996 of $1.7123 = (Pounds)1.00.
(11) Intra-business eliminations consist primarily of intercompany transactions
between the distribution business and the supply business and intra-
business transactions between ancillary support businesses. Pursuant to
the UK regulatory framework, SWEB's distribution of electricity to its
supply customers within its own Franchise Area is billed to SWEB's supply
business, which in turn incorporates the distribution charge into the bill
sent to the final end user.
(12) Includes goodwill, net of amortization, and prepaid pension costs of
(Pounds)173 million ($296 million) and (Pounds)95 million ($163 million),
respectively, at March 31, 1996.
(13) Cash flow from operations for the period from inception (June 23, 1995) to
March 31, 1996 includes the settlement of accounts payable balances of
(Pounds)39 million ($67 million).
21
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors in connection
with the Exchange Offer and the Exchange Capital Securities offered hereby.
FACTORS RELATING TO THE ELECTRIC UTILITY BUSINESS IN GREAT BRITAIN
PRICE REGULATION OF DISTRIBUTION
The distribution business of SWEB is regulated under its PES license
pursuant to which revenue of the distribution business is controlled by the
Distribution Price Control Formula (as defined herein). The Distribution Price
Control Formula determines the maximum average price per unit of electricity
(expressed in kilowatt hours, a "unit") that a REC may charge. The elements
used in the Distribution Price Control Formula are established for a five-year
period and are subject to review by the Director General of Electricity Supply
(the "Regulator") at the end of each five-year period and at other times in
the discretion of the Regulator. At each review, the Regulator can adjust the
value of certain elements in the Distribution Price Control Formula. In July
1994, a review resulted in a 14% price reduction, before allowing for
inflation, effective April 1, 1995. In July 1995, a further review of
distribution prices was concluded by the Regulator for fiscal years 1997 to
2000. As a result of this further review, SWEB's distribution prices were
reduced by a further 11%, before allowing for inflation, effective April 1,
1996. There can be no assurance that any review by the Regulator will not
adversely affect the Company. See "The Electric Utility Industry in Great
Britain--The Structure of the Electricity Industry in Great Britain--
Distribution of Electricity."
COMPETITION IN SUPPLY
Each PES license holder currently has an exclusive right, subject to price
cap regulation, to supply customers in its franchise area with a maximum
demand of not more than 100kW ("Franchise Supply Customers"). However, the
supply business is being progressively opened to competition. The market for
customers with a maximum demand above 1MW has been open to competition for
suppliers of electricity since privatization while, for customers with a
maximum demand above 100kW ("Non-Franchise Supply Customers"), the market
became competitive in April 1994. The final stage of this process is expected
to take place over a period of six months commencing April 1, 1998 when
competition in supply to Franchise Supply Customers will be phased in. There
can be no assurance that competition among suppliers of electricity will not
adversely affect the Company. See "Business--SWEB's Main Businesses--Supply
Business."
POOL PURCHASE PRICE VOLATILITY
SWEB's supply business to Non-Franchise Supply Customers generally involves
entering into fixed price contracts to supply electricity to its customers.
SWEB obtains the electricity to satisfy its obligations under such contracts
primarily by purchases from the wholesale trading market for electricity in
England and Wales (the "Pool"), which was established at the time of
privatization for bulk trading of electricity in England and Wales between
generators and suppliers. See "The Electric Utility Industry in Great
Britain." Because the price of electricity purchased from the Pool can be
volatile, to the extent that SWEB purchases electricity from the Pool, SWEB is
exposed to risk arising from differences between the fixed price at which it
sells and the fluctuating prices at which it purchases electricity unless it
can effectively hedge such exposure. SWEB's ability to manage such risk at
acceptable levels will depend, in part, on the specifics of the supply
contracts that SWEB enters into, SWEB's ability to implement and manage an
appropriate hedging strategy and the development of an adequate market for
hedging instruments. No assurance can be given that this risk will be
effectively mitigated. See "Business--SWEB's Main Businesses--Supply
Business."
22
<PAGE>
FACTORS RELATING TO THE EXCHANGE OFFER
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws,
or pursuant to an exemption therefrom or in a transaction not subject thereto,
and in each case in compliance with certain other conditions and restrictions.
Original Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities which remain outstanding will not be entitled to
any rights to have such Original Capital Securities registered under the
Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exceptions). The Company and the Trust
do not intend to register under the Securities Act any Original Capital
Securities which remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable). To the extent that
Original Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Capital Securities could be
adversely affected.
The Exchange Capital Securities and any Original Capital Securities which
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding liquidation amount thereof have taken certain
actions or exercised certain rights under the Declaration. See "Description of
the Exchange Capital Securities--Voting Rights; Modification and Amendment of
the Declaration."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
June 28, 1997 and declared effective by July 28, 1997, the distribution rate
borne by the Original Capital Securities will increase by 0.25% per annum
until such registration statement has been filed or declared effective, as the
case may be. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the distribution
rate thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of the
Original Securities."
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Capital Securities in exchange for Original Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Exchange Agent of such Original Capital Securities, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of the Original Capital Securities desiring to
tender such Original Capital Securities in exchange for Exchange Capital
Securities should allow sufficient time to ensure timely delivery. Neither the
Company nor the Trust is under any duty to give notification of defects or
irregularities with respect to the tenders of Original Capital Securities for
exchange.
FACTORS RELATING TO THE CAPITAL SECURITIES AND THE SUBORDINATED DEBENTURES
RANKING OF SUBORDINATED OBLIGATIONS UNDER CAPITAL SECURITIES GUARANTEE AND
SUBORDINATED DEBENTURES
The obligations of the Company under the Subordinated Debentures are
unsecured obligations of the Company and will be subordinate and junior in
right of payment, to the extent set forth herein, to all Senior Indebtedness
of the Company, except obligations and securities made pari passu or
subordinate by their terms, but senior to all capital stock now or hereafter
issued by the Company and to any guarantee now or hereafter entered into by
the Company in respect of its capital stock. The Company's obligations under
the Capital
23
<PAGE>
Securities Guarantee to make any Guarantee Payments will constitute unsecured
obligations and will rank subordinate and junior in right of payment to all
other liabilities of the Company, including the Subordinated Debentures,
except for liabilities made pari passu or subordinate by their terms. At
December 31, 1996, liabilities of the Company on a consolidated basis
aggregated approximately (Pounds)1,345 million ($2,303 million). The terms of
the Capital Securities, the Subordinated Debentures or the Capital Securities
Guarantee do not limit the ability of the Company to incur additional
indebtedness or other liabilities, including indebtedness that ranks senior to
or pari passu with the Subordinated Debentures and the Capital Securities
Guarantee, or the ability of its subsidiaries to incur additional indebtedness
or other liabilities. See "Description of the Exchange Guarantee--Status of
the Capital Securities Guarantee" and "Description of the Exchange
Subordinated Debentures--Subordination."
The Indenture contains no provisions which would afford the holders of
Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company or a change of control of the Company.
TRUST DISTRIBUTIONS DEPENDENT ON THE COMPANY'S PAYMENTS ON SUBORDINATED
DEBENTURES
The Trust's ability to make distributions and other payments on the Capital
Securities is solely dependent upon the Company making interest and other
payments on the Subordinated Debentures deposited as trust assets as and when
required. If the Company were not to make distributions or other payments on
the Subordinated Debentures for any reason, including as a result of the
Company's election to defer the payment of interest on the Subordinated
Debentures by extending the interest period on the Subordinated Debentures,
the Trust will not make payments on the Trust Securities. In such an event,
holders of the Capital Securities would not be able to rely on the Capital
Securities Guarantee since distributions and other payments on the Capital
Securities are subject to such Guarantee only if and to the extent that the
Company has made a payment to the Trust of interest or principal on the
Subordinated Debentures deposited in the Trust as trust assets. Instead,
holders of Capital Securities would rely on the enforcement by the
Institutional Trustee of its rights against the Company pursuant to the terms
of the Indenture. However, if the Trust's failure to make distributions on the
Capital Securities is a consequence of the Company's exercise of its right to
extend the interest payment period for the Subordinated Debentures, the
Institutional Trustee will have no right to enforce the payment of
distributions on the Capital Securities until an Event of Default under the
Declaration shall have occurred.
The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Trust, including any taxes and all costs and expenses with
respect thereto, to which the Trust may become subject.
THE COMPANY MAY DEFER INTEREST PAYMENTS ON SUBORDINATED DEBENTURES
So long as the Company shall not be in default in the payment of interest on
the Subordinated Debentures, the Company has the right under the Indenture to
defer payments of interest on the Subordinated Debentures by extending the
interest payment period from time to time on the Subordinated Debentures for
an Extension Period not exceeding 10 consecutive semi-annual interest periods,
during which no interest shall be due and payable, provided that no Extension
Period may extend beyond the Stated Maturity Date of the Subordinated
Debentures. In such an event, semi-annual distributions on the Capital
Securities would not be made (but would continue to accrue with interest
thereon at the rate of 8.23% per annum, compounded semi-annually, to the
extent permitted by applicable law) by the Trust during any such Extension
Period. If the Company exercises the right to extend an interest payment
period, the Company may not during such Extension Period (a) declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its capital stock except for
dividends, payments or distributions payable in shares of its capital stock,
reclassifications of its capital stock and conversions or exchanges of capital
stock of one class or series for capital stock of another class or series and
except for a redemption, purchase or other acquisition of shares of its
capital stock made for
24
<PAGE>
the purpose of an employee incentive plan or benefit plan or other similar
arrangement of the Company or any of its subsidiaries or (b) make any payment
of interest, principal of or premium, if any, on, or repay, repurchase or
redeem any debt securities issued by the Company that rank pari passu with or
junior to the Subordinated Debentures (except by conversion into or exchange
for shares of its capital stock) or (c) make any guarantee payment with
respect to the foregoing. Any Extension Period with respect to payment of
interest on the Subordinated Debentures will apply to distributions with
respect to the Capital Securities.
Prior to the termination of any Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period together
with all such previous and further extensions thereof may not exceed 10
consecutive semi-annual interest periods. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. The
Company may also pay on any Interest Payment Date all or any portion of the
interest accrued during an Extension Period. Consequently, there could be
multiple Extension Periods of varying lengths (up to six Extension Periods of
10 consecutive semi-annual interest periods each or more numerous shorter
Extension Periods) throughout the term of the Subordinated Debentures. See
"Description of the Exchange Capital Securities--Distributions" and
"Description of the Exchange Subordinated Debentures--Option to Extend
Interest Payment Period."
TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIODS
Should an Extension Period occur, a holder of Capital Securities will
continue to accrue income (in the form of original issue discount) in respect
of its pro rata share of the Subordinated Debentures held by the Trust for
United States federal income tax purposes. As a result, a holder of Capital
Securities will include such income in gross income for United States federal
income tax purposes in advance of the receipt of cash, and will not receive
the cash related to such income from the Trust if the holder disposes of the
Capital Securities prior to the record date for the payment of distributions.
See "Certain Income Tax Considerations--US Federal Income Tax Considerations--
Interest Income and Original Issue Discount."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest payment
period on the Subordinated Debentures from time to time for periods not
exceeding 10 consecutive semi-annual interest periods. If the Company
determines to extend an interest payment period, the market price of the
Capital Securities is likely to be adversely affected. In addition, as a
result of such rights, the market price of the Capital Securities (which
represent an undivided interest in the Trust) may be more volatile than other
similar securities that do not have such rights. A holder that disposes of its
Capital Securities during an Extension Period, therefore, may not receive the
same return on its investment as a holder that continues to hold its Capital
Securities. See "Description of the Exchange Subordinated Debentures--Option
to Extend Interest Payment Period."
LACK OF ESTABLISHED TRADING MARKET FOR EXCHANGE CAPITAL SECURITIES
The Original Capital Securities were issued to, and the Company believes
such securities are currently owned by, a relatively small number of
beneficial owners. The Original Capital Securities have not been registered
under the Securities Act and will be subject to restrictions on
transferability if they are not exchanged for the Exchange Capital Securities.
Although the Exchange Capital Securities may be resold or otherwise
transferred by the holders (who are not affiliates of the Company or the
Trust) without compliance with the registration requirements under the
Securities Act, they will constitute a new issue of securities with no
established trading market. Original Capital Securities may be transferred by
the holders thereof only in blocks having a liquidation amount of not less
than $100,000 (100 Original Capital Securities). The Company and the Trust
have been advised by the Initial Purchasers that the Initial Purchasers
presently intend to make a market in the Exchange Capital Securities. However,
the Initial Purchasers are not obligated to do so and any market-
25
<PAGE>
making activity with respect to the Exchange Capital Securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the Exchange Capital Securities or the Original Capital Securities, or as to
the liquidity of or the trading market for the Exchange Capital Securities or
the Original Capital Securities. If an active public market does not develop,
the market price and liquidity of the Exchange Capital Securities may be
adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition of the Company and
the market for similar securities. Depending on these and other factors, the
Exchange Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions
of Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Original Capital Securities, where such Original
Capital Securities were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. See "Plan of Distribution."
SPECIAL EVENT REDEMPTION; DISTRIBUTION OF SUBORDINATED DEBENTURES
Upon the occurrence and during the continuation of a Tax Event or Investment
Company Event (each as defined herein), the Company will have the option to
redeem the Subordinated Debentures in cash (with the result that the Capital
Securities shall be redeemed). In addition, the Company will have the right at
any time to terminate the Trust and cause the Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description of the Exchange Capital Securities--Special Event
Redemption or Distribution." There can be no assurance as to the market prices
for the Subordinated Debentures that may be distributed in exchange for
Capital Securities if a termination and liquidation of the Trust were to
occur.
Under current United States federal income tax law, a distribution of the
Subordinated Debentures upon liquidation of the Trust would not be a taxable
event to holders of the Capital Securities, provided, however, that a
redemption of the Subordinated Debentures may be taxable. See "Certain Income
Tax Considerations--US Federal Income Tax Considerations--Receipt of
Subordinated Debentures or Cash Upon Liquidation of the Trust."
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights and will not
be able to appoint, remove or replace, or to increase or decrease the number
of, Trustees, which rights are vested exclusively in the holders of the Common
Securities. See "Description of the Exchange Capital Securities--Voting
Rights."
OTHER FACTORS
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 included the commitment to introduce a windfall tax
on excess profits of privatised utilities. Neither the total amount of
government revenue to be raised by the tax nor the allocation of the tax
between utilities has been announced. There can be no assurance that the
introduction of a windfall tax or other policies of the new government would
not adversely affect the Company.
26
<PAGE>
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
The Trust is a statutory business trust that was formed under the Delaware
Business Trust Act (the "Business Trust Act") on January 21, 1997 pursuant to
a declaration of trust dated January 21, 1997, as amended and restated on
January 29, 1997 among the Trustees (as defined herein) and the Company, as
sponsor, and the filing of a certificate of trust with the Secretary of State
of Delaware. The Trust exists for the purpose of (a) issuing and selling the
Trust Securities and effecting the Exchange Offer, (b) using the proceeds from
the sale of the Trust Securities to acquire the Original Subordinated
Debentures, (c) exchanging the Original Subordinated Debentures for the
Exchange Subordinated Debentures in the Exchange Offer and (d) engaging in
such other activities as are necessary, advisable or incidental thereto. The
rights of the holders of the Capital Securities, including economic rights,
rights to information and voting rights, are set forth in the Declaration, the
Trust Indenture Act (as defined below) to the extent applicable and the
Business Trust Act. The Company acquired Common Securities in an amount equal
to at least 3% of the total capital of the Trust and owns, directly or
indirectly, all of the issued and outstanding Common Securities. The Capital
Securities and the Common Securities have equivalent terms; provided that (i)
if an Event of Default under the Declaration occurs and is continuing, the
holders of Capital Securities will have a priority over holders of the Common
Securities with respect to distributions and payments upon liquidation,
redemption or otherwise and (ii) holders of Common Securities have the
exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace Trustees and to increase or decrease the number of Trustees.
The number of Trustees of the Trust is initially four. Two of the Trustees
are the Regular Trustees, who are employees or officers of or affiliated with
the Company. The third trustee is Bankers Trust Company, as Institutional
Trustee, which will act as the indenture trustee for purposes of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The fourth
trustee is Bankers Trust (Delaware), which will serve as the Delaware Trustee.
The Regular Trustees, the Institutional Trustee and the Delaware Trustee are
sometimes collectively referred to herein as the "Trustees". Pursuant to the
Declaration, the Institutional Trustee will have the power to exercise all
rights, powers and privileges under the Indenture with respect to the
Subordinated Debentures. The Institutional Trustee will promptly make
distributions to the holders of the Trust Securities out of any funds in the
Trust. The Capital Securities Guarantee will be held by Bankers Trust Company,
acting in its separate capacity as Capital Securities Guarantee Trustee for
the benefit of the holders of the Capital Securities.
Under the Declaration, the Trust shall not, and the Trustees (including the
Institutional Trustee) shall cause the Trust not to, engage in any activity
other than in connection with the purposes of the Trust or other than as
required or authorized by the Declaration. In particular, the Trust shall not
and the Trustees (including the Institutional Trustee) shall not (a) invest
any proceeds received by the Trust from holding the Subordinated Debentures
but shall promptly distribute all such proceeds to holders of Trust Securities
pursuant to the terms of the Declaration and of the Trust Securities; (b)
acquire any assets other than as expressly provided in the Declaration; (c)
possess Trust property for other than a Trust purpose; (d) make any
investments, other than investments represented by the Subordinated
Debentures; (e) possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Trust Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial ownership of, or
beneficial interests in, the Trust other than the Trust Securities; (g) incur
any indebtedness for borrowed money or (h)(1) except as otherwise provided in
the Declaration or the Capital Securities, direct the time, method and place
of exercising any trust or power conferred upon the Indenture Trustee with
respect to the Subordinated Debentures, (2) waive any past default that is
waivable under the applicable provisions of the Indenture, (3) exercise any
right to rescind or annul any declaration that the principal of all of the
Subordinated Debentures shall be due and payable or (4) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures or the Declaration, in each case where such consent shall be
required, unless in the case of this clause (h) the Institutional Trustee
shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters to the effect that such action will not
cause more than an insubstantial risk that the Trust will not be classified as
a grantor trust for United States federal income tax purposes.
27
<PAGE>
Except as provided below or under the Business Trust Act and the Trust
Indenture Act, holders of Capital Securities will have no voting rights. See
"Description of the Exchange Capital Securities--Voting Rights."
The Institutional Trustee, for the benefit of the holders of the Trust
Securities, is authorized under the Declaration to exercise all rights under
the Indenture with respect to the Subordinated Debentures and to enforce the
Company's obligations under the Subordinated Debentures upon the occurrence of
an Indenture Event of Default. The Institutional Trustee, as the Guarantee
Trustee, shall also be authorized to enforce the rights of holders of Capital
Securities under the Capital Securities Guarantee. If the Trust's failure to
make distributions on the Capital Securities is a consequence of the Company's
exercise of its right to extend the interest payment period for the
Subordinated Debentures, the Institutional Trustee will have no right to
enforce the payment of distributions on the Capital Securities until an Event
of Default under the Declaration shall have occurred. Holders of at least a
majority in liquidation amount of the Capital Securities will have the right
to direct the Institutional Trustee with respect to certain matters under the
Declaration and the Capital Securities Guarantee. Any holder of Capital
Securities may institute a legal proceeding against the Company to enforce the
Capital Securities Guarantee. See "Description of the Exchange Capital
Securities--Voting Rights."
If an Indenture Event of Default occurs and is continuing with respect to
any Subordinated Debenture, an Event of Default under the Declaration will
occur and be continuing with respect to the Trust Securities. In such event,
the Declaration provides that the holders of Common Securities will be deemed
to have waived any such Event of Default with respect to the Common Securities
until all Events of Default with respect to the Capital Securities have been
cured or waived. Until all such Events of Default with respect to the Capital
Securities have been so cured or waived, the Institutional Trustee will be
deemed to be acting solely on behalf of the holders of the Capital Securities
and only the holders of the Capital Securities will have the right to direct
the Institutional Trustee with respect to certain matters under the
Declaration and consequently under the Indenture. If any Event of Default with
respect to the Capital Securities is waived by the holders of the Capital
Securities as provided in the Declaration, the holders of Common Securities
pursuant to the Declaration have agreed that such waiver also constitutes a
waiver of such Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of the Common Securities. See "Description of the Exchange Capital
Securities."
The Declaration provides that the Trustees may treat the person in whose
name a Capital Security is registered on the books and records of the Trust as
the sole holder thereof for purposes of receiving distributions and for all
other purposes and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such Capital Securities on the part of any
person, whether or not the Trust shall have actual or other notice thereof.
Capital Securities will be issued in fully registered form. Subject to the
rules and procedures of DTC described under "Description of the Exchange
Capital Securities--Form, Denomination, Book-Entry Procedures and Transfer,"
interests in the Capital Securities will be held in the form of a global
certificate registered on the books and records of the Trust in the name of
DTC or its nominee. Under the Declaration:
(i) the Trust and the Trustees shall be entitled to deal with DTC (or any
successor depositary) for all purposes, including the payment of
distributions and receiving approvals, votes or consents under the
Declaration, and except as set forth in the Declaration, shall have no
obligation to persons owning Capital Securities ("Capital Security
Beneficial Owners") registered in the name of and held by DTC (or any
successor depositary) or its nominee; and
(ii) the rights of Capital Security Beneficial Owners shall be exercised
only through DTC (or any successor depositary) and shall be limited to
those established by law and agreements between such Capital Security
Beneficial Owners and DTC and/or its participating organizations
("Participants"). See "Description of the Exchange Capital Securities--
Form, Denomination, Book-Entry Procedures and Transfer." With respect to
Capital Securities registered in the name of and held by DTC or its
nominee, all notices and other communications required under the
Declaration shall be given to, and all distributions on such Capital
Securities shall be given or made to, DTC (or its successor).
28
<PAGE>
In the Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Trust, including the fees and expenses of the Trustees and
any taxes and all costs and expenses with respect thereto, to which the Trust
may become subject, except for United States withholding taxes. See "Risk
Factors--Trust Distributions Dependent on the Company's Payments on
Subordinated Debentures." The foregoing obligations of the Company under the
Declaration are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against the Trust or any other person
before proceeding against the Company. The Company has agreed in the
Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
THE FOREGOING SUMMARY OF CERTAIN PROVISIONS OF THE DECLARATION IS A
DISCUSSION OF THE MATERIAL TERMS OF THE DECLARATION, BUT DOES NOT PURPORT TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DECLARATION.
The business address of the Trust is Southern Investments UK Capital Trust I
c/o Bankers Trust (Delaware), 1001 Jefferson Street, Suite 550, Wilmington,
Delaware 19801-1457.
29
<PAGE>
THE COMPANY
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 on June 23, 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, having acquired approximately 84% of its shares.
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. In November 1995, the Company acquired the remaining shares of
SWEB. The Company's sole investment and only significant asset is the entire
share capital of SWEB, which is headquartered in Bristol, England. At December
31, 1996, the Company had consolidated assets of (Pounds)1.711 billion ($2.930
billion). The following organizational chart illustrates the ownership
structure of the Company and SWEB in summary form.
LOGO
SWEB's two main business lines are the distribution of electricity and the
supply of electricity to approximately 1.3 million customers in its Franchise
Area. The distribution business and the supply business are distinct business
segments and produced operating income of (Pounds)112 million ($192 million)
and (Pounds)15 million ($26 million), respectively, in Pro Forma Fiscal Year
1996, representing substantially all of the Company's consolidated operating
income in that pro forma fiscal year.
The Company's registered office and principal executive offices are located
at 800 Park Avenue, Aztec West, Almondsbury, Bristol BS12 4SE, England, and
its telephone number is 44 -1454 -201-101.
FRANCHISE AREA
SWEB operates primarily in its Franchise Area which 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. SWEB's Franchise Area has a resident population of approximately
2.8 million.
REGULATION
The revenues and operations of SWEB are regulated by the Regulator through
SWEB's PES license. Under that license, SWEB provides electricity distribution
services to virtually all consumers in its Franchise Area
30
<PAGE>
(whether supplied by SWEB's independent supply business or by other suppliers)
and must offer electricity supply services to all consumers in its Franchise
Area. Franchise Supply Customers within the Franchise Area (primarily
residential/domestic and small commercial consumers) can only be supplied by
SWEB. Non-Franchise Supply Customers within the Franchise Area (primarily
large commercial and agricultural and industrial consumers) may choose to be
supplied by SWEB or another supplier. Similarly, SWEB may supply electricity
to Non-Franchise Supply Customers outside SWEB's Franchise Area.
Under the terms of SWEB's PES license, the distribution business and the
supply business to Franchise Supply Customers are subject to a price cap
regulatory framework that provides economic incentives to SWEB to increase the
number of units of electricity distributed and supplied and to operate in a
cost-efficient manner. The price cap framework, however, does not apply to
Non-Franchise Supply Customers, and SWEB is able to competitively bid or
negotiate to supply electricity to such customers. SWEB's PES license also
limits the scope of SWEB's business activities and its ability, among other
things, to transfer assets and make loans. See "The Electric Utility Industry
in Great Britain--The Structure of the Electricity Industry in Great Britain--
Distribution of Electricity" and "--Electricity Supply."
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.
SWEB's distribution business has grown in both its customer base and in the
number of units distributed, primarily reflecting economic and population
growth in the South West of England. The South West, of which the Franchise
Area forms the greater part, has benefited from economic growth (as measured
by gross domestic product, "GDP") which exceeded the UK average from 1991
through 1996 and has also benefited 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. At March 31, 1996,
SWEB had experienced a 5-year compound annual growth rate of 0.8% in customers
and a 5-year compound annual growth rate of 2.3% in units distributed.
Since its acquisition by the Company, SWEB has introduced several
initiatives that focus on its distribution business. A number of areas for
cost savings and performance improvement have been identified which, together
with service innovations, are expected to improve the current level of
customer satisfaction and SWEB's financial performance. In this regard, a
total of 667 staff reductions (mainly in the distribution business and
representing 20% of staff at the time of the acquisition by the Company of
SWEB) are planned, of which 611 occurred prior to December 31, 1996. In
addition, new work practices developed in consultation with SWEB's unions have
contributed to cost savings. See "Business--SWEB's Main Businesses--
Distribution Business--Strategy."
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 1996, these customers
accounted for approximately 82% 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, from which date competition
to supply Franchise Supply Customers is scheduled to be progressively
introduced.
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
31
<PAGE>
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. As a result of this strategy, SWEB expects to supply a larger portion of
units to Non-Franchise Supply Customers than in fiscal year 1996.
SWEB's strategy for retaining its Franchise Supply Customers is to build
customer loyalty and offer competitive prices. SWEB seeks to build customer
loyalty by providing superior service, including reliable distribution
service. To provide responsive service for billing and other matters, SWEB has
installed a state-of-the-art call center to handle customers' needs and is
continuing work on improving and enhancing a billing system to provide
customers with important information in a user-friendly format.
Most of SWEB's Non-Franchise Supply Customers, who are primarily large
commercial and industrial companies, are located in SWEB's Franchise Area.
They are typically supplied through individual contracts for a duration of one
to two years based on competitively bid or negotiated prices.
SWEB's strategy for increasing market share among Non-Franchise Supply
Customers is to provide more competitive pricing, the superior service
described above and customized service that will be supported through an
expanded staff of key customer account managers utilizing new integrated
information systems.
OTHER BUSINESS ACTIVITIES
SWEB also has ancillary business activities that support the main
electricity businesses, including power generation and gas supply. See
"Business--SWEB's Other Business Activities."
PARENT COMPANIES
Southern owns several companies that together constitute one of the largest
investor-owned electric utility systems in the United States in terms of total
sales, electricity revenues and installed capacity. The Southern Company
system provides energy to approximately 4.8 million customers in Alabama,
Georgia, the panhandle of Florida, southeastern Mississippi and southwestern
England through its five southeastern United States utility operating
subsidiaries, which are Alabama Power Company, Georgia Power Company, Gulf
Power Company, Mississippi Power Company and Savannah Electric and Power
Company, and in England through SWEB. The Southern Company system currently
has ownership interests in over 75 power plants with more than 320 generating
units and with total electric generating capacity of over 36,000 MW. Southern
Energy, Inc. ("Southern Energy"), a wholly owned subsidiary of Southern,
focuses on management of, and investment opportunities related to,
international and domestic power generation, the independent US domestic power
market and international electricity businesses. Within the Southern Company
system, Southern Energy has management supervisory responsibility for
Holdings, the Company and SWEB, as well as certain other investments by the
Southern Company system in electricity businesses in the United States,
Argentina, Chile, China, the Bahamas, Indonesia, the Philippines and Trinidad
and Tobago. SWEB is the third largest operating company in the Southern
Company system in terms of revenue, assets and number of customers. The
acquisition of SWEB is consistent with Southern's stated objective of growing
businesses outside of its core US regulated utilities to contribute to the
consolidated earnings growth of Southern. In January 1997, Southern indirectly
acquired a controlling interest in Consolidated Electric Power Asia ("CEPA").
CEPA is the largest independent power producer in Asia.
PP&L Resources is the holding company for Pennsylvania Power & Light Company
("PP&L") and Power Markets Development Company ("PMDC"). PP&L, a public
utility company headquartered in Allentown, Pennsylvania, provides electric
service to approximately 1.2 million homes and businesses throughout a 10,000
square mile area in central and eastern Pennsylvania. PMDC, which has been a
subsidiary of PP&L Resources since 1995, develops, owns and operates electric
generation and distribution companies in Argentina, Bolivia, Peru, Spain,
Portugal, and the United Kingdom, with the most significant commitment to date
being PMDC's
32
<PAGE>
investment in Holdings. In March 1997, PMDC entered into an agreement to
acquire a controlling interest in a Chilean holding company that owns several
electric distribution companies in Chile and Bolivia. PMDC intends to continue
its strategic growth in Europe and Latin America with the intent of providing
a significant contribution to PP&L Resources earnings by the year 2000.
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the Exchange Capital Securities and the Exchange Guarantee offered
hereby. In consideration for issuing the Exchange Capital Securities in
exchange for Original Capital Securities as described in this Prospectus, the
Trust will receive Original Capital Securities in like liquidation amount. The
Original Capital Securities surrendered in exchange for the Exchange Capital
Securities will be retired and canceled.
All of the proceeds from the sale of the Original Capital Securities were
invested by the Trust in the Original Subordinated Debentures. The Company
used the net proceeds from the sale of the Original Subordinated Debentures,
amounting to approximately $81 million ((Pounds)50 million), to refinance a
term loan and for general corporate purposes.
CAPITALIZATION
The following table sets forth, at December 31, 1996, (i) the actual
consolidated capitalization of the Successor Company, and (ii) the
consolidated capitalization adjusted to reflect the issuance of the
Subordinated Debentures and the application of the net proceeds thereof. This
table should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes thereto of the
Successor Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
ACTUAL AS ADJUSTED
------------------------- -------------------------
(Pounds) $ % (Pounds) $ %
----------- ------ --- ----------- ------ ---
(AMOUNTS IN MILLIONS, EXCEPT %)
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Short-term debt........ (Pounds)307 $ 525(1) 31% (Pounds)282 $ 483(1) 28%
Senior Notes........... 300 500 31 300 500 30
Company Obligated
Mandatorily Redeemable
Subordinated Capital
Income Securities of
Subsidiary Trust Hold-
ing Company Subordi-
nated Debentures(3)... -- -- -- 50 82(2) 5
Total stockholder's eq-
uity.................. 366 627(1) 38 366 627(1) 37
----------- ------ --- ----------- ------ ---
Total capitalization... (Pounds)973 $1,652 100% (Pounds)998 $1,692 100%
=========== ====== === =========== ====== ===
</TABLE>
- --------
(1) Solely for convenience of the reader, UK pounds sterling amounts have been
translated into US dollars at the Noon Buying Rate on December 31, 1996 of
$1.7123 = (Pounds)1.00.
(2) Adjusted on the basis that the net proceeds of the issuance of the Capital
Securities were $81 million ((Pounds)50 million).
(3) As described in this Prospectus, all of the assets of the Trust will be
the Subordinated Debentures of the Company with an aggregate principal
amount not exceeding $84,537,000, and upon redemption of such debt, the
Capital Securities will be mandatorily redeemable.
33
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Capital Securities
will be presented as a separate line item in the consolidated balance sheet of
the Company, and appropriate disclosures concerning the Capital Securities,
the Capital Securities Guarantee and the Subordinated Debentures will be
included in the notes to the consolidated financial statements. For financial
reporting purposes, the Company will record distributions payable on the
Capital Securities as an expense.
EXCHANGE RATES
The following table sets out, for the periods indicated, certain information
concerning the exchange rates between UK pounds sterling and US dollars based
on the Noon Buying Rates.
<TABLE>
<CAPTION>
FISCAL YEAR PERIOD END AVERAGE(1) HIGH LOW
----------- ---------- ---------- ---- ----
($ PER (Pounds)1.00)
<S> <C> <C> <C> <C>
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, through December 31.................... 1.71 1.59 1.71 1.50
</TABLE>
- --------
(1) The average of the Noon Buying Rates in effect on the last business day of
each month during the relevant period.
34
<PAGE>
SELECTED FINANCIAL DATA
The income statement and balance sheet data of the Predecessor Company for
each of the four fiscal years ended 1995 and for the period from April 1 to
September 17, 1995, and of the Company (the "Successor Company" or the
"Company") for the period from inception (June 23, 1995) to March 31, 1996,
have been derived from the audited consolidated financial statements of the
Predecessor Company and the Successor Company, respectively. The unaudited
consolidated income statement data for the nine months ended December 31, 1995
and 1996 have been derived from the unaudited consolidated financial
statements of the Predecessor and Successor Company, respectively. The
unaudited consolidated balance sheet data as of December 31, 1996 have been
derived from the financial statements of the Successor Company. In the opinion
of the management of the Company, all adjustments (consisting of only normal
recurring adjustments) considered necessary for fair presentation of the
condensed unaudited consolidated financial statements have been included, and
the accompanying condensed consolidated financial statements present fairly
the financial position and the results of operations for the interim periods
presented. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto of the Predecessor Company and the Successor Company included
elsewhere in this Prospectus.
The unaudited pro forma condensed consolidated income statement and other
data presented below for fiscal year 1996 reflect the acquisition by the
Company of SWEB as if it had occurred as of April 1, 1995. Such unaudited pro
forma condensed consolidated income statement and other data have been
prepared by the Successor Company based upon assumptions deemed proper by it
and reflect a preliminary allocation of the purchase price paid for the
Predecessor Company. The unaudited pro forma condensed consolidated income
statement and other data presented herein are shown for illustrative purposes
only and are not necessarily indicative of the future results of operations of
the Successor Company or of the results of operations of the Successor Company
that would have actually occurred had the transaction been in effect for the
period presented.
PREDECESSOR COMPANY
UK GAAP(1)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1992 1993 1994 1995
------------ ------------ ------------ ------------
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Turnover............... (Pounds) 847 (Pounds) 892 (Pounds) 900 (Pounds) 875
Operating costs........ (759) (790) (791) (755)
------------ ------------ ------------ ------------
Operating profit....... 88 102 109 120
Exceptional item(2).... -- -- -- (20)
Other income........... 10 11 15 17
Interest, net.......... (15) (12) (7) (5)
Tax on profit.......... (21) (23) (24) (26)
------------ ------------ ------------ ------------
Profit for financial
period(3)............. (Pounds) 62 (Pounds) 78 (Pounds) 93 (Pounds) 86
============ ============ ============ ============
Dividends declared per
share................. (Pounds)0.17 (Pounds)0.20 (Pounds)0.24 (Pounds)0.27
============ ============ ============ ============
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1992 1993 1994 1995
------------ ------------ ------------ ------------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Fixed assets........... (Pounds) 490 (Pounds) 544 (Pounds) 579 (Pounds) 615
Current assets......... 212 213 301 254
Creditors: Amounts
falling due within one
year.................. (179) (176) (205) (243)
------------ ------------ ------------ ------------
Total assets less cur-
rent liabilities...... 523 581 675 626
Creditors: Amounts
falling due in more
than one year......... (85) (87) (92) (95)
Total shareholders'
funds................. 425 479 543 494
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1992 1993 1994 1995
------------ ------------ ------------ ------------
(AMOUNTS IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT(4)................ (Pounds) 99 (Pounds) 115 (Pounds) 126 (Pounds) 142
EBITDA(5).............. 123 141 154 173
Cash flow from opera-
tions(6).............. 128 140 245 124
Ratio of earnings to
fixed charges(7)...... 6 8 12 13
</TABLE>
35
<PAGE>
PREDECESSOR COMPANY
US GAAP(1)
<TABLE>
<CAPTION>
PERIOD FROM PRO FORMA
YEAR ENDED MARCH 31, APRIL 1, 1995 NINE MONTHS ENDED
-------------------------- TO SEPTEMBER 17, DECEMBER 31, 1995
1994 1995 1995(8) (UNAUDITED)(9)
------------ ------------ ---------------- -----------------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating revenues..... (Pounds) 808 (Pounds) 776 (Pounds) 299 (Pounds) 541
Operating income....... 122 139 40 80
Interest, net.......... (7) (4) (3) (48)
Gain on sale of invest-
ment.................. -- -- -- 7
Other, net............. 16 16 1 3
Provision for income
taxes................. (43) (50) (13) (15)
------------ ------------ ------------ ------------
Income from continuing
operations............ 88 101 25 27
Discontinued opera-
tions................. -- (7) (1) --
------------ ------------ ------------ ------------
Net income............. (Pounds) 88 (Pounds) 94 (Pounds) 24 (Pounds) 27
============ ============ ============ ============
Dividends declared per
share ................ (Pounds)0.21 (Pounds)0.25 (Pounds)0.85 (Pounds)0.85
============ ============ ============ ============
<CAPTION>
MARCH 31,
1995
------------
(AMOUNTS
IN MILLIONS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Property, plant and
equipment, net........ (Pounds) 541
Total assets........... 869
Total stockholder's eq-
uity.................. 374
Long-term debt......... 95
Short-term debt........ 24
<CAPTION>
PRO FORMA
PERIOD FROM NINE MONTHS ENDED
YEAR ENDED MARCH 31, APRIL 1, 1995 DECEMBER
-------------------------- TO SEPTEMBER 17, 31, 1995
1994 1995 1995(8) (UNAUDITED)(9)
------------ ------------ ---------------- -----------------
(AMOUNTS IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT(4)................ (Pounds) 142 (Pounds) 162 (Pounds) 43 (Pounds) 97
EBITDA(5).............. 170 193 58 128
Cash flow from opera-
tions(6).............. 236 100 69 142
Ratio of earnings to
fixed charges(7)...... 13 15 9 2
</TABLE>
36
<PAGE>
SUCCESSOR COMPANY
US GAAP
<TABLE>
<CAPTION>
PRO FORMA NINE MONTHS
PERIOD FROM FISCAL YEAR ENDED ENDED
INCEPTION (JUNE 23, 1995) MARCH 31, 1996 DECEMBER 31, 1996
TO MARCH 31, 1996(8) (UNAUDITED)(9) (UNAUDITED)
-------------------------------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10) (Pounds) $(10)
---------------- ------------------------ ------ -------------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating revenues..... (Pounds) 481 $ 823 (Pounds) 780 $1,336 (Pounds) 602 $ 1,031
Operating income....... 86 147 129 221 90 154
Interest, net.......... (21) (36) (57) (98) (38) (65)
Gain on sale of invest-
ments................. 14 24 -- -- 1 2
Other, net............. 2 3 3 5 4 7
Provision for income
taxes................. (28) (48) (26) (44) (22) (38)
---------------- --------- ------------- ------ -------------- -------
Income from continuing
operations............ 53 90 (Pounds) 49 $ 84 35 60
============= ======
Extraordinary gain on
early extinguishment
of debt............... 6 10 -- --
---------------- --------- -------------- -------
Net income............. (Pounds) 59 $ 100 (Pounds) 35 $ 60
================ ========= ============== =======
Dividends declared per
share................. (Pounds) 3.82 $ 6.54 (Pounds) 4.67 $ 8.00 (Pounds) 0.07 $ 0.12
================ ========= ============= ====== ============== =======
<CAPTION>
DECEMBER 31, 1996
MARCH 31, 1996 (UNAUDITED)
----------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10)
---------------- ----------- -------------- ---------
(AMOUNTS IN MILLIONS) (AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Property, plant and
equipment, net........ (Pounds) 1,207 $ 2,068 (Pounds) 1,249 $ 2,139
Total assets........... 1,686 2,887 1,711 2,930
Total stockholder's eq-
uity.................. 368 630 366 627
Short-term debt........ 650 1,113 332 568
<CAPTION>
PRO FORMA NINE MONTHS
PERIOD FROM FISCAL YEAR ENDED ENDED
INCEPTION (JUNE 23, 1995) MARCH 31, 1996 DECEMBER 31, 1996
TO MARCH 31, 1996(8) (UNAUDITED)(9) (UNAUDITED)
-------------------------------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10) (Pounds) $(10)
---------------- ------------------------ ------ -------------- ---------
(AMOUNTS IN MILLIONS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT(4)................ (Pounds) 95 $ 163 (Pounds) 141 $ 241 (Pounds) 96 $ 165
EBITDA(5).............. 117 200 182 311 128 220
Cash flow from opera-
tions(13)............. 25 43 94 161 52 89
Ratio of earnings to
fixed charges(7)...... 4 2 2
</TABLE>
37
<PAGE>
BUSINESS SEGMENTS
PREDECESSOR COMPANY
UK GAAP(1)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------
1992 1993 1994 1995
----------- ----------- ----------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TURNOVER:
Electricity distribu-
tion.................. (Pounds)230 (Pounds)235 (Pounds)250 (Pounds)274
Electricity supply..... 763 787 772 725
Retailing(2)........... 53 72 79 82
Other.................. 21 59 78 84
Less: Intra-busi-
ness(11).............. (220) (261) (279) (290)
----------- ----------- ----------- -----------
Total............... (Pounds)847 (Pounds)892 (Pounds)900 (Pounds)875
OPERATING PROFIT (LOSS):
Electricity distribu-
tion.................. (Pounds) 90 (Pounds) 85 (Pounds) 77 (Pounds) 96
Electricity supply..... 4 16 25 15
Retailing(2)........... (1) (2) 1 1
Other.................. (5) 4 6 9
Less: Intra-busi-
ness(11).............. -- -- -- (1)
----------- ----------- ----------- -----------
Total............... (Pounds) 88 (Pounds)103 (Pounds)109 (Pounds)120
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------
1992 1993 1994 1995
----------- ----------- ----------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Electricity distribu-
tion.................. (Pounds)449 (Pounds)454 (Pounds)472 (Pounds)504
Electricity supply..... 139 134 91 89
Retailing(2)........... 32 38 56 64
Other.................. 82 131 261 212
----------- ----------- ----------- -----------
Total............... (Pounds)702 (Pounds)757 (Pounds)880 (Pounds)869
</TABLE>
38
<PAGE>
BUSINESS SEGMENTS
PREDECESSOR COMPANY
US GAAP(1)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, PERIOD FROM
------------------------- APRIL 1, 1995 TO
1994 1995 SEPTEMBER 17, 1995
----------- ------------ ------------------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
OPERATING REVENUE:
Electricity distribution...... (Pounds)250 (Pounds)274 (Pounds) 105
Electricity supply............ 772 725 276
Other......................... 54 57 23
Less: Intra-business(11)...... (268) (280) (105)
----------- ----------- ------------
Total...................... (Pounds)808 (Pounds)776 (Pounds) 299
OPERATING INCOME (LOSS):
Electricity distribution...... (Pounds) 84 (Pounds)112 (Pounds) 42
Electricity supply............ 27 18 2
Other......................... 11 10 (4)
Less: Intra-business(11)...... -- (1) --
----------- ----------- ------------
Total...................... (Pounds)122 (Pounds)139 (Pounds) 40
<CAPTION>
MARCH 31,
1995
------------
(AMOUNTS
IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS:
Electricity distribution...... (Pounds)531
Electricity supply............ 93
Other......................... 245
-----------
Total...................... (Pounds)869
</TABLE>
39
<PAGE>
BUSINESS SEGMENTS
SUCCESSOR COMPANY
US GAAP
<TABLE>
<CAPTION>
PERIOD FROM PRO FORMA NINE MONTHS
INCEPTION FISCAL YEAR ENDED ENDED
(JUNE 23, 1995) TO MARCH 31, 1996 DECEMBER 31, 1996
MARCH 31, 1996(8) (UNAUDITED)(9) (UNAUDITED)
-------------------------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10) (Pounds) $(10)
-------------- -------------------- ------ -------------- ---------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Electricity distribu-
tion.................. (Pounds) 147 $ 252 (Pounds)252 $ 431 (Pounds) 169 $ 289
Electricity supply..... 450 770 726 1,243 560 959
Other.................. 33 56 54 93 41 70
Less: Intra-busi-
ness(11).............. (149) (255) (252) (431) (168) (287)
-------------- ------- ----------- ------ -------------- -------
Total............... (Pounds) 481 $ 823 (Pounds)780 $1,336 (Pounds) 602 $ 1,031
OPERATING INCOME (LOSS):
Electricity distribu-
tion.................. (Pounds) 72 $ 123 (Pounds)112 $ 192 (Pounds) 76 $ 130
Electricity supply..... 13 22 15 26 12 21
Other.................. 1 2 3 5 3 5
Less: Intra-busi-
ness(11).............. -- -- (1) (2) (1) (2)
-------------- ------- ----------- ------ -------------- -------
Total............... (Pounds) 86 $ 147 (Pounds)129 $ 221 (Pounds) 90 $ 154
<CAPTION>
DECEMBER 31, 1996
MARCH 31, 1996 (UNAUDITED)
------------------------- -------------------------
(Pounds) $(10) (Pounds) $(10)
-------------- --------- -------------- ---------
(AMOUNTS IN MILLIONS) (AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS(12):
Electricity distribu-
tion.................. (Pounds) 1,422 $ 2,435 (Pounds) 1,480 $ 2,534
Electricity supply..... 102 175 132 226
Other.................. 162 277 99 170
-------------- ------- -------------- -------
Total............... (Pounds) 1,686 $ 2,887 (Pounds) 1,711 $ 2,930
</TABLE>
- --------
(1) The financial data for the Predecessor Company shown on pages (i) 35 and
38 and (ii) 36 and 39 were derived from financial statements for the
Predecessor Company prepared, respectively, in accordance with UK GAAP
and US GAAP. The principal differences between US GAAP and UK GAAP as
applied to the Predecessor Company relate to the treatment of
discontinued operations, pension costs and deferred taxes.
(2) A provision for the disposition of the electrical appliance retailing
business resulted in an exceptional item for the fiscal year ended March
31, 1995. The actual disposition of this business segment occurred in
June 1995.
(3) Excluding the exceptional item, profit for fiscal year 1995 would have
been (Pounds)98 million.
(4) EBIT equals income from continuing operations before the sum of interest
expense and income taxes. EBIT for the period from inception (June 23,
1995) to March 31, 1996 and for Pro Forma Fiscal Year 1996 excludes a
nonrecurring gain on sale of investment of (Pounds)14 million ($24
million). This information is provided for informational purposes only
and such measure should not be construed as an alternative to operating
income (as determined in accordance with US GAAP) as an indicator of
operating performance, or as an alternative to cash flows from operating
activities (as determined in accordance with US GAAP) as a measure of
liquidity.
(5) EBITDA equals income from continuing operations before the sum of
interest expense, income taxes, depreciation and amortization. EBITDA for
the period from inception (June 23, 1995) to March 31, 1996 and for Pro
Forma Fiscal Year 1996 excludes a nonrecurring gain on sale of investment
of (Pounds)14 million ($24 million). This information is provided for
informational purposes only and such measure should not be construed as
an alternative to operating income (as determined in accordance with US
GAAP) as an indicator of operating performance, or as an alternative to
cash flows from operating activities (as determined in accordance with US
GAAP) as a measure of liquidity.
(6) Cash flow from operations increased in fiscal year 1994 as a result of
customers who paid bills in advance in order to avoid paying value added
taxes which were introduced by the British government.
(7) The ratio of earnings to fixed charges is computed as the sum of pretax
income from continuing operations and fixed charges divided by fixed
charges. Fixed charges consist of interest expensed.
(8) On September 18, 1995, the Successor Company obtained effective control
of the Predecessor Company pursuant to the Successor Company's offer to
acquire the Predecessor Company.
(9) Pro Forma Nine Months Ended December 31, 1995 and Pro Forma Fiscal Year
1996 financial information gives effect to the acquisition of the
Predecessor Company by the Successor Company as if it had occurred on
April 1, 1995. See pages F-42, F-43 and F-44 included in this Prospectus.
(10) Solely for the convenience of the reader, pounds sterling amounts have
been translated into US dollars at the Noon Buying Rate on December 31,
1996 of $1.7123 = (Pounds)1.00.
(11) Intra-business eliminations consist primarily of intercompany
transactions between the distribution business and the supply business
and intra-business transactions between ancillary support businesses.
Pursuant to the UK regulatory framework, SWEB's distribution of
electricity to its supply customers within its own Franchise Area is
billed to SWEB's supply business, which in turn incorporates the
distribution charge into the bill sent to the final end user.
(12) Includes goodwill, net of amortization, and prepaid pension costs of
(Pounds)173 million ($296 million) and (Pounds)95 million ($163 million),
respectively, at March 31, 1996.
(13) Cash flow from operations for the period from inception (June 23, 1995)
to March 31, 1996 includes the settlement of accounts payable balances of
(Pounds)39 million ($67 million).
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto of Southern Investments UK plc (the
"Successor Company" or the "Company") and with the consolidated financial
statements and the notes thereto of South Western Electricity plc and its
subsidiaries (the "Predecessor Company" or "SWEB") and "Selected Financial
Data" included elsewhere in this Prospectus. The consolidated financial
statements of the Successor Company and the consolidated financial statements
of the Predecessor Company discussed in this Section are presented in
accordance with US GAAP.
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, having acquired
approximately 84% of its shares. 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. In November 1995, the
Company acquired the remaining shares of SWEB. Total consideration for the
acquisition was (Pounds)1.063 billion ($1.820 billion) excluding a special
dividend of (Pounds)52 million ($89 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 (Pounds)23 million ($39 million) paid in October 1995 in respect
of fiscal year 1995, yields the (Pounds)75 million ($128 million) payment of
preacquisition dividends disclosed in the financial statements located
elsewhere in this Prospectus.
ACCOUNTING FOR THE ACQUISITION
The recorded assets and liabilities of SWEB immediately prior to the time
the Company gained effective control of SWEB were (Pounds)855 million and
(Pounds)515 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 (Pounds)910 million to their fair value of (Pounds)1.765
billion ($3.022 billion), and the amount of SWEB's liabilities recorded on the
books of the Company was increased by (Pounds)362 million to their fair value
of (Pounds)877 million ($1.502 billion). The increase in liabilities included
the establishment of reserves totaling (Pounds)44 million related principally
to staff reductions and the disposition of ancillary businesses. The resulting
difference between the purchase price of (Pounds)1.063 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 (Pounds)175 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 unaudited pro forma information presented for the nine months ended
December 31, 1995, consists of the historical results of the Company for the
period from inception (June 23, 1995) to December 31, 1995 and of SWEB for the
period from April 1, 1995 to September 17, 1995, both of which have been
adjusted for the effects of the acquisition as though it had taken place on
April 1, 1995. The pro forma adjustments relate to the allocation of fair
values of assets acquired and liabilities assumed, as well as the reversal of
certain non-recurring items.
41
<PAGE>
The information for Pro Forma Fiscal Year 1996 and that for the pro forma
nine months ended December 31, 1995 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 the relevant period had the
transactions been consummated on the date assumed and does not project the
Company's financial position or results of operations for any future date or
period.
Unaudited amounts have been prepared based upon the 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 The National Grid
Group plc ("NGG") and related actions produced a nonrecurring pre-tax gain of
(Pounds)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 (Pounds)241 million. In October 1995, the 12 RECs and Her
Majesty's Government (owning one special share) agreed to seek a listing for
the NGG shares on the London Stock Exchange. The listing took place in
December 1995. Following that, SWEB progressively sold its approximately 6.3%
ownership interest in NGG for total proceeds of (Pounds)213 million, including
(Pounds)12 million in respect of shares sold by SWEB to the Company. 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 (Pounds)36 million
of its share of the total proceeds from that sale by the end of fiscal year
1996. SWEB's estimated total share of the proceeds from the sale is (Pounds)39
million. As part of the agreement among the shareholders of NGG, each of the
RECs agreed to provide a discount to each of their respective Franchise Supply
Customers which, together with the associated reduction in the Fossil Fuel
Levy (as defined in "The Electric Utility Industry in Great Britain"),
produced a credit on each Franchise Supply Customer's bill of just over
(Pounds)50. The cost to SWEB of providing the discount amounted to (Pounds)57
million which was credited to customers in the last quarter of fiscal year
1996. In order to compensate the RECs for the cost of the customer discount
and other costs associated with the listing and sale, NGG paid a special
dividend shortly before the listing. SWEB's share of the special dividend
after taxation amounted to (Pounds)61 million. Between September 18, 1995 and
March 31, 1996, SWEB paid to the Company and the Company paid to Holdings a
dividend of (Pounds)191 million which was made possible because of the
proceeds from the sale of SWEB's interest in NGG.
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
PRO FORMA NINE MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH NINE MONTHS ENDED
DECEMBER 31, 1996
The revenues recorded for the Franchise Supply Business for the pro forma
nine months ended December 31, 1995 and the nine months ended December 31,
1996 are recognized, in part, using management estimates of the revenues which
will be permitted by the Regulator to be earned during the respective fiscal
years ended March 31. See "The Electric Utility Industry in Great Britain--
Electricity Supply." Accordingly, increases in revenue, operating income and
net income between the two periods discussed below are not necessarily
indicative of the comparative results which actually have been realized
between the pro forma nine months ended December 31, 1995 and the nine months
ended December 31, 1996 or which may actually be realized between the full
fiscal years.
42
<PAGE>
Earnings
Operating income increased by (Pounds)10 million (13%) from (Pounds)80
million in the pro forma nine months ended December 31, 1995 to (Pounds)90
million in the nine months ended December 31, 1996. This increase was
primarily due to a (Pounds)1 million increase in operating income from the
supply business, a (Pounds)5 million increase in operating income from the
distribution business and a (Pounds)4 million increase in operating income
from ancillary businesses.
Net income increased by (Pounds)8 million from (Pounds)27 million in the pro
forma nine months ended December 31, 1995 to (Pounds)35 million in the nine
months ended December 31, 1996. This increase was primarily attributable to
reduced after-tax interest expense of (Pounds)11 million resulting from the
repayment during the second half of fiscal year 1996 of debt issued to finance
the acquisition, increased operating income as described above, partly offset
by the decrease in after-tax interest income of (Pounds)4 million and in
after-tax gain on sale of investments of (Pounds)4 million.
Revenues
Operating revenues increased by (Pounds)61 million (11%) from (Pounds)541
million in the pro forma nine months ended December 31, 1995 to (Pounds)602
million in the nine months ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
--------------------------------
INCREASE (DECREASE) FROM THE PRO
FORMA NINE MONTHS ENDED
DECEMBER 31, 1995 TO THE
NINE MONTHS ENDED
DECEMBER 31, 1996
--------------------------------
((Pounds) MILLIONS, EXCEPT %)
<S> <C>
Electricity distribution.................... (12)
Electricity supply.......................... 57
Other....................................... 3
Less:Intra-business(1)...................... (13)
---
Total operating revenues.................. 61
===
Percentage change......................... 11%
===
</TABLE>
- --------
(1) The change in intra-business revenues has the effect of increasing total
operating revenues due to the elimination of intra-business revenues in
consolidation.
43
<PAGE>
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. See "The Electric Utility Industry in Great
Britain." In the nine months ended December 31, 1996, application of the
Distribution Price Control Formula resulted in a reduction in SWEB's
distribution revenues as compared to the pro forma nine months ended December
31, 1995. 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 (Pounds)12 million (7%) from (Pounds)181 million for the pro
forma nine months ended December 31, 1995 to (Pounds)169 million for the nine
months ended December 31, 1996 as a result of the following factors:
<TABLE>
<CAPTION>
OPERATING REVENUES FROM
ELECTRICITY DISTRIBUTION
--------------------------------
INCREASE (DECREASE) FROM THE PRO
FORMA NINE MONTHS ENDED
DECEMBER 31, 1995 TO THE
NINE MONTHS ENDED
DECEMBER 31, 1996
--------------------------------
((Pounds) MILLIONS, EXCEPT %)
<S> <C>
Application of Distribution Price Control
Formula.................................. (12)
Sales growth.............................. 2
Other revenue attributable to distribution
businesses............................... (2)
---
Total distribution revenues............... (12)
===
Percentage change......................... (7)%
===
</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) 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 (Pounds)57 million (11%) from
(Pounds)503 million for the pro forma nine months ended December 31, 1995 to
(Pounds)560 million for the nine months ended December 31, 1996. In the nine
months ended December 31, 1996, the number of electricity units supplied
increased by 26% but total revenues produced by the supply business increased
by only 11%, 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
supplied increased by 2%, offset by a reduction in allowable income as set by
the Supply Price Control Formula.
Cost of Sales
Cost of sales increased by (Pounds)74 million (22%) from (Pounds)343 million
in the pro forma nine months ended December 31, 1995 to (Pounds)417 million in
the nine months ended December 31, 1996. This increase was principally the
result of an increase in the supply business cost of sales of (Pounds)62
million reflecting an increase in purchases of electricity to supply the
increase in unit sales as discussed above.
44
<PAGE>
Operating Expenses
Operating expenses decreased by (Pounds)23 million (19%) from (Pounds)118
million in the pro forma nine months ended December 31, 1995 to (Pounds)95
million in the nine months ended December 31, 1996. This decrease was
primarily due to a (Pounds)4 million decrease in maintenance costs and a
(Pounds)20 million decrease in selling, general and administrative costs,
which were partially offset by a (Pounds)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 resulted in part
from a decrease in certain classes of computer software development costs
which were expensed during the pro forma nine months ended December 31, 1995
but were capitalized in the nine months ended December 31, 1996, having
satisfied the criteria for capitalization under the Company's accounting
policy (see Note 1 to the Consolidated Financial Statements of the Successor
Company). The decrease in selling, general and administrative costs was also
due to a decrease in labor costs resulting from a reduction in personnel.
Interest Expense
Interest expense decreased by (Pounds)16 million from (Pounds)55 million in
the pro forma nine months ended December 31, 1995 to (Pounds)39 million in the
nine months ended December 31, 1996, principally as a result of the financing
costs associated with the amount of debt issued for the acquisition. Interest
expense for pro forma nine months ended December 31, 1995 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 nine months
ended December 31, 1996, the Company benefitted from the retirement of
(Pounds)96 million of debt and the conversion of (Pounds)500 million of debt
to equity during the second half of fiscal year 1996. Such retirement and
conversion were not reflected in the financial statements for pro forma nine
months ended December 31, 1995.
Gain on sale of investments
The decrease is largely due to a pretax gain of (Pounds)7 million realized
in December 1995 in respect of the sale of a substantial portion of SWEB's
equity holding in NGG. This gain is nonrecurring in nature as it is the result
of changes in circumstances after the fair valuation of the investment in NGG
resulting from the application of APB No. 16 which valuation was finalized
shortly after the date of acquisition.
Income Taxes
Income taxes increased by (Pounds)7 million from (Pounds)15 million in the
pro forma nine months ended December 31, 1995 to (Pounds)22 million in the
nine months ended December 31, 1996. This increase was primarily attributable
to an increase in pre-tax income.
FISCAL YEAR 1995 COMPARED WITH PRO FORMA FISCAL YEAR 1996
Earnings
Operating income decreased by (Pounds)10 million (7%) from (Pounds)139
million in fiscal year 1995 to (Pounds)129 million in Pro Forma Fiscal Year
1996. This decrease was due to a (Pounds)24 million increase in cost of sales,
partially offset by a (Pounds)4 million increase in operating revenues and a
(Pounds)10 million decrease in operating expenses.
Net income decreased by (Pounds)45 million (48%) from (Pounds)94 million in
fiscal year 1995 to (Pounds)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 (Pounds)37 million principally due to debt
issued for the acquisition.
45
<PAGE>
Revenues
Operating revenues increased by (Pounds)4 million (1%) from (Pounds)776
million in fiscal year 1995 to (Pounds)780 million in Pro Forma Fiscal Year
1996 as follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
-----------------------------
INCREASE (DECREASE)
FROM FISCAL YEAR 1995
TO PRO FORMA FISCAL YEAR 1996
-----------------------------
((Pounds) MILLIONS, EXCEPT %)
<S> <C>
Electricity distribution....................... (22)
Electricity supply............................. 1
Other activities............................... (3)
Less: Intra-business(1)........................ (28)
---
Total operating revenues..................... 4
===
Percentage change............................ 1%
===
</TABLE>
- --------
(1) The change in intra-business revenues has the effect of increasing total
operating revenues due to the elimination of intra-business revenues in
consolidation.
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. See "The
Electric Utility Industry in Great Britain." Revenues from the distribution
business decreased by (Pounds)22 million (8%) from (Pounds)274 million in
fiscal year 1995 to (Pounds)252 million in Pro Forma Fiscal Year 1996 as a
result of the following factors:
<TABLE>
<CAPTION>
OPERATING REVENUES FROM
ELECTRICITY DISTRIBUTION
-----------------------------
INCREASE (DECREASE)
FROM FISCAL YEAR 1995
TO PRO FORMA FISCAL YEAR 1996
-----------------------------
((Pounds) MILLIONS, EXCEPT %)
<S> <C>
Application of Distribution Price Control
Formula..................................... (20)
Sales growth................................. 9
Other revenue attributed to distribution
business(1)................................. (11)
---
Total distribution revenues................ (22)
===
Percentage change.......................... (8)%
===
</TABLE>
- --------
(1) Represents non-recurring revenues received in fiscal year 1995 for
installing the telecommunications fiberoptic infrastructure.
Revenues from the supply business increased by (Pounds)1 million from
(Pounds)725 million in fiscal year 1995 to (Pounds)726 million in Pro Forma
Fiscal Year 1996. This increase reflects an increase of (Pounds)11 million in
revenues from the franchise supply market which offset a (Pounds)10 million
reduction in revenues from the non-franchise supply market which was primarily
due to lower unit sales. This 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 revenues decreased by (Pounds)28 million (10%) from
(Pounds)280 million in fiscal year 1995 to (Pounds)252 million in Pro Forma
Fiscal Year 1996 primarily as the result of the decrease in revenues from the
distribution business described above.
46
<PAGE>
Cost of Sales
Cost of sales increased by (Pounds)24 million (5%) from (Pounds)480 million
in fiscal year 1995 to (Pounds)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 (Pounds)20 million.
Operating Expenses
Operating expenses decreased by (Pounds)10 million (6%) from (Pounds)157
million in fiscal year 1995 to (Pounds)147 million in Pro Forma Fiscal Year
1996. This decrease was principally due to a reduction in severance costs of
(Pounds)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,
having satisfied the criteria for capitalization under the Company's
accounting policy (see Note 1 to the Consolidated Financial Statements of the
Successor Company), partially offset by an increase in net pension costs and
an increase in depreciation and amortization expense.
Interest Expense
Interest expense increased by (Pounds)55 million from (Pounds)11 million in
fiscal year 1995 to (Pounds)66 million in Pro Forma Fiscal Year 1996
principally as a result of the financing costs associated with the increased
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 fiscal year 1996, the Company retired an aggregate of (Pounds)96
million of debt and converted (Pounds)500 million of debt to equity, and such
retirement and conversion were not reflected in the financial statements for
Pro Forma Fiscal Year 1996. The weighted average balance of debt outstanding
during the Pro Forma Fiscal Year 1996 was (Pounds)876 million at a weighted
average interest rate of 7.5% compared to (Pounds)93 million at 11.9% during
fiscal year 1995.
Income Taxes
Income taxes decreased by (Pounds)24 million from (Pounds)50 million in
fiscal year 1995 to (Pounds)26 million in Pro Forma Fiscal Year 1996. This
decrease is primarily attributable to a decrease in pre-tax income.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1995
Earnings
Operating income increased by (Pounds)17 million (14%) from (Pounds)122
million in fiscal year 1994 to (Pounds)139 million in fiscal year 1995,
primarily due to a (Pounds)28 million increase in operating income from the
distribution business which was partially offset by a (Pounds)9 million
decrease in operating income from the supply business.
Net income increased by (Pounds)6 million (7%) from (Pounds)88 million in
fiscal year 1994 to (Pounds)94 million in fiscal year 1995. The increase was
primarily due to an increase of (Pounds)11 million in after-tax operating
income, an increase of (Pounds)2 million in after-tax interest income and an
increase of (Pounds)1 million in after-tax gain from discontinued operations,
partly offset by a one-time, after-tax loss of (Pounds)8 million on the sale
of the retail appliance business.
47
<PAGE>
Revenues
Operating revenues decreased by (Pounds)32 million (4%) from (Pounds)808
million in fiscal year 1994 to (Pounds)776 million in fiscal year 1995 as
follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
-----------------------------
INCREASE (DECREASE)
FROM FISCAL YEAR 1994
TO FISCAL YEAR 1995
-----------------------------
((Pounds) MILLIONS, EXCEPT %)
<S> <C>
Electricity distribution....................... 24
Electricity supply............................. (47)
Other activities............................... 3
Less: Intra-business(1)........................ 12
---
Total operating revenues..................... (32)
===
Percentage change............................ (4)%
===
</TABLE>
- --------
(1) The increase in intra-business revenues has the effect of decreasing total
operating revenues due to the elimination of intra-business revenues in
consolidation.
Revenues from the distribution business increased by (Pounds)24 million
(10%) from (Pounds)250 million in fiscal year 1994 to (Pounds)274 million in
fiscal year 1995 as a result of the following factors:
<TABLE>
<CAPTION>
OPERATING REVENUES FROM
ELECTRICITY DISTRIBUTION
-----------------------------
INCREASE FROM
FISCAL YEAR 1994
TO FISCAL YEAR 1995
-----------------------------
((Pounds) MILLIONS, EXCEPT %)
<S> <C>
Application of Distribution Price Control
Formula..................................... 8
Sales growth................................. 2
Other revenue attributed to distribution
business(1)................................. 14
---
Total operating revenue.................... 24
===
Percentage change.......................... 10%
===
</TABLE>
- --------
(1) Represents primarily non-recurring revenues received in fiscal year 1995
for installing the telecommunications fiberoptic infrastructure.
Revenues from the supply business decreased by (Pounds)47 million (6%) from
(Pounds)772 million in fiscal year 1994 to (Pounds)725 million in fiscal year
1995 almost entirely as a result of lower unit sales in the non-franchise
supply market. The impact of the first supply price review was to reduce
revenues from Franchise Supply Customers by approximately (Pounds)3 million,
although additional revenues of (Pounds)14 million were achieved in the
franchise supply market as a result of extinguishing the under-recovery from
fiscal year 1994.
Cost of Sales
Cost of sales decreased by (Pounds)31 million (6%) from (Pounds)511 million
in fiscal year 1994 to (Pounds)480 million in fiscal year 1995. This decrease
was principally the result of a decrease in the amount of energy purchased due
to a reduction in unit sales to Non-Franchise Supply Customers.
Operating Expenses
Operating expenses decreased by (Pounds)18 million (10%) from (Pounds)175
million in fiscal year 1994 to (Pounds)157 million in fiscal year 1995
resulting primarily from a (Pounds)10 million reduction in severance costs and
a (Pounds)10 million reduction in pension costs, partially offset by an
increase of (Pounds)2 million in other expenses.
48
<PAGE>
Income Taxes
Income taxes increased by (Pounds)7 million from (Pounds)43 million in
fiscal year 1994 to (Pounds)50 million in fiscal year 1995 reflecting an
increase in pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funds during Pro Forma Fiscal Year 1996 were
(Pounds)94 million ($161 million) cash from operations, (Pounds)270 million
($462 million) of proceeds from the disposal of the Company's investment in
NGG, (Pounds)500 million ($856 million) of equity contributions from Southern,
and (Pounds)1,247 million ($2,135 million) of proceeds from the issuance of
short-term debt. During Pro Forma Fiscal Year 1996, the Company invested cash
of (Pounds)1,023 million ($1,752 million) in its acquisition of SWEB, and
(Pounds)59 million ($101 million) in capital expenditures. In addition, the
Company repaid (Pounds)696 million ($1,192 million) of its short-term debt,
paid (Pounds)75 million ($128 million) in dividends related to activities of
SWEB prior to the acquisition, and paid (Pounds)191 million ($327 million) of
dividends related to activities subsequent to the acquisition.
The principal sources of funds of the Predecessor Company during fiscal year
1995 were (Pounds)100 million ($171 million) cash from operations and
(Pounds)24 million ($41 million) of net additional short-term borrowings.
During fiscal year 1995, the Predecessor Company invested (Pounds)68 million
($116 million) in capital expenditures, paid dividends of (Pounds)30 million
($51 million), and repurchased common stock totaling (Pounds)103 million ($176
million).
The principal sources of funds of the Predecessor Company during fiscal year
1994 were (Pounds)236 million ($404 million) cash from operations. During
fiscal year 1994, the Predecessor Company invested (Pounds)61 million ($104
million) in capital expenditures, purchased (Pounds)15 million ($26 million)
of investments, paid dividends of (Pounds)26 million ($45 million) and reduced
its short-term borrowings by (Pounds)37 million ($63 million).
At March 31, 1996, the Company had negative working capital of (Pounds)649
million ($1,111 million), compared to positive working capital of the
Predecessor Company of (Pounds)14 million ($24 million) at March 31, 1995. The
working capital deficit at March 31, 1996 is primarily the result of the
initial financing structure of the acquisition of SWEB.
To meet short-term cash needs and contingencies, the Company had
approximately (Pounds)20 million of cash and cash equivalents, on a
consolidated basis, at the end of fiscal year 1996.
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. The Company's primary need for liquidity is to pay interest
on its debt, and the Company expects to receive sufficient amounts of
dividends from SWEB to make such payments. SWEB can make distributions 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
PES license. The Company believes that 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.
SWEB's need for liquidity is to pay interest on its debt and to fund its costs
of operations and capital expenditure programs.
The Company, on a consolidated basis, has four primary sources of liquidity
available to it. SWEB's internal source of funds is cash from operations,
which totalled (Pounds)74 million in Pro Forma Fiscal Year 1996. SWEB has a
(Pounds)292 million ($500 million), three-year revolving credit facility
provided by a banking consortium. SWEB also has five bilateral committed loan
facilities totaling (Pounds)120 million and several uncommitted loan
facilities totalling (Pounds)90 million provided by banking institutions. At
the end of fiscal year 1996, a total of (Pounds)292 million had been drawn
from these facilities.
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 bills its Franchise Supply
Customers on a staggered quarterly basis while it is generally required to pay
related expenses
49
<PAGE>
(principally the cost of purchased electricity) on 28-day terms. However,
approximately 40% of the Franchise Supply Customers settle their accounts
using regular payment plans which either allow prepayment or spreading of the
cost of their annual bill evenly throughout the year. A majority of SWEB's
contracts for supply of electricity to Non-Franchise Supply Customers require
SWEB's customers to pay a fixed price per unit, while the cost of supply to
SWEB from the Pool, if not covered by hedging mechanisms, varies throughout
the year, generally being higher in winter months and lower in summer months.
SWEB balances the effect of these timing and cyclical influences on its
working capital needs with drawings under its available credit facilities.
The distribution business charges licensed suppliers monthly for the
provision of its distribution services. The majority of the distribution
revenue is received from SWEB's supply business. In the case of second-tier
suppliers to Non-Franchise Supply Customers in SWEB's Franchise Area,
distribution charges are billed directly to the suppliers on a monthly basis.
SWEB's capital expenditures are primarily related to the distribution
business and include expenditures for load-related, non-load-related and non-
operational capital assets. Load-related capital expenditures are largely
required by new business growth. Customer contributions are normally received
where capital expenditures are made to extend or upgrade service to customers
(except to the extent that such capital expenditures are made to enhance
SWEB's distribution network generally). Non-load-related capital expenditures
include asset replacement which is expected to continue until at least the
next decade. Other non-load-related expenditures include system upgrade work
that provides for load growth and has the additional benefit of improving
network security and reliability. Non-operational capital expenditures are for
assets such as generation, fixtures and equipment. For the fiscal years 1994,
1995, 1996 and 1997, capital expenditures, net of customer contributions, were
(Pounds)61 million, (Pounds)68 million, (Pounds)60 million and (Pounds)69
million, respectively. SWEB expects total capital expenditures, net of
customer contributions, to be approximately (Pounds)70 million in fiscal year
1998. The Company expects the levels of load-related and non-load-related
capital expenditures to remain stable relative to current levels for several
years. Since its inception, SWEB has generated sufficient funds from
operations to meet its capital expenditure requirements and is expected to do
so in the future.
In November 1996, the Company issued its $168,000,000 6.375% Senior Notes
due 2001 and its $332,000,000 6.800% Senior Notes due 2006. In January 1997,
the Company and the Trust issued the Original Securities.
At the end of 1996, the Company had outstanding approximately (Pounds)15
million of loan notes issued as part of the Company's acquisition of SWEB.
Holders of the loan notes have the right to require the Company to redeem the
loan notes on semi-annual interest payment dates. The Company intends to meet
those redemption obligations with cash on hand.
To assure the stability of future interest charges, the Company has entered
into a series of interest rate swap transactions with total notional amounts
of (Pounds)500 million. These transactions have maturities of between 5 and 15
years. The Company effectively reversed certain of the swap agreements at the
time of issuance of fixed rate Senior Notes in November 1996 and issuance of
the Subordinated Debentures in January 1997.
The Company has foreign currency swap contracts in place, which swap the US
dollar liabilities associated with the Senior Notes back to pounds sterling to
effectively hedge the currency risk associated with the interest on and
principal of the Senior Notes. The Company has also entered into foreign
currency swap contracts to hedge the currency risk associated with the
interest and principal on the Subordinated Debentures, by swapping the US
dollar liabilities back to pounds sterling for the period to February 2007.
Management believes that cash flow from operations, together with its
existing sources of credit and the proceeds from the offering of the Original
Securities, will provide sufficient financial resources to meet the
50
<PAGE>
Company's capital needs and expenditure requirements for at least the next
twelve months. Management further believes that cash flow from operations,
together with its existing sources of credit, will provide sufficient
financial resources to meet the Company's projected capital needs and other
expenditure requirements for the foreseeable future.
The financial statements included elsewhere in this Prospectus 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 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.
51
<PAGE>
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, having acquired approximately 84% of its shares. 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. In November 1995, the Company acquired the remaining shares of SWEB.
The Company's sole investment and only significant asset is the entire share
capital of SWEB, which is headquartered in Bristol, England. At December 31,
1996 the Company had consolidated assets of (Pounds)1.711 billion ($2.930
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 (Pounds)112
million ($192 million) and (Pounds)15 million ($26 million), respectively, in
Pro Forma Fiscal Year 1996, representing substantially all of the Company's
consolidated operating income in that pro forma 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 GDP) which exceeded the UK average from 1991 through 1996 and
has also benefited 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, the rail 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 improvements in system performance and
responsiveness to customers' needs, and to meet and exceed the performance
criteria established by the Regulator. Improvements in customer service are
being pursued in part through improvements in system performance, as measured
primarily by reductions in customer minutes lost and overall number of
outages.
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
52
<PAGE>
high voltage transmission assets were allocated to The National Grid Company
plc ("NGC," which is wholly owned by NGG). See "The Electric Utility Industry
in Great Britain."
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 (see "The Electric Utility Industry in Great
Britain--The Structure of the Electricity Industry in Great Britain--
Electricity Supply") 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"). The Pool also provides centralized settlement of
accounts and clearing. 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. See "The Electric Utility Industry
in Great Britain--The Structure of the Electricity Industry in Great Britain--
The Pool."
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. See "The Electric Utility Industry in Great Britain."
53
<PAGE>
SWEB's distribution business has grown in both its customer base and in the
number of units distributed, primarily reflecting economic and population
growth in the South West of England. At March 31, 1996 SWEB had experienced a
5-year compound annual growth rate of 0.8% in customers and a 5-year compound
annual growth rate of 1.6% in units distributed.
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 611 reductions
occurred prior to December 31, 1996. Part of these reductions are made
possible due to new work practices which SWEB has developed with the
cooperation of SWEB's unions. Team restructuring in the engineering department
of SWEB has commenced, and the establishment of multi-skilled independent
teams has 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, if achieved,
are part of SWEB's strategy to retain Franchise Supply Customers in its
Franchise Area after March 31, 1998 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 building customer loyalty for
the benefit of the supply business by maintaining and 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 allows 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.
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 9.8% of
total electricity distributed by SWEB in fiscal year 1996 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 and units distributed.
54
<PAGE>
<TABLE>
<CAPTION>
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
--------- ---------- ------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
not more than 100kW..... 1,309,819 99.78 0.81% 8.6 62 1.57% 80
above 100kW to 1MW...... 2,600 0.20 4.48 2.3 17 4.86 11
above 1MW............... 235 0.02 4.62 2.9 21 2.44 9
--------- ------ ---- ---------- --------- ---------- ---
Total................. 1,312,654 100.00 0.82 13.8 100 2.26 100
========= ====== ==== ========== ========= ========== ===
</TABLE>
- --------
(1) At December 31, 1996.
(2) Represents the compound annual growth rate ("CAGR") for the period from
January 1, 1992 through December 31, 1996.
(3) In terawatt hours for calendar year 1996.
(4) Represents the CAGR for the period from January 1, 1992 through December
31, 1996.
(5) For calendar year 1996.
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 by SWEB 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 December 31, 1996, 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>
UNDERGROUND
OVERHEAD LINES CABLES
OPERATING VOLTAGE: (CIRCUIT MILES) (CIRCUIT MILES)
------------------ --------------- ---------------
<S> <C> <C>
132kv........................................ 907 37
33kv......................................... 1,740 610
11kv......................................... 10,732 3,882
6.6kv........................................ 15 77
480 or 415/240v.............................. 4,751 6,960
------ ------
Total...................................... 18,145 11,566
====== ======
</TABLE>
In addition to the circuits referred to above, SWEB's distribution
facilities also include approximately:
<TABLE>
<CAPTION>
AGGREGATE CAPACITY
(MEGA VOLT
TRANSFORMERS: NUMBER AMPERES)
------------- ------ ------------------
<S> <C> <C>
132kv/lower voltages............................. 83 5,070
33kv/11kv or 6.6kv............................... 551 7,510
11kv or 6.6kv/lower voltages (including 36,291
pole mounted transformers)...................... 47,797 6,536
<CAPTION>
SUBSTATIONS:
------------
<S> <C> <C>
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.
55
<PAGE>
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. In providing service connections to
customers and to street lighting, traffic lights and other installations from
its network, SWEB uses lengths of overhead lines and underground cables in
addition to those referred to above.
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 1996, these customers
accounted for approximately 82% of all units of electricity supplied by SWEB.
SWEB's exclusive right to supply all 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 prudent costs of purchasing and delivering electricity and hedging
the purchase price are charged to them.
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 for a duration
of 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.
As a result of this strategy, SWEB expects to supply a larger portion of units
to Non-Franchise Supply Customers than in fiscal year 1996.
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 service, including reliable distribution
service, 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 Executive Directors of
SWEB transferred from other companies within the Southern Company system, who
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
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 were often obtained only on an
annual or biennial basis.)
56
<PAGE>
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 and through the measures described in "--Distribution
Business."
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
(which has already begun);
. increasing the number of proposals and bids made to customers and
potential customers (which has already begun);
. 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 1996, sales to Franchise
Supply Customers represented 82% of total units supplied by SWEB and produced
86% of SWEB's total supply revenue.
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 retain its market share of these customers by providing
superior customer service and competitive pricing. During 1996 SWEB met or
exceeded all eight Overall Standards of Performance set by the Regulator and
achieved a 99.98% success rate in meeting the Guaranteed Standard of Service.
See "--Strategy."
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 1996, SWEB had approximately 1,500
Non-Franchise Supply Customers, consisting primarily of large commercial and
industrial accounts. Revenue from these customers during fiscal year 1996
accounted for only 14% 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 24MW 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.
57
<PAGE>
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.
UK ENVIRONMENTAL REGULATION
SWEB's businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The Electricity Act 1989 (the
"Electricity Act") obligates the UK Secretary of State for Trade and Industry
(the "Secretary of State") 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 electromagnetic fields ("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 currently is 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 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 alleging damages caused by
EMFs.
58
<PAGE>
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
SWEB had 3,178 employees (3,079 full time equivalent) and the Company had no
employees at the end of fiscal year 1996. At December 31, 1996, SWEB had 2,729
employees (2,640 full time equivalent). Of SWEB's employees, 95% are
represented by labor unions. All SWEB employees who are not party to a
personal employment contract are subject to a collective bargaining agreement
called The Electricity Business Agreement. This Agreement may be amended by
agreement between SWEB and the unions and is terminable with 12 months notice
by either side. SWEB is currently holding discussions with the unions to
introduce a separate collective bargaining agreement to include meter reading
staff. SWEB believes that its relations with its employees are favorable.
Legal proceedings concerning the Electricity Supply Pension Scheme involving
another company have been taken and may affect SWEB in the future. See
"Business--Legal Proceedings."
PROPERTY
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
SWEB has freehold and leasehold interests in approximately 12,000 network
properties, comprising principally sub-station sites. The recorded cost of
total network land and buildings at March 31, 1996 was (Pounds)62 million.
SWEB owns, directly or indirectly, the freehold of such land and buildings.
NON-NETWORK LAND AND BUILDINGS
SWEB has 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, 1996 was (Pounds)40.3 million.
The number of properties in each category is:
<TABLE>
<CAPTION>
FREEHOLD OR
LONG LEASEHOLD LEASEHOLD
-------------- ---------
<S> <C> <C>
Depots............................................ 24 1
Offices........................................... 8 --
Surplus property(1)............................... 78 25
</TABLE>
- --------
(1) Largely unused retail sites. The number of freeholds is approximated.
For a discussion of other properties and other assets of SWEB, see
"Business--SWEB's Main Businesses--Distribution Facilities."
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
59
<PAGE>
employer's use of ESPS surplus to offset the employer's costs of providing
enhanced pensions on redundancies. 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 is being challenged in the courts and
no payments are required until such challenge has been heard. If the challenge
is unsuccessful, either at the first challenge or on a subsequent appeal, it
will have an adverse effect on SWEB. It is not practical to make an estimate
of the exposure at the present time.
60
<PAGE>
THE ELECTRIC UTILITY INDUSTRY IN GREAT BRITAIN
THE STRUCTURE OF THE ELECTRICITY INDUSTRY IN GREAT BRITAIN
The electric utility industry in Great Britain consists of the following
activities:
Generation: the production of electricity at power stations;
Transmission:
the bulk transfer of electricity across a high voltage
transmission system;
Distribution:
the transfer of electricity from the high voltage transmission
system and its delivery, across low voltage distribution systems,
to consumers; and
Supply: the bulk purchase of electricity by suppliers and its sale to
consumers.
INDUSTRY STRUCTURE
Great Britain has two separate but connected markets, each with a different
commercial framework. In England and Wales electricity is produced by
generators, the largest of which are National Power, PowerGen and Nuclear
Electric, a subsidiary of the recently privatized British Energy. Electricity
is transmitted through the national grid transmission system by NGC and
distributed by the twelve RECs in their respective franchise, or authorized,
areas. Most customers are currently supplied with electricity by their local
REC, although there are other suppliers holding second tier supply licenses,
including other generators and RECs, who can compete to supply larger
customers in that REC's authorized area.
In Scotland there are two vertically integrated companies, Scottish Power
and Hydro-Electric, each generating, transmitting, distributing and supplying
electricity within their respective franchise areas as well as competing to
supply electricity elsewhere. Scottish Nuclear, another subsidiary of British
Energy, sells all the electricity it generates to Scottish Power and Hydro-
Electric under the Nuclear Energy Agreement.
The interconnection between the two transmission systems, owned by Scottish
Power and NGC, is capable of transferring electricity between Scotland and
England and Wales. There is also an interconnection with France, owned by NGC
and Electricite de France, through which electricity can be transferred
between the transmission systems of France and England and Wales.
Virtually all electricity generated in England and Wales is sold by
generators and bought by suppliers through the Pool. A generator which is a
Pool member and also a licensed supplier must nevertheless sell all the
electricity it generates into the Pool, and purchase all the electricity which
it supplies from the Pool. Because Pool prices fluctuate, generators and
suppliers may enter into bilateral arrangements, such as CFDs, to provide a
degree of protection against such fluctuations.
There is no equivalent to the Pool in Scotland, but Scottish Power and
Hydro-Electric are obligated by their licenses to offer electricity for sale
to second tier suppliers. They are also required to provide access to their
transmission and distribution systems on a non-discriminatory basis to
competing suppliers and generators.
INDUSTRY BACKGROUND
The industry structure described above was put in place in March 1990. At
the same time, a licensing regime was introduced for the electricity industry
both in England and Wales and in Scotland. The Regulator was first appointed
in 1989.
The RECs, which at that time collectively owned NGG, NGC's holding company,
were privatized in December 1990. National Power and PowerGen were privatized
in March 1991 (with the balance of the UK Government's holding being sold in
March 1995), Scottish Power and Hydro-Electric were privatized in June 1991
and British Energy was privatized in July 1996. NGG was listed on the London
Stock Exchange in
61
<PAGE>
December 1995. Since the summer of 1995, eleven of the RECs have been acquired
by other companies. In particular, SWEB was acquired by the Company in
September 1995.
In 1990, the vast majority of generating capacity was owned by three
generators. However, since that time competition in generation has increased
as RECs and other new entrant generators have constructed new plant and as
imports through the interconnections with Scotland and France have grown. In
addition, pursuant to undertakings given to the Regulator, National Power and
PowerGen have disposed of an aggregate of 6,000 MW of plant to Eastern Group
plc (a REC holding company which was acquired by Hanson PLC; this company
subsequently has obtained a stock market listing as part of the demerger of
Hanson's energy related interests).
Competition in supply has also been progressively introduced both in England
and Wales and in Scotland. The RECs in England and Wales, and Scottish Power
and Hydro-Electric in Scotland, are subject to competition from second tier
suppliers for the supply of electricity to larger customers in their
respective franchise areas. Under the current licensing regime, competition
for the supply of electricity to all customers in Great Britain, including
domestic customers, is scheduled to be introduced in phases over a six month
period commencing April 1, 1998.
DISTRIBUTION OF ELECTRICITY
Each of the RECs is required to offer terms for connection to its
distribution system to any person, for use of its distribution system to any
authorized electricity operator and for the provision of top-up and stand-by
supplies to any person. In providing use of its distribution system, a REC
must not discriminate between its own supply business and that of any other
authorized electricity operator, or between those of other authorized
electricity operators; nor may its charges differ except where justified by
differences in cost. Similar principles apply to the provision of top-up and
stand-by supplies of electricity, and in the carrying out of connection works.
Disputes over the terms of offers may be determined by the Regulator.
Most revenue of the distribution business is controlled by a formula based
on P+RPI-Xd where Xd is currently 3% (the "Distribution Price Control
Formula"). 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. The Xd factor is
established by the Regulator following review. This formula determines the
maximum average price per unit of electricity distributed (in pence per
kilowatt hour) which a REC is entitled to charge. This price, when multiplied
by the expected number of units to be distributed, determines the expected
distribution revenues of the REC for the relevant year. The Distribution Price
Control Formula permits RECs to partially retain additional revenues due to
increased distribution of units and allows for a pound-for-pound increase in
operating income for efficient operations and reduction of expenses. The
current Distribution Price Control Formula has been in effect since April 1,
1996 and applies for the four year period ending March 31, 2000.
On August 11, 1994, the Regulator announced the results of a review of the
Distribution Price Control Formula. A one-time reduction in the distribution
charges of all the RECs was made with effect from April 1, 1995 and ranged
from 11% to 17% (the reduction in SWEB's case being 14%), in each case before
allowing for inflation. In addition, the Regulator halved from 100% to 50% the
weight of units in the Distribution Price Control Formula and allocated the
remaining 50% to the number of customers. The stated intention of the
Regulator in introducing this change was "to remove any artificial incentive
on the companies to sell more electricity, while retaining a general incentive
for companies to seek out and meet the needs of their customers." In the light
of information concerning the financial position of the RECs that emerged
during the course of the unsuccessful bid by Trafalgar House plc for Northern
Electric plc (one of the RECs), the Regulator further reduced distribution
charges of all the RECs with effect from April 1, 1996 ranging from 10% to 13%
(the reduction in SWEB's case being 11%), in each case before allowing for
inflation.
The Distribution Price Control Formula is expected to be further reviewed
with effect from April 1, 2000. A REC may seek disapplication of its
Distribution Price Control Formula with effect from that date by request
62
<PAGE>
to the Regulator. If the Regulator wishes to refuse the request, he must refer
it to the Monopolies and Mergers Commission ("MMC").
In setting the distribution charges each year, the holder of a PES license
will have to make a projection of the permitted maximum average charge per
unit distributed in that year. The projection will have to take account of
forecasts of units distributed, distribution losses and the actual change in
RPI. Failure to forecast accurately may result in over or under charging; this
is taken into account in the following year through a correction factor in the
price control formula. If a REC has overcharged in the previous year, the
maximum average charge per unit distributed is reduced by an amount to reflect
the excess income received, to which is added interest. In the event of
undercharging, the Distribution Price Control Formula allows the licensee to
recover the shortfall in income plus interest.
If, in any year, the average charge per unit distributed exceeds the
permitted maximum average charge per unit distributed by more than 3%, then,
in the next following year, the REC may not increase distribution charges
unless it has satisfied the Regulator that the average charge per unit in that
next following year is not likely to exceed the permitted maximum average
charge. If, in respect of any two successive years, the sum of the amounts by
which the average charge per unit distributed has exceeded the permitted
maximum average charge per unit distributed in the second of those years is
more than 4% of that permitted maximum average charge, then, in the next
following year, the REC may be required by the Regulator to adjust its charges
so that they fall within the maximum permitted average charge. If, in respect
of two successive years, the licensee undercharges by more than 10% of the
maximum average charge, the Regulator may, by directions to the licensee,
limit the amount by which such undercharging may be recovered.
ELECTRICITY SUPPLY
Subject to minor exceptions, all electricity customers in Great Britain must
be supplied by a licensed supplier. Licensed suppliers purchase electricity
and make use of the transmission and distribution networks to achieve delivery
to customers' premises.
There are two types of licensed suppliers: public electricity (or first
tier) suppliers ("PESs"); and second tier suppliers. PESs are the RECs,
Scottish Power and Hydro-Electric each supplying in its respective franchise
area. Second tier suppliers include National Power, PowerGen, Nuclear
Electric, Scottish Power, Hydro-Electric and other PESs supplying outside
their respective franchise areas. There are also a number of independent
second tier suppliers.
At present, a Franchise Supply Customer can only buy electricity from the
PES authorized to supply the relevant franchise area. Franchise Supply
Customers typically include domestic and small commercial and industrial
customers. Non-Franchise Supply Customers are not limited to buying
electricity from the local PES and can choose to buy from a second tier
supplier. Such customers are typically larger commercial, agricultural and
industrial electricity users. Second tier suppliers compete with one another
and with the local PES to supply customers in this competitive (or "non-
franchise") sector of the market.
Under the current licensing regime, from April 1, 1998 all customers,
including those who are currently Franchise Supply Customers, were to be free
to choose their electricity supplier. However, following wide consultation in
the industry, the Regulator proposed, in December 1996, that competition for
Franchise Supply Customers should be phased in over a six month period,
commencing April 1, 1998.
The supply of electricity to Franchise Supply Customers is subject to price
control. The maximum average charge per unit supplied (in pence per kilowatt
hour) is controlled by a formula based upon P+RPI-Xs+Y (the "Supply Price
Control Formula") where Xs is currently 2%. As with the Distribution Price
Control Formula, P reflects the previous maximum average price per unit of
electricity supplied (in pence per kilowatt hour). 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. The Y
term is a pass through of certain costs which are
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either largely outside the control of the REC or have been regulated
elsewhere. It thus covers the REC's electricity purchase costs, including both
direct Pool purchase costs and costs of hedging, transmission charges made by
NGC, distribution charges made by its own and other REC distribution
businesses and the Fossil Fuel Levy (described below) or amounts equivalent
thereto in respect of the purchase of non-leviable electricity which are
attributable to Franchise Supply Customers. As with the Distribution Price
Control Formula, there is a correction factor in the Supply Price Control
Formula in the event of over or under charging.
If a REC has overcharged in the previous year, the maximum average charge
per unit supplied is reduced by an amount to reflect the excess income
received, to which is added interest. In the event of undercharging, the
Supply Price Control Formula allows the licensee to recover the shortfall in
income plus interest.
If, in any year, the average charge per unit supplied exceeds the permitted
maximum average charge per unit supplied by more than 4%, then, in the next
following year, the REC may not increase supply charges to Franchise Supply
Customers unless it has satisfied the Regulator that the average charge per
unit in that next following year is not likely to exceed the permitted maximum
average charge. If, in respect of any two successive years, the sum of the
amounts by which the average charge per unit supplied has exceeded the
permitted maximum average charge per unit supplied in the second of those
years is more than 5% of that permitted maximum average charge, then, in the
next following year, the REC may be required by the Regulator to adjust its
charges so that they fall within the maximum permitted average charge. If, in
respect of two successive years, the licensee undercharges by more than 10% of
the maximum average charge, the Regulator may, by directions to the licensee,
limit the amount by which such undercharging may be recovered.
The initial value of Xs was set at 0 for all the RECs on March 31, 1990. The
Supply Price Control Formula was reviewed by the Regulator with effect from
April 1, 1994, when the Xs term was set at 2% for all the RECs. This will
apply to the period ending March 31, 1998. Over a period of six months from
April 1, 1998, the exclusive right of the RECs to supply Franchise Supply
Customers is scheduled to come to an end. However, the Regulator has indicated
that some form of price regulation for supply to Franchise Supply Customers
may be continued for an interim period until an adequate level of competition
is established.
THE POOL
The Pool was established at the time of privatization 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 the 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 Pool
also provides centralized settlement of accounts and clearing. The Pool does
not itself buy or sell electricity.
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. A computerized system (the settlement
system) is used to calculate prices and to process metered, operational and
other data and to carry out the other procedures necessary to calculate the
payments due under the Pool trading arrangements. The settlement system is
administered on a day-to-day basis by NGC Settlements Limited, a subsidiary of
NGC, as settlement system administrator.
FOSSIL FUEL LEVY
All the RECs are subject to an obligation to obtain a specified amount of
generating capacity from non-fossil fuel sources (the "NFFOs"). Because
electricity generated from non-fossil fuel plants is generally more expensive
than electricity from fossil fuel plants, a levy system (the "Fossil Fuel
Levy") has been instituted to
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<PAGE>
reimburse the generators and the RECs for the extra costs involved. The
Regulator sets the amount of the Fossil Fuel Levy annually. On July 16, 1996
the Regulator reduced the Fossil Fuel Levy from 10% of the value of sales of
electricity generated from fossil fuel sources to 3.7% effective for the
period November 1, 1996 to March 31, 1997. On December 20, 1996 the Regulator
announced a further reduction to 2.2% effective from April 1, 1997. The
Regulator further announced that the Fossil Fuel Levy in respect of nuclear
commitments will cease as of April 1, 1998.
REGULATION UNDER THE ELECTRICITY ACT 1989
THE REGULATOR
The principal legislation governing the structure and regulation of the
electricity industry in Great Britain is the Electricity Act. The Electricity
Act established the industry structure described above so as to enable
privatization to take place. The Electricity Act also created the
institutional framework under which the industry is currently regulated,
including the office of the Regulator, who is appointed by the Secretary of
State. The present Regulator, Professor Stephen Littlechild, was appointed for
a five year term commencing September 1, 1989 and has since been reappointed
for a further five year term.
The Regulator's functions under the Electricity Act include granting
licenses to generate, transmit or supply electricity (a function which he
exercises under a general authority from the Secretary of State); proposing
modifications to licenses, and making license modification references to the
MMC; enforcing compliance with license conditions; advising the Secretary of
State in respect of the setting of each NFFO; calculating the Fossil Fuel Levy
rate and collecting the levy; determining certain disputes between electricity
licensees and customers; and setting standards of performance for electricity
licensees.
The Regulator exercises concurrently with the Director General of Fair
Trading certain functions relating to monopoly situations under the Fair
Trading Act 1973 and certain functions relating to courses of conduct which
have, or are intended or likely to have, the effect of restricting, distorting
or preventing competition in the generation, transmission or supply of
electricity under the Competition Act 1980.
The Electricity Act requires the Regulator and the Secretary of State to
exercise their functions in the manner each considers is best calculated: to
secure that all reasonable demands for electricity are satisfied; to secure
that license holders are able to finance their licensed activities; and to
promote competition in the generation and supply of electricity.
Subject to these duties, the Secretary of State and the Regulator are
required to exercise their functions in the manner which each considers is
best calculated: to protect the interests of consumers of electricity supplied
by licensed suppliers in respect of price, continuity of supply, and the
quality of electricity supply services; to promote efficiency and economy on
the part of licensed electricity suppliers and the efficient use of
electricity supplied to consumers; to promote research and development by
persons authorized by license to generate, transmit or supply electricity; to
protect the public from the dangers arising from the generation, transmission
or supply of electricity; and to secure the establishment of machinery for
promoting the health and safety of workers in the electricity industry. The
Secretary of State and the Regulator also have a duty to take into account the
effect on the physical environment of activities connected with the
generation, transmission or supply of electricity.
In performing their duties to protect the interests of consumers in respect
of prices and other terms of supply, the Secretary of State and the Regulator
have a duty to take into account in particular the interests of consumers in
rural areas. In performing their duties to protect the interests of consumers
in respect of the quality of electricity supply services, they have a duty to
take into account in particular the interests of those who are disabled or of
pensionable age.
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LICENSES
Generation Licenses
Unless covered by an exemption, all electricity generators operating a power
station in Great Britain are required to have a generation license. There are
currently 41 generation license holders in Great Britain. The conditions
attached to a generation license in England and Wales require the holder,
among other things, to comply with a grid code, be a member of the Pool and
submit relevant generating sets for central dispatch. The conditions attached
to generation licenses in Scotland require the holder, among other things, to
comply with a grid code. Failure to comply with any of the generation license
conditions may subject the licensee to a variety of sanctions, including
enforcement orders by the Regulator, or license revocation if an enforcement
order is not complied with.
PES Licenses
Each of the RECs, Scottish Power and Hydro-Electric has a PES license for
its franchise area and is required, under the Electricity Act, to supply
electricity upon request to any premises in that area, except in specified
circumstances. Each PES is also required not to discriminate between its own
supply business and other users of its distribution system. PESs are subject
to separate price controls on the amounts they may charge for the supply of
electricity to Franchise Supply Customers and in respect of distribution
charges. The PES licenses also require the licensee to procure electricity at
the best price reasonably obtainable having regard to the sources available.
The Regulator published on August 15, 1996 further information relating to
the RECs' performance in relation to their distribution and supply price
controls. The publication entitled "Yardstick of Electricity Purchase Costs"
includes information about the generation costs which they pass through to
Franchise Supply Customers under the Supply Price Control Formula. The
Regulator also stated that it was his intention to review the supply price
controls applicable to PESs with a view to proposing possible new controls to
take effect on April 1, 1998 when the present franchise supply market will be
opened to competition. He issued a consultation paper on this matter on
September 5, 1996 entitled "The Competitive Electricity Market from 1998:
Price Restraints."
In England and Wales, each PES license limits the extent of the generation
capacity in which the relevant REC may hold an interest without the prior
consent of the Regulator ("own-generation limits"). These own-generation
limits, expressed in megawatts, currently restrict the participation of a REC
in generation to a level of approximately 15% of the total electricity
consumption in that REC's franchise area. In the case of SWEB, the own-
generation limit is fixed at 400 MW.
The Regulator has stated that it would be reasonable to consider a REC's
request to increase its own-generation limit on condition that it accepted
explicit restrictions on the contracts it signed with its supply business, and
that at a minimum the REC would be prohibited from passing additional own-
generation contracts into its franchise supply market. He considers that an
increase in own-generation limits subject to such restrictions could allow a
REC to contribute more fully to the development of competition in generation
without the allegation that it was exploiting its captive market and local
monopoly position. In December 1996, the Regulator gave consent, subject to
certain conditions, to Eastern Group plc, in the context of its acquisition of
6,000 MW of generating capacity from National Power and PowerGen, to relax the
own-generation limits.
Second Tier Supply Licenses
Other than a PES in its franchise area and subject to certain other
exceptions, a supplier of electricity to premises in Great Britain must
possess a second tier supply license. Subject to the restrictions described in
"Electricity Supply" above, second tier licensees may compete for the supply
of electricity with one another and with the PES for the relevant area. There
are currently 38 second tier supply license holders for England and Wales and
26 for Scotland.
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Transmission Licenses
In England and Wales, NGC is the only transmission license holder. The
transmission license imposes on NGC the obligation to operate the merit order
system for the central dispatch of generating sets and gives NGC
responsibility for the economic purchasing of ancillary services from
generators and suppliers. The transmission license requires NGC to offer terms
on a non-discriminatory basis for the carrying out of works for connection to,
and use of, the transmission system and for use of the interconnections.
Modifications to Licenses
Subject to a power of veto by the Secretary of State, the Regulator may
modify license conditions with the agreement of the license holder. He must
first publish the proposed modifications and consider representations or
objections made. Following the acquisition of SWEB by the Company, SWEB's PES
license was modified, by agreement, to take into account the fact that the PES
license was now held by a subsidiary company. In particular, the license was
modified to provide that, with few exceptions, the only business activities
which SWEB is permitted to undertake directly are its franchise and second
tier supply businesses and its distribution business. The license now also
requires SWEB to ensure that it has sufficient management and financial
resources and facilities to conduct its supply and distribution businesses and
to comply with its statutory and license obligations. The directors of SWEB
are required to give annual certificates to the Regulator to that effect.
Further, the consent of the Regulator is required for SWEB to create security
over its assets, to incur indebtedness or to give guarantees, unless the
transaction is on normal commercial and arm's length terms and for a
"permitted purpose" (which refers to the supply, distribution or generation
business, or any business conducted by SWEB or its affiliates or related
undertakings (subsidiaries) prior to the take-over). The consent of the
Regulator is also required before SWEB may transfer assets or make loans to
affiliates or related undertakings (subsidiaries). However, various matters,
such as payment of dividends out of distributable reserves, repayments of
capital, and payments on normal commercial and arm's length terms for goods,
services or assets supplied, do not require the consent of the Regulator.
These provisions are subject to an overriding provision in the PES license
which prevents any REC from disposing of (which would include creating a
security interest in) distribution assets.
If the Regulator fails to agree to modifications with a license holder, he
may refer a matter relating to generation, transmission or supply of
electricity under a license to the MMC. If the MMC finds that the matter
referred to it has, or may be expected to have, specified effects adverse to
the public interest which could be remedied or prevented by a license
modification, the Regulator is required to make modifications that appear to
him requisite for the purpose of remedying or preventing the adverse effects
identified by the MMC. Modifications to license conditions may also be made by
the Secretary of State as a consequence of monopoly, merger or other
competition references under general UK competition law.
Term and Revocation of Licenses
SWEB's PES license shall continue until at least 2025 unless revoked. Under
ordinary circumstances, the license may not be revoked except on 25 years'
prior notice, which notice may not be given until 2000. Otherwise, the
Secretary of State may revoke a PES license by not less than 30 days' notice
in writing to the licensee in certain specified circumstances including any
failure to comply with a final order of the Regulator requiring the license
holder to comply with its license conditions or requirements.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of December 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
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, a 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. Prior to joining Georgia Power in 1982,
Mr. Harreld spent 13 years with Arthur Andersen in Atlanta and Missouri. He
graduated from the University of Kentucky in 1966 (BS Commerce with Honors)
and from the University of Missouri in 1967 (MA Accounting with Honors).
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. From 1981 to May 1989, he held positions with
Georgia Power in power supply, finance and accounting. Mr. Boren holds a B.S.
degree in Industrial Management from the Georgia Institute of Technology and
an M.B.A. degree from Georgia State University.
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. Mr. Harrelson holds a bachelor's degree in Industrial Engineering from
Georgia Institute of Technology, 1971, and a Juris Doctor--Atlanta Law School,
1981.
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. From May 1991 to February 1992, Mr. Klappa served
as Vice President of Southern Company Services, Inc. He graduated cum laude
from the University of Wisconsin-Milwaukee in 1972 with a bachelor's degree in
Mass Communications.
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. He graduated from Auburn University in 1974
with a bachelor's degree in Electrical Engineering.
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<PAGE>
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
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. Robert D. Fagan has represented Accentacross at
meetings of the Directors of the Company since July 1996. From November 1995
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. Roger L. 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.
DIRECTOR AND OFFICER 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 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.
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SECURITY OWNERSHIP
The authorized share capital of the Company consists of 500,400,587 ordinary
shares of (Pounds)1 each, all of which have been issued fully paid and are
held by Holdings. The following table sets forth, as of December 31, 1996,
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>
NAME AND ADDRESS CLASS OF SHARES NUMBER OF SHARES PERCENT OF CLASS
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
The Southern Company.......... A Ordinary 150,000(1) 100%
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
PP&L Resources, Inc........... B Ordinary 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.
The following table shows the number of shares of the common stock of
Southern owned by the directors and executive officers of the Company as of
December 31, 1996. It is based on information furnished to the Company by the
directors and executive officers of the Company. The shares owned by all
directors and executive officers as a group constitute less than one percent
of the total number of shares of Southern common stock outstanding as of
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF SECURITY BENEFICIALLY OWNED(1)(2)
----------------- ------------------------
<S> <C> <C>
C. B. (Mike) Harreld.... The Southern Company common 5,285
Alan W. Harrelson....... The Southern Company common 13,690
Gale E. Klappa.......... The Southern Company common 31,914
C. Philip Saunders...... The Southern Company common 8,242
Charles W. Whitney...... The Southern Company common 7,419
Thomas G. Boren......... The Southern Company common 28,279
Richard J. Pershing..... The Southern Company common 19,937
Directors and Executive
Officers of the Company
as a group (9 persons)
(3).................... The Southern Company common 114,766
</TABLE>
- --------
(1) "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.
(2) The shares shown include shares of common stock which certain directors
and executive officers have the right to acquire beneficial ownership
within 60 days pursuant to The Southern Company Executive Stock Plan as
follows: Mr. Klappa, 15,012 shares; Mr. Boren, 16,987 shares; and all
directors and executive officers of the Company as a group, 33,509 shares.
(3) 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.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the Company
and the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to use their
reasonable best efforts to file and to cause to become effective with the
Commission a registration statement with respect to the exchange of the
Original Capital Securities for capital securities with terms identical in all
material respects to the terms of the Original Capital Securities except as
described herein. A copy of the Registration Rights Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus is a
part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and
terms of the Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and will not be
subject to certain restrictions on transfer applicable to the Original Capital
Securities, and will not provide for any increase in the distribution rate
thereon. In that regard, the Original Capital Securities provide, among other
things, that, if a registration statement relating to the Exchange Offer has
not been filed by June 28, 1997 and declared effective by July 28, 1997, the
distribution rate borne by the Original Capital Securities will increase by
0.25% per annum until such registration statement is filed or declared
effective, as the case may be. Upon consummation of the Exchange Offer,
holders of Original Capital Securities will not be entitled to any increase in
the distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Original Capital Securities"
and "Description of the Original Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Original Capital Securities in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Original Capital Securities
are registered on the books of the Trust or any other person who has obtained
a properly completed bond power from the registered holder, or any person
whose Original Capital Securities are held of record by DTC who desires to
deliver such Original Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof the Original Guarantee for the Exchange
Guarantee and the Original Subordinated Debentures for a like aggregate
principal amount of the Exchange Subordinated Debentures. The Exchange
Guarantee and Exchange Subordinated Debentures have also been registered under
the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $82,000,000 aggregate liquidation amount of Exchange Capital
Securities for a like aggregate liquidation amount of Original Capital
Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described below. The
Trust will issue, promptly after the Expiration Date, an aggregate liquidation
amount of up to $82,000,000 of Exchange Capital Securities in exchange for a
like liquidation amount of outstanding Original Capital Securities tendered
and accepted in connection with the Exchange Offer. Holders may tender their
Original Capital Securities in whole or in part in a liquidation amount of not
less than $100,000 (100 Original Capital Securities) or any integral multiple
of $1,000 liquidation amount (one Original Capital Security) in excess
thereof.
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<PAGE>
The Exchange Offer is not conditioned upon any minimum liquidation amount of
Original Capital Securities being tendered. As of the date of this Prospectus,
$82,000,000 aggregate liquidation amount of the Original Capital Securities is
outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities which are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Declaration, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of the Original
Securities."
If any tendered Original Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange
Offer. See "--Fees and Expenses."
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY COMPANY
TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION.
HOLDERS OF ORIGINAL CAPITAL SECURITIES MUST MAKE THEIR OWN DECISIONS WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF
ORIGINAL CAPITAL SECURITIES TO TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL
POSITIONS AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended by the Company or the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Company
or the Trust determines, in its sole and absolute discretion, that any of the
events or conditions referred to under "--Conditions to the Exchange Offer"
have occurred or exist or have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain all Original Capital
Securities tendered pursuant to the Exchange Offer, subject, however, to the
right of holders of Original Capital Securities to withdraw their tendered
Original Capital Securities as described under "--Withdrawal Rights," and (iv)
to waive any condition or otherwise amend the terms of the Exchange Offer in
any respect. If the Exchange Offer is amended in a manner determined by the
Company and the Trust to constitute a material change, or if the Company and
the Trust waive a material condition of the Exchange Offer, the Company and
the Trust will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Capital Securities, and the Company and the Trust will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
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Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company and the Trust may choose to make any
public announcement and, subject to applicable law, the Company and the Trust
shall have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to an appropriate
news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Original Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) Original Capital Securities or a book-entry confirmation of a book-entry
transfer of Original Capital Securities into the Exchange Agent's account at
DTC, including an Agent's Message (as defined below) if the tendering holder
has not delivered a Letter of Transmittal, (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or (in the case of a book-entry transfer) an Agent's
Message in lieu of the Letter of Transmittal, and (iii) any other documents
required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC. The term "Agent's Message" means a message, transmitted by DTC
to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering DTC participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Trust and the Company may enforce such Letter of Transmittal
against such participant.
Subject to the terms and conditions of the Exchange Offer, the Trust will be
deemed to have accepted for exchange, and thereby exchanged, Original Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Original Capital Securities for exchange pursuant to the Exchange Offer. The
Exchange Agent will act as agent for the Trust for the purpose of receiving
tenders of Original Capital Securities, Letters of Transmittal and related
documents, and as agent for tendering holders for the purpose of receiving
Original Capital Securities, Letters of Transmittal and related documents and
transmitting Exchange Capital Securities to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Original Capital
Securities tendered pursuant to the Exchange Offer is delayed (whether before
or after the Trust's acceptance for exchange of Original Capital Securities)
or the Trust extends the Exchange Offer or is unable to accept for exchange or
exchange Original Capital Securities tendered pursuant to the Exchange Offer,
then, without prejudice to the Trust's rights set forth herein, the Exchange
Agent may, nevertheless, on behalf of the Trust and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered Original Capital Securities and such
Original Capital Securities may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described under "--
Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a
holder of Original Capital Securities will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Original Capital Securities, that the Trust will acquire
good, marketable and unencumbered title to the tendered Original Capital
Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Original Capital Securities tendered for exchange are
not subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Trust or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment, and transfer of the Original Capital
Securities tendered pursuant to the Exchange Offer.
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PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Original Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or (in the case of a book-entry tender) an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must be received by the Exchange Agent at one of its addresses set
forth under "--Exchange Agent," and either (i) tendered Original Capital
Securities must be received by the Exchange Agent, or (ii) such Original
Capital Securities must be tendered pursuant to the procedures for book-entry
transfer set forth below and a book-entry confirmation, including an Agent's
Message if the tendering holder has not delivered a Letter of Transmittal,
must be received by the Exchange Agent, in each case on or prior to the
Expiration Date, or (iii) the guaranteed delivery procedures set forth below
must be complied with.
If less than all of the Original Capital Securities are tendered, a
tendering holder should fill in the amount of Original Capital Securities
being tendered in the appropriate box on the Letter of Transmittal. The entire
amount of Original Capital Securities delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Exchange Agent will establish an account with
respect to the Original Capital Securities at DTC for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the Original Capital
Securities by causing DTC to transfer such Original Capital Securities into
the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfers. However, although delivery of Original Capital Securities may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in
lieu of the Letter of Transmittal, and any other required documents, must in
any case be delivered to and received by the Exchange Agent at its address set
forth under "--Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Original Capital Securities need
not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Original Capital Securities is
registered in a name other than that of the person surrendering the
certificate or (b) such holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Original Capital
Securities must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter
of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1
to the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Original Capital
Securities pursuant to the Exchange Offer and the certificates for such
Original Capital Securities are not immediately available or time will not
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permit all required documents to reach the Exchange Agent on or prior to the
Expiration Date, or the procedures for book-entry transfer cannot be completed
on a timely basis, such Original Capital Securities may nevertheless be
tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Original Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange Capital
Securities in exchange for Original Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will in all cases be made only
after timely receipt by the Exchange Agent of Original Capital Securities, or
of a book-entry confirmation with respect to such Original Capital Securities,
and a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other documents required
by the Letter of Transmittal. Accordingly, the delivery of Exchange Capital
Securities might not be made to all tendering holders at the same time, and
will depend upon when Original Capital Securities, book-entry confirmations
with respect to Original Capital Securities and other required documents are
received by the Exchange Agent.
The Trust's acceptance for exchange of Original Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Original Capital Securities will be determined by the Company
and the Trust, in their sole discretion, whose determination shall be final
and binding on all parties. The Company and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the Company and the Trust, be
unlawful. The Company and the Trust also reserve the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Original Capital Securities of any particular
holder whether or not similar conditions or irregularities are waived in the
case of other holders.
The interpretation by the Company and the Trust of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company,
the Trust, any affiliates or assigns of the Company or the Trust, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company
and the Trust, proper evidence satisfactory to the Company and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
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RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital Securities
in reliance on the position of the staff of the Division of Corporation
Finance of the Commission as set forth in certain interpretive letters
addressed to third parties in other transactions. However, neither the Company
nor the Trust sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the Commission would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the staff of the Division of Corporation Finance of the Commission, and
subject to the two immediately following sentences, the Company and the Trust
believe that Exchange Capital Securities issued pursuant to this Exchange
Offer in exchange for Original Capital Securities may be offered for resale,
resold and otherwise transferred by a holder thereof (other than a holder who
is a broker-dealer) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Capital
Securities. However, any holder of Original Capital Securities who is an
"affiliate" of the Company or the Trust or who intends to participate in the
Exchange Offer for the purpose of distributing Exchange Capital Securities, or
any broker-dealer who purchased Original Capital Securities from the Trust to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the
staff of the Division of Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Original Capital Securities in the Exchange Offer and
(c) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or other transfer of such
Original Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original Capital
Securities for Exchange Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of the Company or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv)
if such holder is not a broker-dealer, such holder is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. In addition, the Company and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Company and the Trust (or
an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such holder holds the Original Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives Exchange Capital Securities
for its own account pursuant to the Exchange Offer must acknowledge that it
acquired the Original Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the staff of
the Division of Corporation Finance of the Commission in the interpretive
letters referred to above, the Company and the Trust believe that
Participating Broker-Dealers who acquired Original Capital Securities for
their own accounts as a result of market-making activities or other trading
activities may fulfill their prospectus delivery requirements with respect to
the Exchange Capital Securities received upon exchange of such Original
Capital Securities (other than Original Capital Securities which represent an
unsold allotment from the initial sale of the Original Capital Securities)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
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Exchange Capital Securities. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales
of Exchange Capital Securities received in exchange for Original Capital
Securities where such Original Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making
or other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such
Exchange Capital Securities for a period not exceeding 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described below). See "Plan of Distribution." However, a Participating Broker-
Dealer who intends to use this Prospectus in connection with the resale of
Exchange Capital Securities received in exchange for Original Capital
Securities pursuant to the Exchange Offer must notify the Company or the
Trust, or cause the Company or the Trust to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth
herein under "--Exchange Agent." Any Participating Broker-Dealer who is an
"affiliate" of the Company or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal or delivery of an Agent's
Message in lieu thereof, that upon receipt of notice from the Company or the
Trust of the occurrence of any event or the discovery of (i) any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or (ii) any fact which causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading, or (iii) of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange Subordinated Debentures,
as applicable) pursuant to this Prospectus until the Company or the Trust has
amended or supplemented this Prospectus to correct such misstatement or
omission and has furnished copies of the amended or supplemented Prospectus to
such Participating Broker-Dealer, or the Company or the Trust has given notice
that the sale of the Exchange Capital Securities (or the Exchange Guarantee or
the Exchange Subordinated Debentures, as applicable) may be resumed, as the
case may be. If the Company or the Trust gives such notice to suspend the sale
of the Exchange Capital Securities (or the Exchange Guarantee or the Exchange
Subordinated Debentures, as applicable), it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to
use this Prospectus in connection with the resale of Exchange Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital Securities or
to and including the date on which the Company or the Trust has given notice
that the sale of Exchange Capital Securities (or the Exchange Guarantee or the
Exchange Subordinated Debentures, as applicable) may be resumed, as the case
may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Original Capital Securities to be
withdrawn, the aggregate principal amount of Original Capital Securities to be
withdrawn, and (if certificates for such Original Capital Securities have been
tendered) the name of the registered holder of the Original Capital Securities
as set forth on the Original Capital Securities, if different from that of the
person who tendered such Original Capital Securities. If Original Capital
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Securities have been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such Original Capital Securities, the
tendering holder must submit the serial numbers shown on the particular
Original Capital Securities to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case
of Original Capital Securities tendered for the account of an Eligible
Institution. If Original Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering
Original Capital Securities," the notice of withdrawal must specify the name
and number of the account at DTC to be credited with the withdrawal of
Original Capital Securities, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Original Capital Securities
may not be rescinded. Original Capital Securities properly withdrawn will not
be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all
parties. Neither the Company, the Trust, any affiliates or assigns of the
Company or the Trust, the Exchange Agent nor any other person shall be under
any duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Original Capital Securities which have been tendered but which are
withdrawn will be returned to the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital Securities are
accepted for exchange will not receive distributions on such Original Capital
Securities and will be deemed to have waived the right to receive any
distributions on such Original Capital Securities accumulated from and after
January 29, 1997. Accordingly, holders of Exchange Capital Securities as of
the record date for the payment of distributions on August 1, 1997 will be
entitled to receive distributions accumulated from and after January 29, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company and the Trust will not be required to
accept for exchange, or to exchange, any Original Capital Securities for any
Exchange Capital Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Original Capital Securities have
theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions has occurred or
exists or has not been satisfied:
(a) there shall occur a change in the current interpretation by the staff
of the Commission which permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities
to be offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers and any such holder which is an
"affiliate" of the Company or the Trust within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such Exchange Capital
Securities; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose, or any governmental
approval has not been obtained, which approval the Company or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
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(d) the Company shall receive an opinion of counsel experienced in such
matters to the effect that there is more than an insubstantial risk that
consummation of the Exchange Offer would result in interest payable to the
Trust on the Subordinated Debentures being not deductible by the Company
for United States earnings and profits purposes.
If the Company or the Trust determines in its sole and absolute discretion
that any of the foregoing events or conditions has occurred or exists or has
not been satisfied, it may, subject to applicable law, terminate the Exchange
Offer (whether or not any Original Capital Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company or the Trust
will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Capital Securities and will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent as follows:
BY HAND, OVERNIGHT DELIVERY, REGISTERED OR CERTIFIED MAIL:
Bankers Trust Company
Four Albany Street
4th Floor
New York, New York 10006
Attention: Corporate Trust and Agency Group
Manager Public Utilities Group
Confirm By Telephone:
(212) 250-6826
Facsimile Transmissions:
(212) 250-6725
(ELIGIBLE INSTITUTIONS ONLY)
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Original Capital Securities, and in
handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original Capital Securities in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or other nominees soliciting acceptances of the Exchange Offer.
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DESCRIPTION OF THE EXCHANGE CAPITAL SECURITIES
The following summary of certain material terms and provisions of the
Exchange Capital Securities does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the Declaration. The Original
Capital Securities and the Common Securities were issued and the Exchange
Capital Securities will be issued pursuant to the terms of the Declaration.
The Declaration incorporates by reference terms of the Trust Indenture Act.
The Declaration has been qualified under the Trust Indenture Act. Bankers
Trust Company as the Institutional Trustee, but not the other Trustees of the
Trust, will act as the indenture trustee for purposes of the Trust Indenture
Act. The description of the Exchange Capital Securities and the Declaration
set forth below summarizes the material terms thereof and is subject to, and
qualified in its entirety by reference to, the Declaration, the Business Trust
Act and the Trust Indenture Act. Capitalized terms not otherwise defined
herein have the meanings assigned to them in the Declaration.
GENERAL
The Exchange Capital Securities will be issued in fully registered form
without interest coupons.
The Declaration authorizes the Trust to issue the Capital Securities
(including the Original Capital Securities and the Exchange Capital
Securities), which represent preferred undivided beneficial interests in the
assets of the Trust, and the Common Securities, which represent common
undivided beneficial interests in the assets of the Trust. All of the Common
Securities will be owned, directly or indirectly, by the Company. The Common
Securities and the Capital Securities will have equivalent terms except that
(i) if an Event of Default under the Declaration occurs and is continuing, the
rights of the holders of the Common Securities to payment in respect of
periodic distributions and payments upon liquidation, redemption or otherwise
are subordinated to the rights of the holders of the Capital Securities and
(ii) holders of Common Securities have the exclusive right (subject to the
terms of the Declaration) to appoint, remove or replace Trustees and to
increase or decrease the number of Trustees. The Declaration does not permit
the issuance by the Trust of any securities or other evidences of beneficial
ownership of, or beneficial interests in, the Trust other than the Capital
Securities and the Common Securities, the incurrence of any indebtedness for
borrowed money by the Trust or the making of any investment other than in the
Subordinated Debentures. The payment of distributions out of monies held by
the Trust and payments on redemption of the Capital Securities or liquidation
of the Trust are guaranteed by the Company on a subordinated basis as and to
the extent described under "Description of the Exchange Guarantee". Bankers
Trust Company, in its capacity as Exchange Capital Securities Guarantee
Trustee, will hold the Exchange Guarantee for the benefit of holders of the
Exchange Capital Securities. The Exchange Guarantee covers distributions and
other payments on the Exchange Capital Securities only if and to the extent
that the Company has made a payment to the Institutional Trustee of interest
or principal on the Subordinated Debentures deposited in the Trust as trust
assets. The Exchange Guarantee, when taken together with the Company's
obligations under the Subordinated Debentures and the Indenture and its
obligations under the Declaration, including its obligation to pay costs,
expenses and certain liabilities of the Trust, constitutes a full and
unconditional guarantee of amounts due on the Exchange Capital Securities.
DISTRIBUTIONS
Distributions on the Capital Securities will be fixed at a rate per annum of
8.23% of the stated liquidation amount of $1,000 per Capital Security.
Distributions in arrears will bear interest thereon at the rate per annum of
8.23%, compounded semi-annually, to the extent permitted by applicable law.
The amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter
than a full semi-annual period for which distributions are computed, the
amount of the distribution payable will be computed on the basis of the actual
number of days elapsed in such a 30-day month.
Distributions on the Capital Securities will be cumulative, will accrue from
January 29, 1997 and, except as otherwise described below, will be payable
semi-annually in arrears, on February 1 and August 1 of each year, commencing
on August 1, 1997, but only if, and to the extent that, interest payments are
made in respect of the
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Subordinated Debentures held by the Trust. The term "distribution" as used
herein includes any such interest (including any Additional Sums and
Additional Amounts, each as defined herein) payable unless otherwise stated.
So long as the Company shall not be in default in the payment of interest on
the Subordinated Debentures, the Company has the right under the Indenture to
defer payments of interest on the Subordinated Debentures by extending the
interest payment period from time to time on the Subordinated Debentures for a
period not exceeding 10 consecutive semi-annual interest periods and, as a
consequence, semi-annual distributions on the Capital Securities would not be
made (but would continue to accrue with interest thereon at the rate of 8.23%
per annum, compounded semi-annually, to the extent permitted by applicable
law) by the Trust during any such Extension Period. In the event that the
Company exercises this right, then, during such period, the Company (i) shall
not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock except for dividends, payments or distributions
payable in shares of its capital stock, reclassifications of its capital stock
and conversions or exchanges of capital stock of one class or series into
capital stock of another class or series and except for a redemption, purchase
or other acquisition of shares of its capital stock made for the purpose of an
employee incentive plan or benefit plan or other similar arrangement of the
Company or any of its subsidiaries, (ii) shall not make any payment of
interest, principal of or premium, if any, on, or repay, repurchase or redeem
any debt securities issued by the Company that rank pari passu with or junior
to the Subordinated Debentures (except by conversion into or exchange for
shares of its capital stock), and (iii) shall not make any guarantee payments
with respect to the foregoing. Prior to the termination of any such Extension
Period, the Company may further extend such Extension Period; provided that
such Extension Period together with all such previous and further extensions
thereof may not exceed 10 consecutive semi-annual interest periods. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the above
requirements. The Company may also pay on any Interest Payment Date all or any
portion of the interest accrued during an Extension Period. Consequently,
there could be multiple Extension Periods of varying lengths (up to six
Extension Periods of 10 consecutive semi-annual interest periods each or more
numerous shorter Extension Periods) throughout the term of the Subordinated
Debentures, provided that no Extension Period may extend beyond the Stated
Maturity Date of the Subordinated Debentures. See "Description of the Exchange
Subordinated Debentures--Interest" and "--Option to Extend Interest Payment
Period". Payments of accrued distributions will be payable to holders of
Capital Securities as they appear on the books and records of the Trust on the
first record date after the end of an Extension Period.
Distributions on the Capital Securities must be paid on the dates payable to
the extent that the Trust has cash on hand to permit such payment. The funds
available for distribution to the holders of the Capital Securities will be
limited to payments received by the Trust in respect of the Subordinated
Debentures that are deposited in the Trust as trust assets. See "Description
of the Exchange Subordinated Debentures". If the Company does not make
interest payments on the Subordinated Debentures, the Trust will not make
distributions on the Capital Securities. Under the Declaration, if and to the
extent the Company does make interest payments on the Subordinated Debentures
deposited in the Trust as trust assets, the Trust is obligated to make
distributions on the Trust Securities on a Pro Rata Basis. The payment of
distributions on the Capital Securities is guaranteed by the Company on a
subordinated basis as and to the extent set forth under "Description of the
Exchange Guarantee". The Capital Securities Guarantee covers distributions and
other payments on the Capital Securities only if and to the extent that the
Company has made a payment to the Trust of interest or principal on the
Subordinated Debentures deposited in the Trust as trust assets.
Distributions on the Capital Securities will be made to the holders thereof
as they appear on the books and records of the Trust on the relevant record
dates, which will be 15 days prior to the relevant distribution dates. Subject
to any applicable laws and regulations and the provisions of the Declaration,
each such payment will be made as described under "--Form, Denomination, Book-
Entry Procedures and Transfer". The Declaration provides that the payment
dates or record dates for the Capital Securities shall be the same as the
payment dates and record dates, to the extent there are record dates, for the
Subordinated Debentures. Distributions payable on
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any Capital Securities that are not punctually paid on any distribution date
as a result of the Company having failed to make the corresponding interest
payment on the Subordinated Debentures will forthwith cease to be payable to
the person in whose name such Capital Security is registered on the relevant
record date, and such defaulted distribution will instead be payable to the
person in whose name such Capital Security is registered on the special record
date established by the Regular Trustees, which record date shall correspond
to the special record date, if any, or other specified date determined in
accordance with the Indenture; provided, however, that distributions shall not
be considered payable on any distribution payment date falling within an
Extension Period unless the Company has elected to make a full or partial
payment of interest accrued on the Subordinated Debentures on such
distribution payment date. All distributions paid with respect to the Trust
Securities shall be paid on a Pro Rata Basis to the holders thereof entitled
thereto. If any date on which distributions are to be made on the Capital
Securities is not a Business Day (as defined below), then payment of the
distribution to be made on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date.
"Business Day" means a day other than (i) a Saturday or a Sunday, (ii) a day
on which banks in New York, New York or Bristol, England are authorized or
obligated by law or executive order to remain closed, or (iii) a day on which
the Indenture Trustee's Corporate Trust Office or Institutional Trustee's
principal corporate trust office is closed for business.
MANDATORY REDEMPTION
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the Subordinated Debentures, the proceeds from such
repayment or payment will be promptly applied to redeem Capital Securities and
Common Securities having an aggregate liquidation amount equal to the
Subordinated Debentures so repaid or prepaid, as the case may be, upon not
less than 15 nor more than 60 days' notice of a date of redemption (the
"Redemption Date"), at the applicable Redemption Price (as defined below).
Under the terms of the Indenture, the Company will have the option to prepay
the Subordinated Debentures, (a) in whole or in part, at any time on or after
February 1, 2007 or (b) in whole but not in part, (i) if the Company has or
will become obligated to pay Additional Amounts as described under
"Description of the Exchange Subordinated Debentures--Additional Amounts", or
(ii) upon the occurrence and continuation of a Special Event as described
under "--Special Event Redemption or Distribution".
The Common Securities will be entitled to be redeemed on a Pro Rata Basis
with the Capital Securities, except that if an Event of Default under the
Declaration has occurred and is continuing, the Capital Securities will have a
priority over the Common Securities with respect to payment of the Redemption
Price. Subject to the foregoing, if fewer than all outstanding Capital
Securities and Common Securities are to be redeemed, the Capital Securities
and Common Securities will be redeemed on a Pro Rata Basis. In the event fewer
than all outstanding Capital Securities are to be redeemed, Capital Securities
registered in the name of and held by DTC (or a successor depositary) or its
nominee will be redeemed pro rata as described under "--Form, Denomination,
Book-Entry Procedures and Transfer".
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Special Event Redemption
Upon the occurrence and continuance of a Tax Event or an Investment Company
Event (each as hereinafter defined, and each a "Special Event") at any time,
the Company will have the option to redeem the Subordinated Debentures in
whole but not in part (and thus cause the redemption of the Capital Securities
in whole) at the applicable Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of nationally recognized independent tax counsel experienced in such matters
to the effect that as a result of (a) any amendment to, or
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change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States, the United Kingdom or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after January 23, 1997, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date of such opinion subject to United States federal or United
Kingdom income tax with respect to income accrued or received on the
Subordinated Debentures, (ii) the Trust is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges or (iii) interest payable by the Company
to the Trust on the Subordinated Debentures is not, or within 90 days of the
date of such opinion, will not be, deductible by the Company for United States
earnings and profits purposes or United Kingdom income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced
in practice under the Investment Company Act of 1940, as amended (the "1940
Act"), that, as a result of the occurrence of a change in law or regulation or
a change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more
than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after January 23, 1997
Payment of Additional Sums
If a Tax Event has occurred and is continuing and the Trust is the holder of
all of the Subordinated Debentures, the Company will pay Additional Sums (as
defined below), if any, on the Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of any distribution then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
Distribution of Subordinated Debentures
The Company will have the right at any time to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust, if any, cause the
Subordinated Debentures to be distributed to the holders of Capital Securities
in liquidation of the Trust. This right is optional and wholly within the
discretion of the Company.
On the date fixed for any distribution of Subordinated Debentures, upon
dissolution of the Trust, (i) the Capital Securities and the Common Securities
will no longer be deemed to be outstanding and (ii) certificates representing
Trust Securities will be deemed to represent beneficial interests in the
Subordinated Debentures having an aggregate principal amount equal to the
stated liquidation amount of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, such Trust Securities until such
certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market price for the Subordinated
Debentures which may be distributed in exchange for Trust Securities if a
dissolution and liquidation of the Trust were to occur. Accordingly, the
Subordinated Debentures which the investor may subsequently receive on
dissolution and liquidation of the Trust may trade at a discount to the price
of the Trust Securities exchanged. If the Subordinated Debentures are
distributed to the holders of Trust Securities upon the dissolution of the
Trust, the Company will use its reasonable best efforts to list the
Subordinated Debentures on any securities exchange or other organization on
which the Capital Securities are then listed.
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REDEMPTION PRICE
"Redemption Price" means the amount set forth under "Description of the
Exchange Subordinated Debentures--Optional Redemption" if the Subordinated
Debentures are redeemed on or after February 1, 2007, plus accrued and unpaid
interest thereon to the redemption date (including interest, if any, accrued
during an Extension Period), or, in the case of a redemption as a result of
the occurrence and continuance of a Special Event, means the greater of (i)
the amount equal to 100% of the principal amount of the Subordinated
Debentures being redeemed or (ii) the amount equal to the sum of the present
values of the remaining scheduled payments of principal of and interest on the
Subordinated Debentures being redeemed through February 1, 2007 discounted to
the date of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at a discount rate equal to the Treasury
Yield plus 110 basis points, in the case of such a redemption before February
1, 1998, and the Treasury Yield plus 50 basis points, in the case of such a
redemption on or after February 1, 1998 but prior to February 1, 2007, plus,
for (i) or (ii) above, whichever is applicable, accrued interest on the
Subordinated Debentures 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 through February 1, 2007 of the Subordinated Debentures
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 through
February 1, 2007 of the Subordinated Debentures.
"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 preceding such Redemption Date, as set forth in the most recently
weekly statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "H.15 (519)" 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 Indenture Trustee.
"Reference Treasury Dealer Quotation" means, with respect to the Reference
Treasury Dealer and any redemption date, the average, as determined by the
Indenture 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 Indenture Trustee by such Reference Treasury Dealer
at 5:00 p.m. on the third business day 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
Indenture Trustee.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Capital Securities
unless all accrued and unpaid distributions have been paid on all Capital
Securities for all semi-annual distribution periods terminating on or prior to
the Redemption Date.
If the Trust gives a notice of redemption in respect of Capital Securities
(which notice will be irrevocable), then immediately prior to the close of
business on the Redemption Date, provided that the Company has paid to the
Trust a sufficient amount of cash in connection with the related redemption or
maturity of the Subordinated Debentures, distributions will cease to accrue on
the Capital Securities called for redemption, such Capital
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Securities shall no longer be deemed to be outstanding and all rights of
holders of such Capital Securities so called for redemption will cease, except
the right of the holders of such Capital Securities to receive the Redemption
Price, but without interest on such Redemption Price. Neither the Trustees nor
the Trust shall be required to register or cause to be registered the transfer
of any Capital Securities which have been so called for redemption. If any
date fixed for redemption of Capital Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. If the Company fails to repay Subordinated
Debentures on the Stated Maturity Date or Redemption Date or if payment of the
Redemption Price in respect of Capital Securities is improperly withheld or
refused and not paid by the Trust or by the Company pursuant to the Capital
Securities Guarantee described under "Description of the Exchange Guarantee",
distributions on such Capital Securities will continue to accrue from the
original Redemption Date of the Capital Securities to the date of payment in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
The Trust shall not be required to (i) issue, register the transfer of or
exchange of any Trust Securities during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Trust
Securities and ending at the close of business on the day of the mailing of
the relevant notice of redemption and (ii) register the transfer of or
exchange of any Trust Securities so selected for redemption, in whole or in
part, except the unredeemed portion of any Trust Securities being redeemed in
part.
If a partial redemption of the Capital Securities would result in the
delisting of the Capital Securities by any national securities exchange or
other organization on which the Capital Securities are then listed, the
Company pursuant to the Indenture will only redeem the Subordinated Debentures
in whole and, as a result, the Trust may only redeem the Capital Securities in
whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or any of its subsidiaries
may at any time and from time to time purchase outstanding Capital Securities
by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Capital Securities and Common
Securities at the date of dissolution, winding-up or termination of the Trust
will be entitled to receive on a Pro Rata Basis solely out of the assets of
the Trust, after satisfaction of liabilities of creditors (to the extent not
satisfied by the Company as provided in the Declaration), an amount equal to
the aggregate of the stated liquidation amount of $1,000 per Trust Security
plus accrued and unpaid distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"), unless, in connection with such
dissolution, winding-up or termination, Subordinated Debentures in an
aggregate principal amount equal to the aggregate stated liquidation amount of
such Trust Securities, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid distributions on such Trust Securities, shall
be distributed on a Pro Rata Basis to the holders of the Capital Securities
and Common Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities and the Common Securities shall, except as
provided below, be paid on a Pro Rata Basis.
The holders of the Common Securities will be entitled to receive
distributions upon any such dissolution on a Pro Rata Basis with the holders
of the Capital Securities, except that if an Event of Default under the
Declaration has occurred and is continuing, the Capital Securities shall have
a priority over the Common Securities with respect to payment of the
Liquidation Distribution.
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Pursuant to the Declaration, the Trust shall terminate on the earliest to
occur of: (i) December 31, 2027, (ii) when all of the Trust Securities shall
have been called for redemption and the amounts necessary for redemption
thereof shall have been paid to the holders of Trust Securities in accordance
with the terms of the Trust Securities, or (iii) when all of the Subordinated
Debentures shall have been distributed to the holders of Trust Securities in
exchange for all of the Trust Securities in accordance with the terms of the
Trust Securities.
NO MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets to, any
corporation or other entity except in accordance with the Declaration.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default will constitute an Event of Default under the
Declaration; provided that pursuant to the Declaration, the holder of the
Common Securities will be deemed to have waived any such Event of Default with
respect to the Common Securities until all Events of Default with respect to
the Capital Securities have been cured or waived. Until all such Events of
Default with respect to the Capital Securities have been cured or waived, the
Institutional Trustee will be deemed to be acting solely on behalf of the
holders of the Capital Securities, and only the holders of the Capital
Securities will have the right to direct the Institutional Trustee with
respect to certain matters under the Declaration and consequently under the
Indenture. In the event that any Event of Default with respect to the Capital
Securities is waived by the holders of the Capital Securities as provided in
the Declaration, the holders of Common Securities pursuant to the Declaration
have agreed that such waiver also constitutes a waiver of such Event of
Default with respect to the Common Securities for all purposes under the
Declaration without any further act, vote or consent of the holders of the
Common Securities. See "--Voting Rights".
Upon the occurrence of an Event of Default, the Institutional Trustee will
have the right under the Indenture to declare the principal of and interest on
the Subordinated Debentures to be immediately due and payable. In addition,
the Institutional Trustee will have the power to exercise all rights, powers
and privileges under the Indenture. See "Description of the Exchange
Subordinated Debentures".
VOTING RIGHTS
Except as provided below, under "--Modification and Amendment of the
Declaration" and "Description of the Exchange Guarantee--Amendments and
Assignment" and as otherwise required by the Business Trust Act, the Trust
Indenture Act and the Declaration, the holders of the Capital Securities will
have no voting rights.
Subject to the requirements of the second to last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Capital Securities have the right (i) on behalf of all holders of Capital
Securities, to waive any past default that is waivable under the Declaration
and (ii) to direct the time, method and place of conducting any proceeding for
any remedy available to the Institutional Trustee, or exercising any trust or
power conferred upon the Institutional Trustee under the Declaration;
provided, however, that the holders of the Capital Securities will vote as a
single class (the "Capital Trust Voting Class") with respect to the right to
direct an Institutional Trustee, to (x) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee with respect
to the Subordinated Debentures, (y) waive any past default and its
consequences that is waivable under the applicable provisions of the Indenture
with respect to the Subordinated Debentures or (z) exercise any right to
rescind or annul a declaration that the principal of all Subordinated
Debentures shall be due and payable; provided that where a consent under the
Indenture would require the consent of (1) holders of Subordinated Debentures
representing a specified percentage greater than a majority in principal
amount of such securities or (2) each holder of such securities affected
thereby, no such consent shall be given by any Trustee without the prior
consent of, in the case of clause (1) above, holders of securities in the
Capital Trust Voting Class representing such specified percentage or, in the
case of clause (2) above, each holder of securities in the Capital
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Trust Voting Class affected thereby. The Institutional Trustee shall not
revoke or take any action inconsistent with any action previously authorized
or approved by a vote of the holders of Capital Securities. The Institutional
Trustee shall notify all holders of record of Capital Securities of any notice
of default received from the Indenture Trustee with respect to the
Subordinated Debentures. Other than with respect to directing the time, method
and place of conducting any proceeding for any remedy available to the
Institutional Trustee or the Indenture Trustee as set forth above, the
Institutional Trustee shall be under no obligation to take any of the
foregoing actions at the direction of the holders of the Capital Securities
unless the Institutional Trustee shall have obtained an opinion of nationally
recognized independent tax counsel recognized as expert in such matters to the
effect that the Trust will not be classified for United States federal income
tax purposes as an association taxable as a corporation or a partnership on
account of such action and will be treated as a grantor trust for United
States federal income tax purposes following such action. If the Institutional
Trustee fails to enforce its rights under the Declaration (including, without
limitation, its rights, powers and privileges as a holder of the Subordinated
Debentures under the Indenture), any holder of Capital Securities may, to the
extent permitted by applicable law, upon such holder's written request to the
Institutional Trustee to enforce such rights, institute a legal proceeding
directly against the Company to enforce the Institutional Trustee's rights
under the Declaration, without first instituting a legal proceeding against
the Institutional Trustee or any other Person.
A waiver of an Indenture Event of Default by the Institutional Trustee at
the direction of holders of the Capital Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Trust Securities.
In the event the consent of the Trust as the holder of the Subordinated
Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Subordinated Debentures,
the Institutional Trustee shall request the direction of the holders of the
Trust Securities with respect to such amendment, modification or termination
and shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together in the Capital Trust Voting Class; provided, however, that where any
such amendment, modification or termination of the Indenture would require the
consent of (i) holders of Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of such securities or
(ii) each holder of Subordinated Debentures, the Trustee may only give such
consent at the direction of the holders of securities in the Capital Trust
Voting Class representing such specified percentage in the case of clause (i)
above, or each holder of securities in the Capital Trust Voting Class affected
thereby, in the case of clause (ii) above; and provided further that the
Institutional Trustee shall be under no obligation to take any such action in
accordance with the directions of the holders of the Trust Securities unless
the Institutional Trustee has obtained an opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect
that the Trust will not be classified for United States federal income tax
purposes as an association taxable as a corporation or a partnership on
account of such action and will be treated as a grantor trust for United
States federal income tax purposes following such action.
Any required approval or direction of holders of Capital Securities may be
given at a separate meeting of holders of Capital Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Capital Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel Capital Securities or distribute Subordinated
Debentures in accordance with the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities at such time that are owned by the Company or by
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any entity directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
The procedures by which persons owning Capital Securities registered in the
name of and held by DTC or its nominee may exercise their voting rights are
described under "--Form, Denomination, Book-Entry Procedures and Transfer".
Holders of the Capital Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holder of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended on approval of the Regular
Trustees, provided that, if any proposed modification or amendment provides
for, or the Regular Trustees otherwise propose to effect, (i) any action that
would adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust other than
pursuant to the terms of the Declaration, then the holders of the outstanding
Trust Securities as a class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities,
provided that if any amendment or proposal referred to in clause (i) above
would adversely affect only the Capital Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of a majority in liquidation amount of such class of Trust
Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (A) either
a ruling from the Internal Revenue Service or a written opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that such amendment will not cause the Trust to be classified for United
States federal income tax purposes as an association taxable as a corporation
or a partnership and to the effect that the Trust will not be treated as other
than a grantor trust for purposes of United States federal income taxation on
account of such amendment and (B) a written opinion of nationally recognized
independent counsel experienced in such matters to the effect that such
amendment will not cause the Trust to be an "investment company" which is
required to be registered under the 1940 Act, (ii) certain specified
provisions of the Declaration may not be amended without the consent of all of
the holders of the Trust Securities, (iii) no amendment which adversely
affects the rights, powers and privileges of the Institutional Trustee shall
be made without the consent of the Institutional Trustee, (iv) certain
provisions of the Declaration relating to the obligation of the Company to
purchase the Common Securities and to pay certain obligations and expenses of
the Trust as described under "Southern Investments UK Capital Trust I" may not
be amended without the consent of the Company, and (v) the rights of holders
of Common Securities under the Declaration to increase or decrease the number
of, and to appoint, replace or remove, Trustees shall not be amended without
the consent of each holder of Common Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity, (ii) correct
or supplement any provision in the Declaration that may be defective or
inconsistent with any other provision of the Declaration, (iii) add to the
covenants, restrictions or obligations of the Company, (iv) preserve the
status of the Trust as a grantor trust for United States federal income tax
purposes, and (v) to conform to changes in, or a change in interpretation or
application of, certain 1940 Act requirements by the Commission, which
amendment does not adversely affect the rights, preferences or privileges of
the holders of Trust Securities.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Capital Securities will be issued in blocks having a
liquidation amount of not less than $1,000 and may be transferred or exchanged
in such blocks in the manner and at the offices described below. The
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Exchange Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global
Capital Securities"). The Global Capital Securities will be deposited upon
issuance with the Institutional Trustee as custodian for DTC, in New York, New
York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Capital Securities may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee. Beneficial interests in the Global Capital Securities may
not be exchanged for Capital Securities in certificated form except in the
limited circumstances described below.
Transfers of beneficial interests in the Global Capital Securities will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants (including, if applicable, those of the Euroclear System
("Euroclear") and Cedel Bank, societe anonyme ("Cedel Bank")), which may
change from time to time.
Depositary Procedures
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for Participants and to facilitate
the clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the liquidation amount of the Global Capital Securities and (ii)
ownership of such interests in the Global Capital Securities will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interests in the Global Capital Securities).
The Company understands that under existing industry practices, if either
the Company or the Institutional Trustee requests any action of holders of
Capital Securities or if an owner of an interest in the Capital Securities
desires to give or take any action that a holder is entitled to give or take
under the Indenture or the owner of an interest in the Capital Securities is
entitled to give or take under the Deposit Agreement relating to the
Subordinated Debentures, DTC would authorize the Participants owning the
relevant interests in the Capital Securities to give or take such action, and
such Participants would authorize Indirect Participants to give or take such
action or would otherwise act upon the instructions of owners of interests in
such Capital Securities holding through them.
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are participants in such system, or indirectly
through organizations (including Euroclear and Cedel Bank) which are
participants in such system. Euroclear and Cedel Bank will hold interests in
the Global Capital Securities on behalf of their participants through
customers' securities accounts in their respective names on the books of their
respective depositaries, which are Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear, and Citibank, N.A., as facilitator
for Cedel Bank's access to DTC. The depositaries, in turn, will hold such
interests in the Global Capital Securities in customers' securities accounts
in the depositaries' names on the books of DTC. All interests in a Global
Capital Security, including those held through Euroclear or Cedel Bank, may be
subject to the procedures and requirements of DTC. Those interests held
through Euroclear or Cedel Bank may also be subject to the procedures and
requirements of such system. The laws of some states
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require that certain persons take physical delivery in certificated form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Capital Security to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Capital Security to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the
Declaration for any purpose.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Institutional Trustee to DTC in its
capacity as the registered holder under the Declaration. Under the terms of
the Declaration, the Institutional Trustee will treat the persons in whose
names the Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
Regular Trustees, Institutional Trustee nor any agent of either thereof has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Capital
Securities, or for maintaining, supervising or reviewing any of DTC's records
or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Capital Securities or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the
Company that its current practice, upon receipt of any payment in respect of
securities such as the Capital Securities, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in liquidation amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC
has reason to believe it will not receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Capital Securities will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the
Institutional Trustee, the Trust or the Company. Neither the Trust or the
Company nor the Institutional Trustee will be liable for any delay by DTC or
any of its Participants in identifying the beneficial owners of the Capital
Securities, and the Trust or the Company and the Institutional Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel Bank participants,
interests in the Global Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear and Cedel Bank will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Capital Securities described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear and Cedel Bank
participants, on the other hand, will be effected through DTC in accordance
with DTC's rules on behalf of Euroclear or Cedel Bank, as the case may be, by
its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or Cedel Bank, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such
system. Euroclear or Cedel Bank, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Capital Securities in
DTC, and making or
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receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel Bank
participants may not deliver instructions directly to the depositaries for
Euroclear and Cedel Bank.
Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a Global Capital Security
from a participant in DTC will be credited, and any such crediting will be
reported to the relevant Euroclear or Cedel Bank participant, during the
securities settlement processing day (which must be a business day for
Euroclear or Cedel Bank) immediately following the settlement date of DTC.
Cash received in Euroclear or Cedel Bank as a result of sales of interests in
a Global Capital Security by or through a Euroclear or Cedel Bank participant
to a Participant in DTC will be received with value on the settlement date of
DTC but will be available in the relevant Euroclear or Cedel Bank cash account
only as of the business day for Euroclear or Cedel Bank following DTC's
settlement date.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction
of one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
liquidation amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Declaration, DTC reserves the right to exchange the
Global Capital Securities for legended Capital Securities in certificated form
and to distribute such Capital Securities to its Participants.
The information in this section concerning DTC, Euroclear and Cedel Bank and
their book-entry systems has been obtained from sources that the Trust and the
Company believe to be reliable, but neither the Trust nor the Company takes
responsibility for the accuracy thereof.
Although DTC, Euroclear and Cedel Bank have agreed to the foregoing
procedures to facilitate transfers of interest in the Global Capital
Securities among participants in DTC, Euroclear and Cedel Bank, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Trust or the Company
nor the Institutional Trustee will have any responsibility for the performance
by DTC, Euroclear and Cedel Bank or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Euroclear and Cedel Bank
Euroclear and Cedel Bank each hold securities for their account holders and
facilitate the clearance and settlement of securities transactions by
electronic book-entry transfer between their respective account holders,
thereby eliminating the need for physical movements of certificates and any
risk from lack of simultaneous transfers of securities.
Euroclear and Cedel Bank provide various services including safekeeping,
administration, clearance and settlement of internationally traded securities
lending and borrowing. Euroclear and Cedel Bank also deal with domestic
securities markets in several countries through established depositary and
custodial relationships. Euroclear and Cedel Bank have established an
electronic bridge between their two systems across which their respective
account holders may settle trades with each other.
Account holders in Euroclear and Cedel Bank are world-wide financial
institutions, including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to Euroclear and
Cedel Bank is available to other institutions that clear through or maintain a
custodial relationship with an account holder of either system.
Account holders' overall contractual relations with Euroclear and Cedel Bank
are governed by the respective rules and operating procedures of Euroclear and
Cedel Bank and any applicable laws. Euroclear and Cedel Bank act under such
rules and operating procedures only on behalf of their respective account
holders and have no record of or relationship with persons holding through
their respective account holders.
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Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for Exchange Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary within 90 days
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the Company in its sole discretion elects to cause the issuance of the
Exchange Capital Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after notice
or lapse of time or both would be an Event of Default under the Declaration.
In addition, beneficial interests in a Global Capital Security may be
exchanged for certificated Exchange Capital Securities upon request but only
upon at least 20 days' prior written notice given to the Institutional Trustee
by or on behalf of DTC in accordance with customary procedures. In all cases,
certificated Exchange Capital Securities delivered in exchange for any Global
Capital Security or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the Depositary (in accordance with its customary procedures).
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities held in global form shall be
made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable distribution dates, or in respect of the Capital
Securities that are not held by the Depositary, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address
shall appear on the register. The paying agent (the "Paying Agent") shall
initially be the Institutional Trustee and any co-paying agent chosen by the
Institutional Trustee and acceptable to the Regular Trustees and the Company.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Institutional Trustee and the Company. In the event that
the Institutional Trustee shall no longer be the Paying Agent, the Regular
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Regular Trustees and the Company) to act as Paying Agent.
RESTRICTIONS ON TRANSFER
The Exchange Capital Securities will be issued, and may be transferred only
in minimum denominations of not less than $1,000 and multiples of $1,000 in
excess thereof. Any transfer, sale or other disposition of Exchange Capital
Securities in a denomination of less than $1,000 shall be deemed to be void
and of no legal effect whatsoever. Any such transferee shall be deemed not to
be the holder of such Exchange Capital Securities for any purpose, including
but not limited to the receipt of distributions on such Exchange Capital
Securities, and such transferee shall be deemed to have no interest whatsoever
in such Exchange Capital Securities.
REGISTRAR AND TRANSFER AGENT
Bankers Trust Company will act as registrar and transfer agent for the
Capital Securities.
Registration of transfers of the Capital Securities will be effected without
charge by or on behalf of the Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of the Capital Securities after they have been called for
redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Institutional Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Capital Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The Institutional Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Institutional Trustee reasonably believes
that repayment or adequate indemnity is not reasonably assured to it.
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The Company and certain of its affiliates maintain deposit accounts and
banking relationships with the Institutional Trustee.
GOVERNING LAW
The Declaration and the Trust Securities will be governed by, and construed
in accordance with, the laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as they
deem reasonable in order that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act or that the
Trust will not be classified for United States federal income tax purposes as
an association taxable as a corporation or a partnership and will be treated
as a grantor trust for United States federal income tax purposes. In this
connection, the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Declaration,
that the Regular Trustees determine in their discretion to be reasonable and
necessary or desirable for such purposes, as long as such action does not
adversely affect the interests of holders of the Trust Securities.
The Company and the Regular Trustees on behalf of the Trust will be required
to provide to the Institutional Trustee annually a certificate as to whether
or not the Company and the Trust, respectively, are in compliance with all the
conditions and covenants under the Declaration.
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DESCRIPTION OF THE EXCHANGE GUARANTEE
Set forth below is a summary of information concerning the Exchange
Guarantee that will be executed and delivered by the Company in connection
with the issuance by the Trust of the Exchange Capital Securities for the
benefit of the holders from time to time of Exchange Capital Securities. The
Original Guarantee was executed and delivered by the Company concurrently with
the issuance of the Original Capital Securities by the Trust for the benefit
of the holders from time to time of the Original Capital Securities. As soon
as practicable after the date hereof, the Original Guarantee will be exchanged
by the Company for the Exchange Guarantee. The Exchange Guarantee will be held
by Bankers Trust Company acting in its capacity as Capital Securities
Guarantee Trustee with respect thereto, for the benefit of the holders of the
Exchange Capital Securities. The Exchange Guarantee incorporates by reference
the terms of the Trust Indenture Act. The Exchange Guarantee has been
qualified under the Trust Indenture Act. The summary set forth below does not
purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Exchange Guarantee.
GENERAL
Pursuant to the Capital Securities Guarantee, the Company will agree, to the
extent set forth therein, to pay in full to the holders of the Capital
Securities, the Guarantee Payments (as defined below) (without duplication of
amounts theretofore paid by the Trust), to the extent not paid by the Trust,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert. The following payments or distributions with respect to the
Capital Securities to the extent not paid or made by the Trust (the "Guarantee
Payments") will be subject to the Capital Securities Guarantee (without
duplication): (i) any accrued and unpaid distributions on the Capital
Securities and the Redemption Price, including all accrued and unpaid
distributions to the date of the redemption, with respect to the Capital
Securities called for redemption by the Trust but only if and to the extent
that in each case the Company has made a payment to the Institutional Trustee
of interest or principal on the Subordinated Debentures and (ii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debentures to
holders of Trust Securities or the redemption of all of the Capital Securities
on maturity or upon redemption of the Subordinated Debentures), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Capital Securities to the date of payment, to the extent
the Trust has funds available therefor, and (b) the amount of assets of the
Trust remaining available for distribution to holders of Capital Securities in
liquidation of the Trust. The Company's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Company to
the holders of Capital Securities or by paying the required amount to the
Trust and causing the Trust to pay such amounts to such holders. The Capital
Securities Guarantee, when taken together with the Company's obligations under
the Subordinated Debentures and the Indenture and its obligations under the
Declaration, including its obligation to pay costs, expenses and certain
liabilities of the Trust, constitutes a full and unconditional guarantee of
amounts due on the Capital Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Capital Securities Guarantee, the Company will covenant that, so long
as any Capital Securities remain outstanding, the Company will not (a) declare
or pay any dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its capital stock except for
dividends, payments or distributions payable in shares of its capital stock,
reclassifications of its capital stock and conversions or exchanges of capital
stock of one class or series for capital stock of another class or series and
except for a redemption, purchase or other acquisition of shares of its
capital stock made for the purpose of an employee incentive plan or benefit
plan or other similar arrangement of the Company or any of its subsidiaries or
(b) make any payment of interest, principal of or premium, if any, on, or
repay, repurchase or redeem any debt securities issued by the Company that
rank pari passu with or junior to the Subordinated Debentures (except by
conversion into or exchange for shares of its capital stock) or (c) make any
guarantee payment with respect to the foregoing, if at such time (i) the
Company shall be in default with respect to its Guarantee Payments or other
payment obligations under the Capital Securities Guarantee, (ii) there shall
have occurred and be continuing an Indenture Event of Default or (iii) the
Company shall have given notice of its selection of an Extension Period as
provided
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in the Indenture and such period, or any extension thereof, is continuing. In
addition, so long as any Capital Securities remain outstanding, the Company
(i) has agreed to remain the sole direct or indirect owner of all of the
outstanding Common Securities and shall not cause or permit the Common
Securities to be transferred except to the extent permitted by the
Declaration; provided that any permitted successor of the Company under the
Indenture may succeed to the Company's ownership of the Common Securities, and
(ii) will not take any action which will cause the Trust to cease to be
treated as a grantor trust for United States federal income tax purposes
except in connection with a distribution of Subordinated Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Capital Securities (in which case no consent will be required),
the Capital Securities Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Capital Securities. The manner of obtaining any such approval of
holders of the Capital Securities will be as set forth under "Description of
the Exchange Capital Securities--Voting Rights". All guarantees and agreements
contained in the Capital Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall
inure to the benefit of the holders of the Capital Securities then
outstanding. Except in connection with a consolidation, merger or sale
involving the Company that is permitted under the Indenture, the Company may
not assign its obligations under the Capital Securities Guarantee.
TERMINATION OF THE CAPITAL SECURITIES GUARANTEE
The Capital Securities Guarantee will terminate and be of no further force
and effect as to the Capital Securities upon full payment of the Redemption
Price of all Capital Securities, or upon distribution of the Subordinated
Debentures to the holders of Capital Securities in exchange for all of the
Capital Securities, or upon full payment of the amounts payable upon
liquidation of the Trust. Notwithstanding the foregoing, the Capital
Securities Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Capital Securities must restore
payment of any sums paid with respect to the Capital Securities or the Capital
Securities Guarantee.
STATUS OF THE CAPITAL SECURITIES GUARANTEE
The Company's obligations under the Capital Securities Guarantee to make the
Guarantee Payments will constitute unsecured obligations of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Subordinated Debentures, except
liabilities made pari passu or subordinate by their terms, and (ii) senior to
all capital stock now or hereafter issued by the Company, and to any guarantee
now or hereafter entered into by the Company in respect of any of its capital
stock. The Declaration provides that each holder of Capital Securities by
acceptance thereof agrees to the subordination provisions and other terms of
the Capital Securities Guarantee.
The Capital Securities Guarantee will constitute a guarantee of payment and
not of collection, thus, any holder of Capital Securities may institute a
legal proceeding directly against the Company to enforce such holder's rights
under the Capital Securities Guarantee, without first instituting a legal
proceeding against the Trust or any other person or entity. The Capital
Securities Guarantee will be deposited with the Institutional Trustee, as
Guarantee Trustee, to be held in trust for the benefit of the holders of the
Capital Securities. The Institutional Trustee shall enforce the Capital
Securities Guarantee on behalf of the holders of the Capital Securities. The
holders of not less than a majority in aggregate liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the Capital
Securities Guarantee, including the giving of directions to the Institutional
Trustee.
The Company and certain of its affiliates maintain deposit accounts and
banking relationships with the Institutional Trustee.
GOVERNING LAW
The Capital Securities Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
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DESCRIPTION OF THE EXCHANGE SUBORDINATED DEBENTURES
The Original Subordinated Debentures were issued and the Exchange
Subordinated Debentures will be issued under the Indenture dated as of January
29, 1997 among the Company, Bankers Trust Company, as the Indenture Trustee,
and Bankers Trust Luxembourg S.A., as paying agent and transfer agent. The
Indenture has been qualified under the Trust Indenture Act. This summary of
certain terms and provisions of the Subordinated Debentures and the Indenture
does not purport to be complete, and where reference is made to particular
provisions of the Indenture, such provisions, including the definitions of
certain terms, some of which are not otherwise defined herein, are qualified
in their entirety by reference to all of the provisions of the Indenture and
those terms made a part of the Indenture by the Trust Indenture Act.
Upon the dissolution of the Trust at the option of the Company, Subordinated
Debentures may be distributed to the holders of the Trust Securities in
liquidation of the Trust. See "Description of the Exchange Capital
Securities--Special Event Redemption or Distribution".
GENERAL
Concurrently with the issuance of the Common Securities and the Original
Capital Securities, the Trust invested the proceeds thereof in the Original
Subordinated Debentures issued by the Company.
The Subordinated Debentures are unsecured, subordinated obligations of the
Company, limited in aggregate principal amount to (i) the aggregate
liquidation amount of the Capital Securities issued by the Trust and (ii) the
proceeds received by the Trust upon issuance of the Common Securities to the
Company (which proceeds will be used to purchase an equal principal amount of
Subordinated Debentures).
The Subordinated Debentures mature on February 1, 2027. The Subordinated
Debentures are not subject to any sinking fund.
The Original Subordinated Debentures are, and the Exchange Subordinated
Debentures will be, listed on the Luxembourg Stock Exchange.
If Book-Entry Interests in the Subordinated Debentures are distributed to
holders of Trust Securities in dissolution of the Trust, such Book-Entry
Interests will be transferred by the Trust to DTC, which will operate a book-
entry system for interests in the Book-Entry Interests. DTC will initially
credit Participants holding Capital Securities with interests in the Book-
Entry Interests (pro rata to their holdings of Capital Securities) and DTC
will issue to such Participants interests in such Book-Entry Interests in the
same form as the Capital Securities which such interests replace. To the
extent any Capital Securities are held in certificated form, such Book-Entry
Interests in the Subordinated Debentures will be issued in certificated form
of like denominations.
Payments of principal and interest on Subordinated Debentures will be
payable, the transfer of the Definitive Registered Debentures will be
registrable, and Definitive Registered Debentures will be exchangeable for
Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate trust office of the Indenture Trustee in The City of
New York; provided that payments of interest on Definitive Registered
Debentures may be made at the option of the Company by check mailed to the
address of the persons entitled thereto and that the payment of principal with
respect to any Subordinated Debenture will be made only upon surrender of such
Subordinated Debenture to the Indenture Trustee. So long as the Subordinated
Debentures are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, the Company will maintain a paying and transfer agent in
Luxembourg, which will initially be Bankers Trust Luxembourg S.A. Payments of
principal of and interest on and the transfer of the Subordinated Debentures
in Luxembourg will be through the Luxembourg paying and transfer agent.
If the Subordinated Debentures are distributed to the holders of Trust
Securities upon the dissolution of the Trust, the Company will use its
reasonable best efforts to list the Subordinated Debentures on any securities
exchange or other organization on which the Capital Securities are then
listed.
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The Indenture contains no provisions which would afford the holders of
Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company or a change of control of the Company.
INTEREST
The Subordinated Debentures will bear interest at an annual rate of 8.23%
from January 29, 1997. Interest will be payable semi-annually in arrears on
February 1 and August 1 of each year (each, an "Interest Payment Date"),
commencing on August 1, 1997, to (in the case of the Global Debenture) the
Book-Entry Depositary or (in the case of a Definitive Registered Debenture)
the person in whose name such Definitive Registered Debenture is registered,
subject to certain exceptions, at the close of business on the Business Day
next preceding such Interest Payment Date. Interest payable on any Definitive
Registered Debenture that is not punctually paid or duly provided for on any
Interest Payment Date will forthwith cease to be payable to the person in
whose name such Definitive Registered Debenture is registered on the relevant
record date, and such defaulted interest will instead be payable to the person
in whose name such Definitive Registered Debenture is registered on the
special record date or other specified date determined in accordance with the
Indenture; provided, however, that interest shall not be considered payable by
the Company on any Interest Payment Date falling within an Extension Period
unless the Company has elected to make a full or partial payment of interest
accrued on the Subordinated Debentures on such Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and for any period shorter than a
full semi-annual period for which interest is computed, the amount of interest
payable will be computed on the basis of the actual number of days elapsed in
such a 30-day month. If any Interest Payment Date is not a Business Day, then
payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest on
the Subordinated Debentures, the Company shall have the right to extend the
interest payment period from time to time for a period not exceeding 10
consecutive semi-annual interest periods. The Company has no current intention
of exercising its right to extend an interest payment period. In the event
that the Company exercises this right, then, during such period the Company
(i) shall not declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock except for dividends, payments or distributions
payable in shares of its capital stock, reclassifications of its capital stock
and conversions or exchanges of capital stock of one class or series into
capital stock of another class or series and except for a redemption, purchase
or other acquisition of shares of its capital stock made for the purpose of an
employee incentive plan or benefit plan or other similar arrangement of the
Company or any of its subsidiaries, (ii) shall not make any payment of
interest, principal of or premium, if any, on, or repay, repurchase or redeem
any debt securities issued by the Company that rank pari passu with or junior
to the Subordinated Debentures (except by conversion into or exchange for
shares of its capital stock), and (iii) shall not make any guarantee payments
with respect to the foregoing. No interest shall be due and payable during an
Extension Period, except at the end thereof. Any Extension Period with respect
to payment of interest on the Subordinated Debentures will also apply to
distributions with respect to the Capital Securities. Prior to the termination
of any such Extension Period, the Company may further extend the interest
payment period; provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 10 consecutive semi-
annual interest periods. On the Interest Payment Date occurring at the end of
each Extension Period, the Company shall pay to the holders of Subordinated
Debentures of record on the record date for such Interest Payment Date
(regardless of who the holders of record may have been on other dates during
the Extension Period) all accrued and unpaid interest on the Subordinated
Debentures (together with interest thereon at the rate specified for the
Subordinated Debentures compounded semi-annually to the extent permitted by
law). Upon the termination of
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any Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. The
Company may also pay on any Interest Payment Date all or any portion of the
interest accrued during an Extension Period. Consequently, there could be
multiple Extension Periods of varying lengths (up to six Extension Periods of
10 consecutive semi-annual interest periods each or more numerous shorter
Extension Periods) throughout the term of the Subordinated Debentures;
provided that no Extension Period may extend beyond the Stated Maturity Date
of the Subordinated Debentures. The failure by the Company to make interest
payments during an Extension Period would not constitute a default or an event
of default under the Indenture or the Company's currently outstanding
indebtedness.
If the Trust shall be the sole holder of the Subordinated Debentures, the
Company shall give the Institutional Trustee and the Indenture Trustee notice
of its selection of such Extension Period at least one Business Day prior to
the earlier of (i) the next succeeding date on which the distributions on the
Capital Securities are payable or (ii) the date the Company is required to
give notice to the holders of the Capital Securities of the record date or the
date such distribution is payable. The Trust shall give notice of the
Company's selection of such Extension Period to the holders of the Capital
Securities.
If Subordinated Debentures have been distributed to holders of Trust
Securities, the Company shall give the holders of the Subordinated Debentures
and the Indenture Trustee notice of its selection of such Extension Period at
least ten Business Days prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) the date the Company is required to give notice
to holders of the Subordinated Debentures of the record or payment date of
such related interest payment.
OPTIONAL REDEMPTION
Except as provided below, the Subordinated Debentures may not be redeemed
prior to February 1, 2007. The Company shall have the right to redeem the
Subordinated Debentures, in whole or in part, from time to time, on or after
February 1, 2007 upon not less than 15 nor more than 60 days' notice, at a
Redemption Price equal to the percentages specified below of the principal
amount of the Subordinated Debentures to be redeemed, plus any accrued and
unpaid interest, to the redemption date, including interest accrued during an
Extension Period if redeemed during the 12 month period beginning February 1
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2007 104.115%
2008 103.704
2009 103.292
2010 102.881
2011 102.469
2012 102.058
2013 101.646
2014 101.235
2015 100.823
2016 100.412
2017 and there-
after 100.000
</TABLE>
The Company will also have the right to redeem the Subordinated Debentures at
any time upon not less than 15 nor more than 60 days' notice at the applicable
Redemption Price upon the occurrence and continuation of a Special Event as
described under "Description of the Exchange Capital Securities--Special Event
Redemption or Distribution", or if the Company has or will become obligated to
pay Additional Amounts as described under "Description of the Exchange
Subordinated Debentures--Optional Tax Redemption".
If the Company gives a notice of redemption in respect of Subordinated
Debentures (which notice will be irrevocable), then, on or before the
redemption date, the Company will deposit irrevocably with the Indenture
Trustee funds sufficient to pay the applicable redemption price and will give
irrevocable instructions and authority to pay such redemption price to the
holders of the Subordinated Debentures. If notice of redemption
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shall have been given and funds deposited as required, then upon the date of
such deposit, interest will cease to accrue on the Subordinated Debentures
called for redemption, such Subordinated Debentures will no longer be deemed
to be outstanding and all rights of holders of such Subordinated Debentures so
called for redemption will cease, except the right of the holders of such
Subordinated Debentures to receive the applicable redemption price, but
without interest on such redemption price. If any date fixed for redemption of
Subordinated Debentures is not a Business Day, then payment of the redemption
price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption.
If payment of the redemption price in respect of Subordinated Debentures is
improperly withheld or refused and not paid by the Company, interest on such
Subordinated Debentures will continue to accrue compounded semi-annually, from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the applicable redemption price. If fewer than all of the
Subordinated Debentures are to be redeemed for any reason prior to the
maturity date, the Subordinated Debentures to be redeemed shall be selected by
lot or pro rata or in some other equitable manner determined by the Indenture
Trustee.
The Company shall not be required to (i) issue, register the transfer of or
exchange of any Definitive Registered Debentures during a period beginning at
the opening of business 15 days before the giving of a notice of redemption of
Subordinated Debentures and ending at the close of business on the day of the
giving of the relevant notice of redemption and (ii) register the transfer of
or exchange of any Definitive Registered Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any
Subordinated Debentures being redeemed in part.
ADDITIONAL AMOUNTS
All payments of principal and interest in respect of the Subordinated
Debentures 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 UK or by or within any
political subdivision thereof or any authority therein or thereof having power
to tax ("UK 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
relevant holder of Subordinated Debentures such additional amounts
("Additional Amounts") as will result in the payment to each 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 UK
Taxes in respect of the Subordinated Debentures by reason of such holder
having some connection with the UK (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 UK) other than the
mere holding of a Subordinated Debenture or the receipt of principal and
interest in respect thereof;
(b) to, or to a Person on behalf of, a holder who presents a Subordinated
Debenture (where presentation is required) for payment more than 30 days
after the Relevant Date (as defined below) except to the extent that such
holder would have been entitled to such Additional Amounts on presenting
such Subordinated Debenture 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 Subordinated
Debenture (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
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(e) to, or to a Person on behalf of, a holder of a Definitive Registered
Debenture issued pursuant to the request of owners of interests
representing a majority in outstanding principal amount in 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 Debentures be so issued.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Subordinated Debentures (or any interest therein) been the holder
of the Subordinated Debentures, he would not have been entitled to payment of
Additional Amounts by reason of any one or more of the 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.
"Relevant Date" means whichever is the later of (i) the date on which such
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 Indenture
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 the Indenture.
OPTIONAL TAX REDEMPTION
If (a) the Company satisfies the Indenture Trustee prior to the giving of a
notice as provided below that it has or will become obligated to pay
Additional Amounts with respect to the Subordinated Debentures as a result of
either (x) any change in, or amendment to, the laws or regulations of the UK
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 January 23, 1997 or (y) the issuance of Definitive
Registered Debentures pursuant to the first sentence or clause (a) or (b) of
the third sentence of "--Definitive Subordinated Debentures" and (b) such
obligation cannot be avoided by the Company taking reasonable measures
available to it, the Company may, at its option, on giving not more than 60
nor less than 15 days' notice to the holders, redeem, as a whole but not in
part, the Subordinated Debentures at 100% of the principal amount of the
Subordinated Debentures then outstanding, together with accrued and unpaid
interest to the redemption date; provided that no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obliged to pay such Additional Amounts were a payment in
respect of the Subordinated Debentures then due. Prior to the publication of
any notice of redemption pursuant to this paragraph, the Company shall deliver
to the Indenture Trustee a certificate signed by a director of the Company
stating that the obligation referred to in (a) above cannot be avoided by the
Company taking reasonable measures available to it, and the Indenture Trustee
shall accept such certificate as sufficient evidence of the satisfaction of
the condition precedent set out in (b) above, in which event it shall be
conclusive and binding on the holders. If any date fixed for redemption of
Subordinated Debentures is not a Business Day, then payment of the redemption
price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption.
In the event the Global Debenture is redeemed in whole or in part pursuant
to this provision or "Optional Redemption" above, the Book-Entry Depositary
will redeem, from the amount received by it in respect of the redemption of
the Global Debenture, an equal amount of the related Book-Entry Interest. The
redemption price payable in connection with the redemption of such Book-Entry
Interest will be equal to the amount received by the Book-Entry Depositary in
connection with the redemption of the Global Debenture.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE SUBORDINATED DEBENTURES
In the Indenture, the Company will covenant that it will not (a) declare or
pay any dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its capital stock except
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for dividends, payments or distributions payable in shares of its capital
stock, reclassifications of its capital stock and conversions or exchanges of
capital stock of one class or series for capital stock of another class or
series and except for a redemption, purchase or other acquisition of shares of
its capital stock made for the purpose of an employee incentive plan or
benefit plan or similar arrangement of the Company or any of its subsidiaries
or (b) make any payment of interest, principal of or premium, if any, on, or
repay, repurchase or redeem any debt securities issued by the Company that
rank pari passu with or junior to the Subordinated Debentures (except by
conversion into or exchange for shares of its capital stock) or (c) make any
guarantee payment with respect to the foregoing, if at such time (i) the
Company shall be in default with respect to its Guarantee Payments or other
payment obligations under the Capital Securities Guarantee, (ii) there shall
have occurred any Indenture Event of Default with respect to the Subordinated
Debentures or (iii) the Company shall have given notice of its selection of an
Extension Period as provided in the Indenture and such period, or any
extension thereof, is continuing. In addition, so long as the Capital
Securities remain outstanding, the Company has agreed (i) not to cause or
permit the Common Securities to be transferred except to the extent permitted
by the Declaration; provided that any permitted successor of the Company under
the Indenture may succeed to the Company's ownership of the Common Securities,
(ii) to comply fully with all of its obligations and agreements contained in
the Declaration and (iii) not to take any action which would cause the Trust
to cease to be treated as a grantor trust for United States federal income tax
purposes except in connection with a distribution of Subordinated Debentures.
SUBORDINATION
The Indenture provides that the Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness of the Company. In the
event (a) of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings in respect of the
Company or its property or any proceeding for voluntary liquidation,
dissolution or other winding-up of the Company, or (b) that Subordinated
Debentures are declared due and payable before the Stated Maturity Date
because of the occurrence of an Event of Default under the Indenture (under
circumstances other than as set forth in clause (a) above), then the holders
of all Senior Indebtedness shall first be entitled to receive payment of the
full amount due thereon in money, before the holders of any of the
Subordinated Debentures are entitled to receive a payment on account of the
principal of, premium, if any, or interest on the indebtedness evidenced by
such Subordinated Debentures. In the event and during the continuation of any
default in payment of any Senior Indebtedness or if any event of default shall
exist and all grace periods with respect thereto shall have expired under any
Senior Indebtedness, as "event of default" is defined therein or in the
agreement under which the same is outstanding, no payment of the principal of,
premium, if any, or interest on the Subordinated Debentures shall be made.
The term "Senior Indebtedness" means (a) the principal of and premium, if
any, and interest on all indebtedness of the Company, whether outstanding on
the date of the Indenture or thereafter created, (i) for money borrowed by the
Company, (ii) for money borrowed by, or obligations of, others and either
assumed or guaranteed, directly or indirectly, by the Company, (iii) in
respect of letters of credit and acceptances issued or made by banks, or (iv)
constituting purchase money indebtedness, or indebtedness secured by property
included in the property, plant and equipment accounts of the Company at the
time of the acquisition of such property by the Company, for the payment of
which the Company is directly liable, (b) all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any such
indebtedness, and (c) all other general unsecured obligations and liabilities
of the Company, including without limitation, trade payables. As used in the
preceding sentence the term "purchase money indebtedness" means indebtedness
evidenced by a note, debenture, bond or other instrument (whether or not
secured by any lien or other security interest) issued or assumed as all or a
part of the consideration for the acquisition of property, whether by
purchase, merger, consolidation or otherwise. Notwithstanding anything to the
contrary in the Indenture or the Subordinated Debentures, Senior Indebtedness
shall not include (i) any indebtedness of the Company which, by its terms or
the terms of the instrument creating or evidencing it or by the law governing
it, is subordinate in right of payment to or pari passu with the Subordinated
Debentures, as the case may be, and, in particular, the Subordinated
Debentures shall rank pari passu with all other debt securities and guarantees
in respect of those debt securities, issued to any other Southern Investments
Capital Trust or (ii) any indebtedness of the Company to a subsidiary.
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The Indenture does not limit the aggregate amount of Senior Indebtedness or
other indebtedness that may be issued. There are no terms in the Capital
Securities, the Subordinated Debentures or the Capital Securities Guarantee
that limit the Company's ability to incur additional indebtedness, including
indebtedness that ranks senior to the Subordinated Debentures and the Capital
Securities Guarantee, or the ability of its subsidiaries to incur additional
indebtedness. See "Description of the Exchange Guarantee--Status of the
Capital Securities Guarantee".
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Nothing contained in the Indenture or in the Subordinated Debentures will
prevent any consolidation of the Company with, or merger of the Company with
or into, any other corporation or corporations (whether or not affiliated with
the Company), or successive consolidations or mergers to which the Company or
its successor will be a party, or will prevent any sale, lease or conveyance
of the property of the Company, as an entirety or substantially as an
entirety; provided that upon any such consolidation, merger, sale, lease or
conveyance to which the Company is a party and in which the Company is not the
surviving corporation, the due and punctual performance and observance of all
of the covenants and conditions of the Indenture to be performed or observed
by the Company and the due and punctual payment of the principal of and
interest on all of the Subordinated Debentures, according to their tenor,
shall be expressly assumed by supplemental indenture satisfactory in form to
the Indenture Trustee, executed and delivered to the Indenture Trustee, by the
corporation formed by such consolidation, or into which the Company shall have
been merged, or which shall have acquired such property. In addition, the
Company may assign and delegate all of its rights and obligations under the
Indenture, the Subordinated Debentures, any supplemental indenture relating to
the Subordinated Debentures, 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 UK 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 Debentures or to the relevant holders of the
Definitive Registered Debentures, as the case may be, such additional amounts,
under the same circumstances and subject to the same limitations as are
specified for "UK Taxes," as is set forth under "--Additional Amounts" above,
but substituting for the UK 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 redemption under the same
circumstances and subject to the same limitations as are set forth under "--
Optional Tax Redemption" above, but substituting for the UK in each place the
name of the country under the laws of which such successor entity is
organized.
EVENTS OF DEFAULT AND NOTICE THEREOF
The Indenture defines an Event of Default with respect to the Subordinated
Debentures as being any one of the following events: (a) failure to pay
interest for 30 days after becoming due; (b) failure to pay principal or
premium, if any, after becoming due at maturity, upon redemption or otherwise;
(c) material default in the performance, or material breach, of any other
covenant of the Company for 90 days after notice; and (d) certain events of
bankruptcy, insolvency or reorganization of the Company.
If an Event of Default in respect of Subordinated Debentures occurs and is
continuing, either the Indenture Trustee or the holders of at least 25% in
aggregate principal amount of the Subordinated Debentures outstanding may
declare the principal amount of all of the Subordinated Debentures of to be
due and payable immediately.
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At any time after such a declaration of acceleration in respect of the
Subordinated Debentures has been made, but before a judgment or decree for the
payment of money due upon acceleration has been obtained by the Indenture
Trustee, then such declaration of acceleration shall be automatically annulled
and rescinded if all Events of Default in respect of the Subordinated
Debentures, other than the non-payment of principal due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture.
The Indenture contains a provision entitling the Indenture Trustee, subject
to the duty of a trustee during a default to act with the required standard of
care, to be indemnified by the holders of Subordinated Debentures, before
proceeding to exercise any right or power under the Indenture at the request
of such holders. Subject to such provisions in the Indenture for the
indemnification of the Indenture Trustee and certain other limitations, the
holders of a majority in principal amount of the outstanding Subordinated
Debentures may direct the time, method and place of conducting any proceeding
for any remedy available to the Indenture Trustee, or exercising any trust or
power conferred on the Indenture Trustee.
The Indenture provides that no holder of Subordinated Debentures may
institute any action against the Company under the Indenture (except actions
for payment of overdue principal or interest, provided that a declaration of a
valid Extension Period by the Company shall not constitute a failure to pay
interest for this purpose) unless such holder previously shall have given to
the Indenture Trustee written notice of default and continuance thereof and
unless the holders of not less than 25% in principal amount of the
Subordinated Debentures then outstanding shall have requested the Indenture
Trustee to institute such action and shall have offered the Indenture Trustee
reasonable indemnity, the Indenture Trustee shall not have instituted such
action within 60 days of such notice, request and indemnity and the Indenture
Trustee shall not have received direction inconsistent with such written
request by the holders of a majority in principal amount of the Subordinated
Debentures.
The Indenture contains a covenant that the Company will file annually with
the Indenture Trustee a certificate that no default existed or a certificate
specifying any default that existed, each as of the end of the fiscal year so
ended.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to the Subordinated Debentures that the
Company may elect either (a) to defease and be discharged from any and all
obligations with respect to the Subordinated Debentures (except for the
obligations to register the transfer or exchange of the Definitive Registered
Debentures, to replace temporary or mutilated, destroyed, lost or stolen
Subordinated Debentures, to maintain an office or agency in respect of the
Subordinated Debentures and to hold moneys for payment in trust) ("legal
defeasance") or (b) to be released from its obligations with respect to the
Subordinated Debentures (except for the obligations set forth as exceptions in
the preceding clause (a) and except for the obligations to pay the principal
of, premium, if any, and any interest on the Subordinated Debentures, to
compensate and indemnify the Indenture Trustee and to appoint a successor
Indenture Trustee) ("covenant defeasance"), upon the deposit with the
Indenture Trustee (or other qualifying trustee), in trust for such purpose, of
money or U.S. Government Obligations (as defined in the Indenture) which
through the payment of principal and interest in accordance with their terms
will provide money in an amount sufficient to pay the principal of, premium,
if any, and any interest on the Subordinated Debentures, on the due date
thereof. Such a trust may only be established, if among other things, the
Company has delivered to the Indenture Trustee an opinion of counsel (as
specified in the Indenture) to the effect that the holders of the Subordinated
Debentures will not recognize income, gain or loss for United States federal
income tax purposes as a result of such legal defeasance or covenant
defeasance and will be subject to United States federal income tax on the same
amounts, in the same manner and at the same time as would have been the case
if such legal defeasance or covenant defeasance had not occurred. Such
opinion, in the case of legal defeasance under clause (a) above, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable federal income tax law occurring after the date of the Indenture.
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MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Indenture Trustee may enter
into supplemental indentures without the consent of the holders of
Subordinated Debentures to: (a) secure any Subordinated Debentures, (b)
evidence the assumption by a successor corporation of the obligations of the
Company, (c) add covenants for the protection of the holders of Subordinated
Debentures, (d) cure any ambiguity or correct any inconsistency in the
Indenture, (e) provide for uncertificated Subordinated Debentures and (f)
evidence the acceptance of appointment by a successor trustee.
The Indenture also contains provisions permitting the Company and the
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of all Subordinated Debentures then outstanding and
affected, to add any provisions to, or change in any manner or eliminate any
of the provisions of, the Indenture or modify in any manner the rights of the
holders of the Subordinated Debentures so affected; provided that the Company
and the Indenture Trustee may not, without the consent of the holder of each
outstanding Subordinated Debenture affected thereby, (a) extend the stated
maturity of the principal of any Subordinated Debenture, or reduce the
principal amount thereof or reduce the rate or extend the time of payment of
interest thereon (except that a declaration of a valid Extension Period by the
Company shall not constitute an extension of time of payment of interest for
this purpose), or reduce any amount payable on the redemption thereof or
change the currency in which the principal thereof, premium, if any, or any
interest thereon is payable or impair the right to institute suit for the
enforcement of any payment on any Subordinated Debenture when due or (b)
reduce the aforesaid percentage in principal amount of Subordinated
Debentures, the consent of the holders of which is required for any such
modification.
CONCERNING THE INDENTURE TRUSTEE
The Company and its subsidiaries maintain ordinary banking relationships
with the Indenture Trustee and its affiliates.
FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
General
The Subordinated Debentures will be issued initially only as a Global
Debenture in bearer form and will be payable only in U.S. dollars. Title to
such Global Debenture will pass by delivery. The Global Debenture will be
deposited on issue with Bankers Trust Company, as book-entry depositary (the
"Book-Entry Depositary"), which will hold the Global Debenture for the benefit
of the Trust pursuant to the terms of the deposit agreement (the "Deposit
Agreement") dated as of January 29, 1997 among the Company, the Book-Entry
Depositary and the holders and beneficial owners from time to time of
interests in the Book-Entry Interests (as defined below). Pursuant to the
Deposit Agreement, the Book-Entry Depositary will issue one or more
certificateless depositary interests (the "Book-Entry Interests"), which
together will represent a 100% interest in the Global Debenture. Such Book-
Entry Interests will initially be issued to the Trust.
If Book-Entry Interests are distributed to holders of Capital Securities in
liquidation of such holders' interests in the Trust, the Global Debenture held
by the Book-Entry Depositary and representing all of the Subordinated
Debentures will cease to be held for the benefit of the Trust and will, for
all purposes under the Indenture and the Deposit Agreement, be held by the
Book-Entry Depositary for the benefit of DTC and its Participants, and all of
the Book-Entry Interests in the Global Debenture will be transferred by the
Trust to DTC, which will operate a book-entry system for interests in the
Book-Entry Interests, and to the extent that Capital Securities are held in
certificated form, such Book-Entry Interests will be issued in certificated
form. DTC will initially credit Participants holding Capital Securities with
interests in the Book-Entry Interests (pro rata to their holdings of Capital
Securities) and DTC will issue to such Participants interests in such Book-
Entry Interests in the same form as the Capital Securities which such
interests replace and any Global Capital Security will be replaced by one or
more Global Book-Entry Interests registered in the name of DTC or its nominee.
Unless and until the Global Debenture is exchanged in whole for Definitive
Registered Debentures, Book-Entry Interests
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held by DTC may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any
such nominee to a successor of DTC or a nominee of such successor. For a
description of DTC and its book-entry system, see "Description of the Exchange
Capital Securities--Form, Denomination, Book-Entry Procedures and Transfer".
As of the date of this Prospectus, the description herein of DTC's book-entry
system and DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Capital Securities applies in all material
respects to any Book-Entry Interests registered in the name of and held by DTC
or its nominee. The Company may appoint a successor to DTC or any successor
depositary in the event DTC or such successor depositary is unable or
unwilling to continue as depositary for the Global Subordinated Debentures.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such Global
Subordinated Debentures.
So long as the Book-Entry Depositary, or its nominee, is the holder of the
Global Debenture, the Book-Entry Depositary or such nominee, as the case may
be, will be considered the sole holder of the Global Debenture (and the
Subordinated Debentures) for all purposes under the Indenture. Except as set
forth below with respect to the issuance of Definitive Registered Debentures,
if the Subordinated Debentures are held through the facilities of DTC,
Participants or Indirect Participants will not be entitled to have
Subordinated Debentures registered in their names, will not receive or be
entitled to receive physical delivery of Subordinated Debentures in definitive
bearer or registered form and will not be considered the owners or holders
thereof under the Indenture or the Deposit Agreement. Accordingly, if the
Subordinated Debentures are held through the facilities of DTC, each person
owning an interest in the Book-Entry Interests must rely on the procedures of
the Book-Entry Depositary and DTC and, if such person is not a Participant in
DTC, on the procedures of the Participant through which such person owns its
interest, to exercise any rights and obligations of a holder under the
Indenture or the Deposit Agreement.
In addition to a Paying Agent in the Borough of Manhattan, The City of New
York, the Company will, so long as Subordinated Debentures are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange so require,
maintain a Paying Agent in Luxembourg.
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 the persons entitled thereto in respect
of the Subordinated Debentures or the Book-Entry Interests. None of the
Company, the Indenture 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.
Payments on the Subordinated Debentures
Payments of any amounts in respect of the Global Debenture will be made
through a Paying Agent to the Book-Entry Depositary, as the holder thereof.
The Book-Entry Depositary will pay an amount equal to each such payment to the
persons entitled thereto. If the Subordinated Debentures are held through the
facilities of DTC, such payments will be made by the Book-Entry Depositary to
DTC, which will distribute such payments to its Participants.
If any Definitive Registered Debenture has been issued, the interest payable
on such Definitive Registered Debenture other than at maturity will be paid to
the holder in whose name such Definitive Registered Debenture is registered at
the close of business on the fifteenth day (whether or not a Business Day)
immediately preceding the due date for such payment (each a "Record Date").
The principal of a Definitive Registered Debenture will be payable to the
person in whose name such Definitive Registered Debenture is registered at the
close of business on the immediately preceding Record Date upon surrendering
such Definitive Registered Debenture. Interest payable at maturity will be
payable to the person to whom principal is payable.
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If any Definitive Registered Debenture has been issued, payments of interest
on such Definitive Registered Debenture to be paid other than at maturity will
be made by check to the person entitled thereto at such person's address
appearing on the Security Register. Payments of any interest on the Definitive
Registered Debentures may also be made, in the case of a holder of at least
US$1,000,000 aggregate principal amount of Subordinated Debentures of a
series, by wire transfer to a US Dollar account maintained by the payee with a
bank in the United States; provided that such holder elects payment by wire
transfer by giving written notice to the Indenture 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
Indenture Trustee may accept in its discretion).
Any monies paid by the Company to the Indenture 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 Subordinated Debentures 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 Indenture Trustee and such Paying Agent with
respect thereto will cease.
All payments to the Book-Entry Depositary in respect of the Global
Debenture, and all payments to the holders of the Definitive Registered
Debentures, if issued, will be made without deduction or withholding for any
UK taxes or other governmental charges, or if any such deduction or
withholding is required to be made under the provisions of any applicable UK
law or regulation, except as described under "--Additional Amounts", such
Additional Amounts will be paid as may be necessary in order that the net
amounts received by any holder of the Global Debenture or of any Definitive
Registered Debenture, after such deduction or withholding, will equal the
amounts that such holder would have otherwise received in respect of the
Global Debenture or of such Definitive Registered Debenture absent such
deduction or withholding.
If the due date for payment of principal or any interest installment or any
Additional Amount in respect of any Subordinated Debenture is not a Business
Day, the Holder thereof will not be entitled to payment of the amount due
until the next succeeding Business Day and will not be entitled to any further
interest or other payment in respect of any such delay.
Redemption
In the event the Global Debenture (or a portion thereof) is redeemed, the
Book-Entry Depositary will deliver all amounts received by it in respect of
the redemption of the Global Debenture to the persons entitled thereto and (in
the case of redemption in full) surrender the Global Debenture to the
Indenture Trustee for cancellation. The redemption price payable in connection
with the redemption of interests in a Book-Entry Interest will be equal to the
amount received by the Book-Entry Depositary in connection with the redemption
of the Global Debenture (or a portion thereof). For any redemption of the
Global Debenture in part, if the Subordinated Debentures are held through the
facilities of DTC, selection of interests in the related Book-Entry Interest
to be redeemed will be made by DTC on a pro rata basis (or on such other basis
as DTC deems fair and appropriate); provided that no interest in such Book-
Entry Interest of $1,000 principal amount or less shall be redeemed in part.
Once redeemed in part, a new Global Debenture in the principal amount equal to
the unredeemed portion thereof will be issued and delivered to the Book-Entry
Depositary.
Action by Holders of Subordinated Debentures
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
holders of Subordinated Debentures, the Book-Entry Depositary will mail to the
Institutional Trustee (or, if the Subordinated Debentures are then held
through the facilities of DTC, to DTC) a notice containing (a) such
information as is contained in such notice, (b) a statement that at the close
of business on a specified record date the Institutional Trustee (or DTC, as
applicable) will be entitled to instruct the Book-Entry Depositary as to the
consent, waiver or other action, if any, pertaining to the Subordinated
Debentures and (c) a statement as to the manner in which such instructions may
be given. Upon the written request of the Institutional Trustee (or DTC, as
applicable), the Book-Entry Depositary shall endeavor
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insofar as practicable to take such action regarding the requested consent,
waiver or other action in respect of the Subordinated Debentures in accordance
with any instructions set forth in such request. DTC is expected to follow the
procedures described under "Description of the Exchange Capital Securities--
Form and Delivery--Information Regarding DTC, Cedel Bank and Euroclear" with
respect to soliciting instructions from its Participants. The Book-Entry
Depositary will not exercise any discretion in the granting of consents or
waivers or the taking of any other action relating to the Deposit Agreement or
the Indenture.
Meetings of Holders of Subordinated Debentures
A meeting of the holders of Subordinated Debentures may be called at any
time from time to time pursuant to the Indenture (a) to give any notice to the
Company or to the Indenture Trustee, or to consent to the waiving of any
Default and its consequence, or to take any other action authorized to be
taken by holders, (b) to remove the Indenture Trustee and appoint a successor
trustee, or (c) to consent to the execution of a supplemental indenture.
To be entitled to vote at any meeting of holders, a Person shall be (a) a
holder or (b) 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 Indenture Trustee and its counsel, and any
representatives of the Company and its counsel.
At any meeting of holders, the representative of Persons holding or
representing Subordinated Debentures in an aggregate principal amount
sufficient under the appropriate provision of the Indenture to take action
upon the business for the transaction of which such meeting was called shall
constitute a quorum. No action at a meeting of holders shall be effective
unless approved by Persons holding or representing Subordinated Debentures in
the aggregate principal amount required by the provision of the Indenture
pursuant to which such action is being taken. At any meeting of holders, each
holder or proxy shall be entitled to one vote for each $1,000 principal amount
of outstanding Subordinated Debentures held or represented.
At any time prior to (but not after) the evidencing to the Indenture Trustee
of the taking of any action at a meeting of holders by the holders of the
percentage in aggregate principal amount of the Subordinated Debentures
specified in the Indenture in connection with such action, any holder of a
Subordinated Debenture the serial number of which is included in the
Subordinated Debentures the holders of which have consented to such action
may, by filing written notice with the Indenture Trustee at its principal
corporate trust office and upon proof of holding as provided in the Indenture,
revoke such consent so far as concerns such Subordinated Debentures. Except as
aforesaid any such consent given by the holder of any Subordinated Debentures
shall be conclusive and binding upon such holder and upon all future holders
and owners of such Subordinated Debentures and of any securities issued in
exchange therefor, 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 the Indenture in connection with such
action shall be conclusively binding upon the Company, the Indenture Trustee
and the holders of all the Subordinated Debentures.
Reports and Notices
So long as the Subordinated Debentures are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange so require, notice to holders of
the Subordinated Debentures will be published in a leading newspaper having
general circulation in Luxembourg (which is expected to be the Luxemburger
Wort) in addition to notifying the Book-Entry Depositary and any registered
holders of the Subordinated Debentures. If any Subordinated Debentures have
been distributed to holders of Capital Securities, the Book-Entry Depositary
will immediately send to DTC a copy of any notices, reports and other
communications received by it relating to the Company or the Subordinated
Debentures. In the case of Definitive Registered Debentures, all notices
regarding the Subordinated Debentures will, in addition to publication as
referred to above, be mailed to holders by first-class mail at their
respective addresses as they appear on the registration books of the
Registrar.
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Amendment and Termination
The Deposit Agreement may be amended by agreement between the Company and
the Book-Entry Depositary, and the consent of DTC shall not be required in
connection with any amendment to the Deposit Agreement (i) to cure any formal
defect, omission, inconsistency or ambiguity in the Deposit Agreement, (ii) to
add to the covenants and agreements of the Company or the Book-Entry
Depositary, (iii) to effect the assignment of the Book-Entry Depositary's
rights and duties to a qualified successor, (iv) to comply with the Securities
Act, the Exchange Act, or the 1940 Act, or any other applicable securities
laws, (v) to modify the Deposit Agreement in connection with an amendment to
the Indenture that does not require the consent of the holders of Subordinated
Debentures or (vi) to modify, alter, amend or supplement the Deposit Agreement
in any other respect not inconsistent with such agreement which, in the
opinion of counsel acceptable to the Company, is not materially adverse to DTC
(if any Subordinated Debentures are then held through the facilities of DTC)
or the beneficial owners of the interests in the Book-Entry Interests. No
amendment which materially adversely affects any holder or beneficial owner of
an interest in the Book-Entry Interests may be made to the Deposit Agreement
without the consent of such holder or beneficial owner.
If Definitive Registered Debentures are issued by the Company in exchange
for the entire Global Debenture, the Book-Entry Depositary, as holder of the
Global Debenture, will surrender the Global Debenture against receipt of the
Definitive Registered Debentures and distribute the Definitive Registered
Debentures to the holders of Book-Entry Interests (or such other persons as
the Book-Entry Depositary becomes aware are entitled thereto), whereupon the
Deposit Agreement will terminate. The Deposit Agreement may also be terminated
upon the resignation of the Book-Entry Depositary if no successor has been
appointed within 120 days.
Resignation of Book-Entry Depositary
The Book-Entry Depositary may at any time resign as Book-Entry Depositary
with respect to the Global Debenture. If a successor depositary meeting the
requirements specified in the Deposit Agreement has agreed to enter into
arrangements with the same effect as the Deposit Agreement, the Book-Entry
Depositary shall deliver the Global Debenture to that successor. If no such
successor has so agreed within 120 days, the terms of the Deposit Agreement
will oblige the Book-Entry Depositary to request the Company to issue
Definitive Registered Debentures with respect to the Global Debenture. On
receipt of such Definitive Registered Debentures, the Book-Entry Depositary
will surrender the Global Debenture and distribute such Definitive Registered
Debentures to the persons entitled thereto. The Deposit Agreement will then
terminate.
Obligation of Book-Entry Depositary
The Book-Entry Depositary will assume no obligation or liability under the
Deposit Agreement other than to act in good faith without negligence or wilful
misconduct in the performance of its duties thereunder.
Definitive Subordinated Debentures
Owners of interests in a Book-Entry Interest will be entitled to receive
definitive Subordinated Debentures in registered form ("Definitive Registered
Debentures") in respect of such interest only if an Event of Default has
occurred and is continuing with respect to the Subordinated Debentures and the
holder, in such circumstance, upon instructions from owners of interests
representing a majority in outstanding principal amount in such Book-Entry
Interest shall have requested in writing that the Global Debenture be
exchanged for one or more Definitive Registered Debentures. If any owners of
interests in a Book-Entry Interest make a request pursuant to the preceding
sentence, all of the owners of interests in such Book-Entry Interest will
receive Definitive Registered Debentures in respect of their interests. In
addition, Definitive Registered Debentures shall be issued if at any time (a)
DTC notifies the Company and the Book-Entry Depositary that it is unwilling to
or unable to continue to hold the Book-Entry Interests or if 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 the Global Debenture and
no successor is appointed by the Company within 120 days or (c) the
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Company in its sole discretion determines that Definitive Registered
Debentures shall be issued and executes and delivers to the Indenture Trustee
an Officer's Certificate providing that the Global Debenture shall be so
exchanged. Definitive Registered Debentures so issued will be issued in
denominations of $1,000 or integral multiples thereof and will be issued in
registered form only, without coupons. Such Definitive Registered Debentures
shall be registered in the name or names of such person or persons as the
Book-Entry Depositary shall notify the Indenture Trustee. If the Book-Entry
Interests are then held through the facilities of DTC, it is expected that
such instructions may be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in the Book-
Entry Interests.
PARTICIPANTS AND INDIRECT PARTICIPANTS SHOULD BE AWARE THAT, UNDER CURRENT
UK TAX LAW, UPON THE ISSUANCE OF DEFINITIVE REGISTERED DEBENTURES, THE
INTEREST PAYABLE ON THE DEFINITIVE REGISTERED DEBENTURES WILL BECOME SUBJECT
TO UK INCOME TAX (CURRENTLY AT THE RATE OF 20%) TO BE WITHHELD ON ANY PAYMENTS
OF INTEREST ON THE SUBORDINATED DEBENTURES AS SET FORTH UNDER "CERTAIN INCOME
TAX CONSIDERATIONS--UK INCOME TAX CONSIDERATIONS". IF SUCH DEFINITIVE
REGISTERED DEBENTURES ARE ISSUED PURSUANT TO THE REQUEST OF AN OWNER OF AN
INTEREST IN THE BOOK-ENTRY INTEREST FOLLOWING AN EVENT OF DEFAULT, THE COMPANY
WILL NOT BE OBLIGATED TO PAY ANY ADDITIONAL AMOUNTS TO THAT OWNER OR ANY OF
ITS TRANSFEREES.
In the event that Definitive Registered Debentures are in issue, a holder
may transfer or exchange the Definitive Registered Debentures in accordance
with the Indenture. The Registrar and the Indenture Trustee may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents, and the Company may require a holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Subordinated Debentures selected for redemption or
for a period of 15 days before a selection of Subordinated Debentures to be
redeemed. Upon the issuance of Definitive Registered Debentures, holders will
be able to transfer and exchange Definitive Registered Debentures at the
offices of the Paying and Transfer Agents; provided that all transfers and
exchanges must be effected in accordance with the terms of the Indenture and,
among other things, be recorded in the Register maintained by the Registrar.
RESTRICTIONS ON TRANSFER
The Exchange Subordinated Debentures will be issued, and may be transferred
only, in minimum denominations of not less than $1,000 and multiples of $1,000
in excess thereof. Any transfer, sale or other disposition of Exchange
Subordinated Debentures in a denomination of less than $1,000 shall be deemed
to be void and of no legal effect whatsoever. Any such transferee shall be
deemed not to be the holder of such Exchange Subordinated Debentures for any
purpose, including but not limited to the receipt of payments on such Exchange
Subordinated Debentures, and such transferee shall be deemed to have no
interest whatsoever in such Exchange Subordinated Debentures.
GOVERNING LAW; SUBMISSION TO JURISDICTION
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
Any suit, legal action or proceeding against the Company or its properties,
assets or revenues with respect to its obligations, liabilities or any other
matter arising out of or in connection with the Indenture or a Subordinated
Debenture may be brought in the Supreme Court of New York, New York County or
in the United States District Court for the Southern District of New York and
any appellate court from either thereof. The Company has submitted to the non-
exclusive jurisdiction of such courts for the purposes of any such proceeding
and has irrevocably waived, to the fullest extent it may effectively do so,
any objection to the laying of venue of any such proceeding in any such court
and the defense of an inconvenient forum.
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DESCRIPTION OF THE ORIGINAL SECURITIES
The terms of the Original Securities are identical in all material respects
to the Exchange Securities, except that (i) the Original Securities have not
been registered under the Securities Act, are subject to certain restrictions
on transfer and are entitled to certain rights under the applicable
Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer, except under limited circumstances), (ii) the Exchange
Capital Securities will not contain the $100,000 minimum liquidation amount
transfer restriction and certain other restrictions on transfer applicable to
Original Capital Securities, (iii) the Exchange Capital Securities will not
provide for any increase in the distribution rate thereon and (iv) the
Exchange Subordinated Debentures will not provide for any increase in the
interest rate thereon. The Original Securities provide that, in the event that
a registration statement relating to the Exchange Offer has not been filed by
June 28, 1997 and been declared effective by July 28, 1997, or, in certain
limited circumstances, in the event a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Original Capital
Securities is not declared effective by the time required by the Registration
Rights Agreement, then liquidated damages will accrue at the rate of 0.25% per
annum on the principal amount of the Original Subordinated Debentures and
Additional Distributions will accrue at the rate of 0.25% per annum on the
liquidation amount of the Original Capital Securities, for the period from the
occurrence of such event until such time as such registration statement has
been filed or declared effective, as the case may be. The Exchange Securities
are not, and upon consummation of the Exchange Offer the Original Securities
will not be, entitled to any such additional interest or distributions.
Accordingly, holders of Original Capital Securities should review the
information set forth under "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of the Exchange Capital
Securities."
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
SUBORDINATED DEBENTURES AND THE CAPITAL SECURITIES GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the Capital Securities
(to the extent the Trust has funds on hand legally available for the payment
of such Distributions) will be irrevocably guaranteed by the Company as and to
the extent set forth under "Description of the Exchange Guarantee". Taken
together, the Company's obligations under the Subordinated Debentures, the
Indenture, the Declaration and the Exchange Guarantee will provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
distributions and other amounts due on the Capital Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation
of these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Capital
Securities. If and to the extent that the Company does not make the required
payments on the Subordinated Debentures, the Trust will not have sufficient
funds to make the related payments, including distributions, on the Capital
Securities. The Capital Securities Guarantee will not cover any such payment
when the Trust does not have sufficient funds on hand legally available
therefor. In such event, the remedy of a holder of Capital Securities is to
institute a direct action against the Company. The obligations of the Company
under the Capital Securities Guarantee will be subordinate and junior in right
of payment to all other liabilities of the Company, including the Subordinated
Debentures.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Capital Securities, primarily
because: (i) the aggregate principal amount of the Subordinated Debentures
will be equal to the sum of the liquidation amount or Redemption Price, as
applicable, of the Capital Securities and Common Securities; (ii) the interest
rate and interest and other payment dates for the Trust Securities will match
the distribution rate
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and distribution and other payment dates for the Trust Securities; (iii) the
Company shall pay for all and any costs, expenses and liabilities of the Trust
except the Trust's obligations to holders of Trust Securities under such Trust
Securities; and (iv) the Declaration will provide that the Trust is not
authorized to engage in any activity that is not consistent with the limited
purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any Capital Security may institute a legal proceeding directly
against the Company to enforce its rights under the Capital Securities
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture will provide that no payments
may be made in respect of the Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Subordinated Debentures
would constitute an Event of Default under the Declaration.
LIMITED PURPOSE OF THE TRUST
The Capital Securities will represent preferred undivided beneficial
interests in the assets of the Trust, and the Trust exists for the sole
purpose of issuing and selling the Trust Securities, using the proceeds from
the sale of the Trust Securities to acquire the Subordinated Debentures and
engaging in only those other activities necessary, advisable or incidental
thereto. A principal difference between the rights of a holder of a Capital
Security and a holder of a Subordinated Debenture is that a holder of a
Subordinated Debenture will be entitled to receive from the Company the
principal amount of (and premium, if any) and interest on Subordinated
Debentures held, while a holder of a Capital Security is entitled to receive
distributions from the Trust (or, in certain circumstances, from the Company
under the Capital Securities Guarantee) if and to the extent the Trust has
funds on hand legally available for the payment of such distributions.
RIGHTS UPON TERMINATION
Unless the Subordinated Debentures are distributed to holders of the Trust
Securities, upon any voluntary or involuntary termination and liquidation of
the Trust, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of the Exchange Capital Securities--Liquidation Distribution Upon
Dissolution". Upon any voluntary or involuntary liquidation or bankruptcy of
the Company, the Institutional Trustee, as holder of the Subordinated
Debentures, would be a subordinated creditor of the Company, subordinated in
right of payment to all Senior Indebtedness as set forth in the Indenture, but
entitled to receive payment in full of principal (and premium, if any) and
interest, before any stockholders of the Company receive payments or
distributions. Since the Company will be the guarantor under the Capital
Securities Guarantee and will agree to pay for all costs, expenses and
liabilities of the Trust (other than the Trust's obligations to the holders of
its Trust Securities), the positions of a holder of Capital Securities and a
holder of Subordinated Debentures relative to other creditors and to
stockholders of the Company in the event of liquidation or bankruptcy of the
Company are expected to be substantially the same.
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CERTAIN INCOME TAX CONSIDERATIONS
THIS SUMMARY IS OF A GENERAL NATURE AND IS INCLUDED HEREIN SOLELY FOR
INFORMATIONAL PURPOSES. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED
TO BE, LEGAL OR TAX ADVICE. NO REPRESENTATION WITH RESPECT TO THE CONSEQUENCES
TO ANY PARTICULAR PURCHASER OF THE BOOK-ENTRY INTEREST IS MADE. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR
PARTICULAR CIRCUMSTANCES AND THE EFFECTS OF STATE, LOCAL OR FOREIGN LAWS,
INCLUDING UK TAX LAWS TO WHICH THEY MAY BE SUBJECT.
UK INCOME TAX CONSIDERATIONS
The comments below are of a general nature based on current UK law and
Inland Revenue practice and represent the opinion of Allen & Overy, special UK
counsel to the Company, so far as such comments relate to matters of law or
legal conclusions. They relate only to holders of Subordinated Debentures who
are the absolute beneficial owners of Subordinated Debentures and related
interest and may not apply to certain classes of persons such as dealers. Any
prospective holders of Capital Securities who are in doubt as to the tax
position should consult their professional advisers.
PAYMENTS ON THE SUBORDINATED DEBENTURES
For UK tax purposes, while Subordinated Debentures remains represented by
the Global Debenture in bearer form and continue to be listed on the
Luxembourg Stock Exchange or some other stock exchange recognized by the UK
Inland Revenue, payments of interest to the Trust or other holder may be made
without withholding or deduction for or on account of UK income tax for so
long as the Company's paying agent, the Book-Entry Depositary, if different,
and the Trust are outside the UK.
In other cases, and in particular if Definitive Registered Debentures are
issued, interest will be paid after deduction of UK income tax (currently at
the lower rate of 20%). A US holder of Subordinated Debentures may be eligible
to recover in full any UK tax withheld from payments of interest to which such
holder is beneficially entitled by making a claim under the US/UK Double Tax
Treaty on the appropriate form. Alternatively, a claim may be made by a US
holder in advance of a payment of interest. If the claim is accepted by the
Inland Revenue, they will authorize subsequent payments to that US holder to
be made without withholding of UK income tax. Claims for repayment must be
made within six years of the end of the UK year of assessment (generally April
5 in each year) to which the interest relates and must be accompanied by the
original statement provided by the Company when the interest payment was made
showing the amount of UK income tax deducted. Because a claim is not
considered until the UK tax authorities receive the appropriate form from the
Internal Revenue Service, forms should be sent to the Internal Revenue
Service, in the case of an advance claim, well before the relevant interest
payment date or, in the case of a claim for the repayment of the tax, well
before the end of the appropriate limitation period.
Holders of Subordinated Debentures in other jurisdictions may be entitled to
a refund of any UK income tax deducted or withheld or to make a claim for
interest on the Subordinated Debentures to be paid without, or subject to a
reduced rate of, deduction or withholding under the provisions of an
applicable double tax treaty.
Refund of all or part of any UK income tax deducted or withheld may,
depending on individual circumstances, be available to a holder of
Subordinated Debentures who is resident in the UK or who carries on a trade,
profession or vocation in the UK through a branch or agency to which the
Capital Securities are attributable, or who is a Commonwealth citizen or
otherwise entitled to a UK personal allowance.
Holders of Capital Securities should be aware that under current UK tax law
upon the issuance of Definitive Registered Debentures the holders of such
Definitive Registered Debentures will (subject to any entitlement to make a
claim under the provisions of an applicable double tax treaty as described
above) become subject to
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UK withholding tax on any payments of interest with respect to such Definitive
Registered Debentures. However, such holders will be entitled to the payment
of Additional Amounts in respect of the tax withheld, except as set forth
under "Description of the Exchange Subordinated Debentures--Additional
Amounts" and under "Description of the Exchange Subordinated Debentures--
Definitive Subordinated Debentures," and then subject to the right of the
Company in certain circumstances to redeem the Subordinated Debentures early.
See "Description of the Exchange Subordinated Debentures--Optional Tax
Redemption."
Interest on the Subordinated Debentures constitutes UK source income for tax
purposes and, as such, may be subject to UK income tax by direct assessment
even where paid without deduction or withholding.
However, UK tax chargeable on interest from a UK source beneficially owned
by persons not regarded as resident in the UK for tax purposes will normally
be limited to the tax, if any, deducted at source on payment of such interest.
This will not apply if interest is beneficially owned by a person who is not
resident for tax purposes in the UK if that Holder carries on a trade,
profession or vocation in the UK through a UK branch or agency in connection
with which the interest is received or to which the Subordinated Debentures
are attributable. There are exemptions for interest received by certain
categories of agent (such as some brokers and investment managers).
US FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Troutman Sanders LLP, counsel to the Company and the Trust
("Tax Counsel"), the following is a summary of certain of the material United
States federal income tax consequences of the purchase, ownership and
disposition of Capital Securities held as capital assets by a U.S. Holder (as
defined below) who or that purchases such Capital Securities upon initial
issuance. It does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Capital Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or
of any foreign government that may be applicable to the Capital Securities.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations thereunder, the administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
As used herein, the term "U.S. Holder" means a holder of Capital Securities
who or that is for United States federal income tax purposes (i) a citizen or
individual resident of the United States, (ii) a corporation or partnership
created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject
to United States federal income tax regardless of its source, or (iv) a trust
if both: (A) a court within the United States is able to exercise primary
jurisdiction over the administration of the trust and (B) one or more United
States trustees or fiduciaries have authority to control all substantial
decisions of the trust.
Exchange of Capital Securities
The exchange of Original Capital Securities for Exchange Capital Securities
should not be a taxable event for United States federal income tax purposes,
and the tax attributes of the Original Capital Securities immediately before
the exchange should carry over to the Exchange Capital Securities. For
example, a U.S. Holder should have the same issue price, tax basis, holding
period and market discount or bond premium in the Exchange Capital Securities
as the holder did in the Original Capital Securities immediately before the
exchange.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
In connection with the issuance of the Subordinated Debentures, Tax Counsel
has rendered its opinion generally to the effect that, under then current law
and assuming full compliance with the terms of the Indenture
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(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Company. An
opinion of Tax Counsel, however, is not binding on the Internal Revenue
Service (the "IRS") or the courts. Prospective investors should note that no
rulings have been or are expected to be sought from the IRS with respect to
any of these issues and no assurance can be given that the IRS will not take
contrary positions. Moreover, no assurance can be given that any of the
opinions expressed herein will not be challenged by the IRS or, if challenged,
that such a challenge would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel has
rendered its opinion generally to the effect that, under then-current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal income tax
purposes, each holder of Capital Securities generally will be considered the
owner of an undivided interest in the Subordinated Debentures, and each holder
will be required to include in its gross income any interest (or OID accrued)
with respect to its allocable share of those Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the "Regulations"), a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with original issue discount
("OID"). The Company believes that the likelihood of its exercising its option
to defer payments of interest is "remote" since exercising that option would
prevent the Company from declaring dividends on any class of its equity
securities. Accordingly, the Company intends to take the position, based on
the advice of Tax Counsel, that interest on the Subordinated Debentures
generally will be taxable to a holder as ordinary income at the time it is
paid or accrued in accordance with such holder's method of accounting.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest, the Subordinated Debentures would at that time be
treated as reissued with OID, and all stated interest on the Subordinated
Debentures would thereafter be treated as OID as long as the Subordinated
Debentures remain outstanding. In such event, all of a holder's taxable
interest income with respect to the Subordinated Debentures would thereafter
be accounted for on an economic accrual basis regardless of such holder's
method of tax accounting, and actual distributions of stated interest would
not be reported as taxable income. Consequently, a holder of Capital
Securities would be required to include in gross income OID even though the
Company would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer the payment of
interest was determined not to be "remote," the Subordinated Debentures would
be treated as having been originally issued with OID. In such event, all of a
holder's taxable interest income with respect to the Subordinated Debentures
would be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
would not be reported as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
A U.S. Holder, subject to certain limitations, may be eligible to claim as a
credit or deduction for purposes of computing its US federal income tax
liability UK Taxes withheld (if any). For that purpose, interest income
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and the Additional Amounts will generally be treated as foreign source passive
income (or, in the case of certain US Holders, financial services income). The
rules relating to foreign tax credits are extremely complex, and US Holders
should consult with their own tax advisors with regard to the availability of
a foreign tax credit and the application of the foreign tax credit to their
particular situation.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Company will have the right at any time to liquidate the Trust and cause
the Subordinated Debentures to be distributed to the holders of the Trust
Securities. Under current law, such a distribution, for United States federal
income tax purposes, would be treated as a nontaxable event to each holder,
and each holder would receive an aggregate tax basis in the Subordinated
Debentures equal to such holder's aggregate tax basis in its Capital
Securities. A holder's holding period in the Subordinated Debentures so
received in liquidation of the Trust would include the period during which the
Capital Securities were held by such holder. If, however, the Trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of its dissolution, the distribution of
the Subordinated Debentures may constitute a taxable event to holders of
Capital Securities and a holder's holding period in Subordinated Debentures
would begin on the date such Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of the
Exchange Capital Securities"), the Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
of their Capital Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Capital Securities, and a holder could recognize gain or loss as
if it sold such redeemed Capital Securities for cash. See "United States
Federal Income Taxation--Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and
the amount realized on the sale of such Capital Securities (other than with
respect to accrued and unpaid interest which has not yet been included in
income, which will be treated as ordinary income). A holder's adjusted tax
basis in the Capital Securities generally will be its initial purchase price
increased by OID (if any) previously includable in such holder's gross income
to the date of disposition and decreased by payments (if any) received on the
Capital Securities other than qualified stated interest. Such gain or loss
generally will be capital gain or loss and generally will be a long-term gain
or loss if the Capital Securities have been held for more than one year.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of his Capital Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Subordinated Debentures through the
date of disposition in income as ordinary income (i.e., interest or, possibly,
OID), and to add such amount to his adjusted tax basis in his pro rata share
of the underlying Subordinated Debentures deemed disposed of. To the extent
the selling price is less than the holder's adjusted tax basis (which will
include all accrued but unpaid interest) a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied
to offset ordinary income for United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, deny an issuer a deduction for United States
Federal income tax purposes for the payment of interest on instruments with
characteristics similar to the Subordinated Debentures. If the proposed
legislation were enacted in its current form, it is not expected to apply to
the Subordinated Debentures since the proposed effective date for this
provision is the date of first committee action. There can be no assurances,
however, that the proposed legislation, if enacted, or similar legislation
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enacted after the date hereof would not adversely affect the tax treatment of
the Subordinated Debentures, resulting in a Tax Event. The occurrence of a Tax
Event may result in the redemption of the Subordinated Debentures for cash, in
which event the holders of the Capital Securities would receive cash in
redemption of their Capital Securities. See "Description of the Exchange
Capital Securities--Redemption" and "Description of the Exchange Subordinated
Debentures--Special Event Redemption."
NON-U.S. HOLDERS
Income realized from Capital Securities by a nonresident alien individual,
foreign corporation, foreign partnership, or foreign estate or trust, which
income is not effectively connected with the conduct of a United States trade
or business of the recipient, will not be subject to United States federal
income tax.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
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CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Capital Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence
and diversification requirements of ERISA and would be consistent with the
documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other liabilities under ERISA and/or Section 4975 of the Code
for such persons, unless exemptive relief is available under an applicable
statutory or administrative exemption. Employee benefit plans that are
governmental plans (as defined in Section 3(32) of ERISA), certain church
plans (as defined in Section 3(33) of ERISA) and foreign plans (as described
in Section 4(b)(5) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Trust would not be deemed to be "plan assets" of investing Plans if,
immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interests in the
Trust were held by Plans, other employee benefit plans not subject to ERISA or
Section 4975 of the Code (such as governmental, church and foreign plans), and
entities holding assets deemed to be "plan assets" of any Plan (collectively,
"Benefit Plan Investors"). No assurance can be given that the value of the
Capital Securities held by Benefit Plan Investors will be less than 25% of the
total value of such Capital Securities at the completion of the initial
offering or thereafter, and no monitoring or other measures will be taken with
respect to the satisfaction of the conditions to this exception. All of the
Common Securities will be purchased and initially held by the Company.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities were acquired with "plan
assets" of such Plan and the assets of the Trust were deemed to be "plan
assets" of Plans investing in the Trust. For example, if the Company is a
Party in Interest with respect to an investing Plan, extensions of credit
between the Company and the Trust (as represented by the Subordinated
Debentures and the Guarantee) would likely be prohibited by Section
406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive
relief were available under an applicable administrative exemption (see
below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect
prohibited transactions that may arise from the purchase or holding of the
Capital Securities if assets of the Trust were deemed to be "plan assets" of
Plans investing in the Trust as described above. Those class exemptions are
PTCE 96-23 (for certain transactions determined by in-house asset managers),
PTCE 95-60 (for certain transactions involving insurance company general
accounts), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving insurance
company separate accounts), and PTCE 84-14 (for certain transactions
determined by independent qualified asset managers).
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Because the Capital Securities may be deemed to be equity interests in the
Trust for purposes of applying ERISA and Section 4975 of the Code, the Capital
Securities may not be purchased or held by any Plan, any entity whose
underlying assets include "plan assets" by reason of any Plan's investment in
the entity (a "Plan Asset Entity") or any person investing "plan assets" of
any Plan, unless such purchaser or holder is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable
exemption. Any purchaser or holder of the Capital Securities or any interest
therein will be deemed to have represented by its purchase and holding thereof
that it either (a) is not a Plan or a Plan Asset Entity and is not purchasing
such securities on behalf of or with "plan assets" of any Plan or (b) is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14 or another applicable exemption with respect to such purchase or
holding. If a purchaser or holder of the Capital Securities that is a Plan or
a Plan Asset Entity elects to rely on an exemption other than PTCE 96-23, 95-
60, 91-38, 90-1 or 84-14, the Company and the Trust may require a satisfactory
opinion of counsel or other evidence with respect to the availability of such
exemption for such purchase and holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in nonexempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the Capital
Securities on behalf of or with "plan assets" of any Plan consult with their
counsel regarding the potential consequences if the assets of the Trust were
deemed to be "plan assets" and the availability of exemptive relief under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange for Capital
Securities where such Capital Securities were acquired by such broker-dealer
for its own account as a result of market-making activities or other trading
activities. The Trust and the Company have agreed that, for a period not
exceeding 90 days after the Expiration Date, they will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until [ ], 1997, all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus.
The Trust and the Company will not receive any proceeds from any sale of
Exchange Capital Securities offered hereby. Exchange Capital Securities
received by broker-dealers for their own accounts pursuant to the Exchange
Offer may be sold from time to time in one or more transactions, in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Capital Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such Exchange Capital Securities. Any
broker-dealer that resells Exchange Capital Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Capital Securities and any commissions
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
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VALIDITY OF EXCHANGE CAPITAL SECURITIES
Certain matters of Delaware law relating to the validity of the Exchange
Capital Securities will be passed upon by Richards, Layton & Finger, special
Delaware counsel to the Company and the Trust. Certain legal matters relating
to the validity of the Exchange Capital Securities, the Exchange Subordinated
Debentures and the Exchange Guarantee will be passed upon for the Company by
Shearman & Sterling, New York, New York. Certain matters relating to United
States federal income tax considerations will be passed upon for the Company
by Troutman Sanders LLP. Certain legal matters relating to English law,
including taxation, corporate matters and the enforceability of the
Subordinated Debentures and agreements related thereto, will be passed upon
for the Company by Allen & Overy, London, England.
Troutman Sanders LLP and Shearman & Sterling will rely, without independent
investigation, upon Richards, Layton & Finger and Allen & Overy with respect
to matters relating to Delaware and English law, respectively. Troutman
Sanders LLP will rely, without independent investigation, upon Shearman &
Sterling with respect to matters relating to New York law.
EXPERTS
The consolidated financial statements of Southern Investments UK plc
(Successor Company) as of March 31, 1996 and for the period from inception
(June 23, 1995) to March 31, 1996, and the consolidated financial statements
of South Western Electricity plc (Predecessor Company) for the period from
April 1, 1995 to September 17, 1995, included in this Prospectus have been
audited by Arthur Andersen, Independent Public Accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated financial statements of South Western Electricity plc
(Predecessor Company) at March 31, 1995 and for the years ended March 31, 1995
and 1994, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young, Chartered Accountants, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
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 a 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 periods 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.
The financial information in respect of the Company and the Predecessor
Company set forth in "Summary Financial Information," "Selected Financial
Data," "Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" herein does not constitute statutory
accounts under Section 240 of the Companies Act 1985. Statutory accounts for
the fiscal year to which such financial information relates have been
delivered to the Registrar of Companies in England and Wales. The auditors of
the Company and the Predecessor Company have made a report under Section 235
of the Companies Act 1985 on the statutory accounts for each such fiscal year
which was not qualified within the meaning of Section 262 of the Companies Act
1985 and did not contain a statement made under Section 237(2) or 237(5) of
that Act.
120
<PAGE>
GLOSSARY
6.375% Notes: Direct, unsecured and unsubordinated obligations of the
Company due 2001 in the aggregate principal amount of $168,000,000 ranking
pari passu with all other unsecured and unsubordinated obligations of the
Company.
6.800% Notes: Direct, unsecured and unsubordinated obligations of the
Company due 2006 in the aggregate principal amount of $332,000,000 ranking
pari passu with all other unsecured and unsubordinated obligations of the
Company.
Accentacross: Accentacross Limited, a Director of the Company.
Additional Amounts: Additional amounts that the Company may be required to
pay such that the holder of Subordinated Debentures will receive such amounts
as would have been received without withholding or deduction for or on account
of any present or future taxes, duties, assessments of governmental charges of
whatever nature imposed, levied, collected, withheld or assessed by or within
the UK or by or within any political subdivision thereof or any authority
therein or thereof having power to tax, unless such withholding or deduction
is required by law.
Additional Sums: The additional amounts as may be necessary in order that
the amount of any distribution then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
Affiliate: As defined in Rule 144 under the Securities Act.
Book-Entry Depositary: Bankers Trust Company.
Book-Entry Interests: Certificateless depositary interests to be issued by
the Book-Entry Depositary to DTC.
Business Day: "Business Day" means a day other than (i) a Saturday or a
Sunday, (ii) a day on which banks in New York, New York or Bristol, England
are authorized or obligated by law or executive order to remain closed, or
(iii) a day on which the Indenture Trustee's Corporate Trust Office or
Institutional Trustee's principal corporate trust office is closed for
business.
Business Trust Act: Chapter 38 of Title 12 of the Delaware Code, 12 Del. .
(S) (S) 38 et seq., as it may be amended from time to time, or any successor
legislation.
CAGR: Compound annual growth rate.
Capital Securities: The Original Capital Securities and the Exchange Capital
Securities.
Capital Security Beneficial Owners: Persons owning Capital Securities
representing preferred undivided beneficial interests in the Trust.
Capital Securities Guarantee: The Original Guarantee and the Exchange
Guarantee.
Capital Trust Voting Class: The holders of the Capital Securities when
voting as a single class.
Cedel Bank: Cedel Bank, societe anonyme.
CFDs: Contracts for differences.
Code: The US Internal Revenue Code of 1986, as amended.
121
<PAGE>
Commission: The Securities and Exchange Commission.
Common Securities: The securities representing undivided beneficial
interests in the assets of the Trust with such terms as may be set out in the
Declaration.
Company: Southern Investments UK plc.
Creditor: Any person to whom any debts, obligations, costs, expenses and
taxes, except for United States withholding taxes, are owed by the Company
under the provisions of the Trust as set forth in the Declaration.
Declaration: The Amended and Restated Declaration of Trust dated as of
January 29, 1997 relating to the Trust among the Company, as Sponsor, Bankers
Trust Company, as Institutional Trustee, Bankers Trust (Delaware), as Delaware
Trustee, and the Regular Trustees named therein.
Deposit Agreement: 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 Interests.
Definitive Registered Debenture: The definitive Subordinated Debentures in
registered form that the owners of interests in a Book-Entry Interest will be
entitled to in certain circumstances described under "Description of the
Exchange Subordinated Debentures--Form, Book-Entry Procedures and Transfer--
Definitive Subordinated Debentures."
Delaware Trustee: Bankers Trust (Delaware).
Depositary: DTC and its successor.
Distribution Price Control Formula: 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.
DOL: U. S. Department of Labor
DTC: The Depository Trust Company.
DWAC: The DTC Deposit/Withdraw at Custodian system.
Electricity Act: The Electricity Act 1989.
Electricity Business Agreement: A collective bargaining agreement to which
all SWEB employees who are not party to a personal employment contract are
subject.
EMFs: Electromagnetic fields.
ERISA: Employee Retirement Income Statement Act of 1974, as amended.
Equity Interest: Any interest in an entity other than an instrument which is
treated as indebtedness under applicable local law and which has not
substantial equity features and specifically includes a beneficial interest in
a trust.
Euroclear: The Euroclear System.
Exchange Act: The US Securities Exchange Act of 1934, as amended.
Exchange Capital Securities: The $82,00,000 aggregate liquidation amount of
8.23% Subordinated Capital Income Securities to be issued by the Trust in
exchange for Original Capital Securities.
122
<PAGE>
Exchange Guarantee: The Capital Securities Guarantee Agreement from the
Company in favor of Bankers Trust Company, as Capital Securities Guarantee
Trustee for the benefit of the holders of the Exchange Capital Securities to
be issued in exchange for the Original Guarantee.
Exchange Offer: This exchange offer pursuant to which the Exchange Capital
Securities, the Exchange Subordinated Debentures and the Exchange Guarantee,
each covered by a registration statement filed by the Company and the Trust,
and having the same terms (except with respect to the transfer restrictions
and, in certain circumstances, an increased distribution rate) as the Original
Capital Securities, the Original Guarantee and the Original Subordinated
Debentures, respectively, are offered in exchange for the Original Capital
Securities, the Original Guarantee and the Original Subordinated Debentures,
respectively.
Exchange Securities: The Exchange Capital Securities, the Exchange Guarantee
and the Exchange Subordinated Debentures.
Exchange Subordinated Debentures: The $84,537,000 aggregate liquidation
amount of Exchange Subordinated Debentures due 2027 to be issued by the
Company to the Trust in exchange for Original Subordinated Debentures.
Expiration Date: , 1997, unless the Exchange Offer is extended by
the Company or the Trust (in which case the term Expiration Date shall mean
the latest date and time to which the Exchange Offer is extended).
Extension Period: A deferral period not exceeding 10 consecutive semi-annual
interest periods in which the Company has the right to defer payments of
interest on the Subordinated Debentures, provided that no Extension Period may
extend beyond the Stated Maturity Date.
Financial Institution: A securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business.
Fiscal Year: A year ended March 31.
Fossil Fuel Levy: 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: SWEB's service area as determined by its PES license.
Franchise Supply Customers: Customers with demand of not more than 100kW.
FSA: The Financial Services Act 1986.
GDP: Gross domestic product.
Georgia Power: Georgia Power Company, a subsidiary of Southern.
Global Capital Securities: Capital Securities represented by one or more
Capital Securities in registered, global form.
Guarantee Payments: Certain payments or distributions with respect to the
Capital Securities to the extent not paid or made by the Trust and payable
under the Capital Securities Guarantee.
Holdings: Southern Investments UK Holdings Limited, the direct parent
company of the Company.
Indenture: The Indenture dated as of January 29, 1997 between the Company,
Bankers Trust Company, as trustee, and Bankers Trust Luxembourg, as paying and
transfer agent.
Indenture Trustee: Bankers Trust Company.
Indirect Participants: Persons that hold interests in the Book-Entry
Interest through persons that have accounts with DTC.
123
<PAGE>
Initial Purchasers: Lehman Brothers Inc. and J.P. Morgan Securities Inc., as
initial purchasers of the Capital Securities.
Institutional Trustee: Bankers Trust Company.
Interest Payment Date: Semi-annual dates, in arrears, on February 1 and
August 1 of each year, commencing on August 1, 1997, when interest payments
are payable.
IRS: Internal Revenue Service.
Investment Company Event: As a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Trust is or will
be considered an "investment company" which is required to be registered under
the Investment Company Act of 1940.
Luxembourg Wort: A leading newspaper having general circulation in
Luxembourg.
Mighteager: Mighteager Limited, a Director of the Company.
Mission Energy: Mission Energy Company.
MMC: The UK Monopolies and Mergers Commission.
NASD Automated Quotation System: The automated quotation system of the
National Association of Securities Dealers.
NFFOs: Obligations of RECs to obtain a specified amount of generating
capacity from non-fossil fuel sources.
NGC: The National Grid Company plc, which is wholly-owned by NGG.
NGC Settlements Limited: A subsidiary of NGC.
NGG: The National Grid Group plc.
Noon Buying Rate: 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.
Non-franchise: Competitive sector of the electricity market.
Non-Franchise Supply Customers: Customers with demand greater than 100kW.
Original Capital Securities: The $82,000,000 aggregate liquidation amount of
8.23% Subordinated Capital Income Securities issued by the Trust on January
29, 1997.
Original Guarantee: The Capital Securities Guarantee Agreement dated as of
January 29, 1997 from the Company in favor of Bankers Trust Company, as
Capital Securities Guarantee Trustee for the benefit of the holders of
Original Capital Securities.
Original Securities: The Original Capital Securities, the Original Guarantee
and the Original Subordinated Debentures.
124
<PAGE>
Original Subordinated Debentures: The $84,537,000 aggregate liquidation
amount of 8.23% Subordinated Debentures due 2027 issued by the Company to the
Trust on January 29, 1997.
Own-generation limits: The limit imposed by the PES license on the extent of
generation capacity in which a REC may hold an interest.
Participants: Persons that have accounts with DTC.
Participating Broker-Dealer: Any broker-dealer who acquired the Capital
Securities for its own account as a result of market-making or other trading
activities.
Paying Agent: Initially, the Institutional Trustee and any co-paying agent
chosen by the Institutional Trustee and acceptable to the Regular Trustees and
the Company.
PES license: A Public Electricity Supply license.
PESs: The public electricity (or first tier) suppliers.
PMDC: Power Markets Development Company, an indirect shareholder in Holdings
and a subsidiary of PP&L Resources.
PMDC Directors: Accentacross and Mighteager.
Pool: The wholesale trading market for electricity in England and Wales.
Pooling and Settlement Agreement: 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: PP&L Resources, Inc., the parent of PMDC.
Predecessor Company: South Western Electricity plc prior to its acquisition
by the Company.
Primary Treasury Dealer: A primary US Government securities dealer in New
York City.
PSB: NGG's pumped storage electricity generation business.
PTCE's: Prohibited transaction class exemptions.
Purchase Money Indebtedness: Indebtedness evidenced by a note, debenture,
bond or other instrument.
Qualified Institutional Buyers: As defined in Rule 144A under the Securities
Act.
RECs: The 12 regional electricity companies in England and Wales licensed to
distribute, supply and, to a limited extent, generate electricity.
RPI: Retail Price Index.
Redemption Price: As defined in "Description of the Exchange Capital
Securities--Redemption Price."
Registration Rights Agreement: The Registration Rights Agreement dated as of
January 29, 1997 among the Company, the Trust and the Initial Purchasers for
the benefit of the holders of the Capital Securities.
Regulator: The Director General of Electricity Supply in Great Britain.
125
<PAGE>
Regular Trustees: See "Southern Investments UK Capital Trust I."
Relevant Date: Whichever is the later of (i) the date on which a payment on
the Subordinated Debentures 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 the Indenture.
Securities Act: The United States Securities Act of 1933, as amended.
Secretary of State: The UK Secretary of State for Trade and Industry.
SEI Holdings, Inc.: A subsidiary of Southern.
Senior Notes: The 6.375% Notes and the 6.800% Notes.
SFAS: US GAAP Statement of Financial Accounting Standards.
SFAS No. 71: Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation."
Shareholders' Agreement: Shareholders' Agreement dated July 1, 1996 among
SEI-Europe PMDC UK and Holdings.
Southern: The Southern Company, the ultimate parent company of the Company.
Southern Company system: Southern and its subsidiaries.
Southern Energy: Southern Energy, Inc., an affiliate of the Company and a
wholly-owned subsidiary of Southern.
Special Event: A Tax Event or an Investment Company Event.
Staff: The staff of the Securities and Exchange Commission.
Stated Maturity Date: February 1, 2027, the scheduled maturity date of the
Subordinated Debentures.
Subordinated Debentures: The Original Subordinated Debentures and the
Exchange Subordinated Debentures.
Successor Company: Southern Investments UK plc and its subsidiaries.
Supply Price Control Formula: P + RPI-Xs + Y where P reflects the maximum
average price per 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: South Western Electricity plc, a subsidiary of the Company.
Tax Event: As defined in "Description of the Capital Exchange Securities--
Special Event Redemption or Distribution."
Treasury Yield: 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.
126
<PAGE>
Trust: Southern Investments UK Capital Trust I, a statutory business trust
formed under the Delaware Business Trust Act.
Trust Indenture Act: The Trust Indenture Act of 1939, as amended.
Trust Securities: The Common Securities and the Capital Securities.
Trustees: The Regular Trustees, the Institutional Trustee and the Delaware
Trustee are sometimes collectively referred to as the Trustees.
Unit: Electricity expressed in kilowatt hours for determining the maximum
average price that can be charged by a REC.
UK GAAP: Accounting principles generally accepted in the United Kingdom.
UK Taxes: Any taxes, duties, assessments or any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed,
levied, collected, withheld or assessed by or within the UK or by or within
any political subdivision thereof or any authority therein or thereof having
power to tax.
US GAAP: Accounting principles generally accepted in the United States of
America.
U.S. Holder: A holder of Capital Securities who or that is for United States
federal income tax purposes (i) a citizen or individual resident of the United
States, (ii) a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income tax
regardless of its source, or (iv) a trust if both: (A) a court within the
United States is able to exercise primary jurisdiction over the administration
of the trust and (B) one or more United States trustees or fiduciaries have
authority to control all substantial decisions of the trust.
127
<PAGE>
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES (SUCCESSOR COMPANY)
Report of Independent Public Accountants.................................. F-2
Financial Statements...................................................... F-3
Consolidated Balance Sheet as of March 31, 1996......................... F-3
Consolidated Statement of Income for the Period From Inception (June 23,
1995) to March 31, 1996................................................ F-4
Consolidated Statement of Changes in Stockholder's Equity for the Period
From Inception (June 23, 1995) to March 31, 1996....................... F-5
Consolidated Statement of Cash Flows for the Period From Inception (June
23, 1995) to March 31, 1996............................................ F-6
Notes to the Consolidated Financial Statements............................ F-7
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES (PREDECESSOR COMPANY)
Report of Independent Auditors............................................ F-20
Report of Independent Public Accountants.................................. F-21
Financial Statements
Consolidated Balance Sheet as of March 31, 1995......................... F-22
Consolidated Statements of Income for the Years Ended March 31, 1994 and
1995 and for the Period From April 1, 1995 to September 17, 1995....... F-23
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended March 31, 1994 and March 31, 1995 and for the Period From April
1, 1995 to September 17, 1995.......................................... F-24
Consolidated Statements of Cash Flows for the Years Ended March 31, 1994
and 1995 and the Period From April 1, 1995 to September 17, 1995....... F-25
Notes to the Consolidated Financial Statements............................ F-26
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES (PREDECESSOR COMPANY)
Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of December 31, 1996.. F-36
Unaudited Condensed Consolidated Statements of Income for the Nine
Months Ended December 31, 1995 and 1996................................ F-37
Unaudited Condensed Consolidated Statement of Cash Flows for the Nine
Months Ended
December 31, 1996...................................................... F-38
Unaudited Condensed Consolidated Statement of Cash Flows for the Period
from Inception (June 23, 1995) to December 31, 1995.................... F-39
Notes to the Unaudited Condensed Consolidated Financial Statements........ F-40
Unaudited Pro Forma Consolidated Financial Information.................... F-42
Unaudited Pro Forma Consolidated Statement of Income for the Year Ended
March 31, 1996........................................................... F-43
Unaudited Pro Forma Consolidated Statement of Income for the Nine Months
Ended December 31, 1995.................................................. F-44
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Southern Investments UK plc:
We have audited the accompanying consolidated balance sheet of SOUTHERN
INVESTMENTS UK plc AND SUBSIDIARIES (Successor Company) as of March 31, 1996
and the related consolidated statements of income, changes in stockholder's
equity, and cash flows for the period from inception (June 23, 1995) to March
31, 1996. 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 auditing standards 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 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Southern Investments UK
plc and subsidiaries as of March 31, 1996 and the results of their operations
and their cash flows for the period from inception (June 23, 1995) to March
31, 1996 in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN
Bristol, England
July 25, 1996
F-2
<PAGE>
SOUTHERN INVESTMENTS UK PLC
AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
ASSETS 1996 1996
------ --------- ---------
(Pounds) U.S. $
<S> <C> <C>
PROPERTY, PLANT, AND EQUIPMENT (Note 9).................... 1,227 2,101
Less accumulated depreciation............................. 20 34
----- -----
Property, plant, and equipment, net..................... 1,207 2,067
----- -----
OTHER ASSETS:
Investments (Note 11)..................................... 22 37
Prepaid pension cost (Note 2)............................. 95 163
Goodwill, net of accumulated amortization of (Pounds)2
($3)..................................................... 173 296
----- -----
Total other assets...................................... 290 496
----- -----
CURRENT ASSETS:
Cash and cash equivalents................................. 20 34
Investments (Note 11)..................................... 26 45
Receivables:
Customer accounts, less provision for uncollectibles of
(Pounds)17 ($29)........................................ 95 163
Other.................................................... 20 34
----- -----
Receivables, net.......................................... 115 197
Materials and supplies.................................... 3 5
Prepaid expenses.......................................... 25 43
----- -----
Total current assets.................................... 189 324
----- -----
Total assets............................................ 1,686 2,887
===== =====
<CAPTION>
STOCKHOLDER'S EQUITY AND LIABILITIES
------------------------------------
(Pounds) U.S. $
<S> <C> <C>
STOCKHOLDER'S EQUITY (Note 12):
Share capital, (Pounds)1 par value; 500,400,587 shares
authorized, issued, and outstanding...................... 500 856
Retained earnings/(deficit)............................... (132) (226)
----- -----
Total stockholder's equity.............................. 368 630
----- -----
OTHER NON-CURRENT LIABILITIES
Deferred income taxes (Note 6)............................ 352 603
Provision for loss contracts (Note 4)..................... 62 106
Other..................................................... 66 113
----- -----
Total other non-current liabilities..................... 480 822
----- -----
CURRENT LIABILITIES:
Short-term debt (Note 10)................................. 650 1,113
Accounts payable.......................................... 45 77
Accrued income taxes...................................... 19 33
Unearned revenue.......................................... 10 17
Other..................................................... 114 195
----- -----
Total current liabilities............................... 838 1,435
----- -----
COMMITMENTS AND CONTINGENT MATTERS (Notes 2, 4 and 10)
Total stockholder's equity and liabilities.............. 1,686 2,887
===== =====
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE>
SOUTHERN INVESTMENTS UK PLC
AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
(Pounds) U.S. $
-------- ------
<S> <C> <C>
OPERATING REVENUES............................................ 481 823
COST OF SALES................................................. 318 544
--- ---
GROSS MARGIN.................................................. 163 279
--- ---
OPERATING EXPENSES:
Maintenance.................................................. 21 36
Depreciation and amortization................................ 22 38
Selling, general, and administrative......................... 34 58
--- ---
Total operating expenses................................... 77 132
--- ---
Operating income........................................... 86 147
--- ---
OTHER INCOME (EXPENSE):
Interest income.............................................. 7 12
Interest expense............................................. (28) (48)
Gain on sale of investments (Note 11)........................ 14 24
Other, net................................................... 2 3
--- ---
Total other expense........................................ (5) (9)
--- ---
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES......... 81 138
PROVISION FOR INCOME TAXES.................................... 28 47
--- ---
INCOME FROM CONTINUING OPERATIONS............................. 53 91
EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF DEBT, net of in-
come tax effect of (Pounds)3 ($5) (Note 10).................. 6 10
--- ---
NET INCOME.................................................... 59 101
=== ===
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-4
<PAGE>
SOUTHERN INVESTMENTS UK PLC
AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
RETAINED
SHARE EARNINGS/
CAPITAL (DEFICIT) TOTAL TOTAL
(Pounds) (Pounds) (Pounds) U.S. $
-------- --------- -------- ------
<S> <C> <C> <C> <C>
BALANCE, June 23, 1995...................... 0 0 0 0
Net income................................. 0 59 59 101
Proceeds from sale of National Grid Hold-
ings reflected as dividends
(Note 12)................................. 0 (191) (191) (327)
Conversion of advances to equity (Note
12)....................................... 315 0 315 539
Equity contribution (Note 12).............. 185 0 185 317
--- ---- ---- ----
BALANCE, March 31, 1996..................... 500 (132) 368 630
=== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
(Pounds) U.S.$
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. 59 101
------ -------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ............................................ 20 34
Amortization of goodwill................................. 2 3
Gain on sales of investments............................. (14) (24)
Gain on early extinguishment of debt..................... (9) (15)
Changes in assets and liabilities:
Receivables, net....................................... 6 10
Accounts payable....................................... (39) (66)
Accrued income taxes................................... 5 9
Other, net................................................. (5) (9)
------ -------
Total adjustments.................................... (34) (58)
------ -------
Net cash provided by operating activities............ 25 43
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Consideration for purchase of SWEB paid to former share-
holders................................................... (1,023) (1,752)
Capital expenditures....................................... (37) (63)
Proceeds received from the disposal of investments......... 270 462
------ -------
Net cash used in investing activities................ (790) (1,353)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from advances from Parent (Note 12)............... 315 539
Capital contribution received (Note 12).................... 185 317
Payments of dividends (Note 12)............................ (191) (327)
Payment of preacquisition dividends........................ (75) (128)
Proceeds from issuance of notes............................ 650 1,113
Proceeds from issuance of bonds............................ 597 1,022
Repayment of bonds......................................... (696) (1,192)
------ -------
Net cash provided by financing activities............ 785 1,344
------ -------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................... 20 34
CASH AND CASH EQUIVALENTS, beginning of period............... 0 0
------ -------
CASH AND CASH EQUIVALENTS, end of period..................... 20 34
====== =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest..................................... 21 36
====== =======
Cash paid for income taxes................................. 26 45
====== =======
Business acquisitions:
Fair value of assets acquired............................ 1,940 3,322
Less equity contribution to purchase common stock...... (500) (856)
Less bonds issued to purchase common stock............. (523) (896)
Less noncash consideration issued in exchange for com-
mon stock............................................. (40) (68)
------ -------
Liabilities assumed...................................... 877 1,502
====== =======
Non-cash conversion of advances from Parent to equity (Note
12)....................................................... 315 539
====== =======
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-6
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The Company is a wholly-owned subsidiary of Southern Investments UK Holdings
Limited ("Holdings"), which is wholly-owned indirectly by The Southern Company
("Southern") (see Note 13). 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"), one of the 12 regional electricity companies ("RECs") in
England and Wales licensed to distribute, supply, and, to a limited extent,
generate electricity. 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 to the Predecessor Company represent South Western Electricity plc
and its subsidiaries. See Note 7 for a further discussion of the Acquisition.
SWEB is one of the twelve 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 UK 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 southwest of England, is regulated
under the terms of SWEB's Public Electricity Supply license by the Office of
Electricity Regulation ("OFFER").
SWEB's operates primarily in its franchise area in southwest England. SWEB's
franchise area covers approximately 5,560 square miles running 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.
Basis of Presentation
The financial statements of the Company are presented 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 U.S. 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 U.S. 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
F-7
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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).
These financial statements are presented in pounds sterling ((Pounds)) and
in U.S. dollars ($ or U.S. $), solely for the convenience of the reader, at
the exchange rate of (Pounds)1 = U.S. $1.7123, 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 December 31, 1996. No
representation is made that the pounds sterling amounts have been, could have
been, or could be converted into U.S. dollars at that or any other rate of
exchange.
Use of 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
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition
SWEB records revenue net of value added tax 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 (Note 7) in accordance with Accounting Principles
Board Opinion ("APB") No. 16, "Accounting for Business Combinations." Items
capitalized subsequent to the Acquisition are recorded at original cost, which
includes materials, labor, appropriate administrative and general costs, and
the 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 (Note
9), which approximate 3.1% per year (2.5% per year for depreciable utility
plant in service).
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
F-8
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
incurred. This policy has been adopted effective October 1, 1995 as the
Company has 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 (Pounds)3.0 million in the three
months to December 31, 1995, (Pounds)5.2m of costs in the year ended March 31,
1996 and (Pounds)8.6m of costs in the nine months to December 31, 1996. If the
policy had been adopted by the Predecessor Company, the amount that would have
been capitalized at acquisition would have been zero, as no tangible benefits
were believed to have accrued from current development work at that date and
any costs relating to earlier development work had been fully amortized.
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 (Note 7).
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.
Unearned Revenue
Unearned revenue primarily represents the liability for payments received
from customers in connection with the assessment of a value added tax ("VAT")
on electricity sales, which was imposed by the UK government effective April
1, 1994 to include electricity sales to residential customers. As part of the
adoption of the tax, customers were allowed to prepay their bills and avoid
the VAT on the element of the future electricity consumption which was
prepaid. Revenues are recognized as electricity is supplied to these
customers.
The Regulator permits the Company to bill for all estimated allowed revenue,
while actual allowed revenue is not known until after the end of the fiscal
year. When billings exceed the actual allowed revenue, revenues are deferred
on the excess amounts. The deferred amount is deducted from revenues and
included in current liabilities. When billings are less than the allowed
revenue, no anticipation of any potential future recovery is made.
F-9
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Financial Instruments
The Company uses financial instruments primarily to mitigate the risk of
exposure to volatility in electricity prices and fluctuations in interest
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 March 31, 1996 was
zero (Note 8).
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
which provides guidance on when to assess and how to measure impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
intangibles to be disposed of. The Company adopted SFAS No. 121 on January 1,
1996, with no material effect on its financial position or results of
operations.
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 the year ended March 31,
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 (Pounds)0.1 million ($0.2 million) for the period from
inception (June 23, 1995) through March 31, 1996.
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 (Pounds)4.8 million ($8.2 million) for the period from inception (June
23, 1995) through March 31, 1996.
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.
The following table shows the actuarial results and assumptions for pension
benefits as computed under SFAS No. 87 (in millions):
F-10
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1996
--------- ---------
(Pounds) $
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits................................... (488) (836)
Nonvested benefits................................ 0 0
---- -----
Accumulated benefit obligation...................... (488) (836)
Effect of future increases in compensation.......... (37) (63)
---- -----
Projected benefit obligation........................ (525) (899)
Less:
Fair value of plan assets....................... 642 1,099
Unrecognized net gain........................... (22) (38)
---- -----
Prepaid asset recognized in the consolidated balance
sheets............................................. 95 162
==== =====
</TABLE>
The weighted average rates assumed in the actuarial calculations were as
follows at March 31, 1996:
<TABLE>
<S> <C>
Discount rate....................................................... 8.75%
Annual salary rate increase......................................... 6.00
Long term rate of return on plan assets............................. 9.50
</TABLE>
The components of the plan's net pension income during the period from
inception (June 23, 1995) to March 31, 1996 are shown below (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
Benefits earned during the period........................... 2 3
Interest cost on projected benefit obligation............... 22 38
Actual return on plan assets................................ (50) (86)
Net amortization and deferral............................... 22 38
--- ---
Net pension income.......................................... (4) (7)
=== ===
</TABLE>
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.
F-11
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 nonfranchise markets (above 1MW) were opened to full competition during
privatization in 1990; the nonfranchise markets above 100 kW were opened to
full competition starting in April 1994.
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 today's present value of (Pounds)60
million ($103 million).
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 totaled (Pounds)3
million ($5 million) for the period from inception (June 23, 1995) to March
31, 1996. At March 31, 1996, estimated minimum rental commitments for
noncancelable operating leases were as follows:
<TABLE>
<CAPTION>
AMOUNT
----------------
((Pounds)M) ($M)
<S> <C> <C>
Fiscal year:
1997.................................................. 2 3
1998.................................................. 2 3
1999.................................................. 2 3
2000.................................................. 1 2
2001.................................................. 1 2
Thereafter............................................ 10 17
--- ---
Total minimum payments.............................. 18 30
=== ===
</TABLE>
Labor Subject to Collective Bargaining Agreements
Substantially all of SWEB's employees are subject to one of five 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.
F-12
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 included the commitment to introduce a windfall tax
on excess profits of privatised utilities. Neither the total amount of
government revenue to be raised by the tax nor the allocation of the tax
between utilities has been announced. There can be no assurance that the
introduction of a windfall tax or other policies of the new government would
not adversely affect the Company.
Pension 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 enhanced pensions
on redundancies. 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 is being challenged in the courts and no payments are
required until such challenge has been heard. If the challenge is
unsuccessful, either at the first challenge or on a subsequent appeal, it will
have an adverse effect on SWEB. It is not practical to make an estimate of the
exposure at the present time.
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 during
the period from inception (June 23, 1995) through March 31, 1996 and as of
March 31, 1996 is detailed below (in millions):
<TABLE>
<CAPTION>
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ --------------
(Pounds) $ (Pounds) $ (Pounds) $ (Pounds) $ (Pounds) $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues...... 147 252 450 770 33 57 (149) 255 481 824
Operating income........ 72 123 13 22 1 2 0 0 86 147
Depreciation and amorti-
zation................. 16 27 1 2 5 9 0 0 22 38
Total assets employed at
period-end............. 1,422 2,435 102 175 162 277 0 0 1,686 2,887
Capital expenditures.... 32 55 1 2 4 7 0 0 37 64
</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 use of the network. Such sales are priced
at rates applicable to SWEB and other suppliers operating in the SWEB
franchise area.
6. INCOME TAXES
Details of the income tax provision for the period from inception (June 23,
1995) to March 31, 1996 (including the amount related to the extraordinary
gain in the accompanying consolidated statement of operations) are as follows
(in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
Provision for income taxes:
<CAPTION>
Currently payable........................................... 12 21
<S> <C> <C>
Deferred.................................................... 19 32
--- ---
Total provision........................................... 31 53
=== ===
</TABLE>
F-13
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
MARCH 31,
1996
------------
(Pounds) $
-------- ---
<S> <C> <C>
Deferred tax liabilities:
Property, plant, and equipment basis differences............. 341 584
Pensions..................................................... 32 55
--- ---
Total...................................................... 373 639
--- ---
Deferred tax assets:
Acquisition related accruals................................. 21 36
Other........................................................ 0 0
--- ---
Total...................................................... 21 36
--- ---
<CAPTION>
Net deferred tax liabilities................................... 352 603
0 0
Portion included in current liabilities, net................... -------- ---
Accumulated deferred income taxes in the consolidated balance 352 603
sheets........................................................ ======== ===
</TABLE>
A reconciliation of the UK statutory rate to the effective income tax rate
for the period from inception (June23, 1995) to March 31, 1996 is as follows:
<TABLE>
<CAPTION>
UK statutory rate..................................................... 33%
<S> <C>
Nondeductible amortization of goodwill................................ 1
---
Effective income tax rate............................................. 34%
===
</TABLE>
7. ACQUISITION
The Acquisition of SWEB in the amount of (Pounds)1.063 ($1.820) 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 14% of SWEB through open market
purchases during July and August 1995. On August 25, 1995, the Company
acquired an additional 16% of SWEB through open market purchases. 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.
The Company acquired the remaining shares by November 27, 1995, the date on
which the notice for compulsory acquisition from non-assenting shareholders
expired. The Company's equity in the earnings of SWEB prior to September 18,
1995 and the minority interest in the earnings of SWEB subsequent to the
Acquisition Date were each immaterial and, accordingly, are not separately
presented in the accompanying consolidated statement of income.
The Acquisition was accounted for using the purchase method of accounting in
accordance with APB No. 16, "Accounting for Business Combinations" ("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 (Pounds)28 million ($48 million) of acquisition related costs, by
(Pounds)175 million ($300 million) and is considered goodwill. The operating
results of
F-14
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SWEB have been included in the Company's financial statements from the
effective date of the Acquisition. The revisions to the estimate of fair
values on the Acquisition Date were not material; the final valuations are
shown in the "Notes to the Unaudited Condensed Consolidated Financial
Statements" for the nine months ended December 31 , 1996.
The net purchase price of (Pounds)1.063 billion was allocated as follows (in
millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
Property, plant, and equipment........................... 1,190 2,037
Current assets........................................... 317 543
Investments.............................................. 258 442
Goodwill................................................. 175 300
Current liabilities...................................... (244) (418)
Other liabilities........................................ (633) (1,084)
------ ------
Purchase price........................................... 1,063 1,820
====== ======
</TABLE>
The Company recognized certain liabilities in connection with the
Acquisition, including a plan to increase the ongoing severance program and
costs to exit its electrical contracting and servicing business lines. A
program of staff reductions is being effected which, when completed by the end
of calendar 1997, is expected to reduce the number of staff in the main
electricity business by 21% compared to that at the date of acquisition by the
Company. The Company recorded this provision related to exiting these
businesses in accordance with EITF Consensus No. 95-3, "Recognition of
Liabilities in Connection With a Purchase Business Combination." During the
period, the Company sold South Western Electricity (Connect) Limited to its
existing management and SWEB Servicing Limited to an unaffiliated party. The
activity in these categories is as follows (in millions):
<TABLE>
<CAPTION>
BUSINESS
SEVERANCE DISPOSALS
------------ ------------
(Pounds) $ (Pounds) $
<S> <C> <C> <C> <C>
Balance at Acquisition ......................... 26 44 11 19
Utilized....................................... (2) (3) (5) (9)
--- --- --- ---
Balance at March 31, 1996....................... 24 41 6 10
=== === === ===
</TABLE>
Liabilities existing at March 31, 1996 in respect of business disposals
represent outstanding contractual commitments to the respective purchasers,
which will be resolved by March, 1999.
The following 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.
F-15
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31
-----------------------------
1996 1995
-------------- --------------
(Pounds) $ (Pounds) $
<S> <C> <C> <C> <C>
Operating Revenues (in millions) ........... 780 1,336 776 1,329
Net income (in millions).................... 54 92 47 80
</TABLE>
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.
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, 1996,
sterling interest rate swaps expiring February 8, 2006 with notional amounts
totaling (Pounds)250 million ($428 million), resulted in an unrealized gain of
(Pounds)11 million ($19 million).
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 the bank would pay to terminate the swaps at March 31, 1996. 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 both its CFDs and interest rate swaps. 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. PROPERTY, PLANT, AND EQUIPMENT
The Company records book depreciation expense on a straight-line basis,
using the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Distribution network assets....................................... 40
Generation assets................................................. 15
Buildings......................................................... 40
Fixtures and equipment............................................ 3 to 20
Vehicles and mobile plant......................................... 4 to 10
</TABLE>
F-16
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property, plant, and equipment consisted of the following (in millions):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1996
--------- ---------
(Pounds) $
<S> <C> <C>
Generation............................................ 2 3
Distribution.......................................... 1,123 1,923
Non-network land and buildings........................ 41 70
Fixtures and equipment................................ 48 82
Vehicles and mobile plant............................. 13 22
------ -----
1,227 2,100
Accumulated depreciation.............................. (20) (34)
------ -----
Property, plant, and equipment, net................... 1,207 2,066
====== =====
</TABLE>
At March 31, 1996, nonnetwork land and buildings include approximately
(Pounds)2 million ($3 million) of property and equipment held for sale.
Management believes that the carrying amount of these assets approximates
their net realizable value. There is an arrangement in place whereby HM
Government is entitled to a share in the profits realized by the Company on
certain property disposals made up to March 2000. Full provision for such
clawback liabilities is made as soon as the sale is recognized.
10. DEBT
Short-term debt at March 31, 1996 consists of the following (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- -----
<S> <C> <C>
Borrowings under term loan facility........................ 325 556
Borrowings under revolving credit facility................. 160 274
Short term notes--banks.................................... 138 236
Loan notes to former shareholders.......................... 27 46
--- -----
650 1,112
=== =====
</TABLE>
The weighted average balance of debt outstanding during the period was
(Pounds)605 million ($1,036 million) at a weighted average interest rate of
8.7%.
At March 31, 1996, the Company had in place a (Pounds)325 million ($556
million) term loan facility with certain banks. Interest is payable monthly
based on an interest rate of LIBOR plus 0.23%, which was 6.355% at March 31,
1996. Outstanding borrowings are due February 5, 1997.
SWEB has in place a (Pounds)275 million ($471 million) revolving credit
facility with certain banks, under which (Pounds)160 million ($274 million)
had been drawn at March 31, 1996 at an interest rate of 6.46% (LIBOR plus
0.58%). Each revolving advance may have a term of up to six months, and this
facility expires February 6, 1999.
Short-term notes represent borrowings by SWEB from banks which have
maturities of 90 days or less from March 31, 1996. Amounts outstanding include
(Pounds)120 million from committed loan facilities and (Pounds)12 million from
uncommitted loan facilities. Interest rates on outstanding borrowings were
between 6.06% and 6.19% at March 31, 1996.
In lieu of cash payments to former shareholders of SWEB for their shares,
the Company offered loan notes at the time of acquisition; the notes are
redeemable at the option of the note holders between June 30, 1996 and
F-17
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
December 31, 2002. Accordingly, these notes are classified as current
liabilities in the accompanying balance sheet. Also, on October 6, 1995 and on
November 24, 1995, the Company issued a total of (Pounds)597 million ($1,022
million) of Secured Floating Rate Bonds to finance the acquisition of SWEB
which were redeemed on February 8, 1996.
During the period, SWEB purchased from, and extinguished certain debt held
by, the UK government. Shortly after the Acquisition Date, management had all
the facts necessary to complete a calculation of the fair value of such debt.
The principal and interest amounts to be paid and relevant current market
interest rates were known, permitting a fair calculation based on the present
value of the amounts to be paid discounted at an appropriate market interest
rate, in accordance with APB No. 16. The terms of such debt gave SWEB no
redemption right (except at a redemption premium considered by SWEB to be not
economically feasible), unless the UK government were to offer the debt for
public sale.
On November 21, 1995, the Company learned of the UK government's intent to
conduct a public auction of a portion of the UK RECs' debt and subsequently
submitted a bid to the UK government to redeem such debt for (Pounds)98
million ($168 million), together with accrued interest. The offer made was
below the fair value of the debt at the Acquisition Date as a result of two
changes in circumstances which were not anticipated by SWEB. First, the UK
government elected to hold the debt auction. Because the premium on redemption
in excess of the par value of the debt is not deductible by SWEB, the UK
government agreed to apply a premium in SWEB's bid reflecting the present
value of the income tax related to the deduction for interest expense which
SWEB would no longer be able to deduct once the debt was extinguished. Second,
the market's perception of SWEB's credit risk changed due to the acquisitions
of several other RECs which occurred in late 1995 and uncertainty in the
market with respect to the future debt levels of SWEB following the
Acquisition.
Consequently, the market rate of interest on similar debt had increased from
the time of the Acquisition to the auction date. The premium applied by the UK
government and the higher market interest rate allowed SWEB to offer a price
for the redemption of the debt which was lower than such debt's fair value
upon Acquisition. The UK government accepted SWEB's offer on February 1, 1996.
Accordingly, the Company recorded an extraordinary gain on the early
extinguishment of this debt in the amount of (Pounds)6 million ($10 million),
net of taxes of (Pounds)3 million ($5 million). This gain is nonrecurring in
nature as it is the result of changes in circumstances after the fair
valuation of such debt resulting from the application of APB No. 16, which
valuation was finalized shortly after the Acquisition Date.
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, 1996.
During the period, 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
F-18
<PAGE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Date in accordance with APB No. 16. The Company's valuation of (Pounds)199
million ($341 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.
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
(Pounds)201 million ($344 million) resulting in a pretax gain of (Pounds)14
million ($24 million). (Further proceeds of (Pounds)12 million were received
from the sale of shares transferred to SWEB's former shareholders and bring
the total proceeds received to (Pounds)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 Company's
estimated share of the proceeds from the sale of the PSB on December 21, 1995
was (Pounds)39 million ($67 million). No gain or loss was recognized on this
sale.
12. STOCKHOLDER'S EQUITY
As discussed in Note 7, the Company obtained effective control of SWEB on
September 18, 1995. During October 1995, (Pounds)315 million ($539 million) of
advances from the parent of the Company were converted to share capital, an
equity contribution of (Pounds)185 million ($317 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 accompanying consolidated statements
of changes in stockholder's equity and cash flows.
Dividends in the amount of (Pounds)191 million ($327 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.
13. SUBSEQUENT EVENT
On July 1, 1996, PP&L Resources, Inc. indirectly purchased a 25% share of
the Company's parent, Southern Investments UK Holdings Limited, for
(Pounds)121.5 million ($208 million).
F-19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
South Western Electricity plc:
We have audited the accompanying consolidated balance sheet of SOUTH WESTERN
ELECTRICITY plc AND SUBSIDIARIES (Predecessor Company) as of March 31, 1995
and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the two years in the period then ended.
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 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 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 South Western
Electricity plc and subsidiaries as of March 31, 1995 and the consolidated
results of their operations and their consolidated cash flows for each of the
two years in the period then ended in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG
Chartered Accountants
Bristol, England
August 27, 1996
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
South Western Electricity plc:
We have audited the accompanying consolidated statement of income, statement
of changes in stockholders' equity and statement of cash flows for the period
from April 1, 1995 to September 17, 1995 of SOUTH WESTERN ELECTRICITY plc AND
SUBSIDIARIES (Predecessor Company). 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 auditing standards 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 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 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 cash
flows of South Western Electricity plc and subsidiaries for the period from
April 1, 1995 to September 17, 1995 in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN
Bristol, England
August 27, 1996
F-21
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31,
1995
---------
(Pounds)
<S> <C>
ASSETS
PROPERTY, PLANT, AND EQUIPMENT (Note 9).............................. 830
Less accumulated depreciation...................................... 289
---
Property, plant, and equipment, net............................ 541
---
OTHER ASSETS:
Investments........................................................ 25
Prepaid pension cost (Note 2)...................................... 52
Other.............................................................. 17
---
Total other assets............................................. 94
---
CURRENT ASSETS:
Cash and cash equivalents.......................................... 27
Investments........................................................ 21
Receivables:
Customer accounts, less provision for uncollectibles of
(Pounds)12...................................................... 113
Other............................................................ 15
---
Receivables, net................................................. 128
Materials and supplies............................................. 18
Prepaid taxes...................................................... 33
Prepaid expenses................................................... 7
---
Total current assets........................................... 234
---
Total assets................................................... 869
===
STOCKHOLDERS' EQUITY AND LIABILITIES
STOCKHOLDERS' EQUITY (Note 11):
Share capital, 50p par value common shares; 200 million shares au-
thorized, 111.1 million issued, and outstanding................... 56
Capital redemption reserve......................................... 6
Retained earnings.................................................. 312
---
Total stockholders' equity..................................... 374
---
Long-term debt (Note 10)............................................. 95
OTHER NON-CURRENT LIABILITIES:
Deferred income taxes (Note 7)..................................... 154
Other.............................................................. 26
---
Total other non-current liabilities............................ 180
---
CURRENT LIABILITIES:
Accounts payable................................................... 50
Electricity purchases payable...................................... 36
Accrued income taxes............................................... 43
Unearned revenue................................................... 34
Regulatory overrecovery............................................ 6
Bank loans......................................................... 24
Other.............................................................. 27
---
Total current liabilities...................................... 220
---
COMMITMENTS AND CONTINGENT MATTERS (Notes 2, 5 and 10)
Total stockholders' equity and liabilities..................... 869
===
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-22
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED MARCH 31, 1994 AND 1995
AND FOR THE PERIOD FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
MARCH 31, APRIL 1, 1995 TO
----------------- SEPTEMBER 17,
1994 1995 1995
-------- -------- ----------------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
OPERATING REVENUES......................... 808 776 299
COST OF SALES.............................. 511 480 186
--- --- ---
GROSS MARGIN............................... 297 296 113
--- --- ---
OPERATING EXPENSES:
Maintenance.............................. 42 45 18
Depreciation............................. 28 31 15
Selling, general, and administrative..... 105 81 40
--- --- ---
Total operating expenses............. 175 157 73
--- --- ---
Operating income..................... 122 139 40
--- --- ---
OTHER INCOME (EXPENSE):
Interest income.......................... 4 7 2
Interest expense......................... (11) (11) (5)
Investment income........................ 15 14 1
Other, net............................... 1 2 0
--- --- ---
Total other income (expense)......... 9 12 (2)
--- --- ---
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME
TAXES..................................... 131 151 38
PROVISION FOR INCOME TAXES................. 43 50 13
--- --- ---
INCOME FROM CONTINUING OPERATIONS.......... 88 101 25
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
net of income tax effect of (Pounds)0 for
all periods (Note 12)..................... 0 1 (1)
LOSS ON DISPOSAL OF DISCONTINUED OPERA-
TIONS, net of income tax effect of
(Pounds)4................................. 0 (8) 0
--- --- ---
NET INCOME................................. 88 94 24
=== === ===
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR YEARS ENDED MARCH 31, 1994 AND 1995
AND FOR THE PERIOD FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
NUMBER OF ORDINARY SHARE CAPITAL TOTAL
ORDINARY SHARES OF PREMIUM REDEMPTION RETAINED STOCKHOLDERS'
SHARES 50P EACH ACCOUNT RESERVE EARNINGS EQUITY
--------- --------- -------- ---------- -------- -------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
APRIL 1, 1993........... 123 62 0 0 289 351
Issue of share capi-
tal.................. 0 0 0 0 0 0
Dividends (21p per
share)............... 0 0 0 0 (26) (26)
Net income............ 0 0 0 0 88 88
--- --- --- --- ---- ----
MARCH 31, 1994.......... 123 62 0 0 351 413
Repurchase of own
shares (Note 11)..... (12) (6) 0 6 (103) (103)
Issue of share capi-
tal.................. 0 0 0 0 0 0
Dividends (25p per
share)............... 0 0 0 0 (30) (30)
Net income............ 0 0 0 0 94 94
--- --- --- --- ---- ----
MARCH 31, 1995.......... 111 56 0 6 312 374
Issue of share capi-
tal.................. 1 -- 2 0 0 2
Dividends:
20p per share for
111 million
shares............. 0 0 0 0 (23) (23)
65p per share for 81
million shares..... 0 0 0 0 (52) (52)
Net income............ 0 0 0 0 24 24
--- --- --- --- ---- ----
SEPTEMBER 17, 1995...... 112 56 2 6 261 325
=== === === === ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED MARCH 31, 1994 AND 1995
AND FOR THE PERIOD FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
------------------- APRIL 1, 1995 TO
MARCH 31, MARCH 31, SEPTEMBER 17,
1994 1995 1995
--------- --------- ----------------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................. 88 94 24
--- ---- ---
Adjustments to reconcile net income to
net cash provided by operating activi-
ties:
Depreciation.......................... 28 31 15
Changes in assets and liabilities:
Prepaid pension cost................ (15) (24) (8)
Receivables, net.................... 28 (5) 32
Credit sales, noncurrent............ (1) (6) 16
Materials and supplies.............. (1) (1) 12
Prepaid expenses.................... (8) (2) (3)
Accounts payable.................... 12 1 (7)
Accrued income taxes................ (8) (5) (3)
Unearned revenue.................... 61 (30) (9)
Other liabilities................... 3 24 (9)
Deferred taxes...................... 33 13 4
Other, net.......................... 16 10 5
--- ---- ---
Total adjustments.................. 148 6 45
--- ---- ---
Net cash provided by operating ac-
tivities.......................... 236 100 69
--- ---- ---
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................... (61) (68) (22)
Loans to related parties................ 0 0 (3)
Proceeds from property, plant, and
equipment sales........................ 1 1 5
Purchases of investments................ (53) (66) (28)
Proceeds from sales of investments...... 38 66 26
--- ---- ---
Net cash used in investing activi-
ties.............................. (75) (67) (22)
--- ---- ---
CASH FLOWS FROM FINANCING ACTIVITIES:
Issue of share capital.................. 0 0 2
Common shares purchased................. 0 (103) 0
Payments of dividends................... (26) (30) 0
Change in short term borrowings......... (37) 24 (23)
--- ---- ---
Net cash used in financing activi-
ties.............................. (63) (109) (21)
--- ---- ---
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. 98 (76) 26
CASH AND CASH EQUIVALENTS, beginning of
period.................................. 5 103 27
--- ---- ---
CASH AND CASH EQUIVALENTS, end of peri-
od...................................... 103 27 53
=== ==== ===
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest.................. 10 11 5
=== ==== ===
Cash paid for income taxes.............. 11 33 6
=== ==== ===
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
South Western Electricity plc ("SWEB") is one of the twelve regional
electricity companies ("RECs") in England and Wales licensed to supply,
distribute, and, to a limited extent, generate electricity. The RECs were
created as a result of the privatization of the UK 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 southwest of
England, is regulated under the terms of SWEB's Public Electricity Supply
license by the Office of Electricity Regulation ("OFFER").
SWEB operates primarily in its Franchise Area in southwest England. SWEB's
Franchise Area covers approximately 5,560 square miles running from Bristol
and Bath in the northeast, 188 miles southwest along the peninsular to Land's
End and 28 miles beyond to the Isles of Scilly, and has a resident population
of approximately 2.8 million.
Basis of Presentation
The financial statements of the Company are presented in pounds sterling
((Pounds)) 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 U.S. 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 4) 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 U.S. 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. Dividends received from
investments accounted for under the cost method were (Pounds)9 million for the
year ended 1994, (Pounds)12 million for the year ended 1995, and nil for the
period from April 1, 1995 to September 17, 1995.
Use of 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
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-26
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 original cost which includes
materials, labor, appropriate administrative and general costs, and the
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 composite straight-line rates, except for
distribution network assets which are charged at 3% for 20 years and 2% for
the remaining 20 years (Note 9), which are approximately 4.2% per year (2.8%
per year for depreciable utility plant in service).
Information Technology Consultancy and Development Costs
Information technology consultancy and development costs are expensed when
incurred.
Investments
The Company accounts for its current investments in accordance with
Statement of Financial Accounting Standard ("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 fair value
of which approximates cost. The Company's long-term investments are accounted
for using the cost-method and consist of its 7.69% ownership of Teesside (Note
5) the fair value of which is not readily determinable.
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.
Unearned Revenue
Unearned revenue primarily represents the liability for payments received
from customers in connection with the assessment of a VAT on electricity
sales, which was imposed by the UK government effective April 1, 1994 to
include electricity sales to residential customers. As part of the adoption of
the tax, customers were
F-27
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
allowed to prepay their electricity bills and avoid the VAT on the element of
the future electricity consumption which was prepaid. Revenues are recognized
as electricity is supplied to these customers.
Price regulation permits the Company to bill for all estimated allowed
revenue, while actual allowed revenue is not known until after the end of the
fiscal year. When billings exceed the actual allowed revenue, revenues are
deferred on the excess amounts. The deferred amount is deducted from revenues
and included in current liabilities. When billings are less than the allowed
revenue, no anticipation of any potential future recovery is made.
Financial Instruments
The Company uses financial instruments primarily to mitigate the risk of
exposure to volatility in electricity prices. 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 March 31, 1995 was
zero (Note 8).
2. RETIREMENT BENEFITS
Pension Plans
The Company operates two schemes, one based on defined contributions and a
second based on defined benefits.
Defined Contribution
The defined contribution plan was established in the year ended March 31,
1994. The assets of the defined contribution plan are held and administered by
an independent trustee. Contributions to the defined plan were not material
for any period presented.
Defined Benefit
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 (Pounds)9.6 million for the period ended March 31, 1994, (Pounds)9.8
million for March 31, 1995, and (Pounds)3.7 million for the period from April
1, 1995 to September 17, 1995.
SWEB uses the "entry age normal method with a frozen initial liability"
actuarial method for funding purposes. Amounts funded to the pension are
primarily invested in equity and fixed income securities.
It was not feasible to adopt SFAS No. 87 on the effective date of the
standard. Accordingly, the unrecognized net transition asset at the date of
initial application of SFAS No. 87, April 1, 1993, is being amortized over 15
years, beginning April 1, 1989, in accordance with the interpretations of the
staff of the Securities and Exchange Commission. The amount of the
unrecognized net transition asset credited to equity on April 1, 1993 was
(Pounds)12.9 million.
The following table shows the actuarial results and assumptions for pension
benefits in respect of SWEB's share of the scheme, as computed under SFAS No.
87 (in millions):
F-28
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
MARCH 31,
1995
---------
(Pounds)
<S> <C>
Actuarial present value of benefit obligation:
Vested benefits............................................... (443)
Nonvested benefits............................................ 0
----
Accumulated benefit obligation.................................. (443)
Effect of future increase in compensation....................... (33)
----
Projected benefit obligation.................................... (476)
----
Less:
Fair value of plan assets................................... 547
Unrecognized net transition asset........................... (29)
Unrecognized net loss....................................... 10
----
528
----
Prepaid pension asset........................................... 52
====
</TABLE>
The weighted average rates assumed in the actuarial calculations as of the
following dates were:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, MARCH 31,
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Discount rate..................................... 8.75% 8.25% 8.75%
Annual salary rate increase....................... 6.0 5.5 6.0
Long-term rate of return on plan assets........... 9.5 9.5 9.5
</TABLE>
The components of the plan's net pension income during the periods are shown
below (in millions):
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
------------------- APRIL 1, 1995 TO
MARCH 31, MARCH 31, SEPTEMBER 17,
1994 1995 1995
--------- --------- ----------------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Benefits earned during the period........ 6 5 3
Interest cost on projected benefit obli-
gation.................................. 37 37 20
Actual return on plan assets............. (89) 0 (69)
Net amortization and deferral............ 40 (56) 42
--- --- ---
Net pension income....................... (6) (14) (4)
=== === ===
</TABLE>
3. EMPLOYEE INCENTIVE PLANS
South Western Electricity plc had established incentive compensation plans
under which it was authorized to grant incentive stock options in its common
shares. There were two plans in operation.
The Sharesave Plan, which qualifies as a noncompensatory plan under APB
Opinion No. 25, was open to all eligible employees at the date of grant on
December 11, 1990 at a price of (Pounds)1.75. The options were exercisable in
1996 or at an earlier date if the employee retired or if the Company was
subject to acquisition (see Note 13). The activity in this plan was:
F-29
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
---------
<S> <C>
March 31, 1993 outstanding and exercisable..................... 3,958,004
1994 activity:
Exercised.................................................... (192,924)
---------
March 31, 1994 outstanding and exercisable................... 3,765,080
1995 activity:
Exercised.................................................... (279,801)
---------
March 31, 1995 outstanding and exercisable................... 3,485,279
Activity to September 17, 1995:
Exercised.................................................... (81,122)
---------
September 17, 1995 outstanding and exercisable............... 3,404,157
=========
</TABLE>
The Executive Share Option Plan was open to Executive Directors and Senior
Employees. Options were granted at a price equal to the market value of the
stock at the date of grant and generally became exercisable over three to ten
years following the grant. The activity in this plan was:
<TABLE>
<CAPTION>
AVERAGE
NUMBER OF OPTION
OPTIONS PRICE
--------- --------
(Pounds)
<S> <C> <C>
March 31, 1993 outstanding........................... 1,356,447 2.96
1994 activity:
Granted............................................ 73,202 6.90
Exercised.......................................... (692,902) 2.64
Lapsed............................................. (15,822) 3.16
---------
March 31, 1994 outstanding........................... 720,925
1995 activity:
Granted............................................ 429,295 7.57
Exercised.......................................... (563,388) 3.17
---------
March 31, 1995 and September 17, 1995 outstanding.... 586,832 7.00
=========
</TABLE>
4. 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 P is the
price level at the beginning of each new regulatory period, RPI is the change
in the Retail Price Index (inflation) and X is an adjustment factor determined
by OFFER. For the year ended March 31, 1994, X was -2.25% for distribution and
0.0% for supply. For the year ended March 31, 1995, X was -2.25% for
distribution and 2.0% for supply, and for the period April 1, 1995 to
September 17, 1995, X was 3.0% for distribution and 2.0% for supply.
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
for the twelve months starting April 1, 1995, followed by efficiency factors
of X= 2.0% 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
F-30
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
announcement meant a further real reduction of 11% in allowable distribution
income for the 12 months starting from April 1, 1996 followed by an efficiency
factor of X = 3.0% for each year until March 31, 2000.
In the supply business, which is progressively being opened to competition,
price regulation still applies to the market for customers with a demand of up
to 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 (customers with demand of
not more than 100 kW) income entitlement for the four-year period ending March
1998. A relatively small efficiency factor of X = 2.0% was applied to SWEB and
is being offset by an allowance for both unit and customer growth. The
nonfranchise markets above 1MW were opened to full competition during
privatization in 1990; the nonfranchise markets above 100kW were opened to
full competition starting in April 1994.
5. 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 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 totaled
(Pounds)5.7 million, (Pounds)6.1 million, and (Pounds)2.6 million, for the
years ended March 31, 1994 and 1995 and for the period from April 1, 1995 to
September 17, 1995, respectively. At March 31, 1995, estimated minimum rental
commitments for noncancelable operating leases were as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
--------
(Pounds)
<S> <C>
Fiscal year:
1996.......................................................... 5
1997.......................................................... 4
1998.......................................................... 3
1999.......................................................... 3
2000.......................................................... 3
Thereafter.................................................... 34
---
Total minimum payments...................................... 52
===
</TABLE>
Labor Subject to Collective Bargaining Agreements
Substantially all of SWEB's employees are subject to one of five 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 the Great Britain.
F-31
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. 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 networks.
Information about the Company's operations in these individual segments during
the years ended March 31, 1994 and 1995, and for the period from April 1, 1995
through September 17, 1995 and as of those respective period ends is detailed
below (in millions):
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 250 772 54 (268) 808
Operating income........ 84 27 11 0 122
Depreciation............ 21 0 7 0 28
Total assets employed at
period end............. 483 92 324 (50) 849
Capital expenditures.... 53 1 10 0 64
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 274 725 57 (280) 776
Operating income........ 112 18 10 (1) 139
Depreciation............ 24 0 7 0 31
Total assets employed at
period end............. 531 93 294 (49) 869
Capital expenditures.... 54 0 13 0 67
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 105 276 23 (105) 299
Operating income........ 42 2 (4) 0 40
Depreciation............ 12 0 3 0 15
Total assets employed at
period end............. 537 54 289 (45) 835
Capital expenditures.... 19 0 2 0 21
</TABLE>
Included in "Other" above are insignificant operating subsidiaries of SWEB
(as well as corporate activities), and with the exception of total assets
employed, the values above exclude discontinued operations.
7. INCOME TAXES
Details of the income tax provision for the years ended March 31, 1994 and
1995 and for the period from April 1, 1995 to September 17, 1995 are as
follows (in millions):
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
MARCH 31 APRIL 1, 1995 TO
----------------- SEPTEMBER 17,
1994 1995 1995
-------- -------- ----------------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Provision for income taxes:
Currently payable................... 10 33 10
Deferred............................ 33 13 3
--- --- ---
Total provision................... 43 46 13
=== === ===
</TABLE>
F-32
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
MARCH 31,
1995
---------
(Pounds)
<S> <C>
Deferred tax liabilities:
Property, plant, and equipment basis differences............ 147
Pensions.................................................... 17
---
Total................................................... 164
Deferred tax assets........................................... 10
---
Accumulated deferred income taxes in the consolidated balance
sheet........................................................ 154
===
</TABLE>
Reconciliations of the UK statutory rate to the effective income tax rate for
the year ended March 31, 1994, March 31, 1995, and for the period from April 1,
1995 to September 17, 1995, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
MARCH 31 APRIL 1, 1995 TO
------------- SEPTEMBER 17,
1994 1995 1995
----- ----- ----------------
<S> <C> <C> <C>
UK statutory rate........................ 33% 33% 33%
Permanent differences.................... (0) (0) 2
----- -- --
Effective income tax rate................ 33% 33% 35%
===== == ==
</TABLE>
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 39,100 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.
CFDs have been entered into with UK Power Generators.
The Company is exposed to losses in the event of nonperformance by
counterparties to its CFDs. 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. PROPERTY, PLANT, AND EQUIPMENT
The Company records book depreciation expense on a straight-line basis,
except for distribution network assets which are charged at 3% for 20 years and
2% for the remaining 20 years. Assets are depreciated using the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Distribution network assets...................................... 40
Generation assets................................................ 15 to 40
Buildings........................................................ Up to 60
Fixtures and equipment........................................... 3 to 20
Vehicles and mobile plant........................................ 4 to 10
</TABLE>
F-33
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Leasehold improvements are depreciated over the shorter of their useful
lives or related lease terms.
Property, plant, and equipment consisted of the following (in millions):
<TABLE>
<CAPTION>
MARCH 31,
1995
---------
(Pounds)
<S> <C>
Generation...................................................... 2
Distribution.................................................... 804
Nonnetwork land and buildings................................... 46
Fixtures and equipment.......................................... 101
Vehicles and mobile plant....................................... 24
Consumers' contributions........................................ (147)
----
830
Accumulated depreciation........................................ (289)
----
Property, plant, and equipment, net............................. 541
====
</TABLE>
There is an arrangement in place, known as "clawback," whereby HM Government
is entitled to a share in the profits realized by the Company on certain
property disposals made up to March 2000. Full provision for such clawback
liabilities is made as soon as the sale is recognized.
10. DEBT
Long-term debt at March 31, 1995 consisted of the following (in millions):
<TABLE>
<CAPTION>
(Pounds)
--------
<S> <C>
HM Government bonds.............................................. 80
Consortium tax creditor.......................................... 10
Long term loan................................................... 5
---
Total.......................................................... 95
===
</TABLE>
On October 22, 1990, the Predecessor Company issued (Pounds)80 million
12.365% bonds to HM Government which were due for repayment at par in 2008.
Based on market rates, the HM Government bonds had a fair value of (Pounds)100
million at March 31, 1995.
Consortium tax creditor represents the benefit of losses surrendered from
consortia in which the Company has invested, which are required to be repaid
at a later date depending on when such consortia have UK taxable income.
The carrying value of the remaining debt instruments approximate fair value.
No interest is payable on debts other than the (Pounds)80 million HM
Government bonds.
11. STOCKHOLDERS' EQUITY
Under the authority of a special resolution passed at the 1994 Annual
General Meeting, the Company purchased 12.3 million of its own shares during
the year ended March 31, 1995, which were subsequently canceled. The total
consideration was (Pounds)103.1 million. The excess of cost over par value
((Pounds)96.9 million) was charged to retained earnings.
F-34
<PAGE>
SOUTH WESTERN ELECTRICITY PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
176,526 ordinary shares were issued during the year ended March 31, 1995
under South Western Electricity's Sharesave Scheme (Note 3) to employees who
had left the Company. The shares were fully paid up by the former employees at
an exercise price of (Pounds)1.75 per ordinary share. The average market price
of SWEB's shares during the year ended March 31, 1995 was (Pounds)7.14.
One special rights redeemable preference share, held by the Secretary of
State, was redeemed at par on March 30, 1995 in accordance with the Company's
Articles of Association.
The share premium account and the capital redemption reserve are not
distributable.
12. DISCONTINUED OPERATIONS
On June 5, 1995, the Company sold its electrical retailing business for
(Pounds)4.3 million plus payment for materials and supplies, which resulted in
a loss on disposal of (Pounds)8.1 million, net of income tax effect of
(Pounds)4 million. A (Pounds)7.9 million charge for write-down of electrical
retailing assets is included in income from discontinued operations. These
losses and charges were included in net income for year ended March 31, 1995.
Subsequent revenues in the period April 1, 1995 to June 5, 1995 were (Pounds)9
million and (Pounds)77 million for the year ended March 31, 1995.
In connection with the acquisition of SWEB, the Company announced its plans
to dispose of the appliance servicing business on December 13, 1995 and its
electrical installation and contracting business on January 25, 1996. The
sales were completed in February 1996 and March 1996, respectively. All of
these losses and charges were provided on acquisition at September 18, 1995.
13. SUBSEQUENT EVENTS
On September 18, 1995, Southern Investments UK plc's ("SIUK") agreed bid for
SWEB was declared wholly unconditional, and as a result, SWEB's parent Company
is SIUK. SIUK is a wholly owned subsidiary of Southern Investments UK Holdings
Limited ("Holdings"), which was itself wholly owned indirectly by The Southern
Company.
On July 1, 1996, PP&L Resources, Inc. indirectly purchased a 25% share of
Holdings for (Pounds)121.5 million ($208.0 million).
F-35
<PAGE>
SOUTHERN INVESTMENTS UK PLC
(SUCCESSOR COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
(Pounds) U.S. $
-------- ------
<S> <C> <C>
ASSETS
PROPERTY, PLANT, AND EQUIPMENT................................. 1,298 2,223
Less accumulated depreciation................................. 49 84
----- -----
Property, plant, and equipment, net....................... 1,249 2,139
----- -----
OTHER ASSETS:
Investments................................................... 18 31
Prepaid pension cost.......................................... 103 176
Goodwill, net of accumulated amortization of (Pounds)6($10)... 178 305
----- -----
Total other assets........................................ 299 512
----- -----
CURRENT ASSETS:
Cash and cash equivalents..................................... 2 3
Investments................................................... 20 35
Receivables:
Customer accounts, less provision for uncollectibles of
(Pounds)14 ($24)........................................... 110 188
Other....................................................... 16 27
----- -----
Receivables, net.......................................... 126 215
Materials and supplies........................................ 4 7
Prepaid expenses.............................................. 11 19
----- -----
Total current assets...................................... 163 279
----- -----
Total assets.............................................. 1,711 2,930
===== =====
STOCKHOLDER'S EQUITY AND LIABILITIES
STOCKHOLDER'S EQUITY:
Share capital, (Pounds)1 par value, 500,400,587 shares autho-
rized, issued, and outstanding............................... 500 856
Accumulated deficit (Note 1).................................. (134) (229)
----- -----
Total stockholder's equity............................... 366 627
----- -----
OTHER NON-CURRENT LIABILITIES:
Long-term debt................................................ 300 514
Deferred income taxes......................................... 376 644
Provision for loss contracts.................................. 68 116
Other......................................................... 64 110
----- -----
Total other non-current liabilities....................... 808 1,384
----- -----
CURRENT LIABILITIES:
Short-term borrowings......................................... 332 568
Accounts payable.............................................. 55 94
Accrued income taxes.......................................... 21 36
Unearned revenue.............................................. 15 26
Common dividend declared...................................... 25 43
Other......................................................... 89 152
----- -----
Total current liabilities................................. 537 919
----- -----
COMMITMENTS AND CONTINGENT MATTERS (Note 3)
Total stockholder's equity and liabilities................ 1,711 2,930
===== =====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-36
<PAGE>
SOUTHERN INVESTMENTS UK PLC
(SUCCESSOR COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
SUCCESSOR SUCCESSOR
PRO FORMA COMPANY COMPANY
1995(1) 1996 1996
--------- --------- ---------
(Pounds) (Pounds) U.S.$
<S> <C> <C> <C>
OPERATING REVENUES.............................................................................. 541 602 1,031
COST OF SALES................................................................................... 343 417 714
--- --- -----
GROSS MARGIN.................................................................................... 198 185 317
=== === =====
OPERATING EXPENSES:
Maintenance.................................................................................... 30 26 45
Depreciation and amortization.................................................................. 31 32 55
Selling, general, and administrative........................................................... 57 37 63
--- --- -----
Total operating expenses................................................................... 118 95 163
--- --- -----
Operating income........................................................................... 80 90 154
--- --- -----
OTHER INCOME (EXPENSE):
Interest income................................................................................ 7 1 2
Interest expense............................................................................... (55) (39) (67)
Gain on sale of investment..................................................................... 7 1 2
Other, net..................................................................................... 3 4 7
--- --- -----
Total other expense........................................................................ (38) (33) (56)
=== === =====
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES........................................... 42 57 98
PROVISION FOR INCOME TAXES...................................................................... (15) (22) (38)
--- --- -----
NET INCOME...................................................................................... 27 35 60
- --------------------------------------------------
=== === =====
</TABLE>
- --------
(1) Pro forma financial information gives effect to the acquisition of the
Predecessor Company by the Successor Company as if it had occurred on
April 1, 1995. See page F-44.
The accompanying notes are an integral part of these consolidated statements.
F-37
<PAGE>
SOUTHERN INVESTMENTS UK PLC
(SUCCESSOR COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
SUCCESSOR SUCCESSOR
COMPANY COMPANY
1996 1996
--------- ---------
(Pounds) U.S.$
<S> <C> <C>
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES............. 52 89
---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (54) (93)
Loans to related parties.................................. (2) (3)
Proceeds from property sales.............................. 6 10
Proceeds from sale of fixed asset investments............. 4 7
Disposal of current asset investments, net................ 6 10
---- ----
Net cash used in investing activities................. (40) (69)
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends..................................... (12) (20)
Proceeds of bond issues................................... 300 514
Change in short term borrowings........................... (318) (545)
---- ----
Net cash used in financing activities................. (30) (51)
---- ----
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (18) (31)
CASH AND CASH EQUIVALENTS, beginning of period.............. 20 34
---- ----
CASH AND CASH EQUIVALENTS, end of period.................... 2 3
==== ====
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest................................ (39) (67)
==== ====
Cash paid for income tax refunds...................... (9) (15)
==== ====
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-38
<PAGE>
SOUTHERN INVESTMENTS UK PLC
(SUCCESSOR COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES..................... 73 125
------ ------
CASH FLOWS FORM INVESTING ACTIVITIES:
Consideration for purchase of SWEB paid to former sharehold-
ers......................................................... (1,023) (1,752)
Proceeds from sale of fixed asset investments................ 111 190
Capital expenditures......................................... (23) (39)
------ ------
Net cash used in investing activities....................... (935) (1,601)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from advances from Parent........................... 315 539
Capital contributions received............................... 185 317
Payments of dividends........................................ (75) (128)
Proceeds of bond issues...................................... 597 1,022
Charges in short-term borrowings............................. 139 238
------ ------
Net cash provided by financing activities................... 1,161 1,988
------ ------
INCREASE IN CASH AND CASH EQUIVALENTS......................... 299 512
CASH AND CASH EQUIVALENTS, beginning of period................ 0 0
------ ------
CASH AND CASH EQUIVALENTS, end of period...................... 299 512
====== ======
Cash paid for interest....................................... (8) (14)
Cash received from income tax................................ 6 10
</TABLE>
The Predecessor Company audited consolidated statement of cash flows for the
period from April 1, 1995 to September 17, 1995 is included on page F-25.
The accompanying notes are an integral part of this consolidated statement.
F-39
<PAGE>
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited
and have been prepared by the management of Southern Investments UK plc (the
"Company") in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
usually found in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In the opinion
of the management of the Company, all adjustments (consisting of only normal
recurring adjustments) considered necessary for fair presentation of the
condensed consolidated financial statements have been included, and the
accompanying condensed consolidated financial statements present fairly the
financial position and the results of operations for the interim periods
presented. The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements included elsewhere in
this prospectus.
The Predecessor Company audited consolidated statement of cash flows for the
period from April 1, 1995 to September 17, 1995 is included on page F-25.
As shown within the Consolidated Statement of Changes in Stockholder's
Equity on page F-5, the accumulated deficit is due to the proceeds from the
sale of the Company's investment in NGH being reflected as dividends.
The financial statements as of December 31, 1996 are presented in pounds
sterling ("(Pounds)") and in U.S. dollars ("$ or U.S. $"), solely for the
convenience of the reader, at the exchange rate of (Pounds)1 = U.S. $1.7123,
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
December 31, 1996. No representation is made that the pounds sterling amounts
have been, could have been, or could be converted into U.S. dollars at that or
any other rate of exchange.
2. COMPARABILITY OF PERIODS
The condensed financial information included herein shows the results of the
Successor Company for the nine months ended December 31, 1996 and pro forma
results for the nine months ended December 31, 1995. The results for both
periods have been prepared under US GAAP.
As a result of the acquisition, the basis of accounting for the Successor
Company differs from that for the Predecessor Company. The condensed
consolidated financial statements of the Predecessor Company are presented on
a historical cost basis while the consolidated financial statements of the
Successor Company reflect the acquisition under the purchase method of
accounting. Under the purchase method of accounting, fair value was assigned
to the assets and liabilities of SWEB at the date the Company acquired
effective control of SWEB. Goodwill was created to the extent the purchase
price exceeded the difference between the fair value of SWEB's assets and the
fair value of its liabilities.
The Unaudited Condensed Consolidated Statements of Income show a pro forma
statement of income for the nine months to December 31, 1995. This pro forma
statement comprises the consolidated statement of income for the period from
inception (June 23, 1995) to December 31, 1995 of the Successor Company and
the consolidated statement of income for the Predecessor Company for the
period from April 1, 1995 to September 17, 1995, adjusted for the effects of
the acquisition as though it had taken place on April 1, 1995. See page F-44.
F-40
<PAGE>
NOTES TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the six months ended September 30, 1996, as required by APB No. 16
the Company completed its assessment of the fair values of assets and
liabilities acquired at the date of Acquisition Date. As a result, goodwill
increased from (Pounds)175 million to (Pounds)183 million. The recorded assets
and liabilities of SWEB immediately prior to the time the Company gained
effective control of SWEB were (Pounds)855 million ($1.464 billion) and
(Pounds)515 million ($882 million), respectively. As a result of applying the
purchase method of accounting, the amount of SWEB's assets recorded on the
books of the Company was increased by (Pounds)927 million ($1.587 billion) to
their fair value of (Pounds)1.782 billion ($3.051 billion), and the amount of
SWEB's liabilities recorded on the books of the Company was increased by
(Pounds)385 million ($659 million) to their fair value of (Pounds)900 million
($1.541 billion). The increase in liabilities included the establishment of
reserves totaling (Pounds)44 million ($75 million) related to staff reductions
and the disposition of ancillary businesses. The resulting difference between
the purchase price of (Pounds)1.065 billion ($1.824 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 (Pounds)183 million ($313 million).
3. 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
with Teesside involves purchases which were above market rates at the
acquisition date. Accordingly, the Company recognized a (Pounds)60 million
($103 million) accrual at the acquisition date for the cost of this contract.
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 totaled (Pounds)3
million ($5 million) for the period from September 18, 1995 to March 31, 1996.
At March 31, 1996, estimated minimum rental commitments for noncancelable
operating leases were as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
------------
(Pounds) $
<S> <C> <C>
Fiscal year:
1997...................................................... 2 3
1998...................................................... 2 3
1999...................................................... 2 3
2000...................................................... 1 2
2001...................................................... 1 2
Thereafter................................................ 10 17
--- ---
Total minimum payments.................................. 18 30
=== ===
</TABLE>
F-41
<PAGE>
Labor Subject to Collective Bargaining Agreements
Substantially all of SWEB's employees are subject to one of five 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 included the commitment to introduce a windfall tax
on excess profits of privatised utilities. Neither the total amount of
government revenue to be raised by the tax nor the allocation of the tax
between utilities has been announced. There can be no assurance that the
introduction of a windfall tax or other policies of the new government would
not adversely affect the Company.
Pension 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 enhanced pensions
on redundancies. 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 is being challenged in the courts and no payments are
required until such challenge has been heard. If the challenge is
unsuccessful, either at the first challenge or on a subsequent appeal, it will
have an adverse effect on SWEB. It is not practical to make an estimate of the
exposure at the present time.
F-42
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of income for the year ended
March 31, 1996 reflects the historical results of Southern Investments UK plc
for the period from inception (June 23, 1995) to March 31, 1996 and of South
Western Electricity plc for the period from April 1, 1995 to September 17,
1995, adjusted to show the results for the year ended March 31, 1996 as if the
purchase business combination had occurred on April 1, 1995. The unaudited pro
forma consolidated statement of income for the nine months ended December 31,
1995 reflects the historical results of Southern Investments UK plc for the
period from inception (June 23, 1995) to December 31, 1995 and of South
Western Electricity plc for the period from April 1, 1995 to September 17,
1995, adjusted for the effects of the acquisition as though it had taken place
on April 1, 1995. The pro forma adjustments relate to the allocation of fair
values of assets acquired and liabilities assumed, as well as the reversal of
certain non-recurring items.
This information is prepared for illustrative purposes only and, because of
its nature, cannot give a complete picture of the Company's results of
operations had the transactions been consummated on the date assumed and does
not project the Company's financial position or results of operations for any
future date or period. The unaudited pro forma consolidated statement of
income should be read in conjunction with the consolidated financial
statements of Southern Investments UK plc and the related notes thereto.
Unaudited amounts have been prepared based upon the consolidated financial
statements of the Company, which have been prepared in accordance with US
GAAP.
F-43
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED MARCH
31, 1996
The following unaudited pro forma statement of income is based upon the
consolidated statement of income for the period from inception (June 23, 1995)
to March 31, 1996 of the Successor Company and the 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>
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
U.S. GAAP U.S. GAAP ADJUSTMENTS U.S. GAAP
------------------------- ------------------ ----------------------- --------------
(Pounds) (Pounds) 1 2 3 4 5 (Pounds) U.S. $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................... 481 299 -- -- -- -- -- 780 1,336
Cost of sales........................ 318 186 -- -- -- -- -- 504 863
--- --- --- --- --- --- --- --- -----
Gross margin......................... 163 113 -- -- -- -- -- 276 473
--- --- --- --- --- --- --- --- -----
Operating expenses:
Maintenance........................ 21 18 -- -- -- -- -- 39 67
Depreciation and amortization...... 22 14 3 2 -- -- -- 41 70
Selling, general, and
administrative.................... 34 41 -- -- -- -- (8) 67 115
--- --- --- --- --- --- --- --- -----
Total operating expenses......... 77 73 3 2 -- -- (8) 147 252
--- --- --- --- --- --- --- --- -----
Operating income................. 86 40 (3) (2) -- -- 8 129 221
--- --- --- --- --- --- --- --- -----
Other income (expense):
Interest income.................... 7 2 -- -- -- -- -- 9 15
Interest expense................... (28) (5) -- -- (1) (32) -- (66) (113)
Gain on sale of investment......... 14 -- -- -- -- -- (14) -- --
Other, net......................... 2 1 -- -- -- -- -- 3 5
--- --- --- --- --- --- --- --- -----
Total other expense.............. (5) (2) -- -- (1) (32) (14) (54) (93)
--- --- --- --- --- --- --- --- -----
Income from continuing operations
before income taxes................. 81 38 (3) (2) (1) (32) (6) 75 128
Provision for income taxes........... 28 13 (1) (1) -- (11) (2) 26 44
--- --- --- --- --- --- --- --- -----
Income from continuing operations.... 53 25 (2) (1) (1) (21) (4) 49 84
=== === === === === === === === =====
</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 (Pounds)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 ((Pounds)2 million) on the discounted
provision in respect of Teesside, partly offset by a reduction in interest
to market rates on the HM debt ((Pounds)1 million).
(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 (Pounds)0.4 million.
(5) Remove gain on the sale of investment in NGG and costs incurred by the
Predecessor Company relating to bid defense associated with the
Acquisition.
The unaudited pro forma consolidated statement of income information above
does not give effect to the Senior Notes issued, nor to the Original Capital
Securities issued. Interest expense for the pro forma fiscal year would have
increased by (Pounds)3 million ($5 million) assuming the Senior Notes were
outstanding as of April 1, 1995. Refer to "Use of Proceeds" and
"Capitalization" on page 33 of this Prospectus for further information
regarding the impact of the Offering on the debt of the Company.
F-44
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
DECEMBER 31, 1995
The following unaudited pro forma statement of income is based upon the
consolidated statement of income for the period from inception (June 23, 1995)
to December 31, 1995 of the Successor Company and the 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>
IN MILLIONS
-------------------------------------------------------------------------------------
PRO FORMA
FOR THE
NINE MONTHS
SUCCESSOR PERIOD PREDECESSOR PERIOD ENDED
INCEPTION (JUNE 23, 1995) APRIL 1, 1995 TO DECEMBER 31,
TO DECEMBER 31, 1995 SEPTEMBER 17, 1995 1995
U.S. GAAP U.S. GAAP ADJUSTMENTS U.S. GAAP
------------------------- ------------------ ----------------------- ------------
(Pounds) (Pounds) 1 2 3 4 5 (Pounds) U.S. $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................... 242 299 -- -- -- -- -- 541 926
Cost of sales........................ 157 186 -- -- -- -- -- 343 587
--- --- --- --- --- --- --- --- ---
Gross margin......................... 85 113 -- -- -- -- -- 198 339
--- --- --- --- --- --- --- --- ---
Operating expenses:
Maintenance........................ 12 18 -- -- -- -- -- 30 51
Depreciation and amortization...... 12 14 3 2 -- -- -- 31 53
Selling, general, and
administrative.................... 24 41 -- -- -- -- (8) 57 98
--- --- --- --- --- --- --- --- ---
Total operating expenses......... 48 73 3 2 -- -- (8) 118 202
--- --- --- --- --- --- --- --- ---
Operating income................. 37 40 (3) (2) -- -- 8 80 137
--- --- --- --- --- --- --- --- ---
Other income (expense):
Interest income.................... 5 2 -- -- -- -- -- 7 12
Interest expense................... (17) (5) -- -- (1) (32) -- (55) (94)
Gain on sale of investment......... 7 -- -- -- -- -- -- 7 12
Other, net......................... 2 1 -- -- -- -- -- 3 5
--- --- --- --- --- --- --- --- ---
Total other expense.............. (3) (2) -- -- (1) (32) -- (38) (65)
--- --- --- --- --- --- --- --- ---
Income from continuing operations
before income taxes................. 34 38 (3) (2) (1) (32) 8 42 72
Provision for income taxes........... 12 13 (1) (1) -- (11) 3 15 26
--- --- --- --- --- --- --- --- ---
Income from continuing operations.... 22 25 (2) (1) (1) (21) 5 27 46
- -------------------------------------
=== === === === === === === === ===
</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 (Pounds)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 ((Pounds)2 million) on the discounted
provision in respect of Teesside, partly offset by a reduction in interest
to market rates on the HM debt ((Pounds)1 million).
(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 (Pounds)0.4 million.
(5) Remove the costs incurred by the Predecessor Company relating to bid
defense associated with the Acquisition.
F-45
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or the Trust. Neither the delivery of this Pro-
spectus nor any sale made hereunder shall under any circumstance create an im-
plication that there has been no change in the affairs of the Company or the
Trust since the date hereof. This Prospectus does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer
or solicitation.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 7
Enforcement of Civil Liabilities......................................... 8
Summary.................................................................. 9
Risk Factors............................................................. 22
Southern Investments UK Capital Trust I.................................. 27
The Company.............................................................. 30
Use of Proceeds.......................................................... 33
Capitalization........................................................... 33
Accounting Treatment..................................................... 34
Exchange Rates........................................................... 34
Selected Financial Data.................................................. 35
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 41
Business................................................................. 52
The Electric Utility Industry in Great Britain........................... 61
Management............................................................... 68
Certain Relationships and Related Transactions........................... 69
Security Ownership....................................................... 70
The Exchange Offer....................................................... 71
Description of the Exchange Capital Securities........................... 80
Description of the Exchange Guarantee.................................... 94
Description of the Exchange Subordinated Debentures...................... 96
Description of the Original Securities................................... 110
Relationship Among the Capital Securities, the Subordinated Debentures
and the Capital Securities Guarantee.................................... 110
Certain Income Tax Considerations........................................ 112
Certain ERISA Considerations............................................. 117
Plan of Distribution..................................................... 119
Validity of Exchange Capital Securities.................................. 120
Experts.................................................................. 120
Glossary................................................................. 121
Index to the Consolidated Financial Statements........................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$82,000,000
SOUTHERN
INVESTMENTS UK
CAPITAL TRUST I
8.23% Exchange Subordinated Capital Income Securities
(Liquidation Amount $1,000 per Exchange Capital Security)
Fully and Unconditionally Guaranteed,
as Described Herein, by
SOUTHERN
INVESTMENTS UK PLC
---------------
PROSPECTUS
, 1997
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under UK law there is a general rule that any provision (whether contained
in a company's articles or in any other arrangement with the company)
exempting an officer of the company from, or indemnifying him against, any
liability for negligence or other breach of duty in relation to the company is
void (this would include liability for fraud or dishonesty). As an exemption
to this rule, a company may indemnify an officer against a liability incurred
by him in defending any proceedings in which judgment is given in his favor or
in which he is acquitted. A company may also give an indemnity where, in any
proceedings against a director, the court relieves him from liability for
negligence or breach of duty where he has acted honestly and reasonably and
ought fairly to be excused from liability. An indemnity is permitted where a
director acts within his powers and is not guilty of negligence or other
breach of duty. A company is also permitted to purchase insurance against any
such liability.
Southern has an insurance policy covering the liabilities and expenses of
Southern and its direct and indirect subsidiaries which might arise in
connection with their lawful indemnification of their directors and officers
for certain of their liabilities and expenses and also covering their officers
and directors against certain other liabilities and expenses.
The Bylaws of Southern Energy provide that no present or future director or
officer of Southern Energy shall be liable for any act, omission, step, or
conduct taken or had in good faith, which is required, authorized, or approved
by any order or orders issued pursuant to the Public Utility Holding Company
Act of 1935, the Federal Power Act, or any federal or state statute or
municipal ordinance regulating Southern Energy or its parent by reason of
their being holding or investment companies, public utility companies, public
utility holding companies, or subsidiaries of public utility holding
companies. In the event that the foregoing provisions are found not to
constitute a valid defense on the grounds of not being applicable to the
particular class of plaintiff, each such director and officer is required to
be reimbursed under such Bylaws for, or indemnified against, all expenses and
liabilities incurred by him or imposed on him, in connection with, or arising
out of, any such action, suit, or proceeding based on any act, omission, step,
or conduct taken or had in good faith as in such provisions described.
The Bylaws of Southern Energy further provide that each person who is or was
a director of Southern Energy or officer or employee of Southern Energy
holding one or more positions of management through and inclusive of Project
managers and Business Development Managers (but not positions below the level
of such managers) (such positions being hereinafter referred to as "Management
Positions") and who was or is a party or was or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was serving at the request of Southern Energy
as a director, alternate director, officer, employee, agent or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, shall be indemnified by Southern Energy as a matter of
right against any and all expenses (including attorneys' fees) actually and
reasonably incurred by him and against any and all claims, judgments, fines,
penalties, liabilities and amounts paid in settlement actually incurred by him
in defense of such claim, action, suit or proceeding, including appeals, to
the full extent permitted by applicable law. Expenses (including attorneys'
fees) incurred by a director of Southern Energy or officer or employee of
Southern Energy holding one or more Management Positions with respect to the
defense of any such claim, action, suit or proceeding may be advanced by
Southern Energy prior to the final disposition of such claim, action, suit or
proceeding, as authorized by the board of directors in the specific case, upon
receipt of an undertaking by or on behalf of such person to repay such amount
unless it shall ultimately be determined that such person is entitled to be
indemnified by Southern Energy under such provisions or otherwise.
II-1
<PAGE>
The Articles of Association of the Company provide that, without prejudice
to the provisions of Regulation 118 of Table A of the Companies Acts 1985 to
1989 under UK law, the directors shall have power to purchase and maintain
insurance for or for the benefit of any persons who are or were at any time
directors, officers, or employees or auditors of the Company, or of any other
company which is its holding company or parent undertaking or in which the
Company or such holding company or parent undertaking or any of the
predecessors of the Company or of such holding company or parent undertaking
has any interest whether direct or indirect or which is in any way allied to
or associated with the Company, or of any subsidiary undertaking of the
Company or of any such other company, or who are or were at any time trustees
of any pension fund in which any employees of the Company or of any such other
company or subsidiary undertaking are interested, including (without prejudice
to the generality of the foregoing) insurance against any liability incurred
by such persons in respect of any act or omission in the actual or purported
execution and/or discharge of their duties and/or in the exercise or purported
exercise of their powers and/or otherwise in relation to their duties, powers
or offices in relation to the Company or any such other company, subsidiary
undertaking or pension fund. For the purposes of this Regulation "holding
company," "parent undertaking" and "subsidiary undertaking" shall have the
same meanings as in the Companies Acts 1985 to 1989.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
Indenture of Southern Investments UK plc relating to the
4.1 Subordinated Debentures
4.2 Form of Certificate of Subordinated Debentures (included as
Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of Southern Investments UK Capital Trust I
4.4 Amended and Restated Declaration of Trust of Southern Investments
UK Capital Trust I
4.5 Form of Capital Security Certificate for Southern Investments UK
Capital Trust I (included as Exhibit A-1 to Exhibit 4.4)
4.6 Form of Exchange Guarantee of Southern Investments UK plc relating
to the Exchange Capital Securities
4.7 Registration Rights Agreement
4.8 Capital Securities Guarantee of Southern Investments UK plc
relating to the Original Capital Securities
4.9 Common Securities Guarantee of Southern Investments UK plc
relating to the Common Securities
4.10 Deposit Agreement between Bankers Trust Company, as Book-Entry
Depositary, and Southern Investments UK plc
5.1 Opinion and consent of Shearman & Sterling to Southern Investments
UK plc as to legality of the Exchange Subordinated Debentures and
the Exchange Guarantee to be issued by Southern Investments UK
plc*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as
to legality of the Exchange Capital Securities to be issued by
Southern Investments UK Capital Trust I*
8.1 Opinion of Troutman Sanders LLP, special tax counsel, as to
certain United States federal income tax matters*
8.2 Opinion of Allen & Overy, special tax counsel, as to certain
United Kingdom income tax matters*
12.1 Statement re: Computation of ratio of earnings to fixed charges
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
16.1 Letter re: Change in Certifying Accountants
21.1 List of Subsidiaries of Southern Investments UK plc
23.1 Consent of Arthur Andersen
23.2 Consent of Ernst & Young
23.3 Consent of Arthur Andersen
23.4 Consent of Shearman & Sterling (included in Exhibit 5.1)*
23.5 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
23.6 Consent of Troutman Sanders LLP (included in Exhibit 8.1)*
23.7 Consent of Allen & Overy (included in Exhibit 8.2)*
24.1 Power of Attorney of certain officers and directors of Southern
Investments UK plc
24.2 Resolution of Southern Investments UK plc re: Power of Attorney
25.1 Form T-1 Statement of Eligibility of Bankers Trust Company
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- --------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules of the Predecessor Company and
the Successor Company are filed as part of this Registration Statement:
II-3
<PAGE>
SOUTH WESTERN ELECTRICITY PLC
(PREDECESSOR COMPANY)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR YEARS ENDED MARCH 31, 1994 AND 1995
AND FOR THE PERIOD FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AND FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO MARCH 31, 1996
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
each undersigned Registrant pursuant to the provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by each
undersigned Registrant of expenses incurred or paid by a director, officer of
controlling person of each Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, each Registrant
will, unless in the opinion of its counsel the matter has been settled by the
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired or involved therein, that was not the subject of and included
in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
SOUTHERN INVESTMENTS UK PLC, A PUBLIC LIMITED COMPANY DULY INCORPORATED AND
EXISTING UNDER THE LAWS OF ENGLAND AND WALES, HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF GEORGIA, ON THE 12TH DAY OF MAY,
1997.
Southern Investments UK plc
RICHARD J. PERSHING
By: DIRECTOR AND CHIEF EXECUTIVE
OFFICER
/s/ Wayne Boston
By: ___________________________________
WAYNE BOSTON
ATTORNEY-IN-FACT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED 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
C. 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: Roger L. Petersen
Director
Mighteager Limited
By: Stephen J. Feerrar
Director
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Wayne Boston
May 12, 1997
- -------------------------------------
WAYNE BOSTON
Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SOUTHERN
INVESTMENTS UK CAPITAL TRUST I HAS DULY CAUSED THIS REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF ATLANTA, STATE OF GEORGIA, ON THE 12TH DAY OF MAY, 1997.
Southern Investments UK Capital
Trust I
/s/ Wayne Boston
By: _________________________________
WAYNE BOSTON
REGULAR TRUSTEE
II-6
<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 registration statement and have issued
our report thereon dated July 25, 1996. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in Item 21(b) 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.
Arthur Andersen
Bristol, England
July 25, 1996
S-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
ON SCHEDULE
To: THE BOARD OF DIRECTORS
South Western Electricity plc
We have audited the consolidated financial statements of South Western
Electricity plc (Predecessor Company) as of March 31, 1995 and for the years
ended March 31, 1995 and 1994, and have issued our report thereon dated August
27, 1996. Our audit also included the financial statement schedule listed in
Item 21(b). 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.
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 registration statement and have issued
our report thereon dated August 27, 1996. Our audit was made for the purpose
of forming an opinion on those statements taken as a whole. The schedule
listed in Item 21(b) 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.
Arthur Andersen
Bristol, England
August 27, 1996
S-3
<PAGE>
SOUTH WESTERN ELECTRICITY PLC
(PREDECESSOR COMPANY)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR YEARS ENDED MARCH 31, 1994 AND 1995
AND FOR THE PERIOD FROM APRIL 1, 1995 TO SEPTEMBER 17, 1995
(IN MILLIONS (Pounds))
<TABLE>
<CAPTION>
ADDITIONS
-----------------
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE AT
BEGINNING OF AND TO OTHER END OF
PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Provision for Uncollecti-
ble Accounts:
Year Ended March 31,
1994.................. 14 6 (7) 13
=== === === ===
Year Ended March 31,
1995.................. 13 7 (8) 12
=== === === ===
Period from April 1,
1995 to
September 17, 1995.... 12 2 (3) 11
=== === === ===
</TABLE>
SOUTHERN INVESTMENTS UK PLC AND SUBSIDIARIES
(SUCCESSOR COMPANY)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AND FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO MARCH 31, 1996
(IN MILLIONS (Pounds))
<TABLE>
<CAPTION>
ADDITIONS
-----------------
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE AT
BEGINNING OF AND TO OTHER END OF
PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Provision for Uncollecti-
ble Accounts:
Period from Inception
(June 23, 1995)
to March 31, 1996...... 15(1) 3 (1) 17
=== === === ===
</TABLE>
- --------
(1) Includes an additional (Pounds)4 million of provision created resulting
from the application of purchase accounting at the acquisition.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
Indenture of Southern Investments UK plc relating to the
4.1 Subordinated Debentures
4.2 Form of Certificate of Subordinated Debentures (included as
Exhibit A to Exhibit 4.1)
4.3 Certificate of Trust of Southern Investments UK Capital Trust I
4.4 Amended and Restated Declaration of Trust of Southern
Investments UK Capital Trust I
4.5 Form of Capital Security Certificate for Southern Investments
UK Capital Trust I (included as Exhibit A-1 to Exhibit 4.4)
4.6 Form of Exchange Guarantee of Southern Investments UK plc
relating to the Exchange Capital Securities
4.7 Registration Rights Agreement
4.8 Capital Securities Guarantee of Southern Investment UK plc
relating to the Original Capital Securities
4.9 Common Securities Guarantee of Southern Investment UK plc
relating to the Common Securities
4.10 Deposit Agreement between Bankers Trust Company, as Book-Entry
Depositary, and Southern Investment UK plc
5.1 Opinion and consent of Shearman & Sterling to Southern
Investments UK plc as to legality of the Exchange Subordinated
Debentures and the Exchange Guarantee to be issued by Southern
Investments UK plc*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel,
as to legality of the Exchange Capital Securities to be issued
by Southern Investments UK Capital Trust I*
8.1 Opinion of Troutman Sanders LLP, special tax counsel, as to
certain United States federal income tax matters*
8.2 Opinion of Allen & Overy, special tax counsel, as to certain
United Kingdom income tax matters*
12.1 Statement re: Computation of ratio of earnings to fixed charges
16.1 Letter re: Change in Certifying Accountants
21.1 List of Subsidiaries of Southern Investments UK plc
23.1 Consent of Arthur Andersen
23.2 Consent of Ernst & Young
23.3 Consent of Arthur Andersen
23.4 Consent of Shearman & Sterling (included in Exhibit 5.1)*
23.5 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
23.6 Consent of Troutman Sanders LLP (included in Exhibit 8.1)*
23.7 Consent of Allen & Overy (included in Exhibit 8.2)*
24.1 Power of Attorney of certain officers and directors of Southern
Investments UK plc
24.2 Resolution of Southern Investments UK plc re: Power of Attorney
25.1 Form T-1 Statement of Eligibility of Bankers Trust Company
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- --------
* To be filed by amendment.
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 AGENT AND TRANSFER AGENT
SUBORDINATED DEBENTURE INDENTURE
DATED AS OF JANUARY 29, 1997
<PAGE>
SOUTHERN INVESTMENTS UK plc
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND
SUBORDINATED DEBENTURE INDENTURE, DATED AS OF JANUARY 29, 1997
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
(S) 310(a)(1).............................................609
(a)(2).............................................609
(a)(3)..................................Not Applicable
(a)(4)..................................Not Applicable
(b)................................................608
610
(S) 311(a)....................................................613
311(b)(4)..........................................613(a)
(b)(6)..........................................613(b)
(S) 312(a)................................................701
702(a)
(c).............................................702(b)
(S) 313(a).............................................703(a)
313(b).............................................703(b)
313(c).............................................703(c)
704
(d).............................................703(c)
(S) 314(a)..........................................704, 1007
(b).....................................Not Applicable
(c)(1).............................................102
(c)(2).............................................102
(c)(3)..................................Not Applicable
(d).....................................Not Applicable
(e)................................................102
(S) 315(a).............................................601(a)
(b)................................................602
(c).............................................601(b)
(d).............................................601(c)
(d)(1).......................................601(a)(1)
(d)(2).......................................601(c)(2)
(d)(3).......................................601(c)(3)
(e)................................................514
(S) 316(a)................................................101
(a)(1)(A)..........................................502
512
(a)(1)(B)..........................................513
(a)(2)..................................Not Applicable
(b)................................................508
(S) 317(a)(1).............................................503
(a)(2).............................................504
(b)...............................................1003
(S) 318(a)................................................107
<PAGE>
TABLE OF CONTENTS
PAGE
Parties.................................................................1
Recitals of the Company.................................................1
ARTICLE ONE.............................................................2
DEFINITIONS...........................................................2
SECTION 101. DEFINITIONS...........................................2
Act.............................................................3
Additional Amounts..............................................3
Additional Amounts..............................................3
Affiliate.......................................................3
Allocable Amounts...............................................3
Authenticating Agent............................................4
Bearer Security.................................................4
Board of Directors..............................................4
Board Resolution................................................4
Book-Entry Depositary...........................................4
Book-Entry Interest.............................................4
Business Day....................................................4
Capital Securities..............................................4
Cedel Bank......................................................5
Commission......................................................5
Common Securities...............................................5
Company.........................................................5
Company Request" or "Company Order..............................5
Corporate Trust Office..........................................5
Corporation.....................................................5
Declaration of Trust............................................5
Defaulted Interest..............................................6
Definitive Registered Securities................................6
Deposit Agreement...............................................6
Depositary......................................................6
Distributions...................................................6
Dollar or $.....................................................6
DWAC............................................................6
Euroclear.......................................................6
Event of Default................................................6
Exchange Act....................................................7
Extension Period................................................7
Global Security.................................................7
Guarantee.......................................................7
Holder..........................................................7
Indenture.......................................................7
Institutional Trustee...........................................7
Interest Payment Date...........................................7
Investment Company Act..........................................7
Investment Company Event........................................7
Issuer Trust....................................................8
Maturity........................................................8
New Subordinated Debentures.....................................8
Notice of Default...............................................8
Officers' Certificate...........................................8
Opinion of Counsel..............................................8
Outstanding.....................................................8
Paying Agent....................................................9
Person.........................................................10
Predecessor Security...........................................10
Principal Paying Agent.........................................10
Proceeding.....................................................10
Qualified Institutional Buyer or QIB...........................10
Redemption Date................................................10
Redemption Price...............................................10
Regular Record Date............................................10
Regular Trustee................................................10
Regulation S...................................................11
Regulation S Global Book-Entry Interest........................11
Relevant Date..................................................11
Resale Restriction Termination Date............................11
Responsible Officer............................................11
Restricted Global Security.....................................11
Restricted Period..............................................11
Restricted Securities Legend...................................11
Restricted Security............................................12
Rule 144A......................................................12
Securities Act.................................................12
Security.......................................................12
Security Register and Security Registrar.......................12
Senior Indebtedness............................................12
Significant Subsidiary.........................................13
Special Event..................................................13
Special Record Date............................................13
Stated Maturity................................................13
Subordinated Debentures........................................13
Subsidiary.....................................................13
Tax Event......................................................14
Transfer Agent.................................................14
Trust Indenture Act............................................14
Trust Securities...............................................15
Trustee........................................................15
U.S. Government Obligations....................................15
Vice President.................................................15
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.................15
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE...............16
SECTION 104. ACTS OF HOLDERS......................................17
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY................19
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER..............19
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT....................21
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.............21
SECTION 109. SUCCESSORS AND ASSIGNS...............................21
SECTION 110. SEPARABILITY CLAUSE..................................21
SECTION 111. BENEFITS OF INDENTURE................................22
SECTION 112. GOVERNING LAW........................................22
SECTION 113. LEGAL HOLIDAYS.......................................22
ARTICLE TWO............................................................22
SECURITY FORMS.......................................................22
SECTION 201. SECURITY FORMS GENERALLY.............................22
ARTICLE THREE..........................................................24
THE SECURITIES.......................................................24
SECTION 301. TITLE AND TERMS; DENOMINATIONS.......................24
SECTION 302. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.......25
SECTION 303. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE..26
SECTION 304. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.....28
SECTION 305. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.......29
SECTION 306. PERSONS DEEMED OWNERS................................31
SECTION 307. CANCELLATION.........................................32
SECTION 308. COMPUTATION OF INTEREST..............................32
SECTION 309. GLOBAL SECURITIES....................................32
SECTION 310. Restrictive Legend..................................36
SECTION 311. Special Transfer Provisions..........................38
SECTION 312. TEMPORARY SECURITIES.................................42
SECTION 313. DEFERRALS OF INTEREST PAYMENT DATES..................43
SECTION 314. NOTICE OF EXTENSION..................................44
SECTION 316. CUSIP NUMBERS........................................44
ARTICLE FOUR...........................................................45
SATISFACTION AND DISCHARGE...........................................45
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE..............45
SECTION 402. Application of Trust Money...........................47
SECTION 403. Satisfaction, Discharge and Defiance of Securities
of any Series........................................48
ARTICLE FIVE...........................................................49
REMEDIES 49
SECTION 501. EVENTS OF DEFAULT....................................49
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT...51
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE...........................................52
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.....................53
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES...........................................54
SECTION 506. APPLICATION OF MONEY COLLECTED.......................54
SECTION 507. LIMITATION ON SUITS..................................55
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.................................56
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES...................57
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.......................57
SECTION 511. DELAY OR OMISSION NOT WAIVER.........................57
SECTION 512. CONTROL BY HOLDERS OF SECURITIES.....................58
SECTION 513. WAIVER OF PAST DEFAULTS..............................58
SECTION 514. UNDERTAKING FOR COSTS................................58
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.....................59
ARTICLE SIX............................................................59
THE TRUSTEE..........................................................59
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES..................60
SECTION 602. NOTICE OF DEFAULTS...................................61
SECTION 603. CERTAIN RIGHTS OF TRUSTEE............................61
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES...........................................63
SECTION 605. MAY HOLD SECURITIES..................................64
SECTION 606. MONEY HELD IN TRUST..................................64
SECTION 607. COMPENSATION AND REIMBURSEMENT.......................64
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS..............65
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY..............65
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR....66
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR...............67
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.............................................68
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY....68
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT..................69
ARTICLE SEVEN..........................................................71
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY....................71
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS..............................................71
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS..............................................72
SECTION 703. REPORTS BY TRUSTEE...................................72
SECTION 704. REPORTS BY COMPANY...................................73
ARTICLE EIGHT..........................................................74
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.................74
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.74
SECTION 802. SUCCESSOR CORPORATION SUBSTITUTED....................75
ARTICLE NINE...........................................................75
SUPPLEMENTAL INDENTURES..............................................75
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS...76
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS......77
SECTION 903. GENERAL PROVISIONS REGARDING SUPPLEMENTAL INDENTURE..78
SECTION 904. EXECUTION OF SUPPLEMENTAL INDENTURES.................78
SECTION 905. EFFECT OF SUPPLEMENTAL INDENTURES....................79
SECTION 906. CONFORMITY WITH TRUST INDENTURE ACT..................79
SECTION 907. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES...79
ARTICLE TEN............................................................80
COVENANTS............................................................80
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST...................80
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.....................80
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST...81
SECTION 1004. ADDITIONAL AMOUNTS..................................82
SECTION 1005. CORPORATE EXISTENCE.................................84
SECTION 1006. LIMITATIONS ON DIVIDEND AND CERTAIN OTHER PAYMENTS..84
SECTION 1007. STATEMENT AS TO COMPLIANCE..........................85
SECTION 1008. WAIVER OF CERTAIN COVENANTS.........................85
SECTION 1009. COVENANTS REGARDING TRUST...........................86
ARTICLE ELEVEN.........................................................86
REDEMPTION OF SECURITIES.............................................86
SECTION 1101. OPTIONAL REDEMPTION; CONDITIONS TO OPTIONAL
REDEMPTION..........................................86
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE...............89
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED...90
SECTION 1104. NOTICE OF REDEMPTION................................91
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.........................91
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE...............91
SECTION 1107. SECURITIES REDEEMED IN PART.........................92
SECTION 1108. APPLICABILITY OF ARTICLE............................92
ARTICLE THIRTEEN.......................................................93
SUBORDINATION........................................................93
SECTION 1201. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.......93
SECTION 1202. PAYMENT OF PROCEEDS UPON DISSOLUTION, ETC...........93
SECTION 1203. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT......95
SECTION 1204. PAYMENT PERMITTED IF NO DEFAULT.....................96
SECTION 1205. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS........................................96
SECTION 1206. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.........96
SECTION 1207. TRUSTEE TO EFFECTUATE SUBORDINATION.................97
SECTION 1208. NO WAIVER OF SUBORDINATION PROVISIONS...............97
SECTION 1209. TRUST MONEYS NOT SUBORDINATED.......................98
SECTION 1210. NOTICE TO THE TRUSTEE...............................99
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT..................................100
SECTION 1212. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS.......................................100
SECTION 1213. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS...................100
SECTION 1214. ARTICLE APPLICABLE TO PAYING AGENTS................101
SECTION 1215. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS...........................101
ARTICLE THIRTEEN......................................................101
SECURITYHOLDERS' MEETINGS...........................................102
SECTION 1401. PURPOSES OF MEETINGS..............................102
SECTION 1302. CALL OF MEETINGS BY TRUSTEE.......................102
SECTION 1303. CALL OF MEETINGS BY COMPANY OR HOLDERS............103
SECTION 1304. QUALIFICATIONS FOR VOTING.........................103
SECTION 1305. REGULATIONS.......................................103
SECTION 1306. VOTING............................................104
ARTICLE FOURTEEN......................................................105
MISCELLANEOUS PROVISIONS............................................105
SECTION 1401. NO RECOURSE AGAINST OTHERS.........................105
SECTION 1402. SET-OFF............................................105
SECTION 1403. ASSIGNMENT; BINDING EFFECT.........................106
SECTION 1404. ADDITIONAL AMOUNTS AND ADDITIONAL SUMS.............106
ARTICLE FIFTEEN.......................................................106
MISCELLANEOUS.......................................................106
SECTION 1501. Consent to Jurisdiction; Appointment of Agent to
Accept Service of Process.........................106
SECTION 1502 Counterparts.......................................109
<PAGE>
SUBORDINATED DEBENTURE INDENTURE
THIS SUBORDINATED DEBENTURE INDENTURE is made as of January 29, 1997,
between SOUTHERN INVESTMENTS UK plc, a public limited company incorporated under
the laws of England and Wales (herein called the "Company"), having its
principal office at 800 Park Avenue, Aztec West, Almondsbury, Bristol B512 45E
England, and BANKERS TRUST COMPANY, a banking corporation duly organized and
existing under the laws of the State of New York, having its principal corporate
trust office at Four Albany Street, New York, New York 10006, as Trustee (herein
called the "Trustee") and BANKERS TRUST LUXEMBOURG S.A., as Paying and Transfer
Agent.
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its unsecured subordinated debentures (the "Subordinated
Debentures") and its new unsecured subordinated debentures (the "New
Subordinated Debentures," and together with the Subordinated Debentures, the
"Securities") to be issued in exchange for the Subordinated Debentures;
WHEREAS, Southern Investments UK Capital Trust I (the "Issuer Trust")
has offered undivided preferred beneficial interests in the assets of such
Issuer Trust (the "Capital Securities") and undivided common beneficial
interests in the assets of such Issuer Trust (the "Common Securities" and,
collectively with the Capital Securities, the "Trust Securities");
WHEREAS, to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, 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, 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 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;
(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;
(5) a reference to any Person shall include its successors and
assigns;
(6) a reference to any agreement or instrument shall mean such
agreement or instrument as supplemented, modified, amended or restated
and in effect from time to time; and
(7) a reference to any statute, law, rule or regulation shall
include any amendments thereto applicable to the relevant Person, and
any successor statute, law, rule or regulation.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder of a Security, has the
meaning specified in Section 104.
"Additional Amounts" shall have the meaning specified in Section 1004.
"Additional Sums" " means the additional amounts as may be necessary in
order that the amount of any distribution then due and payable by the Issuer
Trust on the outstanding Trust Securities shall not be reduced as a result of
any additional taxes, duties and other governmental charges to which the Issuer
Trust has become subject as a result of a Tax Event.
"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. Notwithstanding the foregoing, the Issuer Trust shall not be deemed
to be an Affiliate of the Company.
"Allocable Amounts," when used with respect to any Senior Indebtedness,
means all amounts due or to become due on such Senior Indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such Senior Indebtedness (whether as a result of the receipt of
payments by the holders of such Senior Indebtedness from the Company or any
other obligor thereon or from any holders of, or trustee in respect of, other
indebtedness that is subordinate and junior in right of payment to such Senior
Indebtedness pursuant to any provision of such indebtedness for the payment over
of amounts received on account of such indebtedness to the holders of such
Senior Indebtedness or otherwise) but for the fact that such Senior Indebtedness
is subordinate or junior in right of payment to (or subject to a requirement
that amounts received on such Senior Indebtedness be paid over to obligees on)
trade accounts payable or accrued liabilities arising in the ordinary course of
business.
"Authenticating Agent" means any Person or Persons authorized by the
Trustee to authenticate the Securities.
"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 the officers and/or directors of the Company
appointed by 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, and delivered to the Trustee.
"Book-Entry Depositary" means, with respect to the Securities 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 the
Deposit Agreement and, if so provided, to any successor to such Person.
"Book-Entry Interest" means a certificateless depositary interest to be
issued by the Book-Entry Depositary to the Issuer Trust or DTC or its successor
as depositary of the Book-Entry Interests as provided in the Deposit Agreement.
"Business Day" means a day other than (i) a Saturday or a Sunday, (ii)
a day on which banks in New York, New York or Bristol, England are authorized or
obligated by law or executive order to remain closed, or (iii) a day on which
the Trustee's Corporate Trust Office or Institutional Trustee's principal
corporate trust office is closed for business.
"Capital Securities" has the meaning specified in the recitals of this
Indenture.
"Cedel Bank" means Cedel, Bank, societe anonyme.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act 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.
"Common Securities" has the meaning specified in the recitals of this
Indenture.
"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 its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary or any other officer so authorized, and
delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee in the Borough
of Manhattan, New York City, at which at any particular time its corporate trust
business shall be principally administered, which office at the date of
execution of this Indenture is located at Four Albany Street, New York, New York
10006, Attention: Corporate Trust and Agency Group - Public Utilities Group.
"Corporation" includes corporations, partnerships, limited liability
companies, associations, companies and business trusts.
"Declaration of Trust" means the Amended and Restated Declaration of
Trust dated as of January 29, 1997 between the Company, as Sponsor, and the
Trustee, Bankers Trust Company, as Institutional Trustee, Bankers Trust
(Delaware), a Delaware corporation, as Delaware Trustee, and two individuals as
Regular Trustees.
"Defaulted Interest" has the meaning specified in Section 305.
"Definitive Registered Securities" means any Security that is payable
to a registered owner or registered assignee thereof as registered in the
Security Register.
"Deposit Agreement" means the deposit agreement dated January 29, 1997,
among the Company, the Book-Entry Depositary and the holders and beneficial
owners from time to time of interests in the Book-Entry Interests.
"Depositary" means, with respect to Securities issuable or issued as a
Global Security, the Book-Entry Depositary and, with respect to the Book-Entry
Interests the Issuer Trust and after its dissolution, The Depository Trust
Company, New York, New York, or any successor thereto registered as a clearing
agency under the Exchange Act or other applicable statute or regulation, which
in each case, shall be designated by the Company pursuant to Section 309.
"Distributions," with respect to the Trust Securities issued by the
Issuer Trust, means amounts payable in respect of such Trust Securities as
provided in the Declaration of Trust and referred to therein as "Distributions."
"Dollar" or "$" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public and
private debts.
"DWAC" means Deposit and Withdrawal at Custodian Service.
"Euroclear" 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 or any statute
successor thereto, in each case as amended from time to time.
"Extension Period" has the meaning specified in Section 313.
"Global Security" means a Security in bearer form that is executed by
the Company and authenticated and delivered by the Trustee to the Book-Entry
Depositary or pursuant to the Book-Entry Depositary's instruction.
"Guarantee" means either of the Capital Securities Guarantee Agreement
or the Common Securities Guarantee Agreement dated as of the date hereof by the
Company for the benefit of the holders from time to time of all or a portion of
the Trust Securities.
"Holder", when used with respect to any Security, means, in the case of
a Registered Security, the Person in whose name the Security is registered in
the Security Register and, in the case of a Global Security, the bearer thereof.
"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.
"Institutional Trustee" means the Person designated as such in the
Declaration of Trust.
"Interest Payment Date", when used with respect to any installment of
interest on a Security, means the date specified in such Security as the fixed
date on which an installment of interest with respect to the Securities is due
and payable.
"Investment Company Act" means the Investment Company Act of 1940 or any
successor statute thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by the Regular Trustees of
the Issuer Trust of an opinion of nationally recognized independent counsel
experienced in practice under the Investment Company Act to the effect that, as
a result of the occurrence of a change in law or regulation or a change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Issuer
Trust is or will be considered an "investment company" which is required to be
registered under the Investment Company Act, which change or prospective change
becomes effective or would become effective, as the case may be, on or after
January 23, 1997.
"Issuer Trust" has the meaning specified in the recitals of this Indenture.
"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.
"New Subordinated Debentures" has the meaning specified in the recitals of
this Indenture.
"Notice of Default" means a written notice of the kind specified in Section
501(3).
"Officers' Certificate" means a certificate signed by any Director of
the Company and by any other Director of the Company or the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary or any other
officer so authorized, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or regular counsel for the Company, and who shall be reasonably
acceptable to the Trustee.
"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 for whose payment or redemption money 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 that have been paid 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, during any period in which any
Securities are owned by any Person other than the Company or any Affiliate
thereof, whether the Holders of the requisite principal amount of Outstanding
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any Affiliate
thereof shall be disregarded and deemed not to be Outstanding. In determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities that the
Trustee knows to be so owned by the Company or an Affiliate of the Company in
the above circumstances shall be so disregarded. Securities so owned that have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
Affiliate of the Company.
"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.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every Security
evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 304 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.
"Proceeding" has the meaning specified in Section 1202.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"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", shall have the meaning specified in Section 1101 of
this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the date next preceding such Interest Payment Date.
"Regular Trustee", as provided for in the Declaration of Trust, means
the Trustee who is an employee, officer or affiliate of the Company.
"Regulation S" means Regulation S under the Securities Act and any
successor regulation thereto.
"Regulation S Global Book-Entry Interest" means any Global Book-Entry
Interests or Global Securities evidencing Book-Entry Interests that are to be
traded pursuant to Regulation S.
"Relevant Date" means, with respect to any payment made with respect to
the Securities, the later of (i) the date on which such 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.
"Resale Restriction Termination Date" shall have the meaning specified
in Section 310 of this Indenture.
"Responsible Officer" when used with respect to the Trustee, means any
Managing Director, vice president, any assistant vice president, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer in the Corporate Trust and Agency
Group 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 that officer's knowledge of and familiarity with the
particular subject.
"Restricted Global Book-Entry Interest" means any Global Book-Entry
Interest or Book-Entry Interests evidencing Global Book-Entry Interests that are
to be traded pursuant to Rule 144A.
"Restricted Period" shall have the meaning specified in Section 311 of
this Indenture.
"Restricted Securities Legend" shall have the meaning specified in
Section 310 of this Indenture.
"Restricted Security" means each Security required pursuant to Section
310 to bear a Restricted Securities Legend.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933 or any successor statute
thereto, in each case as amended from time to time.
"Security" has the meaning stated in the recitals of this Indenture and
more particularly means any Securities authenticated and delivered under this
Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 303.
"Senior Indebtedness" means, (a) the principal of and premium, if any,
and interest on all indebtedness of the Company, whether outstanding on the date
of this Indenture or thereafter created, (i) for money borrowed by the Company,
(ii) for money borrowed by, or obligations of, others and either assumed or
guaranteed, directly or indirectly, by the Company, (iii) in respect of letters
of credit and acceptances issued or made by banks, or (iv) constituting purchase
money indebtedness, or indebtedness secured by property included in the
property, plant and equipment accounts of the Company at the time of the
acquisition of such property by the Company, for the payment of which the
Company is directly liable, (b) all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any such
indebtedness, and (c) all other general unsecured obligations and liabilities of
the Company, including without limitation, trade payables. As used in the
preceding sentence the term "purchase money indebtedness" means indebtedness
evidenced by a note, debenture, bond or other instrument (whether or not secured
by any lien or other security interest) issued or assumed as all or a part of
the consideration for the acquisition of property, whether by purchase, merger,
consolidation or otherwise. Notwithstanding anything to the contrary in this
Indenture or the Securities, Senior Indebtedness shall not include (i) any
indebtedness of the Company which, by its terms or the terms of the instrument
creating or evidencing it or by the law governing it, is subordinate in right of
payment to or pari passu with the Securities, as the case may be, and, in
particular, the Securities shall rank pari passu with all other debt securities
and guarantees in respect of those debt securities, issued to any other Southern
Investments Capital Trust or (ii) any indebtedness of the Company to a
subsidiary.
"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 Event" means either an Investment Company Event or a Tax Event.
"Special Record Date" for the payment of any Defaulted Interest on the
Securities means a date fixed by the Trustee pursuant to Section 305.
"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, as such date may,
in the case of any installment of interest, be subject to the deferral of any
such date in the case of any Extension Period.
"Subordinated Debentures" has the meaning specified in the recitals of this
Indenture.
"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. For purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"Tax Event" means the receipt by the Regular Trustees of the Issuer
Trust of an opinion of nationally recognized independent tax counsel experienced
in such matters to the effect that as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States, the United Kingdom or any
political subdivision or taxing authority thereof or therein, (b) any amendment
to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (c) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position or (d)
any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is taken,
in each case on or after January 23, 1997, there is more than an insubstantial
risk that (i) the Issuer Trust is, or will be within 90 days of the date of such
opinion, subject to United States federal or United Kingdom income tax with
respect to income accrued or received on the Securities, (ii) the Issuer Trust
is, or will be within 90 days of the date of such opinion, subject to more than
a de minimis amount of other taxes, duties or other governmental charges or
(iii) interest payable by the Company to the Issuer Trust on the Securities is
not, or within 90 days of the date of such opinion will not be, deductible by
the Company for United States earnings and profits purposes or United Kingdom
income tax purposes.
"Transfer Agent" means any Person authorized by the Company to
effectuate the exchange or transfer of any Security on behalf of the Company
hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and any reference herein to the Trust Indenture Act or a particular
provision thereof shall mean such Trust Indenture Act or provision, as the case
may be, as amended or replaced from time to time.
"Trust Securities" has the meaning specified in the recitals of this
Indenture.
"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 such successor Trustee.
"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.
"Vice President", when used with respect to the Trustee, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president."
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
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
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) 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;
(iii) 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
(iv) 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 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 an agent or
agents duly appointed in writing. 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.
Without limiting the generality of the foregoing, 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 or writing 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 or writing acknowledged to him the execution thereof. Where such
execution is by a signer in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The principal or face amount and serial numbers of Bearer
Securities 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.
(d) If Securities are issued in registered form the principal amount
and serial numbers of such Securities held by any Person, and the date of
holding the same, shall be proved by the Security Register.
(e) Any request, demand, authorization, direction, notice, consent,
election, 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.
(f) The fact and date of execution of any such instrument or writing
and the authority of the Person executing the same may also be proved in any
other manner which the Trustee deems sufficient; and the Trustee may in any
instance require further proof with respect to any of the matters referred to in
this Section.
(g) The Company may, in the circumstances permitted by the Trust
Indenture Act, at its option, by Board Resolution, fix in advance a record date
for the determination of Holders of Securities entitled to take such 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 Act may
be sought or given before or after the record date, but only the Holders 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 Outstanding have authorized or agreed or
consented to such Act, and for that purpose the Securities Outstanding shall be
computed as of such record date.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent,
election, 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 of a Security 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 Indenture (to the
attention of its Chief Financial and Accounting Officer) or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; 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 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, 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.
Prior to the effectiveness of a registration statement under the
Securities Act relating to the New Subordinated Debentures, this Indenture shall
incorporate and be governed by the provisions of the TIA. Upon effectiveness of
a registration statement under the Securities Act relating to the New
Subordinated Debentures, this Indenture shall be subject to the provisions of
the TIA that are required to be a part of this Indenture and shall, to the
extent applicable, be governed by such provisions. If any provision hereof
limits, qualifies or conflicts with a provision of the Trust Indenture Act that
is required to be a part of and govern this Indenture, such required provision
shall control.
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 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 the Securities, express or implied, shall
give to any Person, other than the parties hereto, their successors hereunder
and the Holders of Securities and, to the extent provided in Section 1503, the
holders of Senior Indebtedness or Capital Securities, 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 INTERNAL 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, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and without any interest or other payment
in respect of such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such Interest Payment Date or Redemption Date, or at the Stated Maturity.
ARTICLE TWO
SECURITY FORMS
SECTION 201. SECURITY FORMS GENERALLY.
The Securities in bearer form shall be in the form attached hereto as
Exhibit A.
The Securities in definitive form shall be in the form attached hereto
as Exhibit B; provided that the New Subordinated Debentures will not contain any
of the provisions with respect to transfer restrictions under the Securities Act
following the Trustee's authentication.
If the Securities are distributed to the holders of Capital Securities
and Common Securities, the record holder (including the Depositary) of any
Capital Securities or Common Securities shall be issued Securities in the same
form (i.e., Book-Entry Interests or Definitive Registered Securities) as the
securities held by the Issuer Trust at the time of distribution with the legends
in substantially the form of the legends existing on the security representing
the Capital Securities or Common Securities to be exchanged (in all cases, with
such changes thereto as the officers or Directors executing such Securities
determine to be necessary or appropriate, as evidenced by their execution of the
Securities) and such other legends as may be required by Section 310 or Section
311 hereof), duly executed by the Company and authenticated by the Trustee or
the authenticating agent as provided herein, which Securities, if to be held in
global form by any Depositary, may be deposited on behalf of the holders of the
Securities represented thereby with the Trustee, as custodian for the
Depositary.
Any Global Security shall represent such of the outstanding Securities
as shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Securities from time to time endorsed thereon
and that the aggregate amount of outstanding Securities represented thereby may
from time to time be increased or reduced to reflect transfers or exchanges
permitted hereby. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee in such manner and upon instructions given
by the holder of such Securities in accordance with this Indenture. Payment of
principal of and interest and premium, if any, on any Global Security shall be
made to the holder of such Global Security.
The Securities shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such notations, legends or endorsements placed thereon as may be required to
comply with any law, stock exchange rule, agreements to which the Company is
subject or usage.
The Securities shall be printed, lithographed or engraved or produced
by any combination of there or other methods, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
ARTICLE THREE
THE SECURITIES
SECTION 301. TITLE AND TERMS; DENOMINATIONS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to (i) the aggregate liquidation
amount of the Capital Securities issued by the Issuer Trust and (ii) the
proceeds received by the Issuer Trust upon issuance of the Common Securities to
the Company, except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities pursuant to
the exchange of the New Subordinated Debentures for Subordinated Debentures
pursuant to Section 303, 304, 312, 907 or 1107.
The Securities' Stated Maturity shall be February 1, 2027.
The Securities shall bear interest at a rate of 8.23% per annum, from
January 29, 1997 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, as the case may be, payable semi-annually
(subject to deferral as set forth in Section 313 hereof), in arrears, on
February 1 and August 1 of each year, commencing August 1, 1997, until the
principal thereof is paid or made available for payment. Interest will compound
semi-annually and will accrue at the rate of 8.23% per annum on any interest
installment in arrears for more than one semi-annual period or during an
extension of an interest payment period as set forth below in Section 313. In
the event that any date on which interest is payable on the Securities is not a
Business Day, then a payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay) except that if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
Payments of principal, premium and interest on Securities will be
payable, the transfer of the Definitive Registered Securities will be
registrable, and Definitive Registered Securities will be exchangeable for
Securities of other denominations of a like aggregate principal amount, at the
corporate trust office of the Trustee in The City of New York; provided that
payments of interest on Definitive Registered Securities may be made at the
option of the Company by check mailed to the address of the Persons entitled
thereto and that the payment of principal with respect to any Security will be
made only upon surrender of such Security to the Trustee. So long as the
Securities are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, the Company will maintain a paying and transfer agent in
Luxembourg, which will initially be Bankers Trust Luxembourg S.A. Payments of
principal of, premium and interest on and the transfer of the Securities in
Luxembourg will be through the Luxembourg paying and transfer agent.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Thirteen.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be issuable in bearer form or registered form,
without coupons, and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 302. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by any of its
Directors, attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these Directors or officers on the Securities may be manual
or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at the time relevant to the authorization thereof the proper Directors
or officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities 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 as in
this Indenture provided and not otherwise.
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 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.
SECTION 303. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the office of the Security
Registrar designated pursuant to this Section 303 or Section 1002 a register
(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 Securities and of transfers of Registered Securities. The Trustee is hereby
initially appointed as Security Registrar for the purpose of registering
Registered Securities and transfers of Registered Securities as herein provided.
Upon surrender for registration of transfer of any Registered Security
at the office or agency maintained for such purpose, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Registered Securities of any
authorized denominations and of like tenor and aggregate principal amount.
Securities other than a Global Security may be exchanged, at the option
of the Holder, for Securities of any authorized denominations and of like tenor
and aggregate principal amount, upon surrender of the Securities to be exchanged
at any such office or agency.
Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
that the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every 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.
No service charge shall be made 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 Section 312, 907 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, to register the
transfer of or to exchange Securities during a period of 15 days immediately
preceding the date notice is given identifying the serial numbers of the
Securities called for redemption, or (ii) to issue, to register the transfer of
or to exchange any Securities so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 304. 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 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 request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Security
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, 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 issued pursuant to this Section 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 any such new
Security shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 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 305. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest (including Additional Amounts and Additional Sums) on any
Security that 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 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 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).
During such time as the Issuer Trust is the holder of any Securities,
the Company shall pay any Additional Amounts and Additional Sums.
Any interest (including Additional Sums) on any Security that 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 (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 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. 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 at the address of such Holder 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 registered
Securities (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
(including Additional Amounts and Additional Sums, if any) on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
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, 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
(including Additional Amounts and Additional Sums, if any) and unpaid, and to
accrue (including Additional Amounts and Additional Sums, if any), which were
carried by such other Security.
SECTION 306. PERSONS DEEMED OWNERS.
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.
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 305) interest
(including Additional Sums, 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 or monies
payable on any such Registered Security.
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 307. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by the Trustee. 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
canceled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of in accordance with a Company Order and the Trustee
shall promptly deliver a certificate of disposition to the Company.
SECTION 308. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
SECTION 309. GLOBAL SECURITIES.
If the Securities are distributed to the holders of Trust Securities,
Book-Entry Interests distributed in respect of Trust Securities that are held in
global form by a Depositary will initially be issued as a Global Book-Entry
Interest, unless such transfer cannot be effected through book-entry settlement.
If the Company shall establish that the Book-Entry Interests are to be issued in
the form of one or more Global Book-Entry Interests, then the Company shall
execute and the Trustee shall, in accordance with Section 302 and the Company
Order, authenticate and deliver one or more Global Securities that (i) shall
represent and shall be denominated in an amount equal to the aggregate principal
amount of all of the Securities to be issued in the form of Global Securities
and not yet canceled, (ii) shall be in bearer form, and (iii) shall be delivered
by the Trustee to the Depositary or pursuant to the Depositary's instructions.
Global Securities 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 is registered in the name of a Depositary or a
nominee of a Depositary. Notwithstanding the provisions of Section 303, unless
and until it is exchanged in whole or in part for Securities in definitive
registered form, a Global Security representing all or a part of the Securities
may not be transferred in the manner provided in Section 303 except as a whole
by the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Every Security delivered in exchange for, or in lieu of,
this Global Security shall be a Global Security subject to the foregoing, except
in the limited circumstances described above. Unless this certificate is
presented by an authorized representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Company or its agent for exchange or payment,
and any certificate issued is Cede & Co. or such other Person as is requested by
an authorized representative of DTC (and any payment is to be made to Cede & Co.
or to such other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the bearer hereof, Cede & Co., has an interest
herein."
Definitive Securities issued in exchange for all or a part of a Global
Security pursuant to this Section 309 shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the Trustee.
Upon execution and authentication, the Trustee shall deliver such definitive
Securities to the persons in whose names such definitive Securities are so
registered.
At such time as all interests in Global Securities have been redeemed,
repurchased or canceled, such Global Securities shall be, upon receipt thereof,
canceled by the Trustee in accordance with standing procedures and instructions
existing between the Depositary and the Trustee. At any time prior to such
cancellation, if any interest in Global Securities is exchanged for definitive
Securities, redeemed, canceled or transferred to a transferee who receives
definitive Securities therefor or any definitive Security is exchanged or
transferred for part of Global Securities, the principal amount of such Global
Securities shall, in accordance with the standing procedures and instructions
existing between the Depositary and the Trustee, be reduced or increased, as the
case may be, and an endorsement shall be made on such Global Securities by the
Trustee to reflect such reduction or increase.
The Company and the Trustee may for all purposes, including the making
of payments due on the Securities, deal with the Depositary as the authorized
representative of the Holders for the purposes of exercising the rights of
Holders hereunder. The rights of the owner of any beneficial interest in a
Global Book-Entry Interest shall be limited to those established by law and
agreements between such owners and depository participants or Euroclear and
Cedel Bank; provided, that no such agreement shall give any rights to any person
against the Company or the Trustee without the written consent of the parties so
affected. Multiple requests and directions from and votes of the Depositary as
holder of Securities in global form with respect to any particular matter shall
not be deemed inconsistent to the extent they do not represent an amount of
Securities in excess of those held in the name of the Depositary or its nominee.
If at any time the Depositary for any Securities represented by one or
more Global Securities notifies the Company that it is unwilling or unable to
continue as Depositary for such Securities or if at any time the Depositary for
such Securities shall no longer be eligible under this Section 309, the Company
shall appoint a successor Depositary with respect to such Securities. If a
successor Depositary for such Securities is not appointed by the Company within
90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company's election that such Securities be represented by one
or more Global Securities shall no longer be effective and the Company shall
execute, and the Trustee, upon receipt of a Company Order for the authentication
and delivery of definitive Securities, will authenticate and deliver Securities
in definitive registered form, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Securities in exchange for such Global Security or
Securities.
The Company may at any time and in its sole discretion determine that
the Securities issued in the form of one or more Global Securities shall no
longer be represented by a Global Security or Securities. In such event the
Company shall execute, and the Trustee upon receipt of a Company Order or an
Officers' Certificate for the authentication and delivery of definitive
Securities, shall authenticate and deliver, Securities in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 310(a)), Global Securities may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Interests of beneficial owners in a Global Security may be transferred
or exchanged for definitive Securities and definitive Securities may be
transferred or exchange for Global Securities in accordance with rules of the
Depositary and the provisions of Section 311.
Any Security in global form may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Indenture as may be required by the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Securities to
be tradeable on the PORTAL Market or as may be required for the Securities to be
tradeable on any other market developed for trading of securities pursuant to
Rule 144A or required to comply with any applicable law or any regulation
thereunder or with Regulation S or with the rules and regulations of any
securities exchange upon which the Securities may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Securities are subject.
SECTION 310. Restrictive Legend.
(a) Each Global Security and definitive Security that constitutes a
restricted Security shall bear the following legend (the "Restricted Securities
Legend") on the face thereof until three years after the later of the date of
original issue and the last date on which the Company or any Affiliate of the
Company was the owner of such Security (or any predecessor thereto) (the "Resale
Restriction Termination Date"), unless otherwise agreed by the Company and the
Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH SOUTHERN INVESTMENTS UK PLC
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, OR (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS SUBORDINATED DEBENTURE
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSES (D),(E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
Any Security (or security issued in exchange or substitution therefor)
as to which such restrictions on transfer shall have expired in accordance with
their terms may, upon satisfaction of the requirements of Section 310(b) and
surrender of such Security for exchange to the Security Registrar in accordance
with the provisions of this Section 310, be exchanged for a new Security or
Securities, of like tenor and aggregate principal amount, which shall not bear
the restrictive legend required by this Section 310(a).
(b) Upon any sale or transfer of any Restricted Security (including any
interest in a Global Security) (i) that is effected pursuant to an effective
registration statement under the Securities Act or (ii) in connection with which
the Trustee receives certificates and other information (including an opinion of
counsel, if requested) reasonably acceptable to the Company and the Trustee to
the effect that such security will no longer be subject to the resale
restrictions under federal and state securities laws, then (A) in the case of a
Restricted Security in definitive form, the Security Registrar shall permit the
holder thereof to exchange such Restricted Security for a security that does not
bear the legend set forth in Section 310(a), and shall rescind any such
restrictions on transfer and (B) in the case of Restricted Securities
represented by a Global Security, such Security shall no longer be subject to
the restrictions contained in the legend set forth in Section 310(a) (but still
subject to the other provisions hereof). In addition, any Security (or security
issued in exchange or substitution therefor) as to which the restrictions on
transfer described in the legend set forth in Section 310(a) have expired by
their terms may, upon surrender thereof (in accordance with the terms of this
Indenture) together with such certifications and other information (including an
opinion of counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Company, addressed to
the Company and the Trustee and in a form acceptable to the Company, to the
effect that the transfer of such Restricted Security has been made in compliance
with Rule 144 or such successor provision) acceptable to the Company and the
Trustee as either of them may reasonably require, be exchanged for a new
Security or Securities of like tenor and aggregate principal amount, which shall
not bear the restrictive legends set forth in Section 310(a).
SECTION 311. Special Transfer Provisions.
Any transfer of a beneficial interest in a Security in global form
which cannot be effected through book-entry settlement must be effected by the
delivery to the transferee (or its nominee) of a definitive Security or
Securities registered in the name of the transferee (or its nominee) on the
books maintained by the Trustee. With respect to any such transfer, the Trustee
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Trustee, the aggregate principal amount of the
Security in global form to be reduced and, following such reduction, the Company
will execute and the Trustee will authenticate and deliver to the transferee (or
such transferee's nominee, as the case may be) a Security or Securities in the
appropriate aggregate principal amount in the name of such transferee (or its
nominee) and bearing such restrictive legends as may be required by this
Indenture. In connection with any such transfer, the Trustee may request such
representations and agreements relating to the restrictions on transfer of such
Security or Securities from such transferee (or such transferee's nominee) as
the Trustee may reasonably require.
So long as the Securities are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a definitive Security to
a QIB in accordance with Rule 144A, unless otherwise requested by the
transferor, and upon receipt of the definitive Security or Securities being so
transferred, together with a certification from the transferor that the
transferor reasonably believes the transferee is a QIB (or other evidence
satisfactory to the Trustee), the Trustee shall make an endorsement on the
Restricted Global Book-Entry Interest to reflect an increase in the aggregate
principal amount of the Securities represented by the Restricted Global
Book-Entry Interest, the Trustee shall cancel such definitive Security or
Securities and cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Trustee, the aggregate
principal amount of Securities represented by the Restricted Global Book-Entry
Interest to be increased accordingly.
So long as the Securities are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a definitive Security in
accordance with Regulation S, if requested by the transferor, and upon receipt
of the definitive Security or Securities being so transferred, together with a
certification from the transferor that the transfer was made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 under the Securities Act (or other
evidence satisfactory to the Trustee), the Trustee shall make an endorsement on
the Regulation S Global Book-Entry Interest to reflect an increase in the
aggregate principal amount of the Securities represented by the Regulation S
Global Book-Entry Interest, the Trustee shall cancel such definitive Security or
Securities and cause the aggregate principal amount of Securities represented by
the Regulation S Global Book-Entry Interest to be increased accordingly.
If a holder of a beneficial interest in the Restricted Global
Book-Entry Interest wishes at any time to exchange its interest in the
Restricted Global Book-Entry Interest for an interest in the Regulation S Global
Book-Entry Interest, or to transfer its interest in the Restricted Global
Book-Entry Interest to a person who wishes to take delivery thereof in the form
of an interest in the Regulation S Global Book-Entry Interest, such holder may,
subject to the rules and procedures of the Depositary and to the requirements
set forth in the following sentence, exchange or cause the exchange or transfer
or cause the transfer of such interest for an equivalent beneficial interest in
the Regulation S Global Book-Entry Interest. Upon receipt by the Trustee, as
transfer agent, of (1) instructions given in accordance with the Depositary's
procedures from or on behalf of a holder of a beneficial interest in the
Restricted Global Book-Entry Interest, directing the Trustee (via DWAC), as
transfer agent, to credit or cause to be credited a beneficial interest in the
Regulation S Global Book-Entry Interest in an amount equal to the beneficial
interest in the Restricted Global Book-Entry Interest to be exchanged or
transferred, (2) a written order given in accordance with the Depositary's
procedures containing information regarding the Euroclear or Cedel Bank account
to be credited with such increase and the name of such account, and (3) a
certificate given by the holder of such beneficial interest stating that the
exchange or transfer of such interest has been made pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S or Rule 144 under the
Securities Act (or other evidence satisfactory to the Trustee), the Trustee, as
transfer agent, shall promptly deliver appropriate instructions to the
Depositary (via DWAC), its nominee, or the custodian for the Depositary, as the
case may be, to reduce or reflect on its records a reduction of the Restricted
Global Book-Entry Interest by the aggregate principal amount of the beneficial
interest in such Restricted Global Book-Entry Interest to be so exchanged or
transferred from the relevant participant, and the Trustee, as transfer agent,
shall promptly deliver appropriate instructions (via DWAC) to the Depositary,
its nominee, or the custodian for the Depositary, as the case may be,
concurrently with such reduction, to increase or reflect on its records an
increase of the principal amount of such Regulation S Global Book-Entry Interest
by the aggregate principal amount of the beneficial interest in such Restricted
Global Book-Entry Interest to be so exchanged or transferred, and to credit or
cause to be credited to the account of the person specified in such instructions
(who may be Morgan Guaranty Trust Company of New York, Brussels office, as
operator of Euroclear or Cedel Bank or another agent member of Euroclear or
Cedel Bank, or both, as the case may be, acting for and on behalf of them) a
beneficial interest in such Regulation S Global Book-Entry Interest equal to the
reduction in the principal amount of such Restricted Global Book-Entry Interest.
If a holder of a beneficial interest in the Regulation S Global
Book-Entry Interest wishes at any time to exchange its interest in the
Regulation S Global Book-Entry Interest for an interest in the Restricted Global
Book-Entry Interest, or to transfer its interest in the Regulation S Global
Book-Entry Interest to a person who wishes to take delivery thereof in the form
of an interest in the Restricted Global Book-Entry Interest, such holder may,
subject to the rules and procedures of Euroclear or Cedel Bank and the
Depositary, as the case may be, and to the requirements set forth in the
following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent beneficial interest in such
Restricted Global Book-Entry Interest. Upon receipt by the Trustee, as transfer
agent of (1) instructions given in accordance with the procedures of Euroclear
or Cedel Bank and the Depositary, as the case may be, from or on behalf of a
beneficial owner of an interest in the Regulation S Global Book-Entry Interest
directing the Trustee, as transfer agent, to credit or cause to be credited a
beneficial interest in the Restricted Global Book-Entry Interest in an amount
equal to the beneficial interest in the Regulation S Global Book-Entry Interest
to be exchanged or transferred, (2) a written order given in accordance with the
procedures of Euroclear or Cedel Bank and the Depositary, as the case may be,
containing information regarding the account with the Depositary to be credited
with such increase and the name of such account, and (3) prior to the expiration
of the Restricted Period, a certificate given by the holder of such beneficial
interest and stating that the person transferring such interest in such
Regulation S Global Book-Entry Interest reasonably believes that the person
acquiring such interest in the Restricted Global Book-Entry Interest is a QIB
and is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable securities laws of any state of the
United States or any other jurisdiction (or other evidence satisfactory to the
Trustee), the Trustee, as transfer agent, shall promptly deliver (via DWAC)
appropriate instructions to the Depositary, its nominee, or the custodian for
the Depositary, as the case may be, to reduce or reflect on its records a
reduction of the Regulation S Global Book-Entry Interest by the aggregate
principal amount of the beneficial interest in such Regulation S Global
Book-Entry Interest to be exchanged or transferred, and the Trustee, as transfer
agent, shall promptly deliver (via DWAC) appropriate instructions to the
Depositary, its nominee, or the custodian for the Depositary, as the case may
be, concurrently with such reduction, to increase or reflect on its records an
increase of the principal amount of the Restricted Global Book-Entry Interest by
the aggregate principal amount of the beneficial interest in the Regulation S
Global Book-Entry Interest to be so exchanged or transferred, and to credit or
cause to be credited to the account of the person specified in such instructions
a beneficial interest in the Restricted Global Book-Entry Interest equal to the
reduction in the principal amount of the Regulation S Global Book-Entry
Interest. After the expiration of the Restricted Period (as defined below), the
certification requirement set forth in clause (3) of the second sentence of the
above paragraph will no longer apply to such exchanges and transfers.
Any beneficial interest in one of the Global Book-Entry Interests that
is transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.
Prior to or on the 40th day after the later of the commencement of the
offering of the Capital Securities and the Closing Date (the "Restricted
Period"), beneficial interests in a Regulation S Global Book-Entry Interest may
only be held through Morgan Guaranty Trust Company of New York, Brussels Office,
as operator of Euroclear or Cedel Bank or another agent member of Euroclear and
Cedel Bank acting for and on behalf of them, unless delivery is made through the
Restricted Global Book-Entry Interest in accordance with the certification
requirements hereof. During the Restricted Period, interests in the Regulation S
Global Book-Entry Interest, if any, may be exchanged for interests in the
Restricted Global Book-Entry Interest or for definitive Securities only in
accordance with the certification requirements described above.
SECTION 312. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee 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 and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 313. DEFERRALS OF INTEREST PAYMENT DATES.
So long as the Company shall not be in default in the payment of
interest on the Securities, the Company shall have the right, at any time and
from time to time during the term of the Securities, to defer the payment of
interest by extending the interest payment period of such Securities for a
period not exceeding 10 consecutive semi-annual periods, including the first
such semi-annual period during such extension period (each, an "Extension
Period"), during which Extension Periods no interest shall be due and payable;
provided that no Extension Period may extend beyond the Maturity. No Extension
Period shall end on a date other than an Interest Payment Date. At the end of
any such Extension Period the Company shall pay all interest then accrued and
unpaid on the Securities (together with Additional Sums thereon, if any, at the
rate specified for the Securities to the extent permitted by applicable law);
provided that during any such Extension Period, the Company (i) shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock except for dividends, payments or distributions payable in shares
of its capital stock, reclassifications of its capital stock and conversions or
exchanges of capital stock of one class or series into capital stock of another
class or series and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purpose of an employee incentive plan
or benefit plan or other similar arrangement of the Company or any of its
subsidiaries, (ii) shall not make any payment of interest, principal of or
premium, if any, on, or repay, repurchase or redeem any debt securities issued
by the Company that rank pari passu with or junior to the Securities (except by
conversion into or exchange for shares of its capital stock), and (iii) shall
not make any guarantee payments with respect to the foregoing. Prior to the
termination of any such Extension Period, the Company may further defer the
payment of interest, provided that no Extension Period shall exceed the period
or periods specified in such Securities, extend beyond the Stated Maturity of
the principal of such Securities or end on a date other than an Interest Payment
Date. Upon the termination of any such Extension Period and upon the payment of
all accrued and unpaid interest (including interest on such interest) and any
Additional Sums then due on any Interest Payment Date, the Company may elect to
begin a new Extension Period, subject to the above conditions. The Company may
also pay on any Interest Payment Date all or any portion of the interest accrued
during an Extension Period. No interest or Additional Amounts and Additional
Sums shall be due and payable during an Extension Period, except at the end
thereof, but each installment of interest that would otherwise have been due and
payable during such Extension Period shall bear Additional Amounts and
Additional Sums as and to the extent as may be specified as contemplated by
Sections 305 and 1104.
SECTION 314. NOTICE OF EXTENSION.
(a) If the Issuer Trust is the only registered holder of the Securities
at the time the Company selects an Extension Period, the Company shall give
written notice to the Issuer Trust and the Trustee of its selection of such
Extension Period at least one (1) Business Day before the earlier of (i) the
next succeeding date on which distributions on the Trust Securities issued by
the Issuer Trust are payable or (ii) the date the Company is required to give
notice to the holders of the Capital Securities issued by the Issuer Trust of
the record date or the date such distribution is payable.
(b) If the Institutional Trustee is not the only holder of the
Securities at the time the Company selects an Extension Period, the Company
shall give the holders of the Securities and the Trustee written notice of its
selection of such Extension Period at least 10 Business Days before the earlier
of (i) the next succeeding Interest Payment Date, or (ii) the date the Company
is required to give notice to holder of the Securities of the record or payment
date of such interest payment.
SECTION 315. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption and other similar or related materials as a convenience to
Holders; provided that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other materials
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.
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 Amounts as provided in Section 1004 or Additional Sums
as provided for in Section 305), 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 304
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 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, money in an amount 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 made available
for payment (in the case of Securities which have become due and
payable) or to the Stated Maturity, 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,
U.S. Government Obligations 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 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,
premium 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 or Additional Sums 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 Defeasance of Securities of any Series
The Company, at its option, (a) will be discharged from any
and all obligations in respect of the Securities (except in each case for the
obligations to register the transfer or exchange of the Securities, replace
stolen, lost or mutilated Securities, maintain paying agencies and hold moneys
for payment in trust); or (b)will be released from its obligations with respect
to the Securities (except for the obligations set forth in the preceding clause
(a) and except for the obligations to pay the principal of, premium, if any, and
any interest on the Securities, to compensate and indemnify the Trustee and
appoint a successor Trustee, 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, 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
sufficient to pay and discharge the principal and interest on the
outstanding Securities on the dates such payments are due in accordance
with the terms of the Securities (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 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. 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 to and including a Redemption Date on which all
of the outstanding Securities 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 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, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body or occasioned by the operation of
Article Thirteen):
(1) default in the payment of any interest upon the Securities
when it becomes due and payable, and continuance of such default for a
period of thirty (30) days (subject to the deferral of any due date in
the case of an Extension Period); provided, however, that no such
default shall be deemed to exist if, on or prior to the date on which
such interest became due, the Company shall have made a payment
sufficient to pay such interest pursuant to the Guarantee, and shall
have delivered a notice to the Trustee to that effect; or
(2) default in the payment of the principal of, (or premium,
if any) on the Securities at Maturity; provided, however, that no such
default in the payment of principal (or premium, if any) shall be
deemed to exist if, on or prior to the date such principal (and
premium, if any) became due, the Company shall have made a payment
sufficient to pay such principal (and premium, if any) pursuant to the
Guarantee, and shall have delivered a notice to the Trustee to that
effect; or
(3) material default in the performance or material breach of
any covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of
such material default or material breach for a period of 90 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 principal amount of the Outstanding Securities, 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
(4) if this event shall be made to constitute an Event of
Default with respect to the Securities, 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
(5) 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 (5);
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal amount of the Securities 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 a declaration of acceleration has been made, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, if all Events of Default,
other than the non-payment of the principal of Securities which has become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 513.
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.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if an Event of Default occurs under Section
501(1), (2), (3) or (4) with respect to any Securities the Company will, upon
demand of the Trustee, pay to it, for the benefit of the Holders of such
Securities, the whole amount then due and payable on such Securities for
principal (and premium, if any) and interest (including Additional Sums, 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 on any overdue
interest (including Additional Sums, if any), at the rate or rates prescribed
therefor in such Securities, 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, and any other amounts due to the Trustee under Section
607.
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 an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, 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,
(1) 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
any other amounts due to the Trustee under Section 607) and of the
Holders of Securities allowed in such judicial proceeding, and
(2) 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 of Securities 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 of Securities, 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 of a Security
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 of a Security 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, 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; and
Second: Subject to Article Thirteen, to the payment of the
amounts then due and unpaid for principal of (and premium, if
any) and interest (including Additional Additional Sums, if any)
on the Securities in respect of which or for the benefit of which
such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on
such Securities for principal (and premium, if any) and interest
(including Additional Sums, if any), respectively; and
Third: The balance, if any, to the Person or Persons
entitled thereto.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security 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 (except
actions for payment of overdue principal or interest, provided that a
declaration of a valid Extension Period by the Company shall not constitute a
failure to pay interest for this purpose), unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities 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
reasonable indemnity 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;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatsoever 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 of such Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST.
Notwithstanding any other provision in this Indenture but subject to
Article Thirteen and Section 507, the Holder of any Securities shall have the
right, which is absolute and unconditional, to receive payment of the principal
of (and premium, if any) and (subject to Section 305) interest (including any
Additional Sums) on such Security on the due dates 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. If an Event of Default constituting a
failure to pay interest or principal on the Securities on the date such interest
or principal is otherwise payable has occurred and is continuing, then a
registered holder of Capital Securities may institute a legal proceeding
directly against the Company, without first instituting a legal proceeding
directly against or requesting or directing that action be taken by the
Institutional Trustee of the Issuer Trust or any other Person, for enforcement
of payment to such registered holder of principal of or interest on Securities
having a principal amount equal to the aggregate stated liquidation amount of
the Capital Securities of such registered holder on or after the due dates
therefor specified or provided for in the Securities.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder of a Security 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 of Securities shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of 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 304, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders of Securities 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 Security to
exercise any right or remedy 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 of Securities may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders of
Securities.
SECTION 512. CONTROL BY HOLDERS OF SECURITIES.
The Holders of not less than a majority in principal amount of the
Outstanding Securities 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, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and could not involve the Trustee in
personal liability in circumstances where reasonable indemnity would
not be adequate, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may, on behalf of the Holders of all the Securities,
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any)
or interest (including Additional Sums) on any Security, 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 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,
suffered 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; but the
provisions of this Section shall not apply to any suit instituted by the
Company, 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, or to any suit instituted by any Holder of
any Security for the enforcement of the payment of the principal of (or premium,
if any) or interest (including Additional Sums) on any Security on or after the
Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties with respect
to the Securities 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 be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
(b) In case an Event of 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) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(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 a majority in principal amount of the
Outstanding Securities 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; and
(4) no provision of this Indenture shall require the Trustee to
expend 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 it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(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.
SECTION 602. NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any default, the Trustee shall
transmit in the manner provided for in Section 105, to all Holders of Securities
entitled to receive reports pursuant to Section 313(c) of the Trust Indenture
Act, notice of all defaults 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
(including Additional Sums) on any Security, 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 Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interest of the Holders of Securities; and provided, further, that in the case
of any default of the character specified in Section 501(5) with respect to
Securities, no such notice to Holders shall be given until at least 45 days
after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default.
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
and a 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 exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders of Securities pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity 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 to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(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 the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be charged with knowledge of any
Event of Default unless either (1) a Responsible Officer of the Trustee
assigned to the Corporate Trust Office of the Trustee (or any successor
division or department of the Trustee) shall have actual knowledge of
the Event of Default or (2) written notice of such Event of Default
shall have been given to the Trustee by the Company, any other obligor
on such Securities or by any Holder of such Securities.
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 the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. The Trustee
or any Authenticating Agent shall not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Trust Securities and shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself to be a holder of a Trust
Security to establish that such Person is such a holder. The Trustee may
conclusively rely on an Officers' Certificate as evidence that the holders of
the necessary percentage of liquidation preference of Trust Securities have
taken any action contemplated hereunder and shall have no duty to investigate
the truth or accuracy of any statement contained therein.
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), except any such expense, disbursement or advance
as may be attributable to its negligence, willful misconduct 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, willful misconduct or bad faith
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.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of, premium, if any, or interest, if any,
on particular Securities.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire any conflicting interest, within
the meaning of the Trust Indenture Act, it shall, within 90 days after
ascertaining that it has such conflicting interest, either eliminate such
conflicting 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 a
corporation organized and doing business under the laws of the United States of
America, 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, subject to supervision or examination by federal or
state authority and qualified and eligible under this Article and otherwise
permitted by the Trust Indenture Act to act as Trustee under an Indenture
qualified under the Trust Indenture Act. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital 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, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(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 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.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder of a Security
who has been a 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 of a Security 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, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee or
Trustees and shall comply with the applicable requirements of Section 611. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee shall have been so appointed by the Company or the Holders
of Securities and accepted appointment in the manner required by Section 611,
any Holder of a Security 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 appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee in accordance with
Section 105.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) Every successor Trustee appointed hereunder 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) 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) of this Section.
(c) 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 COLLECTION OF CLAIMS AGAINST COMPANY
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor). For purposes of Section 311(b)(4) and
(6) of the Trust Indenture Act.
(a) "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; and
(b) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company (or any such obligor) 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
(or any such obligor) arising from the making, drawing, negotiating or incurring
of the draft, bill of exchange, acceptance or obligation.
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
At any time when any of the Securities remain Outstanding the Trustee
may appoint an Authenticating Agent or Agents that shall be authorized to act on
behalf of the Trustee to authenticate Securities issued upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
304, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each 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 of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by federal or state authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent 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, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof 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 such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities, if any, with respect to which such Authenticating Agent will serve,
as their names and addresses appear in 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.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
The provisions of Sections 306, 604 and 605 shall be applicable to each
Authenticating Agent.
If an appointment is made pursuant to this Section, the Securities 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 referred to in the
within-mentioned Indenture.
Bankers Trust Company
As Trustee
By
As 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
(a) semi-annually, not later than 15 days after such Regular
Record Date, in each year, a list, in such form as the Trustee may
reasonably require, containing all the information in the possession or
control of the Company, or any of its Paying Agents other than the
Trustee, as to the names and addresses of the Holders of Securities as
of the preceding May 15 or November 15, 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 the most recent Regular Record
Date;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall comply with the obligations imposed on it pursuant to
Section 312 of the Trust Indenture Act.
(b) 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
of Securities in accordance with Section 312(b) of the Trust Indenture Act,
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 312(b) of the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
(a) Within 60 days after May 15 of each year commencing with May 15, 1997,
if required by Section 313(a) of the Trust Indenture Act, the Trustee shall
transmit a brief report dated as of such May 15 with respect to any of the
events specified in such Section 313(a) that may have occurred since the later
of the immediately preceding May 15 and the date of this Indenture.
(b) The Trustee shall transmit the reports required by Section 313(b) of
the Trust Indenture Act at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner and
to the Persons required by Sections 313(c) and (d) of the Trust Indenture Act.
SECTION 704. REPORTS BY COMPANY.
The Company, pursuant to Section 314(a) of the Trust Indenture Act,
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) that the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required
to file information, documents or reports pursuant to either of said
Sections, 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 Exchange Act, in respect of a security listed and registered on a
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 may be required from time to time by such rules
and regulations;
(3) transmit, within 30 days after the filing thereof with the
Trustee, to the Holders of Securities, in the manner and to the extent
provided in Section 313(c) of the Trust Indenture Act, 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; and
(4) notify the Trustee when and as the Securities become admitted
to trading on any national securities exchange.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
Nothing contained in this Indenture or in the Securities will prevent
any consolidation of the Company with, or merger of the Company with or into,
any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers to which the Company or its
successor will be a party, or will prevent any sale, lease or conveyance of the
property of the Company, as an entirety or substantially as an entirety;
provided that upon any such consolidation, merger, sale, lease or conveyance to
which the Company is a party and in which the Company is not the surviving
corporation, the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by the
Company and the due and punctual payment of the principal of, premium, if any,
and interest on all of the Securities, according to their tenor, shall be
expressly assumed by supplemental indenture satisfactory in form to the Trustee,
executed and delivered to the Trustee, by the corporation formed by such
consolidation, or into which the Company shall have been merged, or which shall
have acquired such property. 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 1004 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 1101 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 SUBSTITUTED.
Upon any consolidation by the Company with or merger by the Company
into any 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, except in the
case of a lease, 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 of Securities, the Company, when
authorized by a Board Resolution, 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; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture,
to change or eliminate any restrictions on the payment of principal
(or premium, if any) on Securities or to permit the issuance of
Securities in uncertificated form, provided any such action shall not
adversely affect the interests of the Holders in any material respect;
or
(5) to secure the Securities; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee 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; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or
to make provisions with respect to matters or questions arising under
this indenture, provided such action shall not adversely affect the
interests of the Holders or holders of outstanding Trust Securities in
any material respect; or
(8) subject to Section 903(a), to make any change in Article
Thirteen that would limit or terminate the benefits available to any
holder of Senior Indebtedness under such Article; or
(9) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the Trust Indenture Act or under
any similar federal statute hereafter enacted, and to add to this
Indenture such other provisions as may be expressly required by the
Trust Indenture Act.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by 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 under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) extend the Stated Maturity of the principal of, or any
installment of principal of, any Security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of
interest thereon (except that a declaration of a valid extension by the
Company shall not constitute an extension of time of payment of
interest for this purpose) or reduce any amount payable upon the
redemption thereof, or change the currency in which the principal
thereof, premium, if any, or any interest thereon is payable, or impair
the right to institute suit for the enforcement of any payment on any
Security when due, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, 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, Section
513 or Section 1008, 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 of a
Security with respect to changes in the references to "the Trustee" and
concomitant changes in this Section and Section 1008, or the deletion
of this proviso, in accordance with the requirements of Sections 611(b)
and 901(8), or
(4) modify the provisions of this Indenture with respect to
the subordination of the Securities in a manner adverse to such Holder.
SECTION 903. GENERAL PROVISIONS REGARDING SUPPLEMENTAL INDENTURE.
(a) A supplemental indenture entered into pursuant to Section 901 or
Section 902 may not make any change that adversely affects the rights under
Article Thirteen of any holder of Senior Indebtedness then outstanding unless
the holders of such Senior Indebtedness (or any group or representative thereof
authorized to give a consent) consent to such change.
(b) It shall not be necessary for any Act of Holders of Securities
under this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act or action shall approve the
substance thereof.
SECTION 904. 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, immunities or liabilities under this Indenture or
otherwise.
SECTION 905. 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 906. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 907. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities 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 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.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Company will duly and punctually pay the principal of (and premium,
if any) and interest, including Additional Sums (subject to the right of the
Company to extend an interest payment period), on the Securities in accordance
with the terms of the Securities and this Indenture.
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 may be presented or surrendered
for payment, and where notices and demands to or upon the Company in respect of
the Securities 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 where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company or one of its Affiliates shall at any time act as its
own Paying Agent, it will, on or before each due date of the principal of (and
premium, if any) or interest (including Additional Sums, if any) on any of the
Securities, 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
(including Additional Sums, 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, it will,
prior to each due date of the principal of (and premium, if any) or interest
(including Additional Sums,, if any) on any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest
(including Additional Amounts and Additional Sums, if any) so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest (including Additional Sums, if any), and (unless
such Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its action or failure so to act.
The Company will cause each Paying Agent 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, 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 (including Additional Sums, if
any) on Securities 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) in the making of any payment of
principal of (and premium, if any) or interest (including Additional
Sums, if any) on the Securities; 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 any Paying Agent to the Trustee,
such Paying Agent 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 (including Additional Sums, if any) on any Security and
remaining unclaimed for two years after such principal (and premium, if any) or
interest (including Additional Sums, if any) 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; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper of general circulation in New York City and
Luxembourg notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 1004. ADDITIONAL AMOUNTS.
All payments of principal, premium, if any, and interest in respect of
the Securities 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 UK or by or within any political subdivision
thereof or any authority therein or thereof having power to tax ("UK 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 relevant Holder of
Securities such additional amounts ("Additional Amounts") as will result in the
payment to each 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 UK
Taxes in respect of the Security by reason of such Holder having some connection
with the UK (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 UK) other than the mere holding of a Security or the receipt of
principal, premium, if any, and interest in respect thereof;
(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(as defined below) 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 of interests
representing a majority in outstanding principal amount in 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 the 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.
SECTION 1005. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the rights (charter and statutory) and franchises of the Company;
provided, however, that the Company shall not be required to preserve any such
right or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company, and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1006. LIMITATIONS ON DIVIDEND AND CERTAIN OTHER PAYMENTS.
The Company covenants that it will not (a) declare or pay any dividends
on, or redeem, purchase, acquire or make a distribution or liquidation payment
with respect to, any of its capital stock except for dividends, payments or
distributions payable in shares of its capital stock and conversions or
exchanges of capital stock, reclassifications of its capital stock of one class
or series for capital stock of another class or series and except for a
redemption, purchase or other acquisition of shares of its capital stock made
for the purpose of an employee incentive plan or benefit plan or similar
arrangement of the Company or any of its subsidiaries or (b) make any payment of
interest, principal of or premium, if any, on, or repay, repurchase or redeem
any debt securities issued by the Company that rank pari passu with or junior to
the Securities (except by conversion into or exchange for shares of its capital
stock) or (c) make any guarantee payment with respect to the foregoing, if at
such time (i) the Company shall be in default with respect to its guarantee
payments or other payment obligations under the Capital Securities Guarantee,
(ii) there shall have occurred and be continuing any Event of Default, or (iii)
the Company shall have given notice of its selection of an Extension Period as
provided in this Indenture and such period, or any extension thereof, is
continuing.
SECTION 1007. STATEMENT AS TO COMPLIANCE.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, a written statement, which need not comply with Section
102, signed by the principal executive officer, the principal financial officer
or the principal accounting officer of the Company, as to his or her knowledge
of the Company's compliance with all conditions and covenants under this
Indenture. For purposes of this Section 1007, such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) The Company shall deliver to the Trustee, no later than the
Business Day on which the event occurs, written notice of the liquidation,
dissolution or winding-up of the Issuer Trust if such liquidation, dissolution
or winding-up would occur earlier than the Stated Maturity of the Securities.
(c) The Company shall deliver to the Trustee, within five days after
the occurrence thereof, written notice of any event which after notice or lapse
of time or both would become an Event of Default pursuant to Section 501.
SECTION 1008. WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified in Section 301 for Securities, the
Company may omit in any particular instance to comply with any term, provision
or condition set forth in Sections 1005 and 1006 if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 1009. COVENANTS REGARDING TRUST.
For so long as the Capital Securities remain outstanding, the Company
covenants (i) not to cause or permit the Common Securities to be transferred
except to the extent permitted by the Declaration of Trust; provided, however,
that any permitted successor of the Company hereunder may succeed to the
Company's ownership of such Common Securities, (ii) to comply fully with all of
its obligations and agreements contained in the Declaration of Trust and (iii)
not to take any action which would cause the Trust to be treated as a grantor
trust for United States federal income tax purposes except in connection with a
distribution of the Securities.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. OPTIONAL REDEMPTION; CONDITIONS TO OPTIONAL REDEMPTION.
(a) At any time after February 1, 2007, the Company shall have the
right to redeem the Securities, in whole or in part, from time to time, at the
applicable Redemption Price plus any accrued but unpaid interest to the
Redemption Date.
(b) If a Special Event has occurred and is continuing, the Company
shall have the right prior to February 1, 2007, upon not less than 15 nor more
than 60 days written notice to the Holders and the Trustee, to redeem the
Securities, in whole (but not in part),upon the occurrence and continuance of
such Special Event at the applicable Redemption Price.
(c) If the Company has become obligated to pay Additional Amounts as
described under Section 1004, then, the Company shall have the right, upon not
less than 15 nor more than 60 days written notice to the Holders and the
Trustee, to redeem the Securities, in whole (but not in part), at the applicable
Redemption Price plus any accrued but unpaid interest to the Redemption Date.
(d) (1) "Redemption Price" in a case of a redemption pursuant to
paragraph (a) means the amount equal to the percentages specified below of the
principal amount of the Security to be redeemed, plus any accrued and unpaid
interest, to the Redemption Date, including interest accrued during any
Extension Periods if redeemed during the 12-month period beginning February 1 of
the years indicated below:
Year Percentage
---- ----------
2007 104.115%
2008 103.704
2009 103.292
2010 102.881
2011 102.469
2012 102.058
2013 101.646
2014 101.235
2015 100.823
2016 100.412
2017 and thereafter 100.000
(2) "Redemption Price" in a case of a redemption pursuant to
paragraph (b) means the greater of (A) the amount equal to 100% of the principal
amount of the Securities being redeemed or (B) the amount equal to the sum of
the present values of the remaining scheduled payments of principal and premium
of and interest on the Securities being redeemed through February 1, 2007
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at a discount rate equal to the
Treasury Yield plus 110 basis points, in the case of such a redemption before
February 1, 1998 and the Treasury Yield plus 50 basis points, in the case of
such a redemption on or after February 1, 1998 but prior to February 1, 2007,
plus, for (A) or (B) above, whichever is applicable, accrued interest on the
Securities to the Redemption Date, including interest accrued during any
Extension Period.
"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 through February 1, 2007 of the Securities 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 through February 1, 2007
of the Securities.
"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 most recent weekly statistical release (or any successor
release) published by the Federal Reserve Bank of New York and designated
"H.15(519)" 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 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.
(3) "Redemption Price" in a case of a redemption pursuant to
paragraph (c) means 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, 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 January 23, 1997, 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 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 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 shall 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, in which event such certificate shall be conclusive and binding on
the Holders of the Securities.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of all of the Securities, the Company shall, at least 20 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee and the related Institutional Trustee), notify the
Trustee and the related Institutional Trustee in writing of such Redemption
Date. In case of any redemption at the election of the Company of less than all
the Securities, the Company shall, at least 25 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee and the related Institutional Trustee), notify the Trustee and the
related Institutional Trustee in writing of such Redemption Date and of the
principal amount of Securities to be redeemed. In the case of any redemption of
Securities (i) prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, or (ii)
pursuant to an election of the Company which is subject to a condition specified
in the terms of such Securities, 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 the Securities are registered in the name of only one Holder, any
partial redemptions shall be pro rata. If the Securities are held in definitive
form by more than one Holder and if less than all the Securities 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 not previously called for redemption, by lot or other 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 the Securities or any integral multiple thereof) of the
principal amount of Securities of a denomination larger than the minimum
authorized denomination for Securities.
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 in the manner provided in Section
106 to the Holders of Securities to be redeemed not less than 15 nor more than
60 days prior to the Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities 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, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
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.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company or its Affiliate 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 accrued
interest, if any, on all the Securities which are to be redeemed on that date.
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 together with any accrued interest (including
any Additional Amounts and Additional Sums) thereon, and from and after such
date (unless the Company shall default in the payment of the Redemption Price
and accrued interest) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with such notice,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest, if any, and any Additional Amounts and Additional Sums to
the Redemption Date; provided, however, that, installments of interest on
Securities 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, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 305.
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 that is to be redeemed only
in part shall be surrendered at an office or agency of the Company 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 shall authenticate and
deliver to the Holder of such Security without service charge, a new Security 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. APPLICABILITY OF ARTICLE.
Securities which are redeemable before their Stated Maturity shall be
redeemable in accordance with their terms and in accordance with this Article.
ARTICLE TWELVE
SUBORDINATION
SECTION 1201. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article (subject to Article Four), the
payment of the principal of, premium, if any, and interest (including Additional
Amounts and Additional Sums) on each and all of the Securities are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full in cash of all Senior Indebtedness.
SECTION 1202. PAYMENT OF PROCEEDS UPON DISSOLUTION, ETC.
Upon any payment or distribution of assets of the Company to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors, marshalling of assets or liabilities or any
bankruptcy, insolvency or similar proceedings of the Company (each such event,
if any, referred to as a "Proceeding"), the holders of Senior Indebtedness shall
be entitled to receive payment in full of all amounts due on or to become due on
or in respect of all Senior Indebtedness (including any interest accruing
thereon after the commencement of any such Proceeding, whether or not allowed as
a claim against the Company in such Proceeding), before the Holders of the
Securities are entitled to receive any payment or distribution (excluding any
payment described in Section 1209) on account of the principal of, premium, if
any, or interest (including Additional Amounts and Additional Sums, if any) on
the Securities or on account of any purchase, redemption or other acquisition of
Securities by the Company (all such payments, distributions, purchases,
redemptions and acquisitions, whether or not in connection with a Proceeding,
herein referred to, individually and collectively, as a "Payment").
In the event of the acceleration of the maturity of the Securities,
then no payment shall be made by the Company with respect to the principal
(including redemption payments) of or premium, if any, or interest on the
Securities until the holders of all Senior Indebtedness outstanding at the time
of such acceleration shall receive payment in full of all Allocable Amounts due
in respect of such Senior Indebtedness (including any amounts due upon
acceleration).
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of Senior Indebtedness or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any such Senior
Indebtedness may have been issued, as their respective interests may appear, as
calculated by the Company, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
For purposes of this Article, "assets of the Company" shall not be
deemed to include shares of stock of the Company as reorganized or readjusted,
or securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinated at least to
the extent provided in this Article with respect to the Securities to the
payment of all Senior Indebtedness that may at the time be outstanding,
provided, however, that (i) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of the Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided for in
Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation
or reorganization for the purposes of this Section 1202 if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Eight hereof. Nothing in
Section 1203 or in this Section 1202 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607.
SECTION 1203. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
No payment of any principal, including redemption payments, if any,
premium, if any, or interest on (including Additional Amounts and Additional
Sums) the Securities shall be made if
(i) any Senior Indebtedness is not paid when due whether at the
stated maturity of any such payment or by call for redemption and any
applicable grace period with respect to such default has ended, with
such default remaining uncured and such default has not been waived or
otherwise ceased to exist;
(ii) the maturity of any Senior Indebtedness has been accelerated
because of a default; or
(iii) notice has been given of the exercise of an option to
require repayment, mandatory payment or prepayment or otherwise.
In the event that, notwithstanding the foregoing, the Company shall
make any Payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section, then in such event such Payment shall be held in
trust and paid over and delivered forthwith to the holders of the Senior
Indebtedness.
The provisions of this Section shall not apply to any Payment with respect
to which Section 1202 hereof would be applicable.
SECTION 1204. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent the Company, at any time except during the
pendency of any Proceeding referred to in Section 1202 hereof or under the
conditions described in Section 1203 hereof, from making Payments. Nothing in
this Article shall have any effect on the right of the Holders or the Trustee to
accelerate the maturity of the Securities upon the occurrence of an Event of
Default, but, in that event, no payment may be made in violation of the
provisions of this Article with respect to the Securities. If payment of the
Securities is accelerated because of an Event of Default, the Company shall
promptly notify the holders of the Senior Indebtedness (or their
representatives) of such acceleration.
SECTION 1205. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
The rights of the Holders of the Securities shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of, premium, if any, and interest (including
Additional Sums) on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness.
SECTION 1206. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
Holders of the Securities the principal of, premium, if any, and interest
(including Additional Sums) on the Securities as and when the same shall become
due and payable in accordance with their terms; or (b) affect the relative
rights against the Company of the Holders of the Securities and creditors of the
Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder or, under the conditions specified in Section 1203, to
prevent any payment prohibited by such Section or enforce their rights pursuant
to the penultimate paragraph in Section 1203.
SECTION 1207. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company, whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved.
SECTION 1208. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce the subordination provisions provided herein shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or any failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) permit the Company to borrow, repay and
then reborrow any or all of the Senior Indebtedness; (iii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iv) release any Person liable in any manner for
the collection of Senior Indebtedness; (v) exercise or refrain from exercising
any rights against the Company and any other Person; or (vi) apply any sums
received by them to Senior Indebtedness.
SECTION 1209. TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments
from money held in trust by the Trustee under Article Four for the payment of
the principal of, premium, if any, and interest (including Additional Sums) on
the Securities shall not be subordinated to the prior payment of any Senior
Indebtedness or subject to the restrictions set forth in this Article and no
Holder of such Securities nor the Trustee shall be obligated to pay over such
amount to the Company, any holder of Senior Indebtedness (or a designated
representative of such holder) or any other creditor of the Company.
SECTION 1210. NOTICE TO THE TRUSTEE.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article unless and until a
Responsible Officer of the Trustee shall have received written notice thereof at
the Corporate Trust Office of the Trustee from the Company or a holder or
holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 601, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
provided for in this Section 1210 at least two Business Days prior to the date
upon which, by the terms hereof, any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 601, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601 hereof,
and the Holders of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such Proceeding
is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article,
provided that the foregoing shall apply only if such court has been apprised of
the provisions of this Article.
SECTION 1212. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the provisions of Section 601, the Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Company or to any other Person
cash, property or securities to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article or otherwise.
SECTION 1213. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION
OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607 hereof.
SECTION 1214. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee (or the
Company or an Affiliate of the Company) shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article shall
in such case (unless the context otherwise requires) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article in addition to
or in place of the Trustee.
SECTION 1215. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON SUBORDINATION
PROVISIONS.
Each Holder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness, whether such
Senior Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or to continue to hold, such Senior Indebtedness.
ARTICLE THIRTEEN
SECURITYHOLDERS' MEETINGS
SECTION 1301. PURPOSES OF MEETINGS.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article Thirteen for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the
waiving of any default hereunder and its consequences, or to
take any other action authorized to be taken by Holders
pursuant to any of the provisions of Article Five;
(b) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Six;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section
902; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal
amount of such Securities under any other provision of this
Indenture or under applicable law.
SECTION 1302. CALL OF MEETINGS BY TRUSTEE.
The Trustee may at any time call a meeting of Holders to take any
action specified in Section 1301, to be held at such time and at such place in
the Borough of Manhattan, The City of New York, as the Trustee shall determine.
Notice of every meeting of the 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 holders of Securities at their addresses as they
shall appear on the Securities Register. Such notice shall be mailed not less
than 20 nor more than 180 days prior to the date fixed for the meeting.
SECTION 1303. CALL OF MEETINGS BY COMPANY OR HOLDERS.
In case at any time the Company pursuant to a resolution of the Board
of Directors, 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 Holders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such request,
then the Company or such Holders may determine the time and the place in said
Borough of Manhattan for such meeting and may call such meeting to take any
action authorized in Section 1301, by mailing notice thereof as provided in
Section 1302.
SECTION 1304. QUALIFICATIONS FOR VOTING.
To be entitled to vote at any meeting of Holders a person shall (a) be
a holder of one or more Securities or (b) a person appointed by an instrument in
writing as proxy by a holder of one or more Securities. The only persons who
shall be entitled to be present or to speak at any meeting of Holders shall be
the persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 1305. REGULATIONS.
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 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 think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 1303, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 1304, at any meeting each holder
of Securities or proxy therefor shall be entitled to one vote for each $1,000
principal amount of Securities held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Securities held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Holders. Any meeting of
Holders duly called pursuant to the provisions of Section 1302 or 1303 may be
adjourned from time to time by a majority of those present, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
SECTION 1306. VOTING.
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Holders shall be prepared by the secretary of the
meeting and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section 1302.
The record shall show the serial numbers of the Securities voting in favor of or
against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. The holders of the Capital Securities shall vote for all
purposes as a single class.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
SECTION 1401. NO RECOURSE AGAINST OTHERS.
An incorporator or any past, present or future director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder shall waive and release all such
liability. Such waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 1402. SET-OFF.
Notwithstanding anything to the contrary in this Indenture or in any
Security, prior to the dissolution of the Issuer Trust, the Company shall have
the right to set-off and apply against any payment it is otherwise required to
make hereunder or thereunder with respect to the principal of or interest
(including any Additional Amounts and Additional Sums) on the Securities with
and to the extent the Company has theretofore made, or is concurrently on the
date of such payment making, a payment with respect to the Trust Securities
under the Guarantee. Contemporaneously with, or as promptly as practicable
after, any such payment under such Guarantee, the Company shall deliver to the
Trustee an Officers' Certificate (upon which the Trustee shall be entitled to
rely conclusively without any requirement to investigate the facts contained
therein) to the effect that such payment has been made and that, as a result of
such payment, the corresponding payment under the Securities has been set-off in
accordance with this Section 1402.
SECTION 1403. ASSIGNMENT; BINDING EFFECT.
The Company shall have the right at all times to assign any of its
rights or obligations under this Indenture to a direct or indirect wholly-owned
subsidiary of the Company, provided that, in the event of any such assignment,
the Company shall remain primarily liable for the performance of all such
obligations. This Indenture may also be assigned by the Company in connection
with a transaction described in Article Eight. This Indenture shall be binding
upon and inure to the benefit of the Company, the Trustee, the Holders, any
Security Registrar, Paying Agent, and Authenticating Agent and, to the extent
specifically set forth herein, the holders of Senior Indebtedness and their
respective successors and assigns. The provisions of clause (2) of Section 508
and Section 1006 are for the benefit of the holders of the Trust Securities
referred to therein and, prior to the dissolution of the Issuer Trust, may be
enforced by such holders. A holder of a Trust Security shall not have the right,
as such a holder, to enforce any other provision of this Indenture.
SECTION 1404. ADDITIONAL AMOUNTS AND ADDITIONAL SUMS.
Whenever there is mentioned in this Indenture, in any context, the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security, such mention shall be deemed to include mention of the payment of
Additional Amounts and Additional Sums provided for by the terms of the
Securities to the extent that, in such context, Additional Amounts and
Additional Sums is, were or would be payable in respect thereof pursuant to such
terms, and express mention of the payment of Additional Amounts and Additional
Sums in any provisions hereof shall not be construed as excluding Additional
Amounts and Additional Sums in those provisions hereof where such express
mention is not made.
ARTICLE FIFTEEN
MISCELLANEOUS
SECTION 1501. 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 1501 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 1501 (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 1502 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
SOUTHERN INVESTMENTS UK plc
By ________________________
========================
Attest:
BANKERS TRUST COMPANY,
Trustee, Principal Paying
Agent Registrar and
Transfer Agent
By ________________________
========================
Attest:
BANKERS TRUST LUXEMBOURG S.A.,
Paying Agent and Transfer
Agent
By ________________________
========================
<PAGE>
STATE OF _______ )
) SS.:
COUNTY OF _______ )
On the ____ day of ________, 1997, before me personally came
______________, to me known, who, being by me duly sworn, did depose and say
that he is _______________________________ of SOUTHERN INVESTMENTS UK plc, one
of the corporations described herein 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.
Notary Public
[SEAL]
My Commission Expires:
STATE OF NEW YORK )
) SS.:
CITY OF NEW YORK )
On the ____ day of ________, 1997, before me personally came
___________, to me known, who, being by me duly sworn, did depose and say that
he is ___________________ of BANKERS TRUST COMPANY, one of the corporations
described herein 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.
Notary Public
[SEAL]
My Commission Expires:
<PAGE>
Exhibit A
EXCHANGE SUBORDINATED DEBENTURE CERTIFICATE
This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is held by a Book-Entry Depositary or a
nominee of a Book-Entry Depositary. This Security is exchangeable for Securities
held by or 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 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
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 inasmuch
as the bearer hereof, the Book-Entry Depositary, has an interest herein.
SOUTHERN INVESTMENTS UK plc
8.23% Exchange Subordinated Debenture Due 2027
No. ______ $84,537,000
CUSIP No. _________
SOUTHERN INVESTMENTS UK plc, a company duly organized and
existing under the laws of the 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, the principal sum of 84,537,000 on February 1, 2027 ("Maturity
Date"), unless previously redeemed, and to pay interest on the outstanding
principal amount hereof from January 29, 1997, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, semi-annually (subject to deferral as set forth
herein) in arrears on February 1 and August 1 of each year, commencing August 1,
1997, at the rate of 8.23% per annum, until the principal hereof shall have
become due and payable, and at the same rate per annum on any overdue principal
and premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full semi-annual period for which interest is computed
will be computed on the basis of actual number of days elapsed in such a 30-day
month. In the event that any date on which the principal of (or premium, if any)
or interest on this Security is payable is not a Business Day, then the payment
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a Saturday or a Sunday or a day on which banking
institutions in New York, New York or Bristol, England are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the
Institutional Trustee under the Declaration, is closed for business.
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. 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 and may be paid to the bearer hereof at the time of
payment of such Defaulted Interest or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
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 the Borough of Manhattan, The City of New
York, 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 debt. In addition,
the Company will, so long as Subordinated Debentures are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange so require,
maintain a Paying Agent in Luxembourg.
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 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 (as defined in the Indenture) 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.
"Relevant Date" means whichever is the later of (i) the date
on which such payment first becomes due and (ii) if the full amount payable has
not been received in The City of New York by the Trustee or the bearer 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 bearer hereof in
accordance with the Indenture.
References to principal, interest, 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 to the Holder of
this Security upon request.
So long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require, notices to
Holders of Securities will be published in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort).
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
Senior Indebtedness, and this Security is issued subject to the provisions of
the Indenture with respect thereto. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each Holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, or be valid or become obligatory for any
purpose, until the Certificate of Authentication hereon shall have been manually
signed by or on behalf of the Trustee.
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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer or director of the Company duly authorized.
Dated: __________, 1997
SOUTHERN INVESTMENTS UK plc
By:
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated
BANKERS TRUST COMPANY,
as Trustee
By
Authorized Officer
Exhibit A
This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is held by a Book-Entry Depositary or a
nominee of a Book-Entry Depositary. This Security is exchangeable for Securities
held by or 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 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
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 inasmuch
as the bearer hereof, the Book-Entry Depositary, has an interest herein.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SUBORDINATED
DEBENTURE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO THE COMPANY. SUCH HOLDER FURTHER AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
SOUTHERN INVESTMENTS UK plc
8.23% Subordinated Debenture Due 2027
No. 0001 $84,537,000
CUSIP No. 843234 AC 9
SOUTHERN INVESTMENTS UK plc, a company duly organized and
existing under the laws of the 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, the principal sum of 84,537,000 on February 1, 2027 ("Maturity
Date"), unless previously redeemed, and to pay interest on the outstanding
principal amount hereof from January 29, 1997, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, semi-annually (subject to deferral as set forth
herein) in arrears on February 1 and August 1 of each year, commencing August 1,
1997, at the rate of 8.23% per annum, until the principal hereof shall have
become due and payable, and at the same rate per annum on any overdue principal
and premium, if any, and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full semi-annual period for which interest is computed
will be computed on the basis of actual number of days elapsed in such a 30-day
month. In the event that any date on which the principal of (or premium, if any)
or interest on this Security is payable is not a Business Day, then the payment
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a Saturday or a Sunday or a day on which banking
institutions in New York, New York or Bristol, England are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the
Institutional Trustee under the Declaration, is closed for business.
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. 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 and may be paid to the bearer hereof at the time of
payment of such Defaulted Interest or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
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 the Borough of Manhattan, The City of New
York, 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 debt. In addition,
the Company will, so long as Subordinated Debentures are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange so require,
maintain a Paying Agent in Luxembourg.
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 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 (as defined in the Indenture) 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.
"Relevant Date" means whichever is the later of (i) the date
on which such payment first becomes due and (ii) if the full amount payable has
not been received in The City of New York by the Trustee or the bearer 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 bearer hereof in
accordance with the Indenture.
References to principal, interest, 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 to the Holder of
this Security upon request.
So long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require, notices to
Holders of Securities will be published in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort).
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
Senior Indebtedness, and this Security is issued subject to the provisions of
the Indenture with respect thereto. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each Holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, or be valid or become obligatory for any
purpose, until the Certificate of Authentication hereon shall have been manually
signed by or on behalf of the Trustee.
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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer or director of the Company duly authorized.
Dated: January 29, 1997
SOUTHERN INVESTMENTS UK plc
By:
Name:
Title:
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated
BANKERS TRUST COMPANY,
as Trustee
By
Authorized Officer
<PAGE>
SOUTHERN INVESTMENTS UK plc
8.23% Subordinated Debenture Due 2027
This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of January
29, 1997 (the "Indenture"), duly executed and delivered between the Company and
Bankers Trust Company, as Trustee (the "Trustee") and Bankers Trust Luxembourg
S.A., as paying and transfer agent, to which Indenture and any indenture or
indentures supplemental thereto as therein provided reference is hereby made for
a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities.
Except as herein provided, this Security may not be redeemed
prior to February 1, 2007. This Security will be redeemable in whole or in part,
from time to time, at the option of the Company on or after February 1, 2007,
upon not less than 15 nor more than 60 days' notice, at a redemption price equal
to the percentages specified below of the principal amount of the Security to be
redeemed, plus any accrued and unpaid interest, to the redemption date,
including interest accrued during any Extension Period if redeemed during the
12-month period beginning February 1 of the years indicated below:
Year Percentage
---- ----------
2007 104.115%
2008 103.704
2009 103.292
2010 102.881
2011 102.469
2012 102.058
2013 101.646
2014 101.235
2015 100.823
2016 100.412
2017 and thereafter 100.000
The Company will also have the right to redeem this Security
at any time prior to February 1, 2007 upon not less than 15 nor more than 60
days' notice upon the occurrence and continuation of a Special Event as
described in the Indenture at a redemption price being the greater of (i) the
amount equal to 100% of the principal amount of the Securities being redeemed or
(ii) the amount equal to the sum of the present values of the remaining
scheduled payments of principal of and premium and interest on the Securities
being redeemed through February 1, 2007 discounted to the date of redemption on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at a discount rate equal to the Treasury Yield plus 110 basis points, in the
case of such a redemption before February 1, 1998 and the Treasury Yield plus 50
basis points, in the case of such a redemption on or after February 1, 1998 but
prior to February 1, 2007, plus, for (i) or (ii) above, whichever is applicable,
accrued interest on the Securities to Redemption, including interest accrued
during any Extension Period.
"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 through February 1, 2007 of the Securities 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 through February 1, 2007
of the Securities.
"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 most recent weekly statistical release (or any successor
release) published by the Federal Reserve Bank of New York and designated
"H.15(519)" 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 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.
"Special Event" means either an Investment Company Event or a Tax Event.
"Investment Company EventInvestment Company Event" means the
receipt by the Regular Trustees of the Issuer Trust (as defined in the
Indenture) of an opinion of nationally recognized independent counsel
experienced in practice under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), that, as a result of the occurrence of a change
in law or regulation or a change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Issuer Trust is or will be
considered an "investment company" which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective on or
after January 23, 1997.
"Tax EventTax Event" means the receipt by the Regular Trustees
of the Issuer Trust (as defined in the Indenture) of an opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that as a result of (a) any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States, the United Kingdom or any political subdivision or taxing authority
thereof or therein, (b) any amendment to, or change in, an interpretation or
application of any such laws or regulations by any legislative body, court,
governmental agency or regulatory authority (including the enactment of any
legislation and the publication of any judicial decision or regulatory
determination), (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after January 23, 1997, there is more than an insubstantial risk that (i) the
Issuer Trust is, or will be within 90 days of the date of such opinion, subject
to United States federal or United Kingdom income tax with respect to income
accrued or received on the Securities, (ii) the Issuer Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges or (iii) interest
payable by the Company to the Issuer Trust on the Securities is not, or within
90 days of the date of such opinion will not be, deductible by the Company for
United States earnings and profits purposes or United Kingdom income tax
purposes.
If the Securities are only partially redeemed by the Company
pursuant to an Optional Redemption, the Securities will be redeemed pro rata or
by lot or by any other method utilized by the Trustee.
The Securities are also subject to redemption in whole but not
in part upon not less than 15 nor more than 60 days' notice given as provided in
the Indenture, 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 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 January 23, 1997, or (y) the issuance of
Definitive Registered Securities pursuant to any of clauses (a), (b) or (d) of
the ninth 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 such obligation to pay Additional Amounts cannot be avoided by the Company
taking reasonable measures available to it.
Notice of redemption shall be given as provided in the
Indenture not less than 15 days nor more than 60 days prior to the date fixed
for redemption.
Unless the Company defaults in payment of the redemption
price, from and after the redemption date, the Securities or portions thereof
called for redemption will cease to bear interest, and the Holders thereof will
have no right in respect to such Securities except the right to receive the
redemption price thereof.
The Holders of the Securities are entitled to the benefits of the
Registration Rights Agreement (the "Registration Rights Agreement") for the
benefit of the Holders of the Trust Securities and the Securities wherein the
Company and the Issuer Trust have agreed, for the benefit of Holders of Trust
Securities and Securities, (i) to use their reasonable best efforts to file with
the Commission within 150 days after the initial issuance of the Capital
Securities the Exchange Offer Registration Statement relating to the Exchange
Offer for (1) the Exchange Capital Securities, which will have terms identical
to the Capital Securities (except that the Exchange Capital Securities will not
contain terms with respect to transfer restrictions under the Securities Act and
will not provide for any increase in the distribution rate thereon under the
circumstances described below), (2) the Exchange Guarantee, which will have
terms identical tot he Capital Securities Guarantee and (3) the Exchange
Debentures, which will have terms identical to the Subordinated Debentures
(except that the Exchange Debentures will not contain terms with respect to
transfer restrictions under the Securities Act and will not provide for any
increase in the interest rate thereon under the circumstances described below)
and (ii) to use their reasonable best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act with in
180 days after the initial issuance of the Securities.
If the Company or the Trust fails to comply with the Registration
Rights Agreement or if the Exchange Offer Registration Statement or the Shelf
Registration Statement, as defined in the Registration Rights Agreement, fails
to become effective, then, as liquidated damages, additional interest (the
"Additional Interest") shall become payable in respect of the Securities as
follows:
(i) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is filed with the Commission on or prior the 150th
day after the initial issuance of the Securities or (B) notwithstanding that the
Company and the Issuer Trust have consumated or will consumate an Exchange
Offer, the Company and the Issuer Trust are required to file a Shelf
Registration Statement and such Shelf Registration Statement is not filed on or
prior to the date required by the Registration Rights Agreement, then commencing
on the date after either such required filing date, Additional Interest shall
accrue on the principal amount of the Securities at a rate of .25% per annum; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or prior
to the 30th day after the applicable required filing date or (B) notwithstanding
that the Company and the Issuer Trust have consummated or will consummate an
Exchange Offer, the Company and the Trust are required to file a Shelf
Registration Statement and such Shelf Registration Statement is not declared
effective by the Commission on or prior to the 30th day after the date such
Shelf Registration Statement was required to be filed, then, commencing on the
31st day after the applicable required filing date, Additional Interest shall
accrue on the principal amount of the Securities, at a rate of .25% per annum;
or
(iii) If (A) the Trust has not exchanged Exchange Capital Securities
for all Capital Securities or the Company has not exchanged the Exchange
Guarantee or Exchange Debentures for the Capital Securities Guarantee or all
Securities validly tendered, in accordance wit the terms of the Exchange Offer
on or prior the 40th day after the date on which the Exchange Offer Registration
Statement was declared effective or (B) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration Statement
ceases to be effective at any time prior to the third anniversary of the initial
issuance of the Capital Securities (other than after such time as all Capital
Securities have been disposed of thereunder or otherwise cease to be registrable
securities within the meaning of the Registration Rights Agreement), then
Additional Interest shall accrue on the principal amount of the Securities at a
rate of .25% per annum commencing on (x) the 41st day after such effective date,
in the case of (A) above or (y) the day such Shelf Registration Statement ceases
to be effective in the case of (B) above;
provided, however, that the Additional Interest rate on the Securities may not
exceed in the aggregate of .25% per annum; provided further that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration Statement or a Shelf Registration Statement (in the
case of clause (ii) above), (3) upon the exchange of Exchange Capital
Securities, Exchange Guarantee and Exchange Debentures for all Capital
Securities, Capital Securities Guarantee and Securities tendered (in the case of
clause (iii)(A) above), or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause (iii)(B)
above), or (4) upon the expiration of three years (or such shorter period as may
hereafter be provided in Rule 144(k), under the Securities Act) (or similar
successor rule)) commencing on the date of the initial issuance of the Capital
Securities, Additional Interest on the Securities as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue.
This Security shall be exchangeable, in whole but not in part,
for Securities registered in the names of Persons other than the Book-Entry
Depositary 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 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 for the Securities
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 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, have 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 an Event of Default with respect to Securities shall occur
and be continuing, the principal of the Securities 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 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 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.
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.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities at the time outstanding, to add any
provisions to, or change in any manner or eliminate any of the provisions of the
Indenture or modify in any manner the rights of the Holders of the Securities so
affected; provided that the Company and the Trustee may not, without the consent
of each Holder of Securities then outstanding and affected thereby, (i) extend
the Stated Maturity of any Securities, or reduce the principal amount thereof,
or reduce any amount payable on redemption thereof, or reduce the rate or extend
the time of payment of interest thereon (subject to Section 313 of the
Indenture), or make the principal of, or interest or premium on, the Securities
payable in any coin or currency other than U.S. dollars, or impair or affect the
right of any Holder of Securities to institute suit for the payment thereof, or
(ii) reduce the aforesaid percentage of Securities, the Holders of which are
required to consent to any such supplemental indenture. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Securities at the time outstanding, on behalf of all of the
Holders of the Securities, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or premium, if any, or interest on any of the Securities or a
default in respect of any covenant or provision which under the Indenture cannot
be modified or amended without the consent of each Holder of Securities then
outstanding. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of this Security and of any Security issued in exchange herefor or in place
hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any 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.
So long as the Company shall not be in default in the payment
of interest on the Securities, the Company shall have the right, at any time and
from time to time during the term of the Securities, to defer the payment of
interest by extending the interest payment period of such Securities for a
period not exceeding 10 consecutive semi-annual periods, including the first
such semi-annual period during such extension period (each, an "Extension
Period"), during which Extension Periods no interest shall be due and payable;
provided that no Extension Period may extend beyond the Maturity. No Extension
Period shall end on a date other than an Interest Payment Date. At the end of
any such Extension Period the Company shall pay all interest then accrued and
unpaid on the Securities (together with Additional Amounts, Additional Sums
thereon, if any, and interest on such interest at the rate specified for the
Securities to the extent permitted by applicable law); provided that during any
such Extension Period, the Company (i) shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock except for
dividends, payments or distributions payable in shares of its capital stock,
reclassifications of its capital stock and conversions or exchanges of capital
stock of one class or series into capital stock of another class or series and
except for a redemption, purchase or other acquisition of shares of its capital
stock made for the purpose of an employee incentive plan or benefit plan or
other similar arrangement of the Company or any of its subsidiaries, (ii) shall
not make any payment of interest, principal of or premium, if any, on, or repay,
repurchase or redeem any debt securities issued by the Company that rank pari
passu with or junior to the Securities (except by conversion into or exchange
for shares of its capital stock), and (iii) shall not make any guarantee
payments with respect to the foregoing. Prior to the termination of any such
Extension Period, the Company may further defer the payment of interest,
provided that no Extension Period shall exceed the period or periods specified
in such Securities, extend beyond the Stated Maturity of the principal of such
Securities or end on a date other than an Interest Payment Date. Upon the
termination of any such Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Amounts and Additional Sums then due on any
Interest Payment Date, the Company may elect to begin a new Extension Period,
subject to the above conditions. The Company may also pay on any Interest
Payment Date all or any portion of the interest accrued during an Extension
Period. No interest, Additional Amounts or Additional Sums shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear interest at the specified rate to the extent
specified as contemplated by the Indenture.
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 are
exchangeable for a like aggregate principal amount of Securities 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.
When a successor assumes all the obligations of its
predecessor under the Securities 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 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 or the Indenture or for any claim based on, in
respect of or by reason of, such obligations of their creation. Each Holder of
the Securities by accepting Securities this series waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
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 as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
All terms used in this Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAW PROVISIONS THEREOF.
Exhibit 4.3
CERTIFICATE OF TRUST
OF
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Southern Investments UK Capital Trust I
(the "Trust"), dated January 21, 1997, is being duly executed and filed by the
undersigned, as trustees of the Trust, to form a business trust under the
Delaware Business Trust Act (12 Del. C. Section 3801, et seq.).
1. Name. The name of the business trust being formed hereby is Southern
Investments UK Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are Bankers
Trust (Delaware), 1001 Jefferson Street, Suite 550, Wilmington, Delaware 19801.
3. Effective Date. This Certificate of Trust shall be effective as of its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
Name: Wayne Boston
As Regular Trustee
Name: Richard Childs
As Regular Trustee
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By:
Name:
Title:
Exhibit 4.4
AMENDED AND RESTATED DECLARATION
OF TRUST
Southern Investments UK Capital Trust I
Dated as of January 29, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1...............................................................2
SECTION 1.1 Definitions...............................................2
ARTICLE 2..............................................................13
SECTION 2.1 Trust Indenture Act; Application.........................14
SECTION 2.2 Lists of Holders of Securities...........................14
SECTION 2.3 Reports by the Institutional Trustee.....................15
SECTION 2.4 Periodic Reports to Institutional Trustee................15
SECTION 2.5 Evidence of Compliance with Conditions Precedent.........15
SECTION 2.6 Events of Default; Waiver................................16
SECTION 2.7 Event of Default; Notice.................................18
ARTICLE 3..............................................................19
SECTION 3.1 Name.....................................................19
SECTION 3.2 Office...................................................19
SECTION 3.3 Purpose..................................................20
SECTION 3.4 Authority................................................20
SECTION 3.5 Title to Property of the Trust...........................21
SECTION 3.6 Powers and Duties of the Regular Trustees................21
SECTION 3.7 Prohibition of Actions by the Trust and the
Trustees..............................................25
SECTION 3.8 Powers and Duties of the Institutional Trustee...........26
SECTION 3.9 Certain Duties and Responsibilities of the Institutional
Trustee...............................................30
SECTION 3.10 Certain Rights of Institutional Trustee.................33
SECTION 3.11 Delaware Trustee........................................36
SECTION 3.12 Execution of Documents..................................36
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities..37
SECTION 3.14 Duration of Trust.......................................37
SECTION 3.15 Mergers.................................................37
ARTICLE 4..............................................................39
SECTION 4.1 Sponsor's Purchase of Common Securities..................40
SECTION 4.2 Responsibilities of the Sponsor..........................40
SECTION 4.3 Right to Proceed.........................................41
ARTICLE 5..............................................................41
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee............41
SECTION 5.2 Delaware Trustee.........................................42
SECTION 5.3 Institutional Trustee; Eligibility.......................43
SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware
Trustee Generally....................................44
SECTION 5.5 Regular Trustees.........................................44
SECTION 5.6 Delaware Trustee.........................................45
SECTION 5.7 Appointment, Removal and Resignation of Trustees.........45
SECTION 5.8 Vacancies among Trustees.................................47
SECTION 5.9 Effect of Vacancies......................................48
SECTION 5.10 Meetings................................................48
SECTION 5.11 Delegation of Power.....................................49
Section 5.12 Merger, Conversion, Consolidation or Succession to
Business.............................................50
ARTICLE 6..............................................................50
SECTION 6.1 Distributions............................................50
ARTICLE 7..............................................................50
SECTION 7.1 General Provisions Regarding Securities..................51
SECTION 7.2 Execution and Authentication.............................52
SECTION 7.3 Form and Dating..........................................53
SECTION 7.4 Registrar, Paying Agent and Exchange Agent...............55
SECTION 7.5 Paying Agent to Hold Money in Trust......................56
SECTION 7.6 Replacement Securities...................................57
SECTION 7.7 Outstanding Capital Securities...........................57
SECTION 7.8 Capital Securities in Treasury...........................58
SECTION 7.9 Temporary Securities.....................................58
SECTION 7.10 Cancellation............................................59
SECTION 7.11 CUSIP Numbers...........................................60
ARTICLE 8..............................................................60
SECTION 8.1 Termination of Trust.....................................60
ARTICLE 9..............................................................61
SECTION 9.1 Transfer of Securities...................................61
SECTION 9.2 Transfer Procedures and Restrictions.....................62
SECTION 9.3 Deemed Security Holders..................................77
SECTION 9.4 Book-Entry Interests.....................................78
SECTION 9.5 Notices to Clearing Agency...............................79
SECTION 9.6 Appointment of Successor Clearing Agency.................79
ARTICLE 10.............................................................79
SECTION 10.1 Liability...............................................79
SECTION 10.2 Exculpation.............................................80
SECTION 10.3 Fiduciary Duty..........................................81
SECTION 10.4 Indemnification.........................................82
SECTION 10.5 Outside Businesses......................................86
ARTICLE 11.............................................................87
SECTION 11.1 Fiscal Year.............................................87
SECTION 11.2 Certain Accounting Matters..............................87
SECTION 11.3 Banking.................................................88
SECTION 11.4 Withholding.............................................88
ARTICLE 12.............................................................89
SECTION 12.1 Amendments..............................................89
SECTION 12.2 Meetings of the Holders; Action by Written Consent......91
ARTICLE 13.............................................................93
SECTION 13.1 Representations and Warranties of Institutional Trustee.93
SECTION 13.2 Representations and Warranties of Delaware Trustee......94
ARTICLE 14.............................................................95
SECTION 14.1 Registration Rights Agreement...........................95
ARTICLE 15.............................................................96
SECTION 15.1 Notices.................................................96
SECTION 15.2 Governing Law...........................................97
SECTION 15.3 Intention of the Parties................................98
SECTION 15.4 Headings................................................98
SECTION 15.5 Successors and Assigns..................................98
SECTION 15.6 Partial.................................................98
SECTION 15.7 Counterparts............................................98
ANNEX I TERMS OF SECURITIES I-1
EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE A2-1
EXHIBIT B SPECIMEN OF DEBENTURE B-1
EXHIBIT C PURCHASE AGREEMENT C-1
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
January 29, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of January 29, 1997, by the Trustees (as defined herein),
the Sponsor (as defined herein) and by the holders, from time to time, of
undivided beneficial interests in the assets of the Trust to be issued pursuant
to this Declaration;
WHEREAS, the Trustees and the Sponsor established Southern
Investments UK Capital Trust I (the "Trust"), a trust formed under the Delaware
Business Trust Act pursuant to a Declaration of Trust dated as of January 21,
1997 (the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on January 21, 1997, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain Debentures of the Debenture Issuer (each as hereinafter
defined);
WHEREAS, as of the date hereof, no interests in the Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitutes the governing instrument of such business trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the Holders (as defined herein), from time to time, of
the securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
<PAGE>
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are
to this Declaration as modified, supplemented or amended from time to
time;
(d) all references in this Declaration to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes
and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Additional Distributions" means additional distributions payable on the
Securities resulting from the payment of Additional Interest on the Debentures.
"Additional Interest" shall have the meaning set forth in the Registration
Rights Agreement.
"Additional Sums" means additional amounts as may be necessary in order
that the amount of any Distribution then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
"Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
"Authorized Officer" of a Person means any other Person that is authorized
to legally bind such former Person.
"Book-Entry Depositary" means Bankers Trust Company, as book-entry
depositary under the Deposit Agreement.
"Book-Entry Interest" means a beneficial interest in a Global Capital
Security registered in the name of a Clearing Agency or its nominee, ownership
and transfers of which shall be maintained and made through book entries by a
Clearing Agency as described in Section 9.4.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a
day on which banking institutions in New York, New York or Bristol, England are
authorized or required by law or executive order to remain closed or (iii) a day
on which the Indenture Trustee's Corporate Trust Office or Institutional
Trustee's principal Corporate Trust Office is closed for business.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code ss.3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Capital Security Beneficial Owner" means, with respect to a Book-Entry
Interest, a Person who is the beneficial owner of such Book-Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Capital Securities" means, collectively, the Transfer Restricted Capital
Securities and the New Capital Securities.
"Capital Securities Guarantee" means, collectively, the Transfer Restricted
Capital Securities Guarantee and the New Capital Securities Guarantee.
"Capital Trust Voting Class" has the meaning specified in Section 2.6(a).
"Cedel Bank" means Cedel Bank, societe anonyme.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for the
Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Capital Security and which shall
undertake to effect book-entry transfers and pledges of the Capital Securities
and the initial Clearing Agency will be DTC.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Time" means the "Closing Time" under the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the United States Securities and Exchange Commission as
from time to time constituted, or if any time after the execution of this
Declaration such Commission is not existing and performing the duties now
assigned to it under applicable Federal securities laws, then the body
performing such duties at such time.
"Common Securities" has the meaning specified in Section 7.1(a).
"Common Securities Guarantee" means the guarantee agreement dated as of
January 29, 1997 of the Sponsor in respect of the Common Securities.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at Four Albany Street, New York, New York
10006.
"Covered Person" means: (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Southern Investments UK plc, a public limited
company incorporated under the laws of England and Wales, or any successor
entity resulting from any consolidation, amalgamation, merger or other business
combination, in its capacity as issuer of the Debentures under the Indenture.
"Debentures" means, collectively, the Transfer Restricted Debentures and
the New Debentures.
"Default" means an event, act or condition that with notice or lapse of
time, or both, would constitute an Event of Default.
"Definitive Capital Securities" shall have the meaning set forth in Section
7.3(c).
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Deposit Agreement" means the Deposit Agreement dated as of January 29,
1997 between the Debenture Issuer and Bankers Trust Company, as book-entry
depositary.
"Depositary" means, with respect to Securities issuable in whole or in part
in the form of one or more Global Capital Securities, a Clearing Agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities.
"Direct Action" shall have the meaning set forth in Section 3.8(e).
"Distribution" means a distribution payable to Holders in accordance with
Section 6.1 and Annex I hereto.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"DWAC" means Deposit and Withdrawal At Custodian Service.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) that has occurred and is continuing in respect of
the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Exchange Agent" has the meaning set forth in Section 7.4.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Trust to exchange New Capital
Securities for Transfer Restricted Capital Securities, (ii) by the Debenture
Issuer to exchange New Debentures for Transfer Restricted Debentures and (iii)
by the Sponsor to exchange the New Capital Securities Guarantee for the Transfer
Restricted Capital Securities Guarantee.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Capital Securities" has the meaning set forth in Section 7.3(a).
"Global Capital Security" has the meaning set forth in Section 7.3(a).
"Holder" means a Person in whose name a Security is registered on the
register for the Securities, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Indenture" means the Subordinated Debenture Indenture dated as of January
29, 1997, among the Debenture Issuer, Bankers Trust Company, as Indenture
Trustee, and Bankers Trust Luxembourg S.A., as paying and transfer agent, as
amended from time to time.
"Indenture Trustee" means Bankers Trust Company, a New York banking
corporation, as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"Initial Purchasers" means Lehman Brothers Inc. and J.P. Morgan Securities
Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as the term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Institutional Trustee" has the meaning set forth in Section 5.3(a).
"Institutional Trustee Account" has the meaning set forth in Section
3.8(c).
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Ministerial Action" has the meaning set forth in Annex I hereto.
"New Capital Securities" has the meaning specified in Section 7.1(a).
"New Capital Securities Guarantee" means the guarantee agreement to be
entered in connection with the Exchange Offer by the Sponsor in respect of the
New Capital Securities.
"New Debentures" means the 8.23% Subordinated Debentures due February 1,
2027 of the Debenture Issuer issued in exchange for the Transfer Restricted
Debentures pursuant to the Indenture.
"Offering Memorandum" has the meaning set forth in Section 3.6(b).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by a Director, the Chairman, a Vice Chairman, the Chief Executive
Officer, the President, a Vice President, the Comptroller, the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary or any other
officer as authorized by such Person. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration shall include:
(a) a statement that each officer signing the Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" shall mean a written opinion of counsel, who may be an
employee of or regular counsel for the Sponsor, and who shall be reasonably
acceptable to the Institutional Trustee.
"Other Capital Securities" means Capital Securities that are offered and
sold to institutional accredited investors in transactions exempt from
registration under the Securities Act and not made in reliance on Rule 144A or
Regulation S.
"Paying Agent" has the meaning set forth in Section 7.4.
"Payment Amount" has the meaning set forth in Section 6.1.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Purchase Agreement" means the Purchase Agreement for the initial offering
and sale of Capital Securities in the form of Exhibit C.
"QIBs" shall mean qualified institutional buyers as defined in Rule 144A.
"Quorum" means a majority of the Regular Trustees or, if there are only two
Regular Trustees, both of them.
"Registrar" has the meaning set forth in Section 7.4.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of January 29, 1997, by and among the Trust, the Debenture Issuer and
the Initial Purchasers named therein, as amended from time to time.
"Registration Statement" has the meaning set forth in the Registration
Rights Agreement.
"Regular Trustee" has the meaning set forth in Section 5.1.
"Regulation S" means Regulation S under the Securities Act and any
successor regulation thereto.
"Regulation S Global Security" means any Global Capital Security or
Securities evidencing Capital Securities that are to be traded pursuant to
Regulation S.
"Related Party" means, with respect to the Sponsor, any direct or indirect
wholly owned subsidiary of the Sponsor or any other Person that owns, directly
or indirectly, 100% of the outstanding voting securities of the Sponsor.
"Responsible Officer" when used with respect to the Institutional Trustee,
means any Managing Director, any vice president, any assistant vice president,
any assistant secretary, any assistant treasurer, any trust officer or assistant
trust officer, or any other officer in the Corporate Trust and Agency Group of
the Institutional 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 that officer's knowledge and familiarity with the particular
subject.
"Restricted Capital Security" means a Capital Security required by Section
9.2 to contain a Restricted Securities Legend.
"Restricted Definitive Capital Securities" has the meaning set forth in
Section 7.3(c).
"Restricted Global Capital Security" means any Global Capital Security or
Securities evidencing Capital Securities that are to be traded pursuant to Rule
144A.
"Restricted Securities Legend" has the meaning set forth in Section 9.2.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any
successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Securities" or "Trust Securities" means the Common Securities and the
Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee and the
Capital Securities Guarantee.
"Sponsor" means Southern Investments UK plc, a public limited company
incorporated under the laws of England and Wales, or any successor entity
resulting from any merger, consolidation, amalgamation or other business
combination, in its capacity as sponsor of the Trust.
"Successor Delaware Trustee" shall have the meaning set forth in Section
5.7(b)(ii).
"Successor Entity" shall have the meaning set forth in Section 3.15(b)(i).
"Successor Institutional Trustee" has the meaning set forth in Section
3.8(f)(ii).
"Successor Securities" shall have the meaning set forth in Section
3.15(b)(i)(B).
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount" means, with respect to the Trust Securities,
except as provided in the terms of the Capital Securities or by the Trust
Indenture Act, Holder(s) of outstanding Trust Securities voting together as a
single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Transfer Restricted Capital Securities" has the meaning specified in
Section 7.1(a).
"Transfer Restricted Capital Securities Guarantee" means the guarantee
agreement dated as of January 29, 1997, by the Sponsor in respect of the
Transfer Restricted Capital Securities.
"Transfer Restricted Debentures" means the original 8.23% Subordinated
Debentures due February 1, 2027 of the Debenture Issuer issued pursuant to the
Indenture.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Unrestricted Global Capital Security" has the meaning set forth in Section
9.2(b).
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Institutional Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by ss.ss. 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall provide the Institutional Trustee, unless the Institutional
Trustee is Registrar for the Securities (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Institutional
Trustee may reasonably require, of the names and addresses of the Holders ("List
of Holders") as of such record date, provided that neither the Sponsor nor the
Regular Trustees on behalf of the Trust shall be obligated to provide such List
of Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Institutional Trustee by the Sponsor and the
Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30
days of receipt by the Trust of a written request for a List of Holders as of a
date no more than 14 days before such List of Holders is given to the
Institutional Trustee. The Institutional Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity), provided that the Institutional Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its
obligations under ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Institutional Trustee.
Within 60 days after December 15 of each year, commencing
December 15, 1997, the Institutional Trustee shall provide to the Holders of the
Capital Securities such reports as are required by ss. 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by ss. 313 of the
Trust Indenture Act. The Institutional Trustee shall also comply with the
requirements of ss. 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Institutional Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Institutional Trustee such documents, reports and
information as are required by ss. 314 (if any) and the compliance certificate
required by ss. 314 of the Trust Indenture Act in the form, in the manner and at
the times required by ss. 314(a)(4) of the Trust Indenture Act, such compliance
certificate to be delivered annually on or before 120 days after the end of each
fiscal year of the Sponsor.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Institutional Trustee such evidence of compliance
with any conditions precedent provided for in this Declaration that relate to
any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to ss. 314(c)
(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, provided that, if the underlying Event of Default under
the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of (A) greater than a majority
in aggregate principal amount of the holders of the Debentures (a
"Super Majority") or (B) each holder of such securities affected
thereby to be waived under the Indenture, the Event of Default under
the Declaration may only be waived by the vote of, in the case of (A),
the Holders of Securities in the Capital Trust Voting Class (as
defined below) representing such relevant Super Majority or, in the
case of (B), each Holder in the Capital Trust Voting Class affected
thereby.
The foregoing provisions of this Section 2.6(a) shall be in lieu of ss.
316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
The Holders of a Majority in liquidation amount of the Capital
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or to direct the exercise of any trust or power conferred upon the Institutional
Trustee, including the right to direct the Institutional Trustee to exercise the
remedies available to it as holder of the Debentures; provided, however, that
the Holders of the Capital Securities will vote as a single class (the "Capital
Trust Voting Class") with respect to certain rights to direct the Institutional
Trustee described in Annex I hereto.
(b) The Holders of a Majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of (A) a Super Majority or
(B) each Holder of such securities affected thereby to be waived,
except where the Holders of the Common Securities are deemed to have
waived such Event of Default under the Declaration as provided below in
this Section 2.6(b), the Event of Default under the Declaration may
only be waived by the vote of, in the case of (A), the Holders of at
least the proportion in aggregate liquidation amount of the Common
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding or, in the case of (B),
each Holder of the Common Securities affected thereby;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and its consequences if all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Institutional Trustee will be deemed to be acting solely on behalf of the
Holders of the Capital Securities and only the Holders of the Capital Securities
will have the right to direct the Institutional Trustee in accordance with the
terms of the Securities. The foregoing provisions of this Section 2.6(b) shall
be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are
hereby expressly excluded from this Declaration and the Securities, as permitted
by the Trust Indenture Act. Subject to the foregoing provisions of this Section
2.6(b), upon such waiver, any such default shall cease to exist and any Event of
Default with respect to the Common Securities arising therefrom shall be deemed
to have been cured for every purpose of this Declaration, but no such waiver
shall extend to any subsequent or other default or Event of Default with respect
to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Institutional Trustee, at the direction of the Holders of the Capital
Securities, constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of
the Trust Indenture Act is hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Institutional Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of all defaults with respect
to the Securities actually known to a Responsible Officer of the Institutional
Trustee, unless such defaults have been cured before the giving of such notice
(the term "defaults" for the purposes of this Section 2.7(a) being hereby
defined to be an Event of Default as defined in the Indenture, not including any
periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures, the
Institutional Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Institutional Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Institutional Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections 5.01(a) and 5.01(b) of the
Indenture; or
(ii) any default as to which the Institutional Trustee shall
have received written notice or of which a Responsible Officer of the
Institutional Trustee charged with the administration of the
Declaration shall have actual knowledge.
ARTICLE 3
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Southern Investments UK Capital Trust I"
as such name may be modified from time to time by the Regular Trustees following
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is Southern
Investments UK Capital Trust I, c/o Bankers Trust (Delaware), 1001 Jefferson
Street, Suite 550, Wilmington, Delaware 19801-1457. On ten Business Days written
notice to the Holders of Securities, the Regular Trustees may designate another
principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities, (b) use the proceeds from the sale of the Securities
to acquire the Debentures, and (c) except as otherwise limited herein, to engage
in only those other activities necessary, advisable or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, mortgage or pledge any of its assets, or otherwise undertake (or
permit to be undertaken) any activity that would cause the Trust not to be
classified for United States federal income tax purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to
the specific duties of the Institutional Trustee, the Regular Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the
Debentures and the Institutional Trustee Account or as otherwise provided in
this Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Securities in accordance with this
Declaration; provided, however, that except, in the case of (i) and (ii), as
contemplated in Section 7.1(a), (i) the Trust may issue no more than one series
of Capital Securities and no more than one series of Common Securities, (ii)
there shall be no interests in the Trust other than the Securities, and (iii)
the issuance of Securities shall be limited to a simultaneous issuance of both
Capital Securities and Common Securities at any Closing Time,
(b) in connection with the issue and sale of the Capital Securities and the
consummation of the Exchange Offer, at the direction of the Sponsor, to:
(i) execute, if necessary, an offering memorandum (the
"Offering Memorandum") in preliminary and final form prepared by the
Sponsor, in relation to the offering and sale of Transfer Restricted
Capital Securities to qualified institutional buyers in reliance on
Rule 144A under the Securities Act, to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act), and in offshore transactions complying with Rule 903
or Rule 904 of Regulation S, and to execute and file with the
Commission, at such time as determined by the Sponsor, any Registration
Statement, including any amendments thereto, as contemplated by the
Registration Rights Agreement;
(ii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be necessary
in order to qualify or register all or part of the Capital Securities
in any State in which the Sponsor has determined to qualify or register
such Capital Securities for sale;
(iii) at the direction of the Sponsor, execute and
file an application, prepared by the Sponsor, to the New York Stock
Exchange or any other national stock exchange or the Nasdaq Stock
Market's National Market for listing or quotation of the Capital
Securities;
(iv) to execute and deliver letters, documents, or instruments
with DTC and other Clearing Agencies relating to the Capital
Securities;
(v) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act; and
(vi) execute and enter into the Purchase Agreement and the
Registration Rights Agreement providing for the sale of the Capital
Securities;
(c) to acquire the Transfer Restricted Debentures with the
proceeds of the sale of the Transfer Restricted Capital Securities and the
Common Securities and to exchange the Transfer Restricted Debentures for a like
principal amount of New Debentures, pursuant to the Exchange Offer; provided,
however, that the Regular Trustees shall cause legal title to the Debentures to
be held of record in the name of the Institutional Trustee for the benefit of
the Holders;
(d) to give the Sponsor and the Institutional Trustee prompt written notice
of the occurrence of a Tax Event;
(e) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including and with
respect to, for the purposes of ss.316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Capital Securities and Holders of Common Securities as
to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be
required of the Regular Trustees pursuant to the terms of the Securities set
forth in the Securities Certificates and Annex I hereto;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Institutional
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the Trust
Indenture Act to the Institutional Trustee, which certificate may be executed by
any Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out any of
the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar
and Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent is vested in the Institutional Trustee;
(m) to give prompt written notice to the Institutional Trustee
and to Holders of any notice received from the Debenture Issuer of its election
to defer payments of interest on the Debentures by extending the interest
payment period under the Indenture;
(n) to execute all documents or instruments, perform all duties and powers,
and do all things for and on behalf of the Trust in all matters necessary or
incidental to the foregoing;
(o) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction in which such existence
is necessary to protect the limited liability of the Holders of the Capital
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this Declaration
or with applicable law, that the Regular Trustees determine in their discretion
to be necessary or desirable in carrying out the activities of the Trust as set
out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes.
(q) to take all action necessary to consummate the Exchange
Offer or otherwise cause the Capital Securities to be registered pursuant to an
effective registration statement in accordance with the provisions of the
Registration Rights Agreement; and
(r) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of
the Trust.
The Regular Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Regular Trustees shall not take any
action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3 or adversely affects the interests of the Holders.
Subject to this Section 3.6, the Regular Trustees shall have
none of the powers or the authority of the Institutional Trustee set forth in
Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including the
Institutional Trustee) shall not, engage in any activity other than as required
or authorized by this Declaration. The Trust shall not and the Trustees in their
capacities as Trustees for the Trust shall not:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall promptly distribute all such proceeds to Holders
pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any investments, other than investments represented by
the Debentures;
(v) possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever
(except to the extent expressly authorized in this Declaration or by
the terms of the Securities);
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(vii) incur any indebtedness for borrowed money; or
(viii) other than as provided in this Declaration or Annex I, (A)
direct the time, method and place of exercising any trust or power
conferred upon the Indenture Trustee with respect to the Debentures,
(B) waive any past default that is waivable under the applicable
provisions of the Indenture, (C) exercise any right to rescind or
annul any declaration that the principal of all the Debentures shall
be due and payable, or (D) consent to any amendment, modification or
termination of the Indenture or the Debentures or this Declaration in
each case where such consent shall be required unless the Trust shall
have received an opinion of a nationally recognized independent tax
counsel experienced in such matters to the effect that such action
will not cause more than an insubstantial risk that the Trust will not
be classified as a grantor trust for United States federal income tax
purposes.
SECTION 3.8 Powers and Duties of the Institutional Trustee.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Institutional Trustee or the Book-Entry
Depositary in trust for the benefit of the Holders. The right, title and
interest of the Institutional Trustee to the Debentures shall vest automatically
in each Person who may hereafter be appointed as Institutional Trustee in
accordance with Section 5.7. Such vesting and cessation of title shall be
effective whether or not conveyancing documents with regard to the Debentures
have been executed and delivered.
(b) The Institutional Trustee shall not transfer its right,
title and interest in the Debentures to the Regular Trustees or to the Delaware
Trustee (if the Institutional Trustee does not also act as Delaware Trustee).
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Institutional Trustee Account") in the name
of and under the exclusive control of the Institutional Trustee
on behalf of the Holders and, upon the receipt of payments of
funds made in respect of the Debentures held by the Institutional
Trustee, deposit such funds into the Institutional Trustee
Account and make payments to the Holders of the Capital
Securities and Holders of the Common Securities from the
Institutional Trustee Account in accordance with Section 6.1.
Funds in the Institutional Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration.
The Institutional Trustee Account shall be an account that is
maintained with a banking institution the rating on whose
long-term unsecured indebtedness is at least equal to the rating
assigned to the Capital Securities by a "nationally recognized
statistical rating organization", as that term is defined for
purposes of Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Common
Securities to the extent the Debentures are redeemed or mature;
and
(iii) upon written notice of distribution issued by the
Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Debentures to
Holders of Securities upon the occurrence of certain events.
(d) The Institutional Trustee shall take all actions and
perform such duties as may be specifically required of the Institutional Trustee
pursuant to the terms of the Securities.
(e) Subject to Section 3.9(a), the Institutional Trustee shall
take any Legal Action which arises out of or in connection with an Event of
Default of which a Responsible Officer of the Institutional Trustee has actual
knowledge or the Institutional Trustee's duties and obligations under this
Declaration or the Trust Indenture Act and if such Institutional Trustee shall
have failed to take such Legal Action, the Holders of the Capital Securities
may, to the extent permitted by applicable law, take such Legal Action, to the
same extent as if such Holders of Capital Securities held an aggregate principal
amount of Debentures equal to the aggregate liquidation amount of such Capital
Securities, without first proceeding against the Institutional Trustee or the
Trust; provided however, that if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay the principal of or premium, if any, or interest on the Debentures on the
date such principal, premium, if any, or interest is otherwise payable (or in
the case of redemption, on the redemption date), then a Holder of Capital
Securities may, pursuant to the relevant provisions of the Indenture, directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on the Debentures having a
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of Capital Securities to the extent of any payment made by the
Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the preceding sentences, the Holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Debentures.
(f) The Institutional Trustee shall not resign as a Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders pursuant to the terms of
the Securities set forth in the Securities Certificates and Annex I
hereto; or
(ii) a successor Institutional Trustee has been appointed and
has accepted that appointment in accordance with Section 5.7 (a
"Successor Institutional Trustee").
(g) The Institutional Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer of the Institutional Trustee occurs and is continuing, the Institutional
Trustee shall, for the benefit of Holders, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of such
Securities.
(h) The Institutional Trustee shall be authorized to undertake any actions
set forth in ss. 317(a) of the Trust Indenture Act.
(i) For such time as the Institutional Trustee is the Paying
Agent, the Institutional Trustee may authorize one or more Persons acceptable to
the Regular Trustees to act as additional Paying Agents and to pay
Distributions, redemption payments or liquidation payments on behalf of the
Trust with respect to all Securities and any such Paying Agent shall comply with
ss. 317(b) of the Trust Indenture Act. Any such additional Paying Agent may be
removed by the Institutional Trustee at any time the Institutional Trustee
remains as Paying Agent and a successor Paying Agent or additional Paying Agents
may be (but are not required to be) appointed at any time by the Institutional
Trustee while the Institutional Trustee is so acting as Paying Agent.
(j) Subject to this Section 3.8, the Institutional Trustee
shall have none of the duties, liabilities, powers or the authority of the
Regular Trustees set forth in Section 3.6.
(k) The Institutional Trustee shall give prompt written notice
to the holders of the Securities of any notice received by it from the Debenture
Issuer of its election to defer payments of interest on the Debentures by
extending the interest payment period with respect thereto.
The Institutional Trustee must exercise the powers set forth
in this Section 3.8 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Institutional Trustee
shall not take any action that is inconsistent with the purposes and functions
of the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Institutional Trustee.
(a) The Institutional Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default under this
Declaration that may have occurred, shall undertake to perform only such duties
as are specifically set forth in this Declaration and in the Securities and no
implied covenants shall be read into this Declaration against the Institutional
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.6) of which a Responsible Officer of the
Institutional Trustee has actual knowledge, the Institutional Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to
relieve the Institutional Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Institutional
Trustee shall be determined solely by the express provisions
of this Declaration and in the Securities and the
Institutional Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Declaration and in the Securities, and no
implied covenants or obligations shall be read into this
Declaration or the Securities against the Institutional
Trustee; and
(B) in the absence of bad faith on the part of the
Institutional Trustee, the Institutional Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Institutional
Trustee and conforming to the requirements of this
Declaration; provided, however, that in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Institutional
Trustee, the Institutional Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Declaration;
(ii) the Institutional Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Institutional Trustee, unless it shall be proved that the Institutional
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Institutional 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 liquidation amount of the Capital Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or
power conferred upon the Institutional Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the Institutional
Trustee against such risk or liability is not reasonably assured to it;
(v) the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Institutional Trustee Account shall be to deal with such property
in a similar manner as the Institutional Trustee deals with similar
property for its own account, subject to the protections and
limitations on liability afforded to the Institutional Trustee under
this Declaration and the Trust Indenture Act;
(vi) the Institutional Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or sufficiency
of the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith;
(vii) the Institutional Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
in writing with the Sponsor. Money held by the Institutional Trustee
need not be segregated from other funds held by it except in relation
to the Institutional Trustee Account maintained by the Institutional
Trustee pursuant to Section 3.8(c)(i) and except to the extent
otherwise required by law; and
(viii) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of the
Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Institutional Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Institutional Trustee may conclusively rely and
shall be fully 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,
sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration may be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration,
the Institutional Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any
action hereunder, the Institutional Trustee (unless other
evidence is herein specifically prescribed) may, in the absence
of bad faith on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such request, shall
be promptly delivered by the Sponsor or the Regular Trustees;
(iv) the Institutional Trustee shall have no duty to see to
any recording, filing or registration of any instrument
(including any financing or continuation statement or any filing
under tax or securities laws) or any rerecording, refiling or
registration thereof;
(v) the Institutional Trustee may consult with counsel or
other experts of its selection and the advice or opinion of such
counsel and experts with respect to legal matters or advice
within the scope of such experts' area of expertise 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 accordance with such advice or opinion, such counsel may
be counsel to the Sponsor or any of its Affiliates, and may
include any of its employees. The Institutional Trustee shall
have the right at any time to seek instructions concerning the
administration of this Declaration from any court of competent
jurisdiction;
(vi) the Institutional Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Institutional Trustee
security and indemnity, reasonably satisfactory to the
Institutional Trustee, against the costs, expenses (including
reasonable attorneys' fees and expenses and the expenses of the
Institutional Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may
be requested by the Institutional Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to relieve
the Institutional Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers
vested in it by this Declaration;
(vii) the Institutional 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 Institutional Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit;
(viii) the Institutional Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, custodians, nominees or
attorneys and the Institutional Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(ix) any action taken by the Institutional Trustee or its
agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Institutional Trustee or its
agents alone shall be sufficient and effective to perform any
such action and no third party shall be required to inquire as to
the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the
Institutional Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Institutional Trustee (i)
may request instructions from the Holders which instructions may
only be given by the Holders of the same proportion in
liquidation amount of the Securities as would be entitled to
direct the Institutional Trustee under the terms of the
Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in or accordance
with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Institutional Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration; and
(xii) the Institutional Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good
faith, without negligence, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose
any duty or obligation on the Institutional Trustee to perform any act or acts
or exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which the Institutional
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Institutional Trustee described
in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of ss.3807 of the Business Trust Act.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act, each Regular Trustee is
authorized to execute on behalf of the Trust any documents that the Regular
Trustees have the power and authority to execute pursuant to Section 3.6.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Article 8 hereof, shall have existence up to December 31, 2027.
SECTION 3.15 Mergers.
(a) The Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c).
(b) The Trust may, at the request of the Sponsor, with the
consent of the Regular Trustees or, if there are more than two, a majority of
the Regular Trustees and without the consent of the Holders, the Delaware
Trustee or the Institutional Trustee, merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the Securities (the
"Successor Securities") so long as the Successor Securities
rank the same as the Securities rank with respect to
Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) the Successor Securities that are issued in place of
the Capital Securities are listed, or any such Successor
Securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on
which the Capital Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded
by any nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the Holders (including any
Successor Securities) in any material respect (other than with
respect to any dilution of such Holders' interests in the new
entity);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor and the
Institutional Trustee have received an opinion of an independent
counsel to the Trust experienced in such matters to the effect
that:
(A) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of
the Holders (including any Successor Securities) in any
material respect (other than with respect to any dilution of
the Holders' interest in the new entity); and
(B) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the
Trust nor the Successor Entity will be required to register
as an Investment Company; and
(C) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust (or
the Successor Entity) will be treated as a grantor trust for
United States income tax purposes; and
(viii) the Sponsor or any permitted successor or assignee
owns all of the common securities of such Successor Entity and
guarantees the obligations of such Successor Entity under the
Successor Securities at least to the extent provided by the
Capital Securities Guarantee and the Common Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the Successor Entity not to be classified as a grantor
trust for United States federal income tax purposes.
ARTICLE 4
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
At the Closing Time, the Sponsor will purchase all of the
Common Securities then issued by the Trust, in an amount at least equal to 3% of
the capital of the Trust, at the same time as the Transfer Restricted Capital
Securities are issued and sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare the Offering Memorandum and to prepare for
filing by the Trust with the Commission any Registration Statement, including
any amendments thereto as contemplated by the Registration Rights Agreement;
(b) to determine the States and foreign jurisdictions in which
to take appropriate action to qualify or register for sale all or part of the
Capital Securities and to do any and all such acts, other than actions which
must be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such States and foreign jurisdictions;
(c) if deemed necessary or advisable by the Sponsor, to
prepare for filing by the Trust an application to the New York Stock Exchange or
any other national stock exchange or the Nasdaq National Market for listing or
quotation of the Capital Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
(e) to negotiate the terms of the Purchase Agreement and the Registration
Rights Agreement providing for the sale of the Capital Securities.
SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights described in Section
3.8(e) hereof and Section 5 of Annex I hereto of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Debenture Issuer to pay
interest or principal on the Debentures, to institute a proceeding directly
against the Debenture Issuer for enforcement of its payment obligations on the
Debentures.
ARTICLE 5
TRUSTEES
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee.
The number of Trustees initially shall be four (4), and:
(a) at any time before the issuance of any Securities, the Sponsor may, by
written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holders of a majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee, in the case of a natural person,
shall be a person who is a resident of the State of Delaware or that, if not a
natural person, is an entity which has its principal place of business in the
State of Delaware and otherwise meets the requirements of applicable law (the
"Delaware Trustee"); (2) there shall be at least one Trustee who is an employee
or officer of, or is affiliated with the Sponsor (a "Regular Trustee"); and (3)
one Trustee shall be the Institutional Trustee for so long as this Declaration
is required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements. Notwithstanding the above, unless an Event of Default shall have
occurred and be continuing, at any time or times, for the purpose of meeting the
legal requirements of the Trust Indenture Act or of any jurisdiction in which
any part of the Trust's property may at the time be located, the Holders of a
Majority in liquidation amount of the Common Securities acting as a class at a
meeting of the Holders of the Common Securities, and the Regular Trustees shall
have power to appoint one or more persons either to act as a co-trustee, jointly
with the Institutional Trustee, of all or any part of the Trust's property, or
to act as separate trustee of any such property, in either case with such powers
as may be provided in the instrument of appointment, and to vest in such person
or persons in such capacity any property, title, right or power deemed necessary
or desirable, subject to the provisions of this Declaration. In case an Event of
Default has occurred and is continuing, the Institutional Trustee alone shall
have power to make any such appointment of a co-trustee.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided that, if the Institutional Trustee has its principal place of business
in the State of Delaware and otherwise meets the requirements of applicable law,
then the Institutional Trustee shall also be the Delaware Trustee and Section
3.11 shall have no application.
SECTION 5.3 Institutional Trustee; Eligibility.
(a) There shall at all times be one Trustee (the
"Institutional Trustee") which shall act as Institutional Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this Section
5.3(a)(ii), 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.
(b) If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 5.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.7(c).
(c) If the Institutional Trustee has or shall acquire any
"conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture
Act, the Institutional Trustee and the Holder of the Common Securities (as if it
were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in
all respects comply with the provisions of ss. 310(b) of the Trust Indenture
Act.
(d) The Capital Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Institutional Trustee shall be:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Manager Public Utilities Group
SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware
Trustee Generally.
Each Regular Trustee and the Delaware Trustee (unless the
Institutional Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 5.5 Regular Trustees.
The initial Regular Trustees shall be:
Wayne Boston
Richard Childs
(a) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any matter
over which the Regular Trustees have power to act, any power of the Regular
Trustees may be exercised by, or with the consent of, any one such Regular
Trustee.
(b) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6; and
(c) Any Regular Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purposes of signing any documents which the Regular
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 5.6 Delaware Trustee.
The initial Delaware Trustee shall be:
Bankers Trust (Delaware)
1001 Jefferson Street
Suite 550
Wilmington, Delaware 19801-1457
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.7(b) of this Declaration and to
Section 6(b) of Annex I hereto, Trustees may be appointed or removed without
cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, by vote of the
Holders of a Majority in liquidation amount of the Common
Securities voting as a class at a meeting of the Holders of the
Common Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to
the Institutional Trustee or the Delaware Trustee, by vote of
Holders of a Majority in liquidation amount of the Capital
Securities voting as a class at a meeting of Holders of the
Capital Securities.
(b) (i) The Trustee that acts as Institutional Trustee shall
not be removed in accordance with Section 5.7(a) until a Successor Institutional
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Institutional Trustee and delivered to the
Regular Trustees, Sponsor, the Delaware Trustee and the Institutional Trustee
being removed; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with this Section 5.7(a) until a successor
Trustee possessing the qualifications to act as Delaware Trustee under
Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed by such Successor Delaware Trustee and delivered to the
Regular Trustees, the Institutional Trustee, the Delaware Trustee being
removed and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as the
Institutional Trustee shall be effective:
(A) until a Successor Institutional Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Institutional Trustee and delivered to
the Trust, the Regular Trustees, the Delaware Trustee, the
Sponsor and the resigning Institutional Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of
the Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Regular Trustees, the Institutional Trustee, the Sponsor and the
resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Delaware Trustee or Successor
Institutional Trustee, as the case may be, if the Institutional Trustee or the
Delaware Trustee delivers an instrument of resignation in accordance with this
Section 5.7.
(e) If no Successor Institutional Trustee or Successor
Delaware Trustee shall have been appointed and accepted appointment as provided
in this Section 5.7 within 60 days after delivery of an instrument of
resignation or removal, the Institutional Trustee or Delaware Trustee resigning
or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Institutional Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Institutional
Trustee or Successor Delaware Trustee, as the case may be.
(f) No Institutional Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Institutional Trustee
or successor Delaware Trustee, as the case may be.
SECTION 5.8 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees or,
if there are more than two, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.7.
SECTION 5.9 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to dissolve, terminate or annul the Trust. Whenever a
vacancy in the number of Regular Trustees shall occur, until such vacancy is
filled by the appointment of an Regular Trustee in accordance with Section 5.7,
the Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.10 Meetings.
If there is more than one Regular Trustee, meetings of the
Regular Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before such meeting. Notice of any telephonic meetings of the
Regular Trustees or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a brief
statement of the time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of a Regular Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Regular
Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless provided otherwise in this Declaration, any action of
the Regular Trustees may be taken at a meeting by vote of a majority of the
Regular Trustees present (whether in person or by telephone) and eligible to
vote with respect to such matter, provided that a Quorum is present, or without
a meeting by the unanimous written consent of the Regular Trustees. In the event
there is only one Regular Trustee, any and all action of such Regular Trustee
shall be evidenced by a written consent of such Regular Trustee.
SECTION 5.11 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise as the Regular Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 5.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Institutional Trustee or the Delaware
Trustee or any Regular Trustee that is not a natural person, as the case may be,
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
Institutional Trustee or the Delaware Trustee, as the case may be, shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Institutional Trustee or the Delaware Trustee, as the case
may be, shall be the successor of the Institutional Trustee or the Delaware
Trustee, as the case may be, 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.
ARTICLE 6
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities and Annex I hereto. If and
to the extent that the Debenture Issuer makes a payment of interest (including
compounded interest), Additional Amounts (as defined in the Indenture), premium
and/or principal on the Debentures held by the Institutional Trustee or
Additional Interest (as defined in the Registration Rights Agreement) or any
payments of Additional Sums (the amount of any such payments being a "Payment
Amount"), the Institutional Trustee shall and is directed, to the extent funds
are available for that purpose, to make a distribution (a "Distribution") of the
Payment Amount to Holders.
ARTICLE 7
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust issue
one class of capital securities representing undivided preferred beneficial
interests in the assets of the Trust having such terms as are set forth in Annex
I (the "Transfer Restricted Capital Securities") and one class of common
securities representing undivided common beneficial interests in the assets of
the Trust having such terms as are set forth in Annex I (the "Common
Securities"). The Regular Trustees shall on behalf of the Trust issue one class
of capital securities representing undivided preferred beneficial interests in
the Trust having such terms as set forth in Annex I (the "New Capital
Securities") in exchange for Transfer Restricted Capital Securities accepted for
exchange in the Exchange Offer or issued pursuant to a Registration Statement,
which New Capital Securities shall not bear the legends required by Section
9.2(i) unless the Holder of such Transfer Restricted Capital Securities is
either (A) a broker-dealer who purchased such Transfer Restricted Capital
Securities directly from the Trust for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (B) a Person participating in the
distribution of the Transfer Restricted Capital Securities or (C) a Person who
is an affiliate (as defined in Rule 144A) of the Trust. The Trust shall issue no
securities or other interests in the assets of the Trust other than the
Securities.
(b) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable undivided beneficial interests in the assets of
the Trust.
(d) Every Person, by virtue of having become a Holder or a
Capital Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by a
Regular Trustee. In case any Regular Trustee of the Trust who shall have signed
any of the Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not ceased to be such Regular Trustee; and any Securities may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be the Regular Trustees of the Trust, although at the date of
the execution and delivery of the Declaration any such person was not such a
Regular Trustee.
(b) One Regular Trustee shall sign the Capital Securities for
the Trust by manual or facsimile signature. Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Capital Security shall not be valid until authenticated by
the manual signature of an authorized signatory of the Institutional Trustee.
The signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular
Trustee, the Institutional Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in the Terms in Annex I hereto except
as provided in Section 7.6.
The Institutional Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Capital Securities. An authenticating
agent may authenticate Capital Securities whenever the Institutional Trustee may
do so. Each reference in this Declaration to authentication by the Institutional
Trustee includes authentication by such agent. An authenticating agent has the
same rights as the Institutional Trustee to deal with the Sponsor or an
Affiliate.
SECTION 7.3 Form and Dating.
The Capital Securities and the Institutional Trustee's
certificate of authentication shall be substantially in the form of Exhibit A-1
and the Common Securities shall be substantially in the form of Exhibit A-2,
each of which is hereby incorporated in and expressly made a part of this
Declaration. Certificates representing the Securities may be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Regular Trustees, as evidenced by their execution thereof. The
Securities may have letters, CUSIP or other numbers, notations or other marks of
identification or designation and such legends or endorsements required by law,
stock exchange rule, agreements to which the Trust is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Trust). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Institutional Trustee in writing.
Each Capital Security shall be dated the date of its authentication. The terms
and provisions of the Securities set forth in Annex I and the forms of
Securities set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Institutional Trustee and the
Sponsor, by their execution and delivery of this Declaration, expressly agree to
such terms and provisions and to be bound thereby.
(a) Global Securities. Securities offered and sold to QIBs in
reliance on Rule 144A, as provided in the Purchase Agreement, shall be issued in
the form of one or more, permanent global Securities in definitive, fully
registered form without distribution coupons with the global legend and
Restricted Securities Legend set forth in Exhibit A-1 hereto (the "Restricted
Global Capital Securities") or in the form of Regulation S Global Capital
Securities (together with the Restricted Global Capital Securities, the "Global
Capital Securities"), which shall be deposited on behalf of the purchasers of
the Capital Securities represented thereby with the Institutional Trustee, at
its New York office, as custodian for the Clearing Agency, and registered in the
name of the Clearing Agency or a nominee of the Clearing Agency, duly executed
by the Trust and authenticated by the Institutional Trustee as hereinafter
provided. The number of Capital Securities represented by the Global Capital
Securities may from time to time be increased or decreased by adjustments made
on the records of the Institutional Trustee and the Clearing Agency or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 7.3(b) shall apply
only to the Global Capital Security and such other Capital Securities in global
form as may be authorized by the Trust to be deposited with or on behalf of the
Clearing Agency.
The Trust shall execute and the Institutional Trustee shall,
in accordance with this Section 7.3, authenticate and make available for
delivery initially one or more Global Capital Securities that (i) shall be
registered in the name of Cede & Co. or other nominee of such Clearing Agency
and (ii) shall be delivered by the Trustee to such Clearing Agency pursuant to
such Clearing Agency's written instructions or held by the Institutional Trustee
as custodian for the Clearing Agency.
Members of, or participants in, the Clearing Agency
("Participants") shall have no rights under this Declaration with respect to any
Global Capital Security held on their behalf by the Clearing Agency or by the
Institutional Trustee as the custodian of the Clearing Agency or under such
Global Capital Security, and the Clearing Agency may be treated by the Trust,
the Institutional Trustee and any agent of the Trust or the Institutional
Trustee as the absolute owner of such Global Capital Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trust, the Institutional Trustee or any agent of the Trust or the Institutional
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Clearing Agency or impair, as between the
Clearing Agency and its Participants, the operation of customary practices of
such Clearing Agency governing the exercise of the rights of a holder of a
beneficial interest in any Global Capital Security.
(c) Definitive Capital Securities. Except as provided in
Section 7.9, owners of beneficial interests in a Global Capital Security will
not be entitled to receive physical delivery of certificated Capital Securities
("Definitive Capital Securities"). Purchasers of Other Capital Securities who
are "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) will receive Capital Securities in the form of individual
certificates in definitive, fully registered form without distribution coupons
and with the Restricted Securities Legend set forth in Exhibit A-1 hereto
("Restricted Definitive Capital Securities"); provided, however, that upon
transfer of such Restricted Definitive Capital Securities to a QIB, such
Restricted Definitive Capital Securities will, unless the Global Capital
Security has previously been exchanged, be exchanged for an interest in a Global
Capital Security pursuant to the provisions of Section 9.2. Restricted
Definitive Capital Securities will bear the Restricted Securities Legend set
forth on Exhibit A-1 unless removed in accordance with this Section 7.3 or
Section 9.2.
(d) Authorized Denominations. The Capital Securities are issuable only in
denominations of $1,000 and any integral multiple thereof.
SECTION 7.4 Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in the Borough of Manhattan, The City
of New York, (i) an office or agency where Capital Securities may be presented
for registration of transfer ("Registrar"), (ii) an office or agency where
Capital Securities may be presented for payment ("Paying Agent") and (iii) an
office or agency where Securities may be presented for exchange ("Exchange
Agent"). The Registrar shall keep a register of the Capital Securities and of
their transfer. The Trust may appoint the Registrar, the Paying Agent and the
Exchange Agent and may appoint one or more co-registrars, one or more additional
paying agents and one or more additional exchange agents in such other locations
as it shall determine. The term "Registrar" includes any additional registrar,
"Paying Agent" includes any additional paying agent and the term "Exchange
Agent" includes any additional exchange agent. The Trust may change any Paying
Agent, Registrar, co-registrar or Exchange Agent without prior notice to any
Holder. The Paying Agent shall be permitted to resign as Paying Agent upon 30
days' written notice to the Regular Trustees and the Sponsor. The Trust shall
notify the Institutional Trustee of the name and address of any Agent not a
party to this Declaration. If the Trust fails to appoint or maintain another
entity as Registrar, Paying Agent or Exchange Agent, the Institutional Trustee
shall act as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar, or Exchange Agent. The Trust shall act as Paying Agent, Registrar,
co-registrar, and Exchange Agent for the Common Securities.
The Trust initially appoints the Institutional Trustee as
Registrar, Paying Agent, and Exchange Agent for the Capital Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the
Institutional Trustee to agree in writing that the Paying Agent will hold in
trust for the benefit of Holders or the Institutional Trustee all money held by
the Paying Agent for the payment of liquidation amounts or Distributions on the
Securities, and will notify the Institutional Trustee if there are insufficient
funds for such purpose. While any such insufficiency continues, the
Institutional Trustee may require a Paying Agent to pay all money held by it to
the Institutional Trustee. The Trust at any time may require a Paying Agent to
pay all money held by it to the Institutional Trustee and to account for any
money disbursed by it. Upon payment over to the Institutional Trustee, the
Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have
no further liability for the money. If the Trust or the Sponsor or an Affiliate
of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 7.6 Replacement Securities.
If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Institutional Trustee, the Trust shall issue and the Institutional Trustee shall
authenticate a replacement Security if the Institutional Trustee's and the
Trust's requirements, as the case may be, are met. An indemnity bond must be
provided by the Holder which, in the judgment of the Institutional Trustee, is
sufficient to protect the Trustees, the Sponsor or any authenticating agent from
any loss which any of them may suffer if a Security is replaced. The Trust may
charge such Holder for its expenses in replacing a Security.
Every replacement Security is an additional beneficial
interest in the assets of the Trust.
SECTION 7.7 Outstanding Capital Securities.
The Capital Securities outstanding at any time are all the
Capital Securities authenticated by the Institutional Trustee except for those
cancelled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant
to Section 7.6 hereof, it ceases to be outstanding unless the Institutional
Trustee receives proof satisfactory to it that the replaced, paid or purchased
Capital Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with
the terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.
A Capital Security does not cease to be outstanding because
one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.8 Capital Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Institutional Trustee shall be
fully protected in relying on any such direction, waiver or consent, only
Securities which the Institutional Trustee actually knows are so owned shall be
so disregarded.
SECTION 7.9 Temporary Securities.
(a) Until Definitive Securities are ready for delivery, the
Trust may prepare and the appropriate Trustee or Trustees shall execute and, in
the case of the Capital Securities, the Institutional Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Trust considers
appropriate for temporary Securities. Without unreasonable delay, the Trust
shall prepare and, in the case of the Capital Securities, the Institutional
Trustee shall authenticate Definitive Securities in exchange for temporary
Securities.
(b) Except in connection with a transfer to a purchaser of
Other Capital Securities, a Global Capital Security deposited with the Clearing
Agency or with the Institutional Trustee as custodian for the Clearing Agency
pursuant to Section 7.3 shall be transferred to the beneficial owners thereof in
the form of certificated Capital Securities only if such transfer complies with
Section 9.2 and (i) the Clearing Agency notifies the Sponsor that it is
unwilling or unable to continue as Clearing Agency for such Global Capital
Security or if at any time such Clearing Agency ceases to be a "clearing agency"
registered under the Exchange Act and a clearing agency is not appointed by the
Sponsor within 90 days of such notice, (ii) a Default or an Event of Default has
occurred and is continuing or (iii) the Trust at its sole discretion elects to
cause the issuance of certificated Capital Securities.
(c) Any Global Capital Security that is transferable to the
beneficial owners thereof in the form of certificated Capital Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the
Institutional Trustee located in the Borough of Manhattan, The City of New York,
to be so transferred, in whole or from time to time in part, without charge, and
the appropriate Trustee or Trustees shall execute any such Global Capital
Security and the Institutional Trustee shall authenticate and make available for
delivery, upon such transfer of each portion of such Global Capital Security, an
equal aggregate liquidation amount of Securities of authorized denominations in
the form of certificated Capital Securities. Any portion of a Global Capital
Security transferred pursuant to this Section shall be registered in such names
as the Clearing Agency shall direct. Any Capital Security in the form of
certificated Capital Securities delivered in exchange for an interest in the
Restricted Global Capital Security shall, except as otherwise provided by
Sections 7.3 and 9.1, bear the Restricted Securities Legend set forth in Exhibit
A-1 hereto.
(d) Subject to the provisions of Section 7.9(c), the Holder of
a Global Capital Security may grant proxies and otherwise authorize any person,
including Participants and persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.
(e) In the event of the occurrence of any of the events
specified in Section 7.9(b), the Trust will promptly make available to the
Institutional Trustee a reasonable supply of certificated Capital Securities in
fully registered form without distribution coupons.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Capital Securities to the
Institutional Trustee for cancellation. The Registrar, Paying Agent and Exchange
Agent shall forward to the Institutional Trustee any Capital Securities
surrendered to them for registration of transfer, redemption, exchange or
payment. The Institutional Trustee shall promptly cancel all Capital Securities,
surrendered for registration of transfer, redemption, exchange, payment,
replacement or cancellation and shall dispose of cancelled Capital Securities as
the Trust directs, provided that the Institutional Trustee shall not be
obligated to destroy Capital Securities. The Trust may not issue new Capital
Securities to replace Capital Securities that it has paid or that have been
delivered to the Institutional Trustee for cancellation or that any holder has
exchanged.
SECTION 7.11 CUSIP Numbers.
The Trust in issuing the Capital Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Institutional Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders of
Capital Securities; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Capital Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Capital Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers. The Sponsor will promptly notify the
Institutional Trustee of any change in the CUSIP numbers.
ARTICLE 8
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall automatically terminate upon the earliest to occur of:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the
revocation of the Sponsor's Memorandum and Articles of Association and
the expiration of 90 days after the date of revocation without a
reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution of the
Trust by a court of competent jurisdiction;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities;
(v) when all of the Debentures shall have been distributed to the
Holders of the Securities in exchange for all of the Securities in
accordance with the terms thereof; or
(vi) the expiration of the term of the Trust provided in Section
3.14.
(b) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), the Regular Trustees shall file a certificate of cancellation
with the Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9 and Article 10 shall survive the
termination of the Trust.
ARTICLE 9
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article 9, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. Any transfer or purported transfer of any
security not made in accordance with this Declaration shall be null and void.
(c) The Sponsor may not transfer the Common Securities except to its
Affiliate or any permitted successor under the Indenture.
(d) The Regular Trustees shall provide for the registration of
Capital Securities and of the transfer of Capital Securities, which will be
effected without charge but only upon payment (with such indemnity as the
Regular Trustees may require) in respect of any tax or other governmental
charges that may be imposed in relation to it. Upon surrender for registration
of transfer of any Capital Securities, the Regular Trustees shall cause one or
more new Securities to be issued in the name of the designated transferee or
transferees. Every Capital Security surrendered for registration of transfer
shall be accompanied by a written instrument of transfer in form satisfactory to
the Regular Trustees and the Registrar duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Capital Security surrendered
for registration of transfer shall be canceled by the Institutional Trustees. A
transferee of a Capital Security shall be entitled to the rights and subject to
the obligations of a Holder hereunder upon the receipt by such transferee of a
Capital Security. By acceptance of a Security, each transferee shall be deemed
to have agreed to be bound by this Declaration.
SECTION 9.2 Transfer Procedures and Restrictions.
(a) General. Except as otherwise provided in Section 9.2(b),
if Capital Securities are issued upon the transfer, exchange or replacement of
Capital Securities bearing the Restricted Securities Legend set forth in Exhibit
A-1 hereto, or if a request is made to remove such Restricted Securities Legend
on Capital Securities, the Capital Securities so issued shall bear the
Restricted Securities Legend, or the Restricted Securities Legend shall not be
removed, as the case may be, unless there is delivered to the Trust and the
Institutional Trustee such satisfactory evidence, which shall include an Opinion
of Counsel licensed to practice law in the State of New York, as may be
reasonably required by the Sponsor and the Institutional Trustee, that neither
the legend nor the restrictions on transfer set forth therein are required to
ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144
or Regulation S under the Securities Act or, with respect to Restricted
Securities, that such Securities are not "restricted" within the meaning of Rule
144. Upon provision of such satisfactory evidence, the Institutional Trustee, at
the written direction of the Trust, shall authenticate and deliver Capital
Securities that do not bear the legend.
(b) Transfers After Effectiveness of a Registration Statement.
After the effectiveness of a Registration Statement with respect to any Capital
Securities, all requirements pertaining to legends on such Capital Securities
will cease to apply, and beneficial interests in a Capital Security in global
form without legends will be available to transferees of such Capital
Securities, upon exchange of the transferring holder's Restricted Definitive
Capital Security or directions to transfer such Holder's beneficial interest in
the Global Capital Security. No such transfer or exchange of a Restricted
Definitive Capital Security or of an interest in the Global Capital Security
shall be effective unless the transferor delivers to the Trust a certificate in
a form substantially similar to that attached hereto as the "Form of Assignment"
in Exhibit A-1. Except as otherwise provided in Section 9.2(m), after the
effectiveness of a Registration Statement, the Trust shall issue and the
Institutional Trustee, upon a written order of the Trust signed by one Regular
Trustee, shall authenticate a Capital Security in global form without the
Restricted Securities Legend (the "Unrestricted Global Capital Security") to
deposit with the Clearing Agency to evidence transfers of beneficial interests
from the (i) Global Capital Security and (ii) Restricted Definitive Capital
Securities.
(c) Transfer and Exchange of Definitive Capital Securities. When Definitive
Capital Securities are presented to the Registrar
(x) to register the transfer of such Definitive Capital Securities; or
(y) to exchange such Definitive Capital Securities for an equal number of
Definitive Capital Securities,the Registrar or co-registrar shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Definitive Capital
Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Trust and the
Registrar or co-registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Definitive Capital Securities that are
Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from
such Holder to that effect; or
(B) if such Restricted Capital Securities are being
transferred: (i) a certification from the transferor in a form
substantially similar to that attached hereto as the "Form of
Assignment" in Exhibit A-1, and (ii) if the Trust or Registrar
so requests, evidence reasonably satisfactory to them as to
the compliance with the restrictions set forth in the
Restricted Securities Legend.
(d) Special Transfer Provisions.
(i) At any time at the request of the beneficial holder of a
Capital Security in global form, such beneficial holder shall be
entitled to obtain a definitive Capital Security upon written request
to the Institutional Trustee in accordance with the standing
instructions and procedures existing between the Clearing Agency and
the Institutional Trustee for the issuance thereof. Any transfer of a
beneficial interest in a Capital Security in global form which cannot
be effected through book-entry settlement must be effected by the
delivery to the transferee (or its nominee) of a definitive Capital
Security or Securities registered in the name of the transferee (or its
nominee) on the books maintained by the Security Registrar. With
respect to any such transfer, the Institutional Trustee will cause, in
accordance with the standing instructions and procedures existing
between the Clearing Agency and the Institutional Trustee, the
aggregate liquidation amount of the Global Capital Security to be
reduced and, following such reduction, the Institutional Trustee will
cause Definitive Capital Securities in the appropriate aggregate
liquidation amount in the name of such transferee (or its nominee) and
bearing such restrictive legends as may be required by this Declaration
to be delivered. In connection with any such transfer, the
Institutional Trustee may request such representations and agreements
relating to the restrictions on transfer of such Capital Securities
from such transferee (or such transferee's nominee) as the
Institutional Trustee may reasonably require.
(ii) So long as the Capital Securities are eligible for
book-entry settlement, or unless otherwise required by law, upon any
transfer of a definitive Capital Security to a QIB in accordance with
Rule 144A, unless otherwise requested by the transferor, and upon
receipt of the definitive Capital Security being so transferred,
together with a certification from the transferor that the transferor
reasonably believes the transferee is a QIB (or other evidence
satisfactory to the Institutional Trustee), the Institutional Trustee
shall make an endorsement on the Restricted Global Capital Security to
reflect an increase in the aggregate liquidation amount of the
Restricted Global Capital Security, and the Institutional Trustee shall
cancel such definitive Capital Security and cause, in accordance with
the standing instructions and procedures existing between the Clearing
Agency and the Institutional Trustee, the aggregate liquidation amount
of Capital Securities represented by the Restricted Global Security to
be increased accordingly.
(iii) So long as the Capital Securities are eligible for
book-entry settlement, or unless otherwise required by law, upon any
transfer of a definitive Capital Security in accordance with Regulation
S, if requested by the transferor, and upon receipt of the definitive
Capital Security or Capital Securities being so transferred, together
with a certification from the transferor that the transfer was made in
accordance with Rule 903 or 904 of Regulation S or Rule 144 under the
Securities Act (or other evidence satisfactory to the Institutional
Trustee), the Institutional Trustee shall make or direct the custodian
to make, an endorsement on the Regulation S Global Security to reflect
an increase in the aggregate liquidation amount of the Capital
Securities represented by the Regulation S Global Security, and the
Institutional Trustee shall cancel such definitive Capital Security or
Capital Securities and cause or direct the Clearing Agency to cause, in
accordance with the standing instructions and procedures existing
between the Clearing Agency and the Institutional Trustee, the
aggregate liquidation amount of Capital Securities represented by the
Regulation S Global Security to be increased accordingly.
(iv) If a holder of a beneficial interest in the Restricted
Global Security wishes at any time to exchange its interest in the
Restricted Global Security for an interest in the Regulation S Global
Security, or to transfer its interest in the Restricted Global Security
to a person who wishes to take delivery thereof in the form of an
interest in the Regulation S Global Security, such holder may, subject
to the rules and procedures of the Clearing Agency and to the
requirements set forth in the following sentence, exchange or cause the
exchange or transfer or cause the transfer of such interest for an
equivalent beneficial interest in the Regulation S Global Security.
Upon receipt by the Institutional Trustee, as transfer agent of (1)
instructions given in accordance with the Clearing Agency's procedures
from or on behalf of a holder of a beneficial interest in the
Restricted Global Security, directing the Institutional Trustee (via
DWAC), as transfer agent, to credit or cause to be credited a
beneficial interest in the Regulation S Global Security in an amount
equal to the beneficial interest in the Restricted Global Security to
be exchanged or transferred, (2) a written order given in accordance
with the Clearing Agency procedures containing information regarding
the Euroclear or Cedel Bank account to be credited with such increase
and the name of such account, and (3) a certificate given by the holder
of such beneficial interest stating that the exchange or transfer of
such interest has been made pursuant to and in accordance with Rule 903
or Rule 904 of Regulation S or Rule 144 under the Securities Act (or
other evidence satisfactory to the Institutional Trustee), the
Institutional Trustee, as transfer agent, shall promptly deliver
appropriate instructions to the Clearing Agency (via DWAC), its
nominee, or the custodian for the Clearing Agency, as the case may be,
to reduce or reflect on its records a reduction of the Restricted
Global Security by the aggregate liquidation amount of the beneficial
interest in such Restricted Global Security to be so exchanged or
transferred from the relevant participant, and the Institutional
Trustee, as transfer agent, shall promptly deliver appropriate
instructions (via DWAC) to the Clearing Agency, its nominee, or the
custodian for the Clearing Agency, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase
of the liquidation amount of such Regulation S Global Security by the
aggregate liquidation amount of the beneficial interest in such
Restricted Global Security to be so exchanged or transferred, and to
credit or cause to be credited to the account of the person specified
in such instructions (who may be Morgan Guaranty Trust Company of New
York, Brussels office, as operator of Euroclear or Cedel Bank or
another agent member of Euroclear or Cedel Bank or both, as the case
may be, acting for and on behalf of them) a beneficial interest in such
Regulation S Global Security equal to the reduction in the liquidation
amount of such Restricted Global Security.
(v) If a holder of a beneficial interest in the Regulation S
Global Security wishes at any time to exchange its interest in the
Regulation S Global Security for an interest in the Restricted Global
Security, or to transfer its interest in the Regulation S Global
Security to a person who wishes to take delivery thereof in the form of
an interest in the Restricted Global Security, such holder may, subject
to the rules and procedures of Euroclear or Cedel Bank and the Clearing
Agency, as the case may be, and to the requirements set forth in the
following sentence, exchange or cause the exchange or transfer or cause
the transfer of such interest for an equivalent beneficial interest in
such Restricted Global Security. Upon receipt by the Institutional
Trustee, as transfer agent of (1) instructions given in accordance with
the procedures of Euroclear or Cedel Bank and the Clearing Agency, as
the case may be, from or on behalf of a beneficial owner of an interest
in the Regulation S Global Security directing the Institutional
Trustee, as transfer agent, to credit or cause to be credited a
beneficial interest in the Restricted Global Security in an amount
equal to the beneficial interest in the Regulation S Global Security to
be exchanged or transferred, (2) a written order given in accordance
with the procedures of Euroclear or Cedel Bank and the Clearing Agency,
as the case may be, containing information regarding the account with
the Clearing Agency to be credited with such increase and the name of
such account, and (3) prior to the expiration of the Restricted Period,
a certificate given by the holder of such beneficial interest and
stating that the person transferring such interest in such Regulation S
Global Security reasonably believes that the person acquiring such
interest in the Restricted Global Security is a QIB and is obtaining
such beneficial interest in a on meeting the requirements of Rule 144A
and any applicable securities laws of any state of the United States or
any other jurisdiction (or other evidence satisfactory to the
Institutional Trustee), the Institutional Trustee, as transfer agent,
shall promptly deliver (via DWAC) appropriate instructions to the
Clearing Agency, its nominee, or the custodian for the Clearing Agency,
as the case may be, to reduce or reflect on its records a reduction of
the Regulation S Global Security by the aggregate liquidation amount of
the beneficial interest in such Regulation S Global Security to be
exchanged or transferred, and the Institutional Trustee, as transfer
agent, shall promptly deliver (via DWAC) appropriate instructions to
the Clearing Agency, its nominee, or the custodian for the Clearing
Agency, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the liquidation
amount of the Restricted Global Security by the aggregate liquidation
amount of the beneficial interest in the Regulation S Global Security
to be so exchanged or transferred, and to credit or cause to be
credited to the account of the person specified in such instructions a
beneficial interest in the Restricted Global Security equal to the
reduction in the liquidation amount of the Regulation S Global
Security. After the expiration of the Restricted Period, the
certification requirement set forth in clause (3) of the second
sentence of this Section 9.2(d) (v) will no longer apply to such
exchanges and transfers.
(vi) Any beneficial interest in one of the Global Securities
that is transferred to a person who takes delivery in the form of an
interest in the other Global Security will, upon transfer, cease to be
an interest in such Global Security and become an interest in the other
Global Security and, accordingly, will thereafter be subject to all
transfer restrictions and other procedures applicable to beneficial
interests in such other Global Security for as long as it remains such
an interest.
(vii) Prior to one year commencing on the later of the
commencement of the offering of the Capital Securities and the Closing
Date (the "Restricted Period"), beneficial interests in a Regulation S
Global Security may only be held through Morgan Guaranty Trust Company
of New York, Brussels office, as operator of Euroclear or Citibank,
N.A., as facilitator for Cedel Bank's access to DTC or another agent
member of Euroclear and Cedel Bank acting for and on behalf of them
unless delivery is made through the Restricted Global Security in
accordance with the certification requirements hereof. During the
Restricted Period, interests in the Regulation S Global Security, may
be exchanged for interests in the Restricted Global Security or for
definitive Securities only in accordance with the certification
requirements described above.
(e) Transfer and Exchange of Global Capital Securities.
Subject to Section 9.02(f), the transfer and exchange of Global Capital
Securities or beneficial interests therein shall be effected through the
Clearing Agency, in accordance with this Declaration (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Clearing Agency therefor.
(f) Transfer of a Beneficial Interest in a Global Capital Security for a
Definitive Capital Security.
(i) Any Person having a beneficial interest in a Global
Capital Security may upon request, but only upon 20 days prior notice
to the Institutional Trustee, and if accompanied by the information
specified below, exchange such beneficial interest for a Definitive
Capital Security representing the same number of Capital Securities.
Upon receipt by the Institutional Trustee from the Clearing Agency or
its nominee on behalf of any Person having a beneficial interest in a
Global Capital Security of written instructions or such other form of
instructions as is customary for the Clearing Agency or the Person
designated by the Clearing Agency as having such a beneficial interest
in a Restricted Capital Security and a certification from the
transferor (in a form substantially similar to that attached hereto as
the "Form of Assignment" in Exhibit A-1), which may be submitted by
facsimile, then the Institutional Trustee will cause the aggregate
number of Capital Securities represented by Global Capital Securities
to be reduced on its books and records and, following such reduction,
the Trust will execute and the Institutional Trustee will authenticate
and make available for delivery to the transferee a Definitive Capital
Security.
(ii) Definitive Capital Securities issued in exchange for a
beneficial interest in a Global Capital Security pursuant to this
Section 9.2(f) shall be registered in such names and in such authorized
denominations as the Clearing Agency, pursuant to instructions from its
Participants or indirect participants or otherwise, shall instruct the
Institutional Trustee in writing. The Institutional Trustee shall
deliver such Capital Securities to the persons in whose names such
Capital Securities are so registered in accordance with such
instructions of the Clearing Agency.
(g) Restrictions on Transfer and Exchange of Global Capital
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (h) of this Section 9.2), a Global
Capital Security may not be transferred as a whole except by the Clearing Agency
to a nominee of the Clearing Agency or another nominee of the Clearing Agency or
by the Clearing Agency or any such nominee to a successor Clearing Agency or a
nominee of such successor Clearing Agency.
(h) Authentication of Definitive Capital Securities. If at any time:
(i) there occurs a Default or an Event of Default which is
continuing, or
(ii) the Trust, in its sole discretion, notifies the
Institutional Trustee in writing that it elects to cause the issuance
of Definitive Capital Securities under this Declaration,
then the Trust will execute, and the Institutional Trustee, upon receipt of a
written order of the Trust signed by one Regular Trustee requesting the
authentication and delivery of Definitive Capital Securities to the Persons
designated by the Trust, will authenticate and make available for delivery
Definitive Capital Securities, equal in number to the number of Capital
Securities represented by the Global Capital Securities, in exchange for such
Global Capital Securities.
(i) Legend.
(i) Except as permitted by the following paragraph (ii), each
Capital Security certificate evidencing the Global Capital Securities
and the Definitive Capital Securities (and all Capital Securities
issued in exchange therefor or substitution thereof) shall bear a
legend (the "Restricted Securities Legend") in substantially the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH SOUTHERN INVESTMENTS UK PLC (THE "COMPANY") OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, (ii) PURSUANT
TO CLAUSE (E) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE
TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM
OF ANNEX A TO THE OFFERING MEMORANDUM DATED JANUARY 23, 1997,
AND (iii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Restricted Capital
Security (including any Restricted Capital Security represented by a
Global Capital Security) pursuant to an effective registration
statement under the Securities Act or pursuant to Regulation S or Rule
144 under the Securities Act after such registration statement ceases
to be effective:
(A) in the case of any Restricted Capital Security
that is a Definitive Capital Security, the Registrar shall
permit the Holder thereof to exchange such Restricted Capital
Security for a Definitive Capital Security that does not bear
the Restricted Securities Legend and rescind any restriction
on the transfer of such Restricted Capital Security; and
(B) in the case of any Restricted Capital Security
that is represented by a Global Capital Security, the
Registrar shall permit the Holder of such Global Capital
Security to exchange such Global Capital Security for another
Global Capital Security that does not bear the Restricted
Securities Legend.
(j) Cancellation or Adjustment of Global Capital Security. At
such time as all beneficial interests in a Global Capital Security have either
been exchanged for Definitive Capital Securities to the extent permitted by this
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Capital Security shall be returned to the
Institutional Trustee for cancellation or retained and canceled by the
Institutional Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Capital Security is exchanged for Definitive Capital
Securities, Capital Securities represented by such Global Capital Security shall
be reduced and an adjustment shall be made on the books and records of the
Institutional Trustee (if it is then the custodian for such Global Capital
Security) with respect to such Global Capital Security, by the Institutional
Trustee or the Securities Custodian, to reflect such reduction.
(k) Obligations with Respect to Transfers and Exchanges of Capital
Securities.
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Institutional Trustee shall authenticate
Definitive Capital Securities and Global Capital Securities at the
Registrar's or co-Registrar's request in accordance with the terms of
this Declaration.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust
or the Sponsor may require) in respect of any tax or other governmental
charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) Capital Securities during a
period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Capital
Securities for redemption and ending at the close of business on the
day of such mailing; or (b) any Capital Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Capital Security being redeemed in part.
(iv) Prior to the due presentation for registrations of
transfer of any Capital Security, the Trust, the Institutional Trustee,
the Paying Agent, the Registrar or any co-registrar may deem and treat
the person in whose name a Capital Security is registered as the
absolute owner of such Capital Security for the purpose of receiving
Distributions on such Capital Security and for all other purposes
whatsoever, and none of the Trust, the Institutional Trustee, the
Paying Agent, the Registrar or any co-registrar shall be affected by
notice to the contrary.
(v) All Capital Securities issued upon any transfer or
exchange pursuant to the terms of this Declaration shall evidence the
same security and shall be entitled to the same benefits under this
Declaration as the Capital Securities surrendered upon such transfer or
exchange.
(l) No Obligation of the Institutional Trustee.
(i) The Institutional Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Capital Security, a
Participant in the Clearing Agency or other Person with respect to the
accuracy of the records of the Clearing Agency or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Capital Securities or with respect to the delivery to any Participant,
beneficial owner or other Person (other than the Clearing Agency) of
any notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Capital Securities. All notices
and communications to be given to the Holders and all payments to be
made to Holders under the Capital Securities shall be given or made
only to or upon the order of the registered Holders (which shall be the
Clearing Agency or its nominee in the case of a Global Capital
Security). The rights of beneficial owners in any Global Capital
Security shall be exercised only through the Clearing Agency subject to
the applicable rules and procedures of the Clearing Agency. The
Institutional Trustee may conclusively rely and shall be fully
protected in relying upon information furnished by the Clearing Agency
or any agent thereof with respect to its Participants and any
beneficial owners.
(ii) The Institutional Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in
any Capital Security (including any transfers between or among Clearing
Agency Participants or beneficial owners in any Global Capital
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Declaration, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
(m) Exchange of Transfer Restricted Capital Securities for New Capital
Securities. The Transfer Restricted Capital Securities may be exchanged for
Exchange Securities pursuant to the terms of the Exchange Offer. The Trustee
shall make the exchange as follows:
The Sponsor shall present the Institutional Trustee with an Officers'
Certificate certifying the following:
(A) upon issuance of the New Capital Securities, the
transactions contemplated by the Exchange Offer have been
consummated; and
(B) the number of Transfer Restricted Capital Securities
properly tendered in the Exchange Offer that are represented
by a Global Capital Security and the number of Transfer
Restricted Capital Securities properly tendered in the
Exchange Offer that are represented by Definitive Capital
Securities, the name of each Holder of such Definitive
Capital Securities, the liquidation amount of Capital
Securities properly tendered in the Exchange Offer by each
such Holder and the name and address to which Definitive
Capital Securities for New Capital Securities shall be
registered and sent for each such Holder.
The Institutional Trustee, upon receipt of (i) such Officers'
Certificate, (ii) an Opinion of Counsel to the effect that the New Capital
Securities have been registered under Section 5 of the Securities Act and the
Indenture has been qualified under the Trust Indenture Act and (iii) a Company
Order, shall authenticate (A) a Global Capital Security for New Capital
Securities in aggregate liquidation amount equal to the aggregate liquidation
amount of Transfer Restricted Capital Securities represented by a Global Capital
Security indicated in such Officers' Certificate as having been properly
tendered and (B) Definitive Capital Securities representing New Capital
Securities registered in the names of, and in the liquidation amounts indicated
in such Officers' Certificate.
If, upon consummation of the Exchange Offer, less than all the
outstanding Transfer Restricted Capital Securities shall have been properly
tendered and not withdrawn, the Institutional Trustee shall make an endorsement
on the Global Capital Security for Transfer Restricted Capital Securities
indicating the reduction in the number and aggregate liquidation amount
represented thereby as a result of the Exchange Offer.
The Trust shall deliver such Definitive Capital Securities for
New Capital Securities to the Holders thereof as indicated in such Officers'
Certificate.
(n) Minimum Transfers. Transfer Restricted Capital Securities
may only be transferred in minimum blocks of $100,000 aggregate liquidation
amount until such Transfer Restricted Capital Securities are registered pursuant
to an effective registration statement filed under the Securities Act.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security
shall be registered on the books and records of the Trust as the sole owner of
such Security for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Security on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.
SECTION 9.4 Book-Entry Interests.
Global Capital Securities shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the nominee of the
Clearing Agency, and no Capital Security Beneficial Owner will receive a
definitive Capital Security Certificate representing such Capital Security
Beneficial Owner's interests in such Global Capital Securities, except as
provided in Section 9.2 and Section 7.9. Unless and until definitive, fully
registered Capital Securities certificates have been issued to the Capital
Security Beneficial Owners pursuant to Section 9.2 or Section 7.9:
(a) the provisions of this Section 9.4 shall be in full force and
effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the
payment of Distributions on the Global Capital Securities and
receiving approvals, votes or consents hereunder) as the Holder of the
Capital Securities and the sole holder of the Global Certificates and
shall have no obligation to the Capital Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4
conflict with any other provisions of this Declaration, the provisions
of this Section 9.4 shall control; and
(d) the rights of the Capital Security Beneficial Owners shall
be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Capital Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants and receive and transmit payments of Distributions on the
Global Certificates to such Clearing Agency Participants. DTC will make
book-entry transfers among the Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Capital
Security Holders is required under this Declaration, the Trustees shall give all
such notices and communications specified herein to be given to the Holders of
Global Capital Securities to the Clearing Agency, and shall have no notice
obligations to the Capital Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.
ARTICLE 10
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and obligations of the
Trust (other than with respect to the Securities) to the extent not satisfied
out of the Trust's assets, including the fees and expenses of the Trustees and
any taxes and all costs and expenses with respect thereto, to which the Trust
may become subject, except for United States withholding taxes.
(c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of the
Capital Securities shall be entitled to the same limitation of personal
liability extended to stockholders of corporations for profit organized under
the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Institutional Trustee under the Trust
Indenture Act), are agreed by the parties hereto to replace such other duties
and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between any
Covered Persons; or
(ii) whenever this Declaration or any other agreement contemplated
herein or therein provides that an Indemnified Person shall act in a manner
that is, or provides terms that are, fair and reasonable to the Trust or
any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Sponsor shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the Company Indemnified
Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure a judgment in
its favor by reason of the fact that he is or was a Company Indemnified
Person against expenses (including attorneys' fees and expenses)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or
such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full
extent permitted by law, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the
Sponsor only as authorized in the specific case upon a determination
that indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1)
by the Regular Trustees by a majority vote of a quorum consisting of
such Regular Trustees who were not parties to such action, suit or
proceeding, (2) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so directs,
by independent legal counsel in a written opinion, or (3) by the Common
Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the
Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
Company Indemnified Person to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Sponsor
as authorized in this Section 10.4(a). Notwithstanding the foregoing,
no advance shall be made by the Sponsor if a determination is
reasonably and promptly made (i) by the Regular Trustees by a majority
vote of a quorum of disinterested Regular Trustees, (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Regular Trustees so directs, by independent legal counsel
in a written opinion or (iii) the Common Security Holder of the Trust,
that, based upon the facts known to the Regular Trustees, counsel or
the Common Security Holder at the time such determination is made, such
Company Indemnified Person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of
the Trust, or, with respect to any criminal proceeding, that such
Company Indemnified Person believed or had reasonable cause to believe
his conduct was unlawful. In no event shall any advance be made in
instances where the Regular Trustees, independent legal counsel or
Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or Capital
Security Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section
10.4(a) shall not be deemed exclusive of any other rights to which
those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Sponsor or Capital Security Holders of the Trust or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. All rights to
indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Sponsor and each Company Indemnified
Person who serves in such capacity at any time while this Section
10.4(a) is in effect. Any repeal or modification of this Section
10.4(a) shall not affect any rights or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or
not the Debenture Issuer would have the power to indemnify him against
such liability under the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a Company Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(b) The Sponsor agrees to indemnify the (i) Institutional
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional
Trustee and the Delaware Trustee, and (iv) any officers, directors, agents and
employees of the Institutional Trustee and the Delaware Trustee (each of the
Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any and all loss, liability, damage, claim 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 (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 10.4(b)
shall survive the satisfaction and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Institutional Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Institutional Trustee may engage or
be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.
ARTICLE 11
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, full books of account, records
and supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes.
(b) The Regular Trustees shall cause to be duly prepared and
delivered to each of the Holders and the Institutional Trustee, any annual
United States federal income tax information statement, required by the Code,
containing such information with regard to the Securities held by each Holder as
is required by the Code and the Treasury Regulations.
(c) The Regular Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Regular Trustees on behalf of the Trust with any state or local
taxing authority.
SECTION 11.3 Banking.
The Trust may maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Institutional Trustee shall be
made directly to the Institutional Trustee Account and no other funds of the
Trust shall be deposited in the Institutional Trustee Account. The sole
signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Institutional Trustee shall designate the
signatories for the Institutional Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to Distributions or allocations to any Holder, the amount withheld shall
be deemed to be a Distribution in the amount of the withholding to the Holder.
In the event of any claimed over withholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE 12
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may only be amended by a written
instrument approved and executed by the Regular Trustees, the Institutional
Trustee and the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment shall be
void and ineffective:
(i) unless, in the case of any proposed amendment, the Institutional
Trustee shall have first received an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by, and conforms to,
the terms of this Declaration (including the terms of the Securities);
(ii) unless the Regular Trustees shall have first received:
(A) either a ruling from the Internal Revenue Service or a
written opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that such amendment will not
cause the Trust to be classified for United States federal income tax
purposes as a corporation or a partnership and to the effect that the
Trust will not be treated as other than a grantor trust for purposes
of United States federal income taxation on account of such amendment;
and
(B) a written opinion of nationally recognized independent
counsel experienced in such matters to the effect that such amendment
will not cause the Trust to be an "investment company" which is
required to be registered under the Investment Company Act, and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor trust;
(B) reduce or otherwise adversely affect the powers of the
Institutional Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would (i) adversely affect the rights,
privileges or preferences of any Holder of Securities or (ii) affect the
dissolution, winding-up or termination of the Trust other than pursuant to the
terms of this Declaration may be effected only with such additional requirements
as may be set forth in the terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be amended without the
consent of all of the Holders of the Securities;
(e) Article Four shall not be amended without the consent of the Holders of
a Majority in liquidation amount of the Common Securities;
(f) The rights of the holders of the Common Securities under Article Five
to increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of each Holder of the Common Securities;
(g) Sections 4.1 and 10.1(b) shall not be amended without the consent of
the Sponsor; and
(h) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration that may
be defective or inconsistent with any other provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor;
(iv) preserve the status of the Trust as a grantor trust for United
Stated federal income tax purposes; and
(v) conform to changes in, or a change in interpretation or
application of, certain Investment Company Act requirements by the
Commission, which amendment does not adversely affect the rights,
preferences or privileges of the holders of Trust Securities.
provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of the Holders, and any
amendments of this Declaration shall become effective when notice thereof is
given to the Holders.
SECTION 12.2 Meetings of the Holders; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading. The Regular Trustees shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Regular Trustees one or more notice in a
writing stating that the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders calling a meeting shall specify in writing the Security
Certificates held by the Holders exercising the right to call a meeting and only
those Securities specified shall be counted for purposes of determining whether
the required percentage set forth in the second sentence of this paragraph has
been met.
(b) Except to the extent otherwise provided in the terms of
the Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least seven
days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders is permitted or
required under this Declaration or the rules of any stock exchange on
which the Capital Securities are listed or admitted for trading, such
vote, consent or approval may be given at a meeting of the Holders. Any
action that may be taken at a meeting of the Holders of Securities may
be taken without a meeting if a consent in writing setting forth the
action so taken is signed by the Holders of Securities owning not less
than the minimum amount of Securities in liquidation amount that would
be necessary to authorize or take such action at a meeting at which all
Holders having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the
Holders entitled to vote who have not consented in writing. The Regular
Trustees may specify that any written ballot submitted to the Security
Holder for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Regular
Trustees;
(ii) each Holder may authorize any Person to act for it by
proxy on all matters in which a Holder is entitled to participate,
including waiving notice of any meeting, or voting or participating at
a meeting. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder of Securities
executing it. Except as otherwise provided herein, all matters relating
to the giving, voting or validity of proxies shall be governed by the
General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Holders were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders shall be conducted by the
Regular Trustees or by such other Person that the Regular Trustees may
designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules
of any stock exchange on which the Capital Securities are then listed
or trading, otherwise provides, the Regular Trustees, in their sole
discretion, shall establish all other provisions relating to meetings
of Holders, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Holders of
Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements,
voting in person or by proxy or any other matter with respect to the
exercise of any such right to vote.
ARTICLE 13
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee.
The Trustee that acts as initial Institutional Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants to
the Trust and the Sponsor at the time of the Successor Institutional Trustee's
acceptance of its appointment as Institutional Trustee that:
(a) The Institutional Trustee is a New York banking
corporation with trust powers and authority to execute and deliver, and to carry
out and perform its obligations under the terms of, this Declaration;
(b) The execution, delivery and performance by the
Institutional Trustee of the Declaration has been duly authorized by all
necessary corporate action on the part of the Institutional Trustee. The
Declaration has been duly executed and delivered by the Institutional Trustee
and constitutes a legal, valid and binding obligation of the Institutional
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of equity
and the discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law);
(c) The execution, delivery and performance of this
Declaration by the Institutional Trustee does not conflict with or constitute a
breach of the charter or by-laws of the Institutional Trustee; and
(d) No consent, approval or authorization of, or registration
with or notice to, any New York State or federal banking authority is required
for the execution, delivery or performance by the Institutional Trustee of this
Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly existing
and in good standing under the laws of the State of Delaware, with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration;
(b) The execution, delivery and performance by the Delaware
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. This Declaration has been duly
executed and delivered by the Delaware Trustee and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) No consent, approval or authorization of, or registration
with or notice to, any federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee of this Declaration; and
(d) The Delaware Trustee is a natural person who is a resident
of the State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
ARTICLE 14
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights Agreement.
The Holders of the Capital Securities, the Debentures and the
Capital Securities Guarantee (collectively, the "Registrable Securities") are
entitled to the benefits of the Registration Rights Agreement.
ARTICLE 15
MISCELLANEOUS
SECTION 15.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders)and to the Debenture Issuer:
Southern Investments UK plc
800 Park Avenue, Aztec West
Almondsbury, Bristol P512
45E England
Attention: Charl Oosthuizen
and
Southern Investments UK Capital Trust I
c/o Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, Georgia 30346-6401
Attention: Wayne Boston or Richard Childs, as Regular Trustees
(b) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as Delaware Trustee may give notice of to
the Holders):
Bankers Trust (Delaware)
1001 Jefferson Street
Suite 550
Wilmington, Delaware 19801-1457
Attention: Lisa Wilkins
(c) if given to the Institutional Trustee, at the
Institutional Trustee's mailing address set forth below (or such other address
as the Institutional Trustee may give notice of to the Holders):
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Manager Public Utilities Group
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
Southern Investments UK plc
800 Park Avenue, Aztec West
Almondsbury, Bristol 8512
45E England
Attention: Charl Oosthuizen
(e) if given to any other Holder, at the address set forth on the books and
records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 15.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 15.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
SECTION 15.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 15.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 15.6 Partial.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees and the Sponsor to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Declaration to be executed as of the day and year first above written.
----------------------------------
Wayne Boston, as Regular Trustee
----------------------------------
Richard Childs, as Regular Trustee
BANKERS TRUST (DELAWARE),
as Delaware Trustee
By:
Name:
Title:
BANKERS TRUST COMPANY,
as Institutional Trustee
By:
Name:
Title:
SOUTHERN INVESTMENTS UK plc,
as Sponsor
By:
Name:
Title:
<PAGE>
ANNEX I
TERMS OF
8.23% TRANSFER RESTRICTED/NEW CAPITAL SECURITIES
8.23% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of January 29, 1997 (as amended from time to
time, the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Securities are set out below
(each capitalized term used but not defined herein has the meaning set forth in
the Declaration or, if not defined in such Declaration, as defined in the
Offering Memorandum referred to below in Section 2(c) of this Annex I):
1. Designation and Number.
(a) Capital Securities. 82,000 Transfer Restricted Capital
Securities of the Trust and 82,000 New Capital Securities of the Trust, each
with an aggregate liquidation amount with respect to the assets of the Trust of
eighty-two million dollars ($82,000,000), and each with a liquidation amount
with respect to the assets of the Trust of $1,000 per security, are hereby
designated for the purposes of identification only as "8.23% Transfer Restricted
Capital Securities" and "8.23% New Capital Securities", respectively
(collectively, the "Capital Securities"). The certificates evidencing the
Capital Securities shall be substantially in the form of Exhibit A-1 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform to the rules
of any stock exchange on which the Capital Securities are listed.
(b) Common Securities. 2,537 Common Securities of the Trust
with an aggregate liquidation amount with respect to the assets of the Trust of
two million five hundred thirty-seven thousand dollars ($2,537,000) and a
liquidation amount with respect to the assets of the Trust of $1,000 per
security, are hereby designated for the purposes of identification only as
"8.23% Common Securities" (the "Common Securities" and, together with the
Capital Securities, the "Securities"). The certificates evidencing the Common
Securities shall be substantially in the form of Exhibit A-2 to the Declaration,
with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a
rate per annum of 8.23% (the "Coupon Rate") of the liquidation amount of $1,000
per Security (the "Liquidation Amount"), such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee. Distributions
in arrears for more than one semi-annual period will bear additional
distributions thereon compounded semi-annually at the Coupon Rate (to the extent
permitted by applicable law). Pursuant to the Registration Rights Agreement, in
certain limited circumstances the Debenture Issuer will be required to pay
Additional Interest with respect to the Debentures, and corresponding Additional
Distributions shall become payable on the Securities. The term "Distributions",
as used herein, includes distributions on the Securities at the Coupon Rate
(including any Additional Sums, any Additional Amounts (as defined in the
Indenture) and any amounts payable on distributions in arrears) and Additional
Distributions payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds on
hand legally available therefor.
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from January 29, 1997, and will be payable
semi-annually in arrears on February 1 and August 1 of each year, commencing on
August 1, 1997 (each, a "Distribution Date"), except as otherwise described
below. Distributions will be computed on the basis of a 360-day year consisting
of twelve 30-day months and for any period shorter than a full semi-annual
period for which distributions are computed on the basis of the actual number of
days elapsed in such a 30-day month. As long as the Debenture Issuer is not in
default in the payment of interest on the Debentures, the Debenture Issuer has
the right under the Indenture to defer payments of interest on the Debentures by
extending the interest payment period from time to time on the Debentures for
consecutive periods not exceeding 10 consecutive semi-annual periods (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, provided that no Extension Period shall extend beyond
the Maturity Date of the Debentures. As a consequence of extension,
distributions will also be deferred. Despite such deferral, semi-annual
distributions will continue to accumulate with additional Distributions thereon
at the Coupon Rate compounded semi-annually to the extent permitted by
applicable law during any such Extension Period. Prior to the termination of any
such Extension Period, the Debenture Issuer may further extend such Extension
Period; provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 10 consecutive semi-annual periods,
or extend beyond the Maturity Date of the Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.
The Company may also pay on any Interest Payment Date (as defined in the
Indenture) all or any portion of the interest accrued during an Extension
Period.
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which will be 15 days prior to the relevant Distribution
Date, which Distribution Dates correspond to the Interest Payment Dates on the
Debentures. Subject to any applicable laws and regulations and the provisions of
the Declaration, each such payment in respect of the Securities will be made as
described under the heading "Description of the Capital Securities -- Form,
Denomination, Book-Entry Procedures and Transfer" in the Offering Memorandum
dated January 23, 1997, of the Debenture Issuer and the Trust relating to the
Securities and the Debentures. Payments in respect of Capital Securities held in
certificated form will be made by check mailed to the Person entitled thereto.
The relevant record dates for the Common Securities shall be the same as the
record dates for the Capital Securities. Distributions payable on any Securities
that are not punctually paid on any Distribution Date, as a result of the
Debenture Issuer having failed to make a payment under the Debentures, will
cease to be payable to the Person in whose name such Securities are registered
on the relevant record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Securities are registered on the
special record date, if any, or other specified date determined in accordance
with the Indenture. If any date on which Distributions are payable on the
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except that
if such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) In the event that there is any money or other property
held by or for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined herein) among the Holders of the
Securities.
3. Liquidation Distribution Upon Dissolution.
The Sponsor will have the right at any time to terminate the
Trust and, after satisfaction of liabilities to creditors of the Trust, if any,
cause the Debentures to be distributed to the holders of Capital Securities in
liquidation of the Trust. This right is optional and wholly within the
discretion of the Sponsor.
In the event of any voluntary or involuntary dissolution,
winding-up or termination of the Trust or if the Sponsor otherwise gives notice
of its election to terminate the Trust as provided above, subject to the
provisions of Section 4(e), the Trust shall be liquidated by the Regular
Trustees as expeditiously as the Regular Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the Holders on a Pro Rata basis an amount equal
to the aggregate of the stated liquidation amount of $1,000 per Security plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution") unless, in connection with such
dissolution, winding-up or termination, Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of such Securities, and
bearing accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Securities, shall be distributed on a Pro Rata basis to
the holders of the Capital Securities and Common Securities in exchange
therefor.
On and from the date fixed by the Regular Trustees for any
distribution of Debentures and liquidation of the Trust: (i) the Securities will
no longer be deemed to be outstanding, and (ii) any certificates representing
Securities not held by the Clearing Agency or its nominee (or any successor
Clearing Agency or its nominee) will be deemed to represent beneficial interests
in the amount of Debentures corresponding to the aggregate liquidation amount of
such Securities until such certificates are presented to the Sponsor or its
agent for transfer or reissue.
If, upon any such dissolution, winding up or termination, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets on hand legally available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part,
whether at maturity or upon redemption, the proceeds from such repayment shall
be simultaneously applied by the Institutional Trustee to redeem on a Pro Rata
basis Securities having an aggregate liquidation amount equal to the aggregate
principal amount of Debentures so repaid or redeemed at a price (the "Redemption
Price") equal to the applicable repayment price or redemption price of the
Debentures so repaid or redeemed. The Securities shall be redeemed on the date
(the "Redemption Date") fixed for redemption or repayment of the Debentures, as
the case may be.
If fewer than all the outstanding Securities are to be so
redeemed, the Capital Securities will be redeemed Pro Rata and the Capital
Securities to be redeemed will be determined as described in Section 4(e)(ii)
below.
If a partial redemption of the Capital Securities would result
in the delisting of the Capital Securities by any national securities exchange
or other organization on which the Capital Securities are then listed, the
Company pursuant to the Indenture will only redeem the Debentures in whole and,
as a result, the Trust may only redeem the Capital Securities in whole.
The Trust may not redeem fewer than all the outstanding
securities unless all accrued and unpaid Distributions have been paid on all
Securities for all semi-annual Distribution periods terminating on or before the
Redemption Date.
(b) The Debenture Issuer shall have the right under the terms
of the Indenture to redeem the Debentures in whole or in part, at its option on
or after February 1, 2007, at a redemption price equal to the percentages
specified below of the principal amount of the Debentures to be redeemed, plus
any accrued and unpaid interest, to the Redemption Date, including interest
accrued during any Extension Period if redeemed during the 12-month period
beginning February 1 of the years indicated below:
Year Percentage
---- ----------
2007 104.115%
2008 103.704
2009 103.292
2010 102.881
2011 102.469
2012 102.058
2013 101.646
2014 101.235
2015 100.823
2016 100.412
2017 and thereafter 100.000
(c) The Debenture Issuer will also have the right to redeem
the Debentures at any time prior to February 1, 2007 upon the occurrence and
continuation of a Special Event (as defined below) at a redemption price equal
to or the greater of (i) the amount equal to 100% of the principal amount of the
Debentures being redeemed or (ii) the amount equal to the sum of the present
values of the remaining scheduled payments of principal of and premium and
interest on the Debentures being redeemed through February 1, 2007 discounted to
the Redemption Date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 110
basis points, in the case of such a redemption before February 1, 1998 and the
Treasury Yield plus 50 basis points, in the case of such a redemption on or
after February 1, 1998 but prior to February 1, 2007, plus, for (i) or (ii)
above, whichever is applicable, accrued interest on the Debentures to the
Redemption Date, including interest accrued during any Extension Period.
"Special Event" means a Tax Event or an Investment Company Event.
"Tax Event" means that the Regular Trustees shall have
obtained an opinion of nationally recognized independent tax counsel experienced
in such matters to the effect that as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States, the United Kingdom or any
political subdivision or taxing authority thereof or therein, (b) any amendment
to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (c) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position or (d)
any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is taken,
in each case on or after January 23, 1997, there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days of the date of such
opinion, subject to United States federal or United Kingdom income tax with
respect to income accrued or received on the Debentures, (ii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges or (iii)
interest payable by the Debenture Issuer to the Trust on the Debentures is not,
or within 90 days of the date of such opinion will not be, deductible by the
Debenture Issuer for United States earnings and profits purposes or United
Kingdom income tax purposes.
"Investment Company Event" means that the Regular Trustees
shall have received an opinion of nationally recognized independent counsel
experienced in practice under the Investment Company Act of 1940, as amended
(the "1940 Act"), that, as a result of the occurrence of a change in law or
regulation or a change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after January 23, 1997.
"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 through February 1, 2007 of the Debentures 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 through February 1, 2007
of the Debentures.
"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 preceding such Redemption Date, as set forth in the
most recent weekly statistical release (or any successor release) published by
the Federal Reserve Bank of New York and designated "H.15(519)" 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 Indenture Trustee by such Reference Treasury Dealer
at 5:00 p.m. on the third Business Day preceding such Redemption Date).
"Reference Treasury Dealer" means a primary US Government
securities dealer in New York City appointed by the Sponsor and reasonably
acceptable to the Indenture Trustee.
(d) If at any time the Debenture Issuer has or will become
obligated to pay Additional Amounts (as defined and provided in the Indenture),
the Debenture Issuer shall have the right (subject to the conditions set forth
in the Indenture) to redeem the Debentures in whole, but not in part.
(e) The procedures with respect to the redemption of Securities or the
distribution of Debentures shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") (which notice will be irrevocable) will be given by the Trust
by mail to each Holder to be redeemed or exchanged not fewer than 15
nor more than 60 days before the Redemption Date or the date fixed for
such exchange, as the case may be. Notices pursuant to this Section
4(e)(i) shall be deemed to be given on the day such notice is first
mailed by first-class mail, postage prepaid, to Holders. Each
Redemption/Distribution Notice shall be addressed to the Holders of
Securities at the address of each such Holder appearing in the books
and records of the Trust. No defect in the Redemption/ Distribution
Notice or in the mailing of either thereof with respect to any Holder
shall affect the validity of the redemption or exchange proceedings
with respect to any other Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be redeemed shall be
redeemed Pro Rata from each Holder of Capital Securities, it being
understood that, in respect of Capital Securities registered in the
name of and held of record by the Clearing Agency or its nominee (or
any successor Clearing Agency or its nominee) or any nominee, the
distribution of the proceeds of such redemption will be made to the
Clearing Agency and disbursed by such Clearing Agency in accordance
with the procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice (which notice will be irrevocable), then
(A) with respect to Capital Securities issued in book-entry form, by
12:00 noon, New York City time, on the Redemption Date, provided that
the Debenture Issuer has paid the Institutional Trustee a sufficient
amount of cash in connection with the related redemption or maturity of
the Debentures by 10:00 a.m., New York City time, on the maturity date
or the Redemption Date, as the case requires, the Institutional Trustee
will deposit irrevocably with the Clearing Agency or its nominee (or
successor Clearing Agency or its nominee) funds sufficient to pay the
applicable Redemption Price with respect to such Capital Securities and
will give the Clearing Agency irrevocable instructions and authority to
pay the Redemption Price to the relevant Clearing Agency Participants,
and (B) with respect to Capital Securities issued in certificated form
and Common Securities, provided that the Debenture Issuer has paid the
Institutional Trustee a sufficient amount of cash in connection with
the related redemption or maturity of the Debentures, the Institutional
Trustee will pay the relevant Redemption Price to the Holders by check
mailed to the address of the relevant Holder appearing on the books and
records of the Trust on the Redemption Date. If a
Redemption/Distribution Notice shall have been given and funds
deposited as required, if applicable, then immediately prior to the
close of business on the Redemption Date, Distributions will cease to
accrue on the Securities so called for redemption and all rights of
Holders so called for redemption will cease, except the right of the
Holders of such Securities to receive the Redemption Price, but without
interest on such Redemption Price, and such Securities shall cease to
be outstanding.
Neither the Regular Trustees nor the Trust shall be required
to register or cause to be registered the transfer of (i) any Securities
beginning on the opening of business 15 days before the day of mailing of a
notice of redemption or any notice of selection of Securities for redemption or
(ii) any Securities selected for redemption except the unredeemed portion of any
Security being redeemed. If any date fixed for redemption of Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date fixed for redemption. If the Debenture Issuer fails to
repay Debentures on the stated maturity date or Redemption Date or if payment of
the Redemption Price in respect of any Securities is improperly withheld or
refused and not paid either by the Institutional Trustee or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accrue from the original Redemption Date to the
actual date of payment, in which case the actual payment date will be considered
the Redemption Date for purposes of calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Institutional Trustee on behalf of the Trust to (A) in respect of the
Capital Securities, the Clearing Agency or its nominee (or any
successor Clearing Agency or its nominee) if the Global Certificates
have been issued or, if Definitive Capital Security Certificates have
been issued, to the Holder thereof, and (B) in respect of the Common
Securities to the Holder thereof.
(v) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), the Sponsor
or any of its subsidiaries may at any time and from time to time
purchase outstanding Capital Securities by tender, in the open market
or by private agreement.
5. Voting Rights - Capital Securities.
(a) Except as provided under Sections 5(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights.
(b) Subject to the requirements of the second to last sentence
of this paragraph, the Holders of a majority in aggregate liquidation amount of
the Capital Securities have the right (i) on behalf of all Holders of Capital
Securities, to waive any past default that is waivable under the Declaration and
(ii) to direct the time, method and place of conducting any proceeding for any
remedy available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration; provided,
however, that the Holders of the Capital Securities will vote as a single class
(the "Capital Trust Voting Class") with respect to the right to direct an
Institutional Trustee, to (x) direct the time, method and place of conducting
any proceeding for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee with respect to the
Debentures, (y) waive any past default and its consequences that is waivable
under the applicable provisions of the Indenture with respect to the Debentures
or (z) exercise any right to rescind or annul a declaration that the principal
of all Debentures shall be due and payable; provided that where a consent under
the Indenture would require the consent of (1) holders of Debentures
representing a specified percentage greater than a majority in principal amount
of such securities or (2) each holder of such securities affected thereby, no
such consent shall be given by any Trustee without the prior consent of, in the
case of clause (1) above, Holders of securities in the Capital Trust Voting
Class representing such specified percentage or, in the case of clause (2)
above, each Holder of securities in the Capital Trust Voting Class affected
thereby. The Institutional Trustee shall not revoke or take any action
inconsistent with any action previously authorized or approved by a vote of the
Holders of Capital Securities. The Institutional Trustee shall notify all
Holders of record of Capital Securities of any notice of default received from
the Indenture Trustee with respect to the Debentures. Other than with respect to
directing the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee or the Indenture Trustee as set forth
above, the Institutional Trustee shall be under no obligation to take any of the
foregoing actions at the direction of the Holders of the Capital Securities
unless the Institutional Trustee shall have obtained an opinion of nationally
recognized independent tax counsel recognized as expert in such matters to the
effect that the Trust will not be classified for United States federal income
tax purposes as an association taxable as a corporation or a partnership on
account of such action and will be treated as a grantor trust for United States
federal income tax purposes following such action. If the Institutional Trustee
fails to enforce its rights under the Declaration (including, without
limitation, its rights, powers and privileges as a holder of the Debentures
under the Indenture), any holder of Capital Securities may, to the extent
permitted by applicable law, upon such holder's written request to the
Institutional Trustee to enforce such rights, institute a legal proceeding
directly against the Company to enforce the Institutional Trustee's rights under
the Declaration, without first instituting a legal proceeding against the
Institutional Trustee or any other Person.
Subject to Section 3.9(a)of the Declaration, the Institutional
Trustee shall take any legal action against the Trust which arises out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or the Institutional Trustee's duties
and obligations under the Declaration or the Trust Indenture Act and if such
Institutional Trustee shall have failed to take such legal action, the Holders
of the Capital Securities may, to the extent permitted by applicable law, take
such legal action, to the same extent as if such Holders of Capital Securities
held an aggregate principal amount of Debentures equal to the aggregate
liquidation amount of such Capital Securities, without first proceeding against
the Institutional Trustee or the Trust. If an Event of Default under the
Declaration has occurred and is continuing and such event is attributable to the
failure of the Debenture Issuer to pay principal of or premium, if any, or
interest on the Debentures on the due date (or in the case of redemption, on the
redemption date), then a Holder of Capital Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
premium, if any, or interest on the Debentures (a "Direct Action") on or after
the respective due date specified in the Debentures. In connection with such
Direct Action, the rights of the Common Securities Holder will be subrogated to
the rights of such Holder of Capital Securities to the extent of any payment
made by the Debenture Issuer to such Holder of Capital Securities in such Direct
Action. Except as provided in the second preceding sentence, the Holders of
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may
be given at a separate meeting of Holders of Capital Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Institutional Trustees will cause a notice of
any meeting at which Holders of Capital Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of record of Capital Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents.
No vote or consent of the Holders of the Capital Securities
will be required for the Trust to redeem and cancel Capital Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Capital Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Capital Securities that are owned by the Sponsor or any Affiliate of the
Sponsor shall not be entitled to vote or consent and shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
6. Voting Rights - Common Securities.
(a) Except as provided under Sections 6(b), 6(c), and 7 as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Unless an Event of Default under the Declaration shall
have occurred and be continuing, any Trustee may be removed at any time by the
Holder of the Common Securities. If a Debenture Event of Default has occurred
and is continuing, the Institutional Trustee and the Delaware Trustee may be
removed at such time by the Holders of a majority in liquidation amount of the
outstanding Capital Securities. In no event will the Holders of the Capital
Securities have the right to vote to appoint, remove or replace the Regular
Trustees, which voting rights are vested exclusively in the Sponsor as the
Holder of the Common Securities. No resignation or removal of a Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Declaration.
(c) So long as any Debentures are held by the Institutional
Trustee, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
executing any trust or power conferred on such Indenture Trustee with respect to
the Debentures, (ii) waive any past default that is waivable under the
applicable provisions of the Indenture, (iii) exercise any right to rescind or
annul a declaration of acceleration of the maturity of the principal of the
Debentures or (iv) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required, without, in
each case, obtaining the prior approval of the Holders of a majority in
liquidation amount of all outstanding Common Securities; provided, however, that
where a consent under the Indenture would require the consent of (1) holders of
Debentures representing a specified percentage greater than a majority in
principal amount of such securities or (2) each holder of such securities
affected thereby, no such consent shall be given by any Trustee without the
prior consent of, in the case of clause (1) above, Holders of Common Securities
representing such specified percentage or, in the case of clause (2) above, each
Holder of Common Securities affected thereby. The Trustees shall not revoke or
take any action inconsistent with any action previously authorized or approved
by a vote of the Holders of the Common Securities except by subsequent vote of
such Holders. The Institutional Trustee shall notify each Holder of Common
Securities of any notice of default with respect to the Debentures. In addition
to obtaining the foregoing approvals of such Holders of the Common Securities,
prior to taking any of the foregoing actions, the Trustees shall obtain an
opinion of counsel experienced in such matters to the effect that the Trust will
not be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
If an Event of Default under the Declaration has occurred and
is continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures on
the due date (or in the case of redemption, on the redemption date), then a
Holder of Common Securities may institute a Direct Action for enforcement of
payment to such Holder of the principal of or premium, if any, or interest on
the Debentures on or after the respective due date specified in the Debentures.
In connection with Direct Action, the rights of the Common Securities Holder
will be subordinated to the rights of such Holder of Capital Securities to the
extent of any payment made by the Debenture Issuer to such Holder of Common
Securities in such Direct Action. Except as provided in the second preceding
sentence, the Holders of Common Securities will not be able to exercise directly
any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
7. Amendments to Declaration and Indenture.
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the
Sponsor, the Delaware Trustee, the Institutional Trustee and the
Regular Trustees, without the consent of the Holders of the Securities
(i) to cure any ambiguity, (ii) correct or supplement any provisions in
the Declaration that may be defective or inconsistent with any other
provisions of the Declaration,(iii) add to the covenants, restrictions
or obligations of the Sponsor, (iv) preserve the status of the Trust as
a grantor trust for United Stated federal income tax purposes, and (v)
to conform to changes in, or a change in interpretation or application
of, certain 1940 Act requirements by the Commission, which amendment
does not adversely affect the rights, preferences or privileges of the
holders of Trust Securities. The Declaration may be modified and
amended on approval of a majority of the Regular Trustees, provided
that, if any proposed modification or amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the
Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up or termination of the
Trust other than pursuant to the terms of the Declaration, then the
holders of the outstanding Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall
not be effective except with the approval of at least a majority in
liquidation amount of the Securities, provided that, if any amendment
or proposal referred to in clause (i) above would adversely affect only
the Capital Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval
of a majority in liquidation amount of such class of Securities. The
Declaration may be amended by the Trustees and the Sponsor with (i) the
consent of Holders representing a majority in liquidation amount of all
outstanding Securities, and (ii) receipt by the Trustees of an Opinion
of Counsel to the effect that such amendment or the exercise of any
power granted to the Trustees in accordance with such amendment will
not affect the Trust's status as a grantor trust for United States
federal income tax purposes or cause the Trust to be an "investment
company" which is required to be registered under the 1940 Act,
provided that, certain amendments to the Declaration may require the
consent of the Institutional Trustee or all holders of the Common
Securities and/or the Capital Securities.
8. Registration Rights Agreement.
The Holders of the Capital Securities shall be entitled to the
benefits of the Registration Rights Agreement dated January 29, 1997 among
Lehman Brothers Inc., the Sponsor and the Trust.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the Capital
Securities pro rata according to the aggregate liquidation amount of Capital
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Capital Securities outstanding, and only after satisfaction of all
amounts owed to the Holders of the Capital Securities, to each Holder of Common
Securities pro rata according to the aggregate liquidation amount of Common
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Common Securities outstanding.
10. Ranking.
The Capital Securities rank pari passu with the Common
Securities and payment thereon shall be made Pro Rata with the Common
Securities, except that, if an Event of Default under the Declaration occurs and
is continuing, no payments in respect of Distributions on, or payments upon
liquidation, redemption or otherwise with respect to, the Common Securities
shall be made until the Holders of the Capital Securities shall be paid in full
the Distributions, Redemption Price, Liquidation Distribution and other payments
to which they are entitled at such time.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Capital Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Capital Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), the Indenture (including any supplemental indenture) to a Holder
without charge on written request to the Sponsor at its principal place of
business.
<PAGE>
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
IF THIS GLOBAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT:
THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR SUCH
OTHER ENTITY AS REQUESTED BY AN AUTHORITY OF THE DEPOSITARY TRUST COMPANY, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[IF THIS SECURITY IS A RESTRICTED CAPITAL SECURITY, INSERT:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH SOUTHERN
INVESTMENTS UK PLC (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, (ii) PURSUANT TO CLAUSE (E) TO REQUIRE
THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE
SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED JANUARY
23, 1997, AND (iii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY OR ANY
INTEREST THEREIN UNLESS THE TRANSFEROR DELIVERS TO THE TRANSFER AGENT A
REPRESENTATION FROM THE TRANSFEREE THAT IT EITHER IS (I) NOT A PENSION,
PROFIT-SHARING OR OTHER EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (COLLECTIVELY, "PLANS"), AND IS
NOT PURCHASING THE CAPITAL SECURITIES (OR INTEREST THEREIN) ON BEHALF OR WITH
THE ASSETS OF ANY PLAN OR (II) ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO ITS PURCHASE AND HOLDING OF THE CAPITAL SECURITIES (OR INTEREST
THEREIN). SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
<PAGE>
Certificate Number Aggregate Liquidation
Amount of Capital Securities
CUSIP NO. __________
Certificate Evidencing Capital Securities
of
Southern Investments UK Capital Trust I
[ ]% [Transfer Restricted/New] Subordinated
Capital Income Securities
(liquidation amount $1,000 per Capital Security)
Southern Investments UK Capital Trust I, a statutory business
trust created under the laws of the State of Delaware (the "Trust"), hereby
certifies that ______________ (the "Holder") is the registered owner of
[$_________ in aggregate liquidation amount of Capital Securities of the Trust*]
[the aggregate liquidation amount of Capital Securities of the Trust specified
in Schedule A hereto**] representing undivided preferred beneficial interests in
the assets of the Trust designated the [ ]% [Transfer Restricted/New] Capital
Securities (liquidation amount $1,000 per Capital Security) (the "Capital
Securities"). The Capital Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities represented hereby are issued and shall in all respects
be subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of January 29, 1997, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the Capital
Securities as set forth in Annex I to the Declaration. Capitalized terms used
but not defined herein shall have the meaning given them in the Declaration. The
Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee
and the Indenture to a Holder without charge upon written request to the Trust
at its principal place of business.
Unless the Institutional Trustee's Certificate of
Authentication hereon has been properly executed, these Capital Securities shall
not be entitled to any benefit under the Declaration or be valid or obligatory
for any purposes.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
- ---------------
* Insert in Definitive Capital Securities only.
** Insert in Global Capital Securities only.
<PAGE>
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Capital
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate
this ____ day of __________, ____.
Southern Investments UK Capital Trust I
By:________________________________
Name:
Regular Trustee
<PAGE>
INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
Dated: ,
BANKERS TRUST COMPANY,
as Institutional Trustee
By:
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed
at a rate per annum of 8.23% (the "Coupon Rate") of the liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears for
more than one semi-annual period will bear interest thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
Pursuant to the Registration Rights Agreement, in certain limited circumstances
the Debenture Issuer will be required to pay Additional Interest (as defined in
the Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest (including any Additional Sums, Additional Distributions and any
Additional Amounts (as defined in the Indenture)) unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds on hand legally available therefor.
Distributions on the Capital Securities will be cumulative,
will accrue from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from January 29, 1997, and will be payable
semi-annually in arrears, on February 1 and August 1 of each year, commencing on
August 1, 1997, to Holders of record fifteen (15) days prior to such payment
dates, except as otherwise described below. Distributions will be computed on
the basis of a 360-day year consisting of twelve 30-day months and, for any
period shorter than a full semi-annual period for which Distributions are
computed, the number of days elapsed in such a 30-day month. So long as the
Debenture Issuer shall not be in default in the payment of interest on the
Debentures, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for successive periods not exceeding 10
consecutive semi-annual periods (each an "Extension Period"), provided that no
Extension Period shall extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
extension, semi-annual Distributions will continue to accrue with additional
interest thereon at the Coupon Rate compounded semi-annually to the extent
permitted by applicable law during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; provided that
such Extension Period, together with all such previous and further extensions
within such Extension Period, may not exceed 10 consecutive semi-annual periods
or extend beyond the Maturity Date of the Debentures. The Debenture Issuer may
also pay on any Interest Payment Date (as defined in the Indenture) all or any
portion of the interest accrued during an Extension Period. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
The Sponsor will have the right, at any time, to terminate the
Trust and cause the Debentures to be distributed to the holders of the
Securities in liquidation of the Trust or, simultaneously with any redemption of
the Debentures, cause a like amount of the Securities to be redeemed by the
Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security
Certificate to:
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
___________________________________________________________ agent to transfer
this Capital Security Certificate on the books of the Trust. The agent may
substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side
of this Capital Security Certificate)
Signature Guarantee*: ___________________________________
_______________________
* Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
<PAGE>
[Include the following if the Capital Security bears a Restricted Capital
Securities Legend --
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account without transfer; or
(2) |_| transferred pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(3) |_| transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) |_| transferred to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2) or (3) or (7) of Rule 501 under
the Securities Act of 1933 that is acquiring the Capital Securities
for its own account, or for the account of such an institutional
"accredited investor," for investment purposes and not with a view to,
or for offer or sale in connection with, any distribution in violation
of the Securities Act of 1933; or
(5) |_| transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(6) |_| transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Exchange Agent will refuse to register
any of the Capital Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(3), (4) or (5) is checked, the Registrar may require, prior to registering any
such transfer of the Capital Securities, such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; provided, further, that (i)
if box (2) is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A or (ii) if box (4) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Offering Memorandum dated January 23,
1997; provided, further, that after the date that a Registration Statement has
been filed and so long as such Registration Statement continues to be effective,
the Registrar may only permit transfers for which box (6) has been checked.
Signature
<PAGE>
SCHEDULE A*
The initial aggregate liquidation amount of Capital Securities
evidenced by the Certificate to which this Schedule is attached is $__________
(equivalent to ________ Capital Securities). The notations on the following
table evidence decreases and increases in the number of Capital Securities
evidenced by such Certificate.
Decrease in Increase in Liquidation Amount of Notation by
Liquidation Liquidation Capital Securities Registration
Amount Amount of Remaining After Such
of Capital Capital Decrease or Increase
Securities Securities
___________________________
* Append to Global Capital Securities only.
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH SOUTHERN
INVESTMENTS UK PLC (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, (ii) PURSUANT TO CLAUSE (E) TO REQUIRE THAT THE
TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN
THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED JANUARY 23, 1997, AND (iii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT
TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY OR ANY INTEREST
THEREIN UNLESS THE TRANSFEROR DELIVERS TO THE TRANSFER AGENT A REPRESENTATION
FROM THE TRANSFEREE THAT IT EITHER IS (I) NOT A PENSION, PROFIT-SHARING OR OTHER
EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (COLLECTIVELY, "PLANS"), AND IS NOT PURCHASING THE COMMON
SECURITIES (OR INTEREST THEREIN) ON BEHALF OR WITH THE ASSETS OF ANY PLAN OR
(II) ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PROHIBITED TRANSACTION
CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO ITS PURCHASE
AND HOLDING OF THE COMMON SECURITIES (OR INTEREST THEREIN). SUCH HOLDER FURTHER
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
<PAGE>
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
Southern Investments UK Capital Trust I
8.23% Common Securities
(liquidation amount $1,000 per Common Security)
Southern Investments UK Capital Trust I, a statutory business
trust formed under the laws of the State of Delaware (the "Trust"), hereby
certifies that Southern Investments UK plc (the "Holder") is the registered
owner of __________ common securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 8.23% Common
Securities (liquidation amount $1,000 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records of
the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer and satisfaction of
the other conditions set forth in the Declaration (as defined below) including,
without limitation, Section 9.1(c) thereof. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of January 29, 1997, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common Securities
as set forth in Annex I to the Declaration. Capitalized terms used but not
defined herein shall have the meaning given them in the Declaration. The Sponsor
will provide a copy of the Declaration, the Common Securities Guarantee and the
Indenture (including any supplemental indenture) to the Holder without charge
upon written request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
Reference is made to the select provisions of the Common
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of
, ____.
Southern Investments UK Capital Trust I
By:________________________________
Name:
Regular Trustee
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at
a rate per annum of 8.23% (the "Coupon Rate") of the liquidation amount of
$1,000 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears for
more than one semi-annual period will bear interest thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
The term "Distributions", as used herein, includes such cash distributions and
any such interest (including any Additional Sums, Additional Distributions and
Additional Amounts (as defined in the Indenture)) unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds available therefor.
Distributions on the Common Securities will be cumulative,
will accrue from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from January 29, 1997 and will be payable
semi-annually in arrears, on February 1 and August 1 of each year, commencing on
August 1, 1997, to the Holders of record fifteen (15) days prior to such payment
dates, except as otherwise described below. Distributions will be computed on
the basis of a 360-day year consisting of twelve 30-day months and, for any
period shorter than a full semi-annual period for which Distributions are
computed, the number of days elapsed in such a 30-day month. So long as the
Debenture Issuer shall not be in default in the payment of interest on the
Debentures, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for successive periods not exceeding 10
consecutive semi-annual periods (each an "Extension Period"), provided that no
Extension Period shall extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
extension, Distributions will continue to accrue with additional interest
thereon at the Coupon Rate compounded semi-annually to the extent permitted by
applicable law during any such Extension Period. Prior to the termination of any
such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; provided that such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semi-annual periods or
extend beyond the Maturity Date of the Debentures. The Debenture Issuer may also
pay on any Interest Payment Date (as defined in the Indenture) all or a portion
of the interest accrued during an Extension Period. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
The Sponsor will have the right, at any time, to terminate the
Trust and cause the Debentures to be distributed to the holders of the
Securities in liquidation of the Trust or, simultaneously with any redemption of
the Debentures, cause a like amount of the Securities to be redeemed by the
Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
<PAGE>
---------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints ________________________________________
agent to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this
Common Security Certificate)
Signature Guarantee*: ___________________________________
__________________________________
* Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
<PAGE>
Include the following if the Common Security bears a Restricted Common
Securities Legend --
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) |_| exchanged for the undersigned's own account without transfer; or
(2) |_| transferred pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(3) |_| transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) |_| to an institutional "accredited investor" within the meaning of
subpararaph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act that is acquiring the Preferred Security for its own account, or
for the account of such an institutional accredited investor, for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act;
or
(5) |_| transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(6) |_| transferred pursuant to an effective Registration Statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Common Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; provided, however, that if box (3),
(4) or (5) is checked, the Registrar may require, prior to registering any such
transfer of the Common Securities, such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act; provided, further, that (i) if
box (2) is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A or (ii) if box (4) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Offering Memorandum dated January 23,
1997; provided further that after the date that a Registration Statement has
been filed and so long as such Registration Statement continues to be effective,
the Exchange Agent may only permit transfers for which box (6) has been checked.
Signature
Exhibit 4.6
------------------------------------------------------------------------------
EXCHANGE CAPITAL SECURITIES GUARANTEE AGREEMENT
Southern Investments UK plc
Dated as of __________________, 1997
------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
SECTION 1.1 Definitions and Interpretation.................................2
ARTICLE II
SECTION 2.1 Trust Indenture Act; Application...............................5
SECTION 2.2 Lists of Holders of Securities.................................5
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee............6
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee.......6
SECTION 2.5 Evidence of Compliance with Conditions Precedent...............6
SECTION 2.6 Events of Default; Waiver......................................6
SECTION 2.7 Event of Default; Notice.......................................6
SECTION 2.8 Conflicting Interests..........................................7
ARTICLE III
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee..7
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee.........9
SECTION 3.3 Not Responsible for Recitals or Issuance of Capital...........11
ARTICLE IV
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility.............11
SECTION 4.2 Appointment, Removal and Registration of Capital Securities
Guarantee Trustee.............................................12
ARTICLE V
SECTION 5.1 Guarantee.....................................................13
SECTION 5.2 Waiver of Notice and Demand...................................13
SECTION 5.3 Obligations Not Affected......................................13
SECTION 5.4 Rights of Holders.............................................14
SECTION 5.5 Guarantee of Payment..........................................15
SECTION 5.6 Subrogation...................................................15
SECTION 5.7 Independent Obligations.......................................15
ARTICLE VI
SECTION 6.1 Limitation of Transactions....................................15
SECTION 6.2 Ranking.......................................................16
ARTICLE VII
SECTION 7.1 Termination...................................................16
SECTION 8.1 Exculpation...................................................17
SECTION 8.2 Indemnification...............................................17
ARTICLE IX
SECTION 9.1 Successors and Assigns........................................17
SECTION 9.2 Amendment.....................................................18
SECTION 9.3 Notices.......................................................18
SECTION 9.4 Benefit.......................................................19
SECTION 9.5 Governing Law.................................................19
<PAGE>
EXCHANGE CAPITAL SECURITIES GUARANTEE AGREEMENT
This EXCHANGE CAPITAL SECURITIES GUARANTEE AGREEMENT (the
"Capital Securities Guarantee"), dated as of _________________, 1997, is
executed and delivered by Southern Investments UK plc, a public limited
liability company incorporated under the Companies Act 1985 in England and Wales
(the "Guarantor"), and Bankers Trust Company, a New York banking corporation, as
trustee (the "Capital Securities Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Capital Securities (as
defined herein) of Southern Investments UK Capital Trust I, a Delaware statutory
business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of January 29, 1997, among the trustees of
the Trust, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof 82,000 8.23% Exchange Subordinated Capital Income Securities,
having an aggregate liquidation amount of $82,000,000 (collectively, the
"Capital Securities").
WHEREAS, as incentive for the Holders to exchange their
Original Capital Securities for the Capital Securities, the Guarantor desires
irrevocably and unconditionally to agree, to the extent set forth in this
Capital Securities Guarantee, to pay to the Holders the Guarantee Payments (as
defined below). The Guarantor agrees to make certain other payments on the terms
and conditions set forth herein.
WHEREAS, the Guarantor has executed and delivered a guarantee
agreement with substantially identical terms to this Capital Securities
Guarantee Agreement, for the benefit of the holders of the Original Capital
Securities (as defined herein) (the "Original Capital Securities Guarantee") and
a guarantee agreement (the "Common Securities Guarantee"), with substantially
identical terms to this Capital Securities Guarantee, for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of the Common Securities to receive guarantee payments under
the Common Securities Guarantee are subordinated, to the extent and in the
manner set forth in the Common Securities Guarantee, to the rights of holders of
Capital Securities and the Original Capital Securities to receive Guarantee
Payments under this Capital Securities Guarantee and the Original Capital
Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the purchase by each
Holder which purchase the Guarantor hereby acknowledges shall benefit the
Guarantor, the Guarantor executes and delivers this Capital Securities Guarantee
for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Capital Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Capital Securities
Guarantee but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this Capital Securities Guarantee have the same meaning
when used in this Capital Securities Guarantee unless otherwise defined
in this Capital Securities Guarantee;
(c) a term defined anywhere in this Capital Securities Guarantee
has the same meaning throughout;
(d) all references to "the Capital Securities Guarantee" or
"this Capital Securities Guarantee" are to this Capital Securities
Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Capital Securities Guarantee to
Articles and Sections are to Articles and Sections of this Capital
Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Capital Securities Guarantee, unless
otherwise defined in this Capital Securities Guarantee or unless the
context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in The City of New York or London
are authorized or required by law or executive order to close.
"Capital Securities Guarantee Trustee" means Bankers Trust
Company, a New York banking corporation, until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Capital Securities Guarantee and thereafter means each such
Successor Capital Securities Guarantee Trustee.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Capital
Securities Guarantee Trustee at which the corporate trust business of the
Capital Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this Capital
Securities Guarantee is located at Four Albany Street, New York, New York 10006.
"Covered Person" means any Holder or beneficial owner of Capital
Securities.
"Debentures" means the series of subordinated debt securities
of the Guarantor designated the 8.23% Exchange Subordinated Debentures due
February 1, 2027 held by the Institutional Trustee (as defined in the
Declaration) of the Trust.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Capital Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by or on behalf of the Trust: (i) any accrued and
unpaid Distributions (as defined in the Declaration) that are required to be
paid on such Capital Securities to the extent the Trust has funds on hand
legally available therefor at such time, (ii) the redemption price, including
all accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), to the extent the Trust has funds on hand legally available therefor at
such time, with respect to any Capital Securities called for redemption by the
Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Debentures to the Holders in exchange for Capital Securities or the redemption
of all of the Capital Securities on maturity or upon redemption of the
Debentures, as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Capital
Securities to the date of payment, to the extent the Trust has funds on hand
legally available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to Holders in liquidation of the Trust. If an Event
of Default has occurred and is continuing, no guarantee payments under the
Common Securities Guarantee with respect to the Common Securities shall be made
until the Holders of Capital Securities shall be paid in full the Guarantee
Payments to which they are entitled under this Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Trust, of any Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Capital Securities Guarantee
Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any
officers, directors, and employees.
"Indenture" means the Indenture dated as of January 29, 1997,
among the Guarantor, Bankers Trust Company, as Indenture Trustee, and Bankers
Trust Luxembourg S.A., as paying agent and transfer agent pursuant to which the
Debentures are to be issued to the Institutional Trustee of the Trust.
"Majority in liquidation amount of the Capital Securities"
means, except as provided by the Trust Indenture Act, a vote by Holder(s) of
Capital Securities, voting separately as a class, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all Capital
Securities.
"Officers' Certificate" means a certificate signed by any
Director of the Guarantor and by any other Director of the Guarantor or the
Treasurer, Secretary, Assistant Treasurer or Assistant Secretary or any other
officer so authorized and delivered to the Capital Securities Guarantee Trustee.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(c) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Original Capital Securities" means the $82,000,000 aggregate
principal amount of 8.23% Subordinated Capital Income Securities (liquidation
amount $1,000 per Capital Security) issued by the Trust on January 23, 1997.
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer", when used with respect to the Capital
Securities Guarantee Trustee, means any officer within the Corporate Trust
Office of the Capital Securities Guarantee Trustee, including any vice
president, managing director, assistant treasurer, assistant vice president,
assistant secretary or any other officer of the Capital Securities Guarantee
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 that officer's knowledge of and familiarity with the particular
subject.
"Successor Capital Securities Guarantee Trustee" means a
successor Capital Securities Guarantee Trustee possessing the qualifications to
act as Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Securities" means the Common Securities and the
Original Capital Securities and the Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Capital Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Capital Securities Guarantee and shall, to the extent applicable, be governed by
such provisions; and
(b) If and to the extent that any provision of this Capital
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Capital Securities
Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise
the registrar of the Capital Securities) with a list, in such form as the
Capital Securities Guarantee Trustee may reasonably require, of the names and
addresses of the Holders of the Capital Securities ("List of Holders") as of
such date, (i) within one Business Day after June 1 and December 1 of each year,
and (ii) at any other time within 30 days of receipt by the Guarantor of a
written request for a List of Holders as of a date no more than 15 days before
such List of Holders is given to the Capital Securities Guarantee Trustee,
provided that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Capital Securities Guarantee Trustee by the
Guarantor. The Capital Securities Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
Within 60 days after December 15 of each year, commencing
December 15, 1997, the Capital Securities Guarantee Trustee shall provide to the
Holders such reports as are required by Section 313 of the Trust Indenture Act,
if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Capital Securities Guarantee Trustee shall also comply with
the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such documents, reports and information as required by Section
314 (if any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only and the Capital Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Capital
Securities Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Capital Securities Guarantee that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Capital Securities Guarantee, but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice
(a) The Capital Securities Guarantee Trustee shall, within 90
days after the occurrence of a default with respect to this Capital Securities
Guarantee, mail by first class postage prepaid, to all Holders of the Capital
Securities, notices of all defaults actually known to a Responsible Officer of
the Capital Securities Guarantee Trustee, unless such defaults have been cured
before the giving of such notice, provided that, except in the case of default
in the payment of any Guarantee Payment, the Capital Securities Guarantee
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
and/or Responsible Officers of the Capital Securities Guarantee Trustee in good
faith determines that the withholding of such notice is in the interests of the
holders of the Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital Securities
Guarantee Trustee shall have received written notice, or a Responsible Officer
of the Capital Securities Guarantee Trustee charged with the administration of
the Declaration shall have obtained actual knowledge, of such Event of Default.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described
in this Capital Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
(a) This Capital Securities Guarantee shall be held by the
Capital Securities Guarantee Trustee for the benefit of the Holders, and the
Capital Securities Guarantee Trustee shall not transfer this Capital Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on
acceptance by such Successor Capital Securities Guarantee Trustee of its
appointment to act as Successor Capital Securities Guarantee Trustee. The right,
title and interest of the Capital Securities Guarantee Trustee shall
automatically vest in any Successor Capital Securities Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee has occurred and is
continuing, the Capital Securities Guarantee Trustee shall enforce this Capital
Securities Guarantee for the benefit of the Holders.
(c) The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of Default
that may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Capital Securities Guarantee, and no implied
covenants shall be read into this Capital Securities Guarantee against the
Capital Securities Guarantee Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) and is actually
known to a Responsible Officer of the Capital Securities Guarantee Trustee, the
Capital Securities Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Capital Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Capital Securities Guarantee shall be
construed to relieve the Capital Securities Guarantee Trustee from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Capital
Securities Guarantee Trustee shall be determined solely by the
express provisions of this Capital Securities Guarantee, and
the Capital Securities Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Capital Securities
Guarantee, and no implied covenants or obligations shall be
read into this Capital Securities Guarantee against the
Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Capital Securities Guarantee Trustee and conforming to the
requirements of this Capital Securities Guarantee; but in the
case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to
the Capital Securities Guarantee Trustee, the Capital
Securities Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Capital Securities Guarantee Trustee, unless it shall be
proved that the Capital Securities Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;
(iii) the Capital Securities Guarantee 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 a
Majority in liquidation amount of the Capital Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Capital Securities Guarantee Trustee, or exercising
any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Capital Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee shall
require the Capital Securities Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Capital Securities Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Capital Securities Guarantee or indemnity, reasonably satisfactory to
the Capital Securities Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may conclusively
rely, and shall be fully 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, sent or presented
by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Capital Securities Guarantee may be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Capital
Securities Guarantee, the Capital Securities Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Securities
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Guarantor.
(iv) The Capital Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or reregistration thereof).
(v) The Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel
with respect to legal matters 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 accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The Capital Securities
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Capital Securities Guarantee from
any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by
this Capital Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Capital
Securities Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Capital Securities Guarantee Trustee, against the
costs, expenses (including attorneys' fees and expenses and the
expenses of the Capital Securities Guarantee Trustee's agents, nominees
or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Capital Securities Guarantee
Trustee; provided that, nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Capital Securities Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Capital Securities
Guarantee.
(vii) The Capital Securities Guarantee 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
Capital Securities Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit.
(viii) The Capital Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Capital Securities Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Capital Securities Guarantee
Trustee or its agents hereunder shall bind the Holders, and the
signature of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action. No
third party shall be required to inquire as to the authority of the
Capital Securities Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Capital Securities
Guarantee, both of which shall be conclusively evidenced by the Capital
Securities Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Capital Securities
Guarantee the Capital Securities Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Capital Securities
Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Capital Securities, (ii) may
refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such instructions.
(xi) The Capital Securities Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in
good faith, without negligence, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Capital Securities Guarantee.
(b) No provision of this Capital Securities Guarantee shall be
deemed to impose any duty or obligation on the Capital Securities Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Capital Securities Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Capital Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Capital
Securities Guarantee
The recitals contained in this Capital Securities Guarantee
shall be taken as the statements of the Guarantor, and the Capital Securities
Guarantee Trustee does not assume any responsibility for their correctness. The
Capital Securities Guarantee Trustee makes no representation as to the validity
or sufficiency of this Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least U.S.$50,000,000 and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then, for the purposes of this Section
4.1(a)(ii), 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.
(b) If at any time the Capital Securities Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Capital
Securities Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor
shall in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
SECTION 4.2 Appointment, Removal and Registration of Capital Securities
Guarantee Trustee
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office
until a Successor Capital Securities Guarantee Trustee shall have been appointed
or until its removal or resignation. The Capital Securities Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery of an instrument of removal or resignation, the
Capital Securities Guarantee Trustee resigning or being removed may petition any
court of competent jurisdiction for appointment of a Successor Capital
Securities Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Capital Securities
Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Capital Securities Guarantee
Trustee.
(f) Upon termination of this Capital Securities Guarantee or
removal or resignation of the Capital Securities Guarantee Trustee pursuant to
this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee
Trustee all amounts due to the Capital Securities Guarantee Trustee pursuant to
the terms hereof accrued to the date of such termination, removal or
resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Trust), as and when due, to the extent
not paid by the Trust, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by paying the required amount to the
Trust and causing the Trust to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Capital Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Trust or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this Capital Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Capital
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Capital
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Capital
Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum
payable that results from the extension of any interest payment period
on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Capital Securities, or any action on the part of the Trust
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.3 that the obligations of the
Guarantor with respect to the Guarantee Payments shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Capital Securities Guarantee or exercising
any trust or power conferred upon the Capital Securities Guarantee Trustee under
this Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Capital Securities Guarantee, any Holder may institute a legal
proceeding directly against the Guarantor to enforce the Capital Securities
Guarantee Trustee's rights under this Capital Securities Guarantee, without
first instituting a legal proceeding against the Trust, the Capital Securities
Guarantee Trustee or any other person or entity. The Guarantor waives any right
or remedy to require that any action be brought first against the Trust or any
other person or entity before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Capital Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Trust in respect of any amounts paid to such Holders by
the Guarantor under this Capital Securities Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Capital Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this Capital
Securities Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Capital
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Capital
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Capital Securities remain outstanding, the
Guarantor shall not (a) declare or pay any dividends on, or redeem, purchase,
acquire or make a distribution or liquidation payment with respect to, any of
the Guarantor's capital stock except for dividends, payments or distributions
payable in shares of the Guarantor's capital stock, reclassifications of its
capital stock and conversions or exchanges of capital stock of one class or
series for capital stock of another class or series and except for a redemption,
purchase or other acquisition of shares of or its capital stock made for the
purpose of an employee incentive plan or benefit plan or other similar
arrangement of the Guarantor or any of its subsidiaries or (b) make any payment
of interest, principal of or premium, if any, on, or repay, repurchase or redeem
any debt securities issued by the Guarantor that rank pari passu with or junior
in right of payment to the Debentures (except by conversion into or exchange for
shares of its capital stock) or (c) make any guarantee payments with respect to
the foregoing, if at such time (i) the Guarantor shall be in default with
respect to its Guarantee Payments or other payment obligations under this
Capital Securities Guarantee Agreement; (ii) there shall have occurred and be
continuing an event of default under the Indenture; or (iii) the Guarantor shall
have given notice of its election of the exercise of its right to extend the
interest payment period pursuant to Section 313 of the Indenture and any such
period, or any extension thereof, shall be continuing.
So long as any Capital Securities remain outstanding, the
Guarantor (i) will remain the sole direct or indirect owner of all of the
outstanding Common Securities and shall not cause or permit the Common
Securities to be transferred except to the extent permitted by the Declaration;
provided, that any permitted successor of the Guarantor under the Indenture may
succeed to the Guarantor's ownership of the Common Securities, and (ii) will not
take any action which will cause the Trust to cease to be treated as a grantor
trust for United States federal income tax purposes except in connection with a
distribution of Debentures.
SECTION 6.2 Ranking
This Capital Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, including the Debentures,
except liabilities made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Guarantor, and to any
guarantee now or hereafter entered into by the Guarantor in respect of any of
its capital stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Capital Securities Guarantee shall terminate and be of no
further force and effect (i) upon full payment of the Redemption Price (as
defined in the Declaration) of all Capital Securities, or (ii) upon distribution
of the Debentures to the Holders in exchange for all of the outstanding Capital
Securities, or (iii) upon full payment of the amounts payable upon liquidation
of the Trust. Notwithstanding the foregoing, this Capital Securities Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any Holder must restore payment of any sums paid with respect to the
Capital Securities or this Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Capital
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Capital Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence, willful
misconduct or bad faith 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 (including reasonable legal fees and expenses) of defending
itself against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation
to indemnify as set forth in this Section 8.2 shall survive the termination of
this Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding. Except in connection with a consolidation, merger, conveyance,
transfer, lease or sale involving the Guarantor that is permitted under the
Indenture, the Guarantor may not assign its obligations under this Capital
Securities Guarantee.
SECTION 9.2 Amendments
Except with respect to any changes that do not adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Capital Securities Guarantee may only be amended with the prior
approval of the Holders of a Majority in liquidation amount of the Capital
Securities (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined). The provisions of Article 12 of
the Declaration with respect to meetings of Holders of the Securities apply to
the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Capital Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Trust, in care of the Regular Trustees at
the mailing addresses set forth below (or such other address as the Trust may
give notice of to the Holders):
Southern Investments UK Capital Trust I
c/o Southern Investments UK plc
800 Park Avenue
Aztec West
Almondsbury, Bristol BS12 4SE
England
Attention: Charl Oosthuizen
Telecopy: 011-44-1454-452-361
and
Southern Investments UK Capital Trust I
c/o Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, GA 30346-6401
Attention: Wayne Boston or Richard Childs, Regular Trustees
Telecopy: 770-821-2894
(b) If given to the Capital Securities Guarantee Trustee, at
the Capital Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Capital Securities Guarantee Trustee may give notice
of to the Holders):
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Manager Public Utilities Group
Telecopy: 212-250-6725
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Capital Securities):
Southern Investments UK plc
800 Park Avenue
Aztec West
Almondsbury, Bristol BS12 4SE
England
Attention:
Telecopy:
(d) If given to any Holder, at the address set forth on the books and
records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Capital Securities Guarantee is solely for the benefit of
the Holders of the Capital Securities and, subject to Section 3.1(a), is not
separately transferable from the Capital Securities.
SECTION 9.5 Governing Law
THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
<PAGE>
THIS CAPITAL SECURITIES GUARANTEE is executed as of the day
and year first above written.
SOUTHERN INVESTMENTS UK plc,
as Guarantor
By:
Name:
Title:
BANKERS TRUST COMPANY, as
Capital Securities Guarantee Trustee
By:
Name:
Title:
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
Dated January 29, 1997
among
SOUTHERN INVESTMENTS UK plc
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
and
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
as Initial Purchasers
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of January 29, 1997 among SOUTHERN INVESTMENTS UK plc, a
United Kingdom corporation (the "Company"), SOUTHERN INVESTMENTS UK CAPITAL
TRUST I, a statutory business trust formed under the laws of the state of
Delaware (the "Trust"), and LEHMAN BROTHERS INC. ("Lehman Brothers") and J.P.
MORGAN SECURITIES INC. (collectively the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated January 23, 1997 (the "Purchase Agreement"), among the Company, as issuer
of the 8.23% Subordinated Debentures due February 1, 2027 (the "Subordinated
Debentures"), the Trust and the Initial Purchasers, which provides for among
other things, the sale by the Trust to the Initial Purchasers of $82,000,000 of
the Trust's 8.23% Subordinated Capital Income Securities, liquidation amount
$1,000 per Capital Security (the "Capital Securities") the proceeds of which
will be used by the Trust to purchase Subordinated Debentures. The Capital
Securities, together with the Subordinated Debentures and the Company's
guarantee of the Capital Securities (the "Capital Securities Guarantee") are
collectively referred to as the "Securities". In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company and the Trust have
agreed to provide to the Initial Purchasers and their direct and indirect
transferees the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Additional Distribution" shall have the meaning set forth in
Section 2(e) hereof.
"Additional Interest" shall have the meaning set forth in Section
2(e) hereof.
"Advice" shall have the meaning set forth in the last paragraph
of Section 3 hereof.
"Applicable Period" shall have the meaning set forth in Section
3(t) hereof.
"Business Day" shall mean a day other than (i) a Saturday or a
Sunday, (ii) a day on which banks in New York, New York or Bristol,
England are authorized or obligated by law or executive order to remain
closed or (iii) a day on which the Indenture Trustee's Corporate Trust
Office or Institutional Trustee's principal corporate trust office is
closed for business.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble to
this Agreement and also includes the Company's successors and permitted
assigns.
"Declaration" or "Declaration of Trust" shall mean the Amended
and Restated Declaration of Trust, dated as of January 29, 1997, by the
trustees named therein and the Company as sponsor.
"Depositary" shall mean The Depository Trust Company,or any
other depositary appointed by the Trust; provided, however, that such
depositary must have an address in the Borough of Manhattan, in The
City of New York.
"Effectiveness Period" shall have the meaning set forth in
Section 2(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exchange Offer" shall mean the offer by the Company and the
Trust to the Holders to exchange all of the Registrable Securities
(other than Private Exchange Securities) for a like principal amount of
Exchange Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Period" shall have the meaning set forth in Section
2(a) hereof.
"Exchange Securities" shall mean (i) with respect to the
Subordinated Debentures, the 8.23% Subordinated Debentures due February
1, 2027 (the "Exchange Debentures") containing terms identical to the
Subordinated Debentures (except that they will not contain terms with
respect to the transfer restrictions under the Securities Act, will not
require transfers thereof to be in minimum blocks of $100,000 principal
amount and will not provide for any increase in the interest rate
thereon), (ii) with respect to the Capital Securities, the Trust's
8.23% Subordinated Capital Income Securities, liquidation amount $1,000
per Capital Security (the "Exchange Capital Securities") which will
have terms identical to the Capital Securities (except that they will
not contain terms with respect to transfer restrictions under the
Securities Act, will not require transfers thereof to be in minimum
blocks of $100,000 principal amount and will not provide for any
increase in the distribution rate thereon) and (iii) with respect to
the Capital Securities Guarantee, the Company's guarantee (the
"Exchange Capital Securities Guarantee") of the Exchange Capital
Securities which will have terms identical to the Capital Securities
Guarantee.
"Holder" shall mean the Initial Purchasers, for so long as
they own any Registrable Securities, and each of its respective
successors, assigns and direct and indirect transferees who become
registered owners of Registrable Securities under the Indenture or
Declaration of Trust.
"Indenture" shall mean the Indenture relating to the
Subordinated Debentures and the Exchange Debentures dated as of January
29, 1997 among the Company, as issuer, Bankers Trust Company, as the
Indenture Trustee and Bankers Trust Luxemburg S.A., as paying and
transfer agent, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n)
hereof.
"Issue Date" shall mean the date of original issuance of the
Securities.
"Majority Holders" shall mean the Holders of a majority of the
aggregate liquidation amount of outstanding Capital Securities.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 3(t) hereof.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, limited liability Company, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to a prospectus, including post-effective amendments, and
in each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Records" shall have the meaning set forth in Section 3(n)
hereof.
"Registration Default" shall have the meaning set forth in
Section 2(e) hereof.
"Registrable Securities" shall mean the Securities; provided,
however, that Securities, shall cease to be Registrable Securities when
(i) a Registration Statement with respect to such Securities for the
exchange thereof, shall have been declared effective under the
Securities Act and such Securities shall have been disposed of pursuant
to such Registration Statement, (ii) such Securities, shall have been
sold to the public pursuant to Rule 144(k) (or any similar provision
then in force, but not Rule 144A) under the Securities Act, (iii) such
Securities shall have ceased to be outstanding or (iv) such Securities
have been exchanged for Exchange Securities upon consummation of the
Exchange Offer and are thereafter freely tradeable by the holder
thereof (other than an affiliate of the Company).
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC or National
Association of Securities Dealers, Inc. (the "NASD") registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities) and compliance with the rules of
the NASD in the amount not exceeding $15,000 in the aggregate, (iii)
all expenses of any Persons in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement,
any Prospectus and any amendments or supplements thereto, and in
preparing or assisting in preparing, printing and distributing any
Registration Statement, any Prospectus and any amendments or
supplements thereto, and in preparing or assisting in preparing,
printing and distributing any underwriting agreements, securities sales
agreements and other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees, (v) the
fees and disbursements of counsel for the Company and of the
independent certified public accountants of the Company, including the
expenses of any "cold comfort" letters required by or incident to such
performance and compliance, (vi) the fees and expenses of the Trustees,
and any exchange agent or custodian, (vii) all fees and expenses
incurred in connection with the listing, if any, of any of the
Registrable Securities on any securities exchange or exchanges, and
(viii) the reasonable fees and expenses of any special experts retained
by the Company in connection with any Registration Statement.
"Registration Statement" shall mean any registration statement
of the Company and the Trust which covers any of the Exchange
Securities or Registrable Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Rule 144(k) Period" shall mean the period of three years (or
such shorter period as may hereafter be provided in Rule 144(k) under
the Securities Act (or similar successor rule)) commencing on the Issue
Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble to
this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Shelf Registration" shall mean a registration effected pursuant
to Section 2(b) hereof.
"Shelf Registration Event" shall have the meaning set forth in
Section 2(b) hereof.
"Shelf Registration Event Date" shall have the meaning set forth
in Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company and the Trust pursuant to the
provisions of Section 2(b) hereof which covers all of the Registrable
Securities, on an appropriate form under Rule 415 under the Securities
Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"TIA" shall have the meaning set forth in Section 3(1) hereof.
"Trustees" shall mean any and all trustees with respect to (i)
the Capital Securities under the Declaration, (ii) the Subordinated
Debentures under the Indenture and (iii) the Capital Securities
Guarantee.
2. Registration Under the Securities Act.
(a) Exchange Offer. To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Company and the Trust
shall, for the benefit of the Holders, at the Company's cost, use its reasonable
best efforts to (i) cause to be filed with the SEC within 150 days after the
Issue Date an Exchange Offer Registration Statement on an appropriate form under
the Securities Act covering the Exchange Offer, (ii) cause such Exchange Offer
Registration Statement to be declared effective under the Securities Act by the
SEC not later than the date which is 180 days after the Issue Date, and (iii)
keep such Exchange Offer Registration Statement effective for not less than 30
calendar days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the Holders. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company and the Trust shall promptly
commence the Exchange Offer, it being the objective of such Exchange Offer to
enable each Holder eligible and electing to exchange Registrable Securities for
a like principal amount of Exchange Debentures or a like liquidation amount of
Exchange Capital Securities, together with the Exchange Guarantee, as applicable
(assuming that such Holder is not an affiliate of the Company within the meaning
of Rule 405 under the Securities Act and is not a broker-dealer tendering
Registrable Securities acquired directly from the Company for its own account,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any Person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Securities) to transfer such Exchange Securities from and after their receipt
without any limitations or restrictions under the Securities Act and under state
securities or blue sky laws.
In connection with the Exchange Offer, the Company and the
Trust shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of
not less than 30 days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period
referred to herein as the "Exchange Period");
(iii) utilize the services of the Depositary for the Exchange
Offer;
(iv) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last Business
Day of the Exchange Period, by sending to the institution specified in
the notice, a telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of
Securities delivered for exchange, and a statement that such Holder is
withdrawing his election to have such Securities exchanged;
(v) notify each Holder that any Security not tendered by such
Holder in the Exchange Offer will remain outstanding and continue to
accrue interest or accumulate distributions, as the case may be, but
will not retain any rights under this Agreement (except in the case of
the Initial Purchasers and Participating Broker-Dealers as provided
herein); and
(vi) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company and the Trust, as the case requires, shall:
<PAGE>
(vii) accept for exchange all Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer;
(viii) deliver, or cause to be delivered, to the applicable
Trustee for cancellation all Securities or portions thereof so
accepted for exchange by the Company; and
(ix) issue, and cause the applicable Trustee under the Indenture,
the Declaration or the Guarantee, as applicable, to promptly
authenticate and deliver to each Holder, new Exchange Securities equal
in principal amount to the principal amount of the Subordinated
Debentures or equal in liquidation amount of the liquidation amount to
the Capital Securities (together with the guarantee thereof) as are
surrendered by such Holder.
Distributions on each Exchange Capital Security and interest
on each Exchange Debenture issued pursuant to the Registered Exchange Offer will
accrue from the last date on which a Distribution or interest was paid on the
Capital Security or the Subordinated Debenture surrendered in exchange therefor
or, if no Distribution or interest has been paid on such Capital Security or
Subordinated Debenture, from the Issue Date. To the extent not prohibited by any
law or applicable interpretation of the staff of the SEC, the Company and the
Trust shall use their reasonable best efforts to complete the Exchange Offer as
provided above, and shall comply with the applicable requirements of the
Securities Act, the Exchange Act and other applicable laws in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the staff of the SEC. Each Holder of Registrable
Securities who wishes to exchange such Registrable Securities for Exchange
Securities in the Exchange Offer will be required to make certain customary
representations in connection therewith, including, in the case of any Holder of
Capital Securities, representations that (i) it is not an affiliate of the Trust
or the Company, (ii) the Exchange Securities to be received by it were acquired
in the ordinary course of its business and (iii) at the time of the Exchange
Offer, it has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Capital Securities.
Each Holder hereby acknowledges and agrees that any Participating Broker-Dealer
and any such Holder using the Exchange Offer to participate in a distribution of
the securities to be acquired in the Exchange Offer (1) could not under SEC
policy as in effect on the date of this Agreement rely on the position of the
SEC enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in
the SEC's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to clause
(i) above, and (2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if the
resales are of Exchange Securities obtained by such Holder in exchange for
Securities acquired by such Holder directly from the Trust or the Company.
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are
Exchange Securities held by Participating Broker-Dealers, and the Company and
the Trust shall have no further obligation to register the Registrable
Securities (other than pursuant to Section 2(b)(iii)) pursuant to Section 2(b)
of this Agreement.
(c) Shelf Registration. In the event that (i) the Company and the Trust are
not permitted to effect the Exchange Offer because of any change in law or in
currently prevailing interpretations of the staff of the SEC, (ii) the Exchange
Offer Registration Statement is not declared effective within 180 days of the
Issue Date, (iii) upon the request of any Initial Purchaser with respect to any
Registrable Securities held by it, if such Initial Purchaser is not permitted,
in the reasonable opinion of Shearman & Sterling, pursuant to applicable law or
applicable interpretations of the staff of the SEC, to participate in the
Exchange Offer and thereby receive securities that are freely tradeable without
restriction under the Securities Act and applicable blue sky or state securities
laws or (iv) if the Company has received an opinion of counsel having a
recognized national tax practice to the effect that, as a result of the
consummation of the Exchange Offer, there is more than an insubstantial risk
that (A) the Trust could be subject to US federal or UK income tax with respect
to income received or accrued on the Subordinated Debentures or Exchange
Debentures, (B) interest payable by the Company on such Subordinated Debentures
or Exchange Debentures would not be deductible by the Company, in whole or in
part, for US earnings and profits purposes or UK income tax purposes, or (C) the
Trust could be subject to more than a de minimis amount of other taxes, duties
or other governmental charges, or in certain other circumstances (any of the
events specified in (i) - (iv) being a "Shelf Registration Event" and the date
of occurrence thereof, the "Shelf Registration Event Date"), the Company and the
Trust shall promptly deliver to the holders and the Institutional Trustee
written notice thereof and, at their cost, use their reasonable best efforts to
cause to be filed as promptly as practicable after such Shelf Registration Event
Date, as the case may be, and, in any event, within 45 days after such Shelf
Registration Event Date (which shall be no earlier than 75 days after the
Closing Time), a Shelf Registration Statement providing for the sale by the
Holders of all of the Registrable Securities, and shall use its reasonable best
efforts to have such Shelf Registration Statement declared effective by the SEC
as soon as practicable; provided, however that if the Shelf Registration Event
is pursuant to clause (iii) the Company may register such Registrable Securities
together with the Exchange Offer Registration Statement, filed pursuant to
Section 2(a), and the requirements as to timing applicable thereto. No Holder of
Registrable Securities shall be entitled to include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and until
such Holder agrees in writing to be bound by all of the provisions of this
Agreement applicable to such Holder and furnishes to the Company and the Trust
in writing, within 15 days after receipt of a request therefor, such information
as the Company and the Trust may, after conferring with counsel with regard to
information relating to Holders that would be required by the SEC to be included
in such Shelf Registration Statement or Prospectus included therein, reasonably
request for inclusion in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is being effected agrees
promptly to furnish to the Company and the Trust all information with respect to
such Holder necessary to make the information previously furnished to the
Company by such Holder not materially misleading.
The Company and the Trust agree to use their reasonable best
efforts to keep the Shelf Registration Statement continuously effective for the
Rule 144(k) Period (subject to extension pursuant to the last paragraph of
Section 3 hereof) or for such shorter period which will terminate when all of
the Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or cease to be outstanding
(the "Effectiveness Period"). The Company and the Trust shall not permit any
securities other than Registrable Securities to be included in the Shelf
Registration. The Company and the Trust will, in the event a Shelf Registration
Statement is declared effective, provide to each Holder a reasonable number of
copies of the Prospectus which is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration has become effective. The
Company and the Trust further agree, if necessary, to supplement or amend the
Shelf Registration Statement, if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registrations, and the Company and the Trust
agree to furnish to the Holders of Registrable Securities copies of any such
supplement or amendment promptly after its being used or filed with the SEC.
(d) Expenses. The Company shall pay all Registration Expenses in connection
with the registration pursuant to Section 2(a) or 2(b) hereof. Except as
provided herein, each Holder shall pay all expenses of its counsel, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the Shelf
Registration Statement.
(e) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof (or a combination of the two) will not be deemed
to have become effective unless it has been declared effective by the SEC;
provided, however, that if, after it has been declared effective, the offering
of Registerable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume. The Company and the Trust will be
deemed not to have used their reasonable best efforts to cause the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, to become, or to remain, effective during the requisite period if either
of them voluntarily take any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable
Securities covered thereby not being able to exchange or offer and sell such
Registrable Securities during that period unless such action is required by
applicable law.
(f) Additional Interest and Distributions. In the event that
(i) (A) neither the Exchange Offer Registration Statement nor
a Shelf Registration Statement is filed with the SEC on or prior to the
150th day after the Issue Date or (B) notwithstanding that the Company
and the Trust have consummated or will consummate an Exchange Offer,
the Company and the Trust are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not filed on or
prior to the date required by Section 2(b) hereof, then commencing on
the day after the applicable required filing date, additional interest
shall accrue on the principal amount of the Subordinated Debentures
("Additional Interest"), and additional distributions shall accumulate
on the liquidation amount of the Capital Securities ("Additional
Distributions"), each at a rate of 0.25% per annum; or
(ii) (A) neither the Exchange Offer Registration Statement nor
a Shelf Registration Statement is declared effective by the SEC on or
prior to the 30th day after the applicable required filing date or (B)
notwithstanding that the Company and the Trust have consummated an
Exchange Offer, the Company and the Trust are required to file a Shelf
Registration Statement and such Shelf Registration Statement is not
declared effective by the SEC on or prior to the 30th day after the
date such Shelf Registration Statement was required to be filed, then,
commencing on the 31st day after the applicable required filing date,
Additional Interest shall accrue on the principal amount of the
Subordinated Debentures, and Additional Distributions shall accumulate
on the liquidation amount of the Capital Securities, each at a rate of
0.25% per annum; or
(iii) (A) the Trust has not exchanged Exchange Capital
Securities for all Capital Securities or the Company has not exchanged
the Exchange Guarantees or Exchange Subordinated Debentures for the
Guarantees or all Subordinated Debentures validly tendered, in
accordance with the terms of the Exchange Offer on or prior to the 40th
day after the date on which the Exchange Offer Registration Statement
was declared effective or (B) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration
Statement ceases to be effective at any time prior to the expiration of
the Rule 144(k) Period (other than after such time as all Capital
Securities have been disposed of thereunder or otherwise cease to be
Registrable Securities), then Additional Interest shall accrue on the
principal amount of Subordinated Debentures, and Additional
Distributions shall accumulate on the liquidation amount of the Capital
Securities, each at a rate of 0.25% per annum commencing on (x) the
41st day after such effective date, in the case of (A) above, or (y)
the day such Shelf Registration Statement ceases to be effective in the
case of (B) above;
provided, however, that neither the Additional Interest rate on the Subordinated
Debentures, nor the Additional Distribution rate on the liquidation amount of
the Capital Securities, may exceed in the aggregate 0.25% per annum; provided
further, however, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of clause (i) above),
(2) upon the effectiveness of the Exchange Offer Registration Statement or a
Shelf Registration Statement (in the case of clause (ii) above), (3) upon the
exchange of Exchange Capital Securities, Exchange Guarantee and Exchange
Subordinated Debentures for all Capital Securities, the Guarantee and all
Subordinated Debentures tendered (in the case of clause (iii)(A) above), or upon
the effectiveness of the Shelf Registration Statement which had ceased to remain
effective (in the case of clause (iii)(B) above), or (4) upon the expiration of
three years (or such shorter period as may hereafter be provided in Rule 144K
under the Securities Act (or similar rule)) commencing on the date of original
issuance of the Securities, Additional Interest on the Subordinated Debentures,
and Additional Distributions on the liquidation amount of the Capital Securities
as a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue or accumulate, as the case may be.
Any amounts of Additional Interest and Additional
Distributions due pursuant to Section 2(e) (i), (ii) or (iii) above will be
payable in cash on the relevant payment dates for the payment of interest and
Distributions pursuant to the Indenture and the Declaration, respectively.
(g) Specific Enforcement. Without limiting the remedies available to the
Holders, the Company and the Trust acknowledge that any failure by the Company
or the Trust to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Holders for which there
is no adequate remedy at law, that it would not be possible to measure damages
for such injuries precisely and that, in the event of any such failure, any
Holder may obtain such relief as may be required to specifically enforce the
Company's and the Trust's obligations under Section 2(a) and Section 2(b)
hereof.
3. Registration Procedures. In connection with the obligations of the
Company and the Trust with respect to the Registration Statements pursuant to
Sections 2(a) and 2(b) hereof, the Company and the Trust shall use their best
reasonable efforts to:
<PAGE>
(a) prepare and file with the SEC a Registration
Statement or Registration Statements as prescribed by Sections 2(a) and
2(b) hereof within the relevant time period specified in Section 2
hereof on the appropriate form(s) under the Securities Act, which
form(s) (i) shall be selected by the Company and the Trust, (ii) shall,
in the case of a Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and (iii) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the
SEC to be filed therewith; and use its reasonable best efforts to cause
such Registration Statement to become effective and remain effective in
accordance with Section 2 hereof; provided, however, that if (1) such
filing is pursuant to Section 2(b), or (2) a Prospectus contained in an
Exchange Offer Registration Statement filed pursuant to Section 2(a) is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company and the Trust shall furnish to and afford the
Holders of the Registrable Securities and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed. The Company and
the Trust shall not file any Registration Statement or Prospectus or
any amendments or supplements thereto in respect of which the Holders
must be afforded an opportunity to review prior to the filing of such
document if the Majority Holders or such Participating Broker-Dealer,
as the case may be, their counsel or the managing underwriters, if any,
shall reasonably object;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
Effectiveness Period or the Applicable Period, as the case may be; and
cause each Prospectus to be supplemented, if so determined by the
Company or the Trust or requested by the SEC, by any required
prospectus supplement and as so supplemented to be filed pursuant to
Rule 424 (or any similar provision then in force) under the Securities
Act, and comply with the provisions of the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder applicable to
it with respect to the disposition of all securities covered by each
Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof
described in this Agreement (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify
each Holder of Registrable Securities included in the Shelf
Registration Statement, at least three Business Days prior to filing,
that a Shelf Registration Statement with respect to the Registrable
Securities is being filed and advising such Holder that the
distribution of Registrable Securities will be made in accordance with
the method selected by the Majority Holders; (ii) furnish to each
Holder of Registrable Securities included in the Shelf Registration
Statement and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Securities; (iii) consent
to the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities included in the
Shelf Registration Statement in connection with the offering and sale
of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto; and (iv) furnish to each Holder of
Registrable Securities either a summary of the terms of this Agreement
or a copy of this Agreement.
(d) in the case of a Shelf Registration, cooperate
with the Trustee to register or qualify the Registrable Securities
under all applicable state securities or "blue sky" laws of such
jurisdictions by the time the applicable Registration Statement is
declared effective by the SEC as any Holder of Registrable Securities
covered by a Registration Statement and each underwriter of an
underwritten offering of Registrable Securities shall reasonably
request in writing in advance of such date of effectiveness; provided,
however, that the Company and the Trust shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (ii) file any general consent to service of
process in any jurisdiction where it would not otherwise be subject to
such service of process or (iii) file annual reports or comply with any
other requirements deemed by the Company to be unduly burdensome;
(e) in the case of (1) a Shelf Registration or (2)
Participating Broker-Dealers from whom the Company or the Trust has
received prior written notice that they will be utilizing the
Prospectus contained in the Exchange Offer Registration Statement as
provided in Section 3(t) hereof, are seeking to sell Exchange
Securities and are required to deliver Prospectuses, notify each Holder
of Registrable Securities, or such Participating Broker-Dealers, as the
case may be, their counsel and the managing underwriters, if any,
promptly and promptly confirm such notice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any
request by the SEC or any state securities authority for amendments and
supplements to a Registration Statement or Prospectus or for additional
information after the Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities authority of
any stop order suspending the effectiveness of a Registration Statement
or the qualification of the Registrable Securities or the Exchange
Securities to he offered or sold by any Participating Broker-Dealer in
any jurisdiction described in paragraph 3(d) hereof or the initiation
of any proceedings for that purpose, (iv) in the case of a Shelf
Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company and the
Trust contained in any purchase agreement, securities sales agreement
or other similar agreement, if any cease to be true and correct in all
material respects, and (v) of the happening of any event or the failure
of any event to occur or the discovery of any facts or otherwise,
during the Effectiveness Period which makes any statement made in such
Registration Statement or the related Prospectus untrue in any material
respect or which causes such Registration Statement or Prospectus to
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, and (vi) the Company and the Trust's reasonable
determination that a post-effective amendment to the Registration
Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) in the case of a Shelf Registration, furnish to
each Holder of Registrable Securities included within the coverage of
such Shelf Registration Statement, without charge, at least one
conformed copy of each Registration Statement relating to such Shelf
Registration and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Securities to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive
legends and in such denominations (consistent with the provisions of
the Indenture and the Declaration) and registered in such names as the
selling Holders or the underwriters may reasonably request at least two
Business Days prior to the closing of any sale of Registrable
Securities pursuant to such Shelf Registration Statement;
(i) in the case of a Shelf Registration or an
Exchange Offer Registration, upon the occurrence of any circumstance
contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi)
hereof, prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and to notify each Holder to suspend use of
the Prospectus as promptly as practicable after the occurrence of such
an event, and each Holder hereby agrees to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission;
(j) in the case of a Shelf Registration, a reasonable
time prior to the filing of any document which is to be incorporated by
reference into a Registration Statement or a Prospectus after the
initial filing of a Registration Statement, provide a reasonable number
of copies of such document to the Holders; and make such of the
representatives of the Company and the Trust as shall he reasonably
requested by the Holders of Registrable Securities or the Initial
Purchasers on behalf of such Holders available for reasonable
discussion of such document;
(k) obtain a CUSIP number for all Exchange Capital
Securities and the Capital Securities (and if the Trust has made a
distribution of the Subordinated Debentures to the Holders of the
Capital Securities, the Subordinated Debentures or the Exchange
Subordinated Debentures), as the case may be, not later than the
effective date of a Registration Statement, and provide the relevant
Trustee with printed certificates for the Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible for
deposit with the Depositary;
(l) cause the Indenture, the Declaration, the
Guarantee and the Exchange Guarantee to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the registration
of the Exchange Securities or Registrable Securities, as the case may
be, and effect such changes to such documents as may be required for
them to be so qualified in accordance with the terms of the TIA and
execute, and use its reasonable best efforts to cause the relevant
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with
the SEC to enable such documents to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into
such agreements (including underwriting agreements) as are customary in
underwritten offerings and consistent with the terms of the Purchase
Agreement and take all such other appropriate actions as are reasonably
requested in order to expedite or facilitate the registration or the
disposition of such Registrable Securities, and in such connection,
whether or not an underwriting agreement is entered into and whether or
not the registration is an underwritten registration, if requested by
(x) any Initial Purchaser, in the case where an Initial Purchaser holds
Securities acquired by it as part of its initial distribution and (y)
other Holders of Securities covered thereby: (i) make such
representations and warranties to Holders of such Registrable
Securities and the underwriters (if any), with respect to the business
of the Trust, the Company and its subsidiaries as then conducted and
the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested;
(ii) obtain opinions of counsel to the Company and the Trust and
updates thereof (which may be in the form of a reliance letter) in form
and substance reasonably satisfactory to the managing underwriters (if
any) and the Holders of a majority in principal amount of the
Registrable Securities being sold, addressed to each selling Holder and
the underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such underwriters (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (iii) obtain "cold comfort" letters and
updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants
of the Company and the Trust (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company and the
Trust or of any business acquired by the Company and the Trust for
which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary, form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as
reasonably requested by such underwriters in accordance with Statement
on Auditing Standards No. 72; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 4 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Securities
covered by such Registration Statement and the managing underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section (including, without limitation, such underwriters and selling
Holders). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder and
as consistent with the terms of the Purchase Agreement;
(n) if (1) a Shelf Registration is filed pursuant to
Section 2(b) or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2(a) is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period,
make reasonably available for inspection by any selling Holder of such
Registrable Securities being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Trust, the Company
and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and
employees of the Trust, the Company and its subsidiaries to supply all
relevant information in each case reasonably requested by any such
Inspector in connection with such Registration Statement provided,
however, that the foregoing inspection and information gathering shall
be coordinated on behalf of the Purchasers by you and on behalf of the
other parties, by one counsel designated by you and on behalf of such
other parties as described in Section 2(c) hereof. Records which the
Company and the Trust determine, in good faith, to be confidential and
any records which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a material misstatement or
omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or is necessary in connection with any
action, suit or proceeding or (iii) the information in such Records has
been made generally available to the public. Each selling Holder of
such Registrable Securities and each such Participating Broker-Dealer
will be required to agree in writing that information obtained by it as
a result of such inspections shall be deemed confidential and shall not
be used by it as the basis for any market transactions in the
securities of the Trust or the Company unless and until such is made
generally available to the public. Each selling Holder of such
Registrable Securities and each such Participating Broker-Dealer will
he required to further agree in writing that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(o) comply with all applicable rules and regulations
of the SEC so long as any provision of this Agreement shall be
applicable and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods;
(p) upon consummation of an Exchange Offer, if
requested by a Trustee, obtain an opinion of counsel to the Company
addressed to the relevant Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer and which
includes an opinion that (i) the Company and the Trust, as the case
requires, has duly authorized, executed and delivered the Exchange
Securities, and (ii) each of the Exchange Securities constitutes a
legal, valid and binding obligation of the Company or the Trust, as the
case requires, enforceable against the Company or the Trust, as the
case requires, in accordance with its respective terms (in each case,
with customary exceptions);
(q) if an Exchange Offer is to be consummated, upon
delivery of the Registrable Securities by Holders to the Company or the
trust, as applicable (or to such other Person as directed by the
Company or the Trust, respectively), in exchange for the Exchange
Securities, the Company or the Trust, as applicable, shall mark, or
cause to be marked, on such Registrable Securities delivered by such
Holders that such Registrable Securities are being cancelled in
exchange for the Exchange Securities in no event shall such Registrable
Securities be marked as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable
Securities covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to
be made with the NASD;
(s) use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer
Registration Statement (i) indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer
Registration Statement that any broker or dealer registered under the
Exchange Act who holds Securities that are Registrable Securities and
that were acquired for its own account as a result of market-making
activities or other trading activities (other than Registrable
Securities acquired directly from the Company and the Trust) (such
broker or dealer, a "Participating Broker-Dealer"), may exchange such
Securities pursuant to the Exchange Offer; however, such Participating
Broker-Dealer may be deemed to be an "underwriter" within the meaning
of the Securities Act and must, therefore, deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales
of the Exchange Securities received by such Participating Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be
satisfied by the delivery by such Participating Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such
"Plan of Distribution" section shall also contain all other information
with respect to such resales by Participating Broker-Dealers that the
Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such
Participating Broker-Dealer or disclose the amount of Exchange
Securities held by any such Participating Broker-Dealer except to the
extent required by the Commission as a result of a change in policy
announced after the date of this Agreement, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the notice
referred to in Section 3(e), without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or supplement
thereto, as such Participating Broker-Dealer may reasonably request
(each of the Company and the Trust hereby consents to the use of the
Prospectus forming part of the Exchange Offer Registration Statement or
any amendment or supplement thereto by any Person subject to the
prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers, in connection with the sale or transfer
of the Exchange Securities covered by the Prospectus or any amendment
of supplement thereto), (iii) use its reasonable best efforts to keep
the Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus contained therein in order to permit such
Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period
of time as such Persons must comply with such requirements under the
Securities Act and applicable rules and regulations in order to resell
the Exchange Securities; provided, however, that such period shall not
be required to exceed 90 days (or such longer period if extended
pursuant to the last sentence of Section 3 hereof) (the "Applicable
Period"), and (iv) include in the transmittal letter or similar
documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer
holding Registrable Securities acquired for its own
account as a result of market-making activities or
other trading activities, it will deliver a
prospectus meeting the requirements of the Securities
Act in connection with any resale of Exchange
Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer
making the acknowledgement described in clause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Securities,
the broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration
Statement, the Company and the Trust agree to deliver to the Initial
Purchasers or to another representative of the Participating
Broker-Dealers, if requested by any such Initial Purchasers or such
other representative of the Participating Broker-Dealers, on behalf of
the Participating Broker-Dealers upon consummation of the Exchange
Offer (i) an opinion of counsel in form and substance reasonably
satisfactory to the Initial Purchasers or such other representative of
the Participating Broker-Dealers, covering the matters customarily
covered in opinions requested in connection with Exchange Offer
Registration Statements and such other matters as may be reasonably
requested (it being agreed that the matters to be covered by such
opinion may be subject to customary qualifications and exceptions),
(ii) an officers' certificate containing certifications substantially
similar to those set forth in Section 5(d) of the Purchase Agreement
and such additional certifications as are customarily delivered in a
public offering of debt securities and (iii) as well as upon the
effectiveness of the Exchange Offer Registration Statement, a comfort
letter, in each case, in customary form if permitted by Statement on
Auditing Standards No. 72. Each of the foregoing shall be consistent
with the terms of the Purchase Agreement.
The Company or the Trust may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the Company or the
Trust, as applicable, such information regarding such seller as may be required
by the staff of the SEC to be included in a Registration Statement. The Company
or the Trust may exclude from such registration the Registrable Securities of
any seller who unreasonably fails to furnish such information within a
reasonable time after receiving such request. The Company shall have no
obligation to register under the Securities Act the Registrable Securities of a
seller who so fails to furnish such information.
In the case of (1) a Shelf Registration Statement or (2) Participating
Broker-Dealers who have notified the Company and the Trust that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, are seeking to sell Exchange Securities and
are required to deliver Prospectuses each Holder agrees that, upon receipt of
any notice from the Company or the Trust of the happening of any event of the
kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof or until
it is advised in writing (the "Advice") by the Company and the Trust that the
use of the applicable Prospectus may be resumed, and, if so directed by the
Company and the Trust, such Holder will deliver to the Company or the Trust (at
the Company's or the Trust's expense, as the case requires) all copies in such
Holder's possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities or Exchange
Securities, as the case may be, current at the time of receipt of such notice.
If the Company or the Trust shall give any such notice to suspend the
disposition of Registrable Securities or Exchange Securities, as the case may
be, pursuant to a Registration Statement, the Company and the Trust shall use
their best efforts to file and have declared effective (if an amendment) as soon
as practicable an amendment or supplement to the Registration Statement and
shall extend the period during which such Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days in the
period from and including the date of the giving of such notice to and including
the date when the Company and the Trust shall have made available to the Holders
(x) copies of the supplemented or amended Prospectus necessary to resume such
dispositions or (y) the Advice.
4. Indemnification.
(a) In connection with any Registration Statement, the Company
and the Trust shall, jointly and severally, indemnify and hold harmless each
Initial Purchaser, each Holder, each underwriter who participates in an offering
of the Registrable Securities, each Participating Broker-Dealer, and each
Person, if any, who controls any of such parties within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (each an "Indemnified
Party") as follows:
<PAGE>
(i) from and against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act or otherwise, and to
reimburse the Indemnified Party for any legal or other expenses
incurred by them in connection with defending any actions, insofar as
such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus or the Prospectus as amended
or supplemented, or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission which was made in such Prospectus,
or the Prospectus as amended or supplemented, in reliance upon and in
conformity with information furnished in writing to the Company by such
Indemnified Party for use therein and except that this indemnity with
respect to the Prospectus if the Company shall have furnished any
amendment or supplement thereto, shall not inure to the benefit of any
Indemnified Party on account of any losses, claims, damages,
liabilities or actions arising from the sale of Registrable Securities
to any person if a copy of the Prospectus, as the same may then be
amended or supplemented, shall not have been sent or given by or on
behalf of such Indemnified Party to such person with or prior to the
written confirmation of the sale involved. Each Indemnified Party shall
agree, that within ten days after the receipt by it of notice of the
commencement of any action in respect of which indemnity may be sought
by it, or by any person controlling it, from the Company on account of
its agreement contained in this Section 4, to notify the Company in
writing of the commencement thereof, but the omission of such
Indemnified Party so to notify the Company of any such action shall not
release the Company from any liability which it may have to such
Indemnified Party or to such controlling person otherwise than on
account of the indemnity agreement contained in this Section 4. In case
any such action shall be brought against any Indemnified Party or any
such person controlling such Indemnified Party shall notify the Company
of the commencement thereof, as above provided, the Company shall be
entitled to participate in (and, to the extent that it shall wish,
including the selection of counsel, to direct) the defense thereof at
its own expense. In case the Company elects to direct such defense and
select such counsel, any Indemnified Party or controlling person shall
have the right to employ its own counsel, but, in any such case, the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or controlling person unless the employment of such
counsel has been authorized in writing by the Company in connection
with defending such action.
The Company's indemnity agreement contained in this Section 4, shall remain
in full force and effect regardless of any investigation made by or on behalf of
any Indemnified Party or controlling person, and shall survive the registration
of the Registrable Securities.
(c) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, the Trust, any underwriter and the other selling Holders
and each of their respective directors, officers (including each officer of the
Company and the Trust who signed the Registration Statement), employees and
agents and each Person, if any, who controls the Company, the Trust, any
underwriter or any other selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
loss, liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 4(a) hereof, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company or the Trust by such selling Holder with
respect to such Holder expressly for use in the Registration Statement (or any
amendment thereto), or any such Prospectus (or any amendment or supplement
thereto); provided, however, that, in the case of Shelf Registration Statement,
no such Holder shall be liable for any claims hereunder in excess of the amount
of net proceeds received by such Holder from the sale of Registrable Securities
pursuant to such Shelf Registration Statement.
(d) The Company shall give notice to each Indemnifying Party of any action
commenced against it in respect of which indemnity may be sought hereunder in
accordance with the terms of, and have the same effect as in Section 4(a).
5. Participation in Underwritten Registrations. No Holder may participate
in any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Selection of Underwriters. The Holders of Registrable Securities covered
by the Shelf Registration Statement who desire to do so may sell the securities
covered by such Shelf Registration in an underwritten offering. In any such
underwritten offering, the underwriter or underwriters and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of the Registrable Securities included in such
offering; provided, however, that such underwriters and managers must be
reasonably satisfactory to the Company and the Trust.
7. Miscellaneous.
<PAGE>
(a) Rule 144 and Rule 144A. For so long as the Company or the Trust is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act
and any Registrable Securities remain outstanding, the Company and the Trust, as
the case may be, will their its reasonable best efforts to file the reports
required to be filed by it under the Securities Act and Section 13(a) or 15(d)
of the Exchange Act and the rules and regulations adopted by the SEC thereunder,
that if it ceases to be so required to file such reports, it will, upon the
request of any Holder of Registrable Securities (a) make publicly available such
information as is necessary to permit sales of their securities pursuant to Rule
144 under the Securities Act, (b) deliver such information to prospective
purchaser as is necessary to permit sales of their securities pursuant to Rule
144A under the Securities Act and it will take such further action as any Holder
of Registrable Securities may reasonably request, and (c) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
rule may be amended from time to time, (ii) Rule 144A under the Securities Act,
as such rule may be amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company and the Trusts will deliver to such Holder a
written statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company or the Trust has not entered
into nor will the Company or the Trust on or after the date of this Agreement
enter into any agreement which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's or the Trust's other issued and outstanding securities
under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company and the Trust have obtained the written consent of Holders of
at least a majority in aggregate principal amount of the outstanding Registrable
Securities affected by such amendment, modification, supplement, waiver or
departure; provided no departure with respect to the provisions of Section 4
hereof shall be effective as against any Holder of Registrable Securities.
Notwithstanding the foregoing sentence, (i) this Agreement may be amended,
without the consent of any Holder of Registrable Securities, by written
agreement signed by the Company, the Trust and Lehman Brothers, to cure any
ambiguity, correct or supplement any provision of this Agreement that may be
inconsistent with any other provision of this Agreement or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with other provisions of this Agreement, (ii)
this Agreement may be amended, modified or supplemented, and waivers and
consents to departures from the provisions hereof may be given, by written
agreement signed by the Company, the Trust and Lehman Brothers to the extent
that any such amendment, modification, supplement, waiver or consent is, in
their reasonable judgment, necessary or appropriate to comply with applicable
law (including any interpretation of the Staff of the SEC) or any change therein
and (iii) to the extent any provision of this Agreement relates to the Initial
Purchasers, such provision may be amended, modified or supplemented, and waivers
or consents to departures from such provisions may be given, by written
agreement signed by Lehman Brothers, the Company and the Trust.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if
to a Holder, at the most current address given by such Holder to the Company or
the Trust by means of a notice given in accordance with the provisions of this
Section 7(d), which address initially is, with respect to the Initial
Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the
Company or the Trust, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of the Initial
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers shall be a
third party beneficiary of the agreements made hereunder between the Company and
the Trust, on the one hand, and the Holders, on the other hand, and shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE
STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE
TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company, the Trust or its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company,
the Trust or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
SOUTHERN INVESTMENTS UK PLC
By:
Name:
Title:
SOUTHERN INVESTMENTS UK CAPITAL TRUST I
By:
Name:
Title:
Confirmed and accepted as of
the date first above
written:
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
By: LEHMAN BROTHERS INC.
as Representative of the
Several Initial Purchasers
Exhibit 4.8
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CAPITAL SECURITIES GUARANTEE AGREEMENT
Southern Investments UK plc
Dated as of January 29, 1997
------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation................................. 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application............................... 5
SECTION 2.2 Lists of Holders of Securities................................. 6
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee ........... 6
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee....... 6
SECTION 2.5 Evidence of Compliance with Conditions Precedent............... 7
SECTION 2.6 Events of Default; Waiver...................................... 7
SECTION 2.7 Event of Default; Notice....................................... 7
SECTION 2.8 Conflicting Interests.......................................... 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee.. 8
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee.........10
SECTION 3.3 Not Responsible for Recitals or Issuance of Capital
Securities Guarantee...........................12
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility..............12
SECTION 4.2 Appointment, Removal and Registration of Capital Securities
Guarantee Trustee..............................13
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee......................................................14
SECTION 5.2 Waiver of Notice and Demand....................................14
SECTION 5.3 Obligations Not Affected.......................................14
SECTION 5.4 Rights of Holders..............................................15
SECTION 5.5 Guarantee of Payment...........................................16
SECTION 5.6 Subrogation....................................................16
SECTION 5.7 Independent Obligations........................................16
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.....................................17
SECTION 6.2 Ranking........................................................17
ARTICLE VII
TERMINATION
SECTION 7.1 Termination....................................................18
SECTION 8.1 Exculpation....................................................18
SECTION 8.2 Indemnification................................................19
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.........................................19
SECTION 9.2 Amendment......................................................19
SECTION 9.3 Notices........................................................19
SECTION 9.4 Exchange Offer.................................................21
SECTION 9.5 Benefit........................................................21
SECTION 9.6 Governing Law..................................................21
<PAGE>
CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Capital Securities Guarantee"),
dated as of January 29, 1997, is executed and delivered by Southern Investments
UK plc, a public limited liability company incorporated under the Companies Act
1985 in England and Wales (the "Guarantor"), and Bankers Trust Company, a New
York banking corporation, as trustee (the "Capital Securities Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Capital Securities (as defined herein) of Southern Investments UK Capital
Trust I, a Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of January 29, 1997, among the trustees of
the Trust, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust (i) is
issuing on the date hereof 82,000 8.23% Subordinated Capital Income Securities,
having an aggregate liquidation amount of $82,000,000, such capital securities
being designated the 8.23% Capital Securities (the "Capital Securities") and, in
connection with an Exchange Offer (as defined in the Declaration), to execute
and deliver the Exchange Capital Securities Guarantee (as defined in the
Declaration) for the benefit of holders of the Exchange Capital Securities (as
defined in the Declaration).
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Capital Securities Guarantee, to pay to the Holders
the Guarantee Payments (as defined below). The Guarantor agrees to make certain
other payments on the terms and conditions set forth herein.
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Capital Securities Guarantee, for the benefit of the holders of
the Common Securities (as defined herein), except that if an Event of Default
(as defined in the Declaration) has occurred and is continuing, the rights of
holders of the Common Securities to receive guarantee payments under the Common
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Securities Guarantee, to the rights of holders of Capital
Securities and the Exchange Capital Securities to receive Guarantee Payments
under this Capital Securities Guarantee and the Exchange Capital Securities
Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the purchase by each
Holder which purchase the Guarantor hereby acknowledges shall benefit the
Guarantor, the Guarantor executes and delivers this Capital Securities Guarantee
for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Capital Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Capital Securities
Guarantee but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this Capital Securities Guarantee have the same meaning
when used in this Capital Securities Guarantee unless otherwise defined
in this Capital Securities Guarantee;
(c) a term defined anywhere in this Capital Securities Guarantee
has the same meaning throughout;
(d) all references to "the Capital Securities Guarantee" or
"this Capital Securities Guarantee" are to this Capital Securities
Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Capital Securities Guarantee to
Articles and Sections are to Articles and Sections of this Capital
Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Capital Securities Guarantee, unless
otherwise defined in this Capital Securities Guarantee or unless the
context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule
405 under the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in The City of New York or London
are authorized or required by law or executive order to close.
"Capital Securities Guarantee Trustee" means Bankers Trust
Company, a New York banking corporation, until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Capital Securities Guarantee and thereafter means each such
Successor Capital Securities Guarantee Trustee.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Capital
Securities Guarantee Trustee at which the corporate trust business of the
Capital Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this Capital
Securities Guarantee is located at Four Albany Street, New York, New York 10006.
"Covered Person" means any Holder or beneficial owner of Capital
Securities.
"Debentures" means the series of subordinated debt securities
of the Guarantor designated the 8.23% Subordinated Debentures due February 1,
2027 held by the Institutional Trustee (as defined in the Declaration) of the
Trust.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Capital Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by or on behalf of the Trust: (i) any accrued and
unpaid Distributions (as defined in the Declaration) that are required to be
paid on such Capital Securities to the extent the Trust has funds on hand
legally available therefor at such time, (ii) the redemption price, including
all accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), to the extent the Trust has funds on hand legally available therefor at
such time, with respect to any Capital Securities called for redemption by the
Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Debentures to the Holders in exchange for Capital Securities or the redemption
of all of the Capital Securities on maturity or upon redemption of the
Debentures, as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Capital
Securities to the date of payment, to the extent the Trust has funds on hand
legally available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to Holders in liquidation of the Trust. If an Event
of Default has occurred and is continuing, no guarantee payments under the
Common Securities Guarantee with respect to the Common Securities shall be made
until the Holders of Capital Securities shall be paid in full the Guarantee
Payments to which they are entitled under this Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Trust, of any Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Capital Securities Guarantee
Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any
officers, directors, and employees.
"Indenture" means the Indenture dated as of January 29, 1997,
among the Guarantor, Bankers Trust Company, as Indenture Trustee, and Bankers
Trust Luxemburg S.A., as paying agent and transfer agent pursuant to which the
Debentures are to be issued to the Institutional Trustee of the Trust.
"Majority in liquidation amount of the Capital Securities"
means, except as provided by the Trust Indenture Act, a vote by Holder(s) of
Capital Securities, voting separately as a class, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all Capital
Securities.
"Officers' Certificate" means a certificate signed by any
Director of the Guarantor and by any other Director of the Guarantor or the
Treasurer, Secretary, Assistant Treasurer or Assistant Secretary or any other
officer so authorized and delivered to the Capital Securities Guarantee Trustee.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(c) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of January 29, 1997, by and among the Guarantor, the Trust
and the Initial Purchasers named therein as such agreement may be amended,
modified or supplemented from time to time.
"Responsible Officer", when used with respect to the Capital
Securities Guarantee Trustee, means any officer within the Corporate Trust
Office of the Capital Securities Guarantee Trustee, including any vice
president, managing director, assistant treasurer, assistant vice president,
assistant secretary or any other officer of the Capital Securities Guarantee
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 that officer's knowledge of and familiarity with the particular
subject.
"Successor Capital Securities Guarantee Trustee" means a
successor Capital Securities Guarantee Trustee possessing the qualifications to
act as Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Securities" means the Common Securities and the Capital Securities
and the Exchange Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a)......This Capital Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Capital Securities Guarantee and shall, to the extent applicable, be governed by
such provisions; and
(b)......If and to the extent that any provision of this
Capital Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities
(a)......The Guarantor shall provide the Capital Securities
Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise
the registrar of the Capital Securities) with a list, in such form as the
Capital Securities Guarantee Trustee may reasonably require, of the names and
addresses of the Holders of the Capital Securities ("List of Holders") as of
such date, (i) within one Business Day after June 1 and December 1 of each year,
and (ii) at any other time within 30 days of receipt by the Guarantor of a
written request for a List of Holders as of a date no more than 15 days before
such List of Holders is given to the Capital Securities Guarantee Trustee,
provided that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Capital Securities Guarantee Trustee by the
Guarantor. The Capital Securities Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b)......The Capital Securities Guarantee Trustee shall comply
with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
Within 60 days after December 15 of each year, commencing
December 15, 1997, the Capital Securities Guarantee Trustee shall provide to the
Holders such reports as are required by Section 313 of the Trust Indenture Act,
if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Capital Securities Guarantee Trustee shall also comply with
the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such documents, reports and information as required by Section
314 (if any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only and the Capital Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Capital
Securities Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Capital Securities Guarantee that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Capital Securities Guarantee, but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice
(a)......The Capital Securities Guarantee Trustee shall,
within 90 days after the occurrence of a default with respect to this Capital
Securities Guarantee, mail by first class postage prepaid, to all Holders of the
Capital Securities, notices of all defaults actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee, unless such defaults have
been cured before the giving of such notice, provided that, except in the case
of default in the payment of any Guarantee Payment, the Capital Securities
Guarantee 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 and/or Responsible Officers of the Capital Securities Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the holders of the Capital Securities.
(b)......The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital Securities
Guarantee Trustee shall have received written notice, or a Responsible Officer
of the Capital Securities Guarantee Trustee charged with the administration of
the Declaration shall have obtained actual knowledge, of such Event of Default.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described
in this Capital Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
(a)......This Capital Securities Guarantee shall be held by
the Capital Securities Guarantee Trustee for the benefit of the Holders, and the
Capital Securities Guarantee Trustee shall not transfer this Capital Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on
acceptance by such Successor Capital Securities Guarantee Trustee of its
appointment to act as Successor Capital Securities Guarantee Trustee. The right,
title and interest of the Capital Securities Guarantee Trustee shall
automatically vest in any Successor Capital Securities Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Securities Guarantee Trustee.
(b)......If an Event of Default actually known to a
Responsible Officer of the Capital Securities Guarantee Trustee has occurred and
is continuing, the Capital Securities Guarantee Trustee shall enforce this
Capital Securities Guarantee for the benefit of the Holders.
(c)......The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of Default
that may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Capital Securities Guarantee, and no implied
covenants shall be read into this Capital Securities Guarantee against the
Capital Securities Guarantee Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) and is actually
known to a Responsible Officer of the Capital Securities Guarantee Trustee, the
Capital Securities Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Capital Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(d)......No provision of this Capital Securities Guarantee
shall be construed to relieve the Capital Securities Guarantee Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Capital
Securities Guarantee Trustee shall be determined solely by the
express provisions of this Capital Securities Guarantee, and
the Capital Securities Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Capital Securities
Guarantee, and no implied covenants or obligations shall be
read into this Capital Securities Guarantee against the
Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Capital Securities Guarantee Trustee and conforming to the
requirements of this Capital Securities Guarantee; but in the
case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to
the Capital Securities Guarantee Trustee, the Capital
Securities Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Capital Securities Guarantee Trustee, unless it shall be
proved that the Capital Securities Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;
(iii) the Capital Securities Guarantee 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 a
Majority in liquidation amount of the Capital Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Capital Securities Guarantee Trustee, or exercising
any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Capital Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee shall
require the Capital Securities Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Capital Securities Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of this
Capital Securities Guarantee or indemnity, reasonably satisfactory to
the Capital Securities Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may conclusively
rely, and shall be fully 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, sent or presented
by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Capital Securities Guarantee may be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Capital
Securities Guarantee, the Capital Securities Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Securities
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Guarantor.
(iv) The Capital Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or reregistration thereof).
(v) The Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel
with respect to legal matters 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 accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The Capital Securities
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Capital Securities Guarantee from
any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by
this Capital Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Capital
Securities Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Capital Securities Guarantee Trustee, against the
costs, expenses (including attorneys' fees and expenses and the
expenses of the Capital Securities Guarantee Trustee's agents, nominees
or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Capital Securities Guarantee
Trustee; provided that, nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Capital Securities Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Capital Securities
Guarantee.
(vii) The Capital Securities Guarantee 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
Capital Securities Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit.
(viii) The Capital Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Capital Securities Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Capital Securities Guarantee
Trustee or its agents hereunder shall bind the Holders, and the
signature of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action. No
third party shall be required to inquire as to the authority of the
Capital Securities Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Capital Securities
Guarantee, both of which shall be conclusively evidenced by the Capital
Securities Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Capital Securities
Guarantee the Capital Securities Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Capital Securities
Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Capital Securities, (ii) may
refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such instructions.
(xi) The Capital Securities Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in
good faith, without negligence, and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Capital Securities Guarantee.
(b) No provision of this Capital Securities Guarantee shall be
deemed to impose any duty or obligation on the Capital Securities Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Capital Securities Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Capital Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance of Capital Securities
Guarantee
The recitals contained in this Capital Securities Guarantee
shall be taken as the statements of the Guarantor, and the Capital Securities
Guarantee Trustee does not assume any responsibility for their correctness. The
Capital Securities Guarantee Trustee makes no representation as to the validity
or sufficiency of this Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least U.S.$50,000,000 and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then, for the purposes of this Section
4.1(a)(ii), 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.
(b) If at any time the Capital Securities Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Capital Securities Guarantee
Trustee shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Registration of Capital Securities
Guarantee Trustee
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office
until a Successor Capital Securities Guarantee Trustee shall have been appointed
or until its removal or resignation. The Capital Securities Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery of an instrument of removal or resignation, the
Capital Securities Guarantee Trustee resigning or being removed may petition any
court of competent jurisdiction for appointment of a Successor Capital
Securities Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Capital Securities
Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Capital Securities Guarantee
Trustee.
(f) Upon termination of this Capital Securities Guarantee or
removal or resignation of the Capital Securities Guarantee Trustee pursuant to
this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee
Trustee all amounts due to the Capital Securities Guarantee Trustee pursuant to
the terms hereof accrued to the date of such termination, removal or
resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Trust), as and when due, to the extent
not paid by the Trust, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by paying the required amount to the
Trust and causing the Trust to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Capital Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Trust or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this Capital Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Capital
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Capital
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Capital
Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum
payable that results from the extension of any interest payment period
on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Capital Securities, or any action on the part of the Trust
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred;
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the
Guarantor with respect to the Guarantee Payments shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Capital Securities Guarantee or exercising
any trust or power conferred upon the Capital Securities Guarantee Trustee under
this Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Capital Securities Guarantee, any Holder may institute a legal
proceeding directly against the Guarantor to enforce the Capital Securities
Guarantee Trustee's rights under this Capital Securities Guarantee, without
first instituting a legal proceeding against the Trust, the Capital Securities
Guarantee Trustee or any other person or entity. The Guarantor waives any right
or remedy to require that any action be brought first against the Trust or any
other person or entity before proceeding directly against the Guarantor.
SECTION 5.5 Guarantee of Payment
This Capital Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Trust in respect of any amounts paid to such Holders by
the Guarantor under this Capital Securities Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Capital Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this Capital
Securities Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Capital
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Capital
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Capital Securities remain outstanding, the
Guarantor shall not (a) declare or pay any dividends on, or redeem, purchase,
acquire or make a distribution or liquidation payment with respect to, any of
the Guarantor's capital stock except for dividends, payments or distributions
payable in shares of the Guarantor's capital stock, reclassifications of its
capital stock and conversions or exchanges of capital stock of one class or
series for capital stock of another class or series and except for a redemption,
purchase or other acquisition of shares of or its capital stock made for the
purpose of an employee incentive plan or benefit plan or other similar
arrangement of the Guarantor or any of its subsidiaries or (b) make any payment
of interest, principal of or premium, if any, on, or repay, repurchase or redeem
any debt securities issued by the Guarantor that rank pari passu with or junior
in right of payment to the Debentures (except by conversion into or exchange for
shares of its capital stock) or (c) make any guarantee payments with respect to
the foregoing, if at such time (i) the Guarantor shall be in default with
respect to its Guarantee Payments or other payment obligations under this
Capital Securities Guarantee Agreement; (ii) there shall have occurred and be
continuing an event of default under the Indenture; or (iii) the Guarantor shall
have given notice of its election of the exercise of its right to extend the
interest payment period pursuant to Section 313 of the Indenture and any such
period, or any extension thereof, shall be continuing.
So long as any Capital Securities remain outstanding, the
Guarantor (i) will remain the sole direct or indirect owner of all of the
outstanding Common Securities and shall not cause or permit the Common
Securities to be transferred except to the extent permitted by the Declaration;
provided, that any permitted successor of the Guarantor under the Indenture may
succeed to the Guarantor's ownership of the Common Securities, and (ii) will not
take any action which will cause the Trust to cease to be treated as a grantor
trust for United States federal income tax purposes except in connection with a
distribution of Debentures.
SECTION 6.2 Ranking
This Capital Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, including the Debentures,
except liabilities made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Guarantor, and to any
guarantee now or hereafter entered into by the Guarantor in respect of any of
its capital stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Capital Securities Guarantee shall terminate and be of no
further force and effect (i) upon full payment of the Redemption Price (as
defined in the Declaration) of all Capital Securities, or (ii) upon distribution
of the Debentures to the Holders in exchange for all of the outstanding Capital
Securities, or (iii) upon full payment of the amounts payable upon liquidation
of the Trust. Notwithstanding the foregoing, this Capital Securities Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any Holder must restore payment of any sums paid with respect to the
Capital Securities or this Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Capital
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Capital Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence, willful
misconduct or bad faith 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 (including reasonable legal fees and expenses) of defending
itself against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation
to indemnify as set forth in this Section 8.2 shall survive the termination of
this Capital Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding. Except in connection with a consolidation, merger, conveyance,
transfer, lease or sale involving the Guarantor that is permitted under the
Indenture, the Guarantor may not assign its obligations under this Capital
Securities Guarantee.
SECTION 9.2 Amendments
Except with respect to any changes that do not adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Capital Securities Guarantee may only be amended with the prior
approval of the Holders of a Majority in liquidation amount of the Capital
Securities (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined). The provisions of Article 12 of
the Declaration with respect to meetings of Holders of the Securities apply to
the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Capital Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Trust, in care of the Regular Trustees at
the mailing addresses set forth below (or such other address as the Trust may
give notice of to the Holders):
Southern Investments UK Capital Trust I
c/o Southern Investments UK plc
800 Park Avenue
Aztec West
Almondsbury, Bristol BS12 4SE
England
Attention:.......Charl Oosthuizen
Telecopy: 011-44-1454-452-361
and
Southern Investments UK Capital Trust I
c/o Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, GA 30346-6401
Attention:.......Wayne Boston or Richard Childs, Regular Trustees
Telecopy:........770-821-2894
(b) If given to the Capital Securities Guarantee Trustee, at
the Capital Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Capital Securities Guarantee Trustee may give notice
of to the Holders):
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention:.......Corporate Trust and Agency Group
Manager Public Utilities Group
Telecopy:........212-250-6725
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Capital Securities):
Southern Investments UK plc
800 Park Avenue
Aztec West
Almondsbury, Bristol BS12 4SE
England
Attention:
Telecopy:
(d) If given to any Holder, at the address set forth on the books and
records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Exchange Offer
In the event an Exchange Offer Registration Statement (as
defined in the Registration Rights Agreement) becomes effective and the Trust
issues any Exchange Capital Securities in the Exchange Offer, the Guarantor will
enter into a new capital securities guarantee agreement, in substantially the
same form as this Capital Securities Guarantee, with respect to the Exchange
Capital Securities.
SECTION 9.5 Benefit
This Capital Securities Guarantee is solely for the benefit of
the Holders of the Capital Securities and, subject to Section 3.1(a), is not
separately transferable from the Capital Securities.
SECTION 9.6 Governing Law
THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
<PAGE>
THIS CAPITAL SECURITIES GUARANTEE is executed as of the day
and year first above written.
SOUTHERN INVESTMENTS UK plc,
as Guarantor
By:
Name:
Title:
BANKERS TRUST COMPANY, as Capital
Securities Guarantee Trustee
By:
Name:
Title:
Exhibit 4.9
= = = = = = = = = = = = = = = = = = = =
COMMON SECURITIES GUARANTEE AGREEMENT
Southern Investments UK plc
Dated as of January 29, 1997
= = = = = = = = = = = = = = = = = = = =
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions Interpretation................................... 2
ARTICLE II
GUARANTEE
SECTION 2.1. Guarantee.................................................... 3
SECTION 2.2. Waiver of Notice and Demand.................................. 3
SECTION 2.3. Obligations Not Affected..................................... 3
SECTION 2.4. Rights of Holders............................................ 4
SECTION 2.5. Guarantee of Payment......................................... 4
SECTION 2.6. Subrogation.................................................. 5
SECTION 2.7. Independent Obligations...................................... 5
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. Limitation of Transactions................................... 5
SECTION 3.2. Ranking...................................................... 6
ARTICLE IV
TERMINATION
SECTION 4.1. Termination.................................................. 6
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Successors and Assigns....................................... 7
SECTION 5.2. Amendments................................................... 7
SECTION 5.3. Notices...................................................... 7
SECTION 5.4. Benefit...................................................... 8
SECTION 5.5. Governing Law................................................ 8
<PAGE>
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"),
dated as of January 29, 1997, is executed and delivered by Southern Investments
UK plc, a public limited liability company incorporated under the Companies Act
1985 in England and Wales (the "Guarantor"), for the benefit of the Holders (as
defined herein) from time to time of the Common Securities (as defined herein)
of Southern Investments UK Capital Trust I, a Delaware business trust (the
"Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of January 29, 1997, among the Trustees of
the Trust named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof 2,537 common securities designated the 8.23% Common
Securities (the "Common Securities"), having an aggregate stated liquidation
amount of $2,537,000 to meet the capital requirements of the Trust;
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Common Securities Guarantee, to pay to the holders
of the Common Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Capital Securities Guarantee") for the benefit of the
holders of the Capital Securities (as defined in the Declaration) and upon
consummation of the Exchange Offer (as defined in the Declaration) will execute
and deliver a guarantee agreement (the "Exchange Capital Securities Guarantee")
for the benefit of the holders of the Exchange Capital Securities (as defined in
the Declaration), each in substantially identical terms to this Common
Securities Guarantee, except that if an Event of Default (as defined in the
Declaration) has occurred and is continuing, the rights of Holders of the Common
Securities to receive Guarantee Payments under this Common Securities Guarantee
are subordinated to the rights of holders of the Capital Securities to receive
guarantee payments under the Capital Securities Guarantee and the Exchange
Capital Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the purchase by each
holder of Common Securities, which purchase the Guarantor hereby acknowledges
shall benefit the Guarantor, the Guarantor executes and delivers this Common
Securities Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1.......Definitions Interpretation
In this Common Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Common Securities Guarantee
but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this Common Securities Guarantee have the same meaning
when used in this Common Securities Guarantee unless otherwise defined
in this Common Securities Guarantee;
(c) a term defined anywhere in this Common Securities Guarantee
has the same meaning throughout;
(d) all references to "the Common Securities Guarantee" or
"this Common Securities Guarantee" are to this Common Securities
Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to
Articles and Sections are to Articles and Sections of this Common
Securities Guarantee unless otherwise specified; and
(f) a reference to the singular includes the plural and vice
versa.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Common Securities, to
the extent not paid or made by or on behalf of the Trust: (i) any accrued and
unpaid Distributions that are required to be paid on such Common Securities to
the extent the Trust has funds on hand legally available therefor at such time,
(ii) the redemption price, including all accrued and unpaid Distributions to the
date of redemption (the "Redemption Price"), to the extent the Trust has funds
on hand legally available therefor at such time, with respect to any Common
Securities called for redemption by the Trust, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Debentures to the Holders in exchange for
Common Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid Distributions on
the Common Securities to the date of payment, to the extent the Trust has funds
on hand legally available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to Holders in liquidation of the Trust (in
either case, the "Liquidation Distribution"). If an Event of Default has
occurred and is continuing, no Guarantee Payments with respect to the Common
Securities shall be made until holders of Capital Securities shall be paid in
full the Guarantee Payments to which they are entitled under the Capital
Securities Guarantee and the Exchange Capital Securities Guarantee, as the case
may be.
"Holder" means any holder, as registered on the books and records of the
Trust, of any Common Securities.
ARTICLE II
GUARANTEE
SECTION 2.1.......Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Trust), as and when due, to the extent
not paid by the Trust, regardless of any defense, right of set-off or
counterclaim which the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by paying the required amount to the
Trust and causing the Trust to pay such amounts to the Holders.
SECTION 2.2.......Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Common Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Trust or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 2.3.......Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this Common Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Common
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Common
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Common
Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum
payable that results from the extension of any interest payment period
on the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Common Securities, or any action on the part of the Trust
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Common
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 2.3 that the obligations of the
Guarantor with respect to the Guarantee Payments shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.4.......Rights of Holders
The Guarantor expressly acknowledges that any Holder may
institute a legal proceeding directly against the Guarantor to enforce its
rights under this Common Securities Guarantee, without first instituting a legal
proceeding against the Trust or any other Person.
SECTION 2.5.......Guarantee of Payment
This Common Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 2.6.......Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Trust in respect of any amounts paid to such Holders by
the Guarantor under this Common Securities Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any rights which it may acquire by
way of subrogation or any indemnity, reimbursement or other agreement, in all
cases as a result of payment under this Common Securities Guarantee, if, at the
time of any such payment, any amounts are due and unpaid under this Common
Securities Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 2.7.......Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Common
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.3 hereof.
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1.......Limitation of Transactions
So long as any Common Securities remain outstanding, the
Guarantor will not (a) declare or pay any dividends on, or redeem, purchase,
acquire or make a distribution or liquidation payment with respect to, any of
the Guarantor's capital stock except for dividends, payments or distributions
payable in shares of the Guarantor's capital stock, reclassifications of its
capital stock and conversions or exchanges of capital stock of one class or
series for capital stock of another class or series and except for a redemption,
purchase or other acquisition of shares of or its capital stock made for the
purpose of an employee incentive plan or benefit plan or other similar
arrangement of the Guarantor or any of its subsidiaries or (b) make any payment
of interest, principal of or premium, if any, on or repay, repurchase or redeem
any debt securities issued by the Guarantor that rank pari passu with or junior
in right of payment to the Debentures (except by conversion into or exchange for
shares of its capital stock) or (c) make any guarantee payments with respect to
the foregoing, if at such time (i) the Guarantor shall be in default with
respect to its Guarantee Payments or other payment obligations under this
Capital Securities Guarantee Agreement; (ii) there shall have occurred and be
continuing an event of default under the Indenture or (iii) the Guarantor shall
have given notice of its election of the exercise of its right to extend the
interest payment period pursuant to Section 313 of the Indenture and any such
extension, or any extension thereof, shall be continuing. So long as any Capital
Securities remain outstanding, the Guarantor (i) will remain the sole direct or
indirect owner of all of the outstanding Common Securities and shall not cause
or permit the Common Securities to be transferred except to the extent permitted
by the Declaration; provided, that any permitted successor of the Guarantor
under the Indenture may succeed to the Guarantor's ownership of the Common
Securities, and (ii) will not take any action which will cause the Trust to
cease to be treated as a grantor trust for United States federal income tax
purposes except in connection with a distribution of Debentures.
SECTION 3.2.......Ranking
This Common Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, including the Debentures,
except liabilities made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Guarantor, and to any
guarantee now or hereafter entered into by the Guarantor in respect of any of
its capital stock.
ARTICLE IV
TERMINATION
SECTION 4.1.......Termination
This Common Securities Guarantee shall terminate and be of no
further force and effect (i) upon full payment of the Redemption Price of all
Common Securities, (ii) upon the distribution of the Debentures to the Holders
of all of the Common Securities or (iii) upon full payment of the amounts
payable in accordance with the Declaration upon liquidation of the Trust.
Notwithstanding the foregoing, this Common Securities Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid with respect to the Common
Securities or this Common Securities Guarantee.
ARTICLE V
MISCELLANEOUS
SECTION 5.1.......Successors and Assigns
All guarantees and agreements contained in this Common
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Common Securities then outstanding. Except in connection with a
consolidation, merger, conveyance, transfer, lease or sale involving the
Guarantor that is permitted under the Indenture, the Guarantor may not assign
its obligations under this Common Capital Securities Guarantee.
SECTION 5.2.......Amendments
Except with respect to any changes which do not adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Common Securities Guarantee may only be amended with the prior
approval of the Holders of at least a majority in liquidation amount of all the
outstanding Common Securities. The provisions of Section 12.2 of the Declaration
with respect to meetings of Holders of the Securities apply to the giving of
such approval.
SECTION 5.3.......Notices
All notices provided for in this Common Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the mailing address set forth below (or such other address as the Trust
may give notice of to the Holders):
Southern Investments UK Capital Trust I
c/o Southern Investments UK plc
800 Park Avenue
Aztec West
Almondsbury, Bristol BS12 4SE
England
Attention: Charl Oosthuizen
Telecopy: 011-44-1454-452-361
and
Southern Investments UK Capital Trust I
c/o Southern Company Services, Inc.
64 Perimeter Center East
Atlanta, GA 30346-6401
Attention: Wayne Boston or Richard Childs, Regular Trustees
Telecopy: 770-821-2894
(b) if given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may
give notice of to the Holders:
Southern Investments UK plc
800 Park Avenue
Aztec West
Almondsbury, Bristol BS12 4SE
Attention: Charl Oosthuizen
Telecopy: 001-44-1454-452-361
(c) if given to any Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 5.4. Benefit
This Common Securities Guarantee is solely for the benefit of
the Holders of the Common Securities and is not separately transferable from the
Common Securities.
SECTION 5.5. Governing Law
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
<PAGE>
THIS COMMON SECURITIES GUARANTEE is executed as of the day and
year first above written.
SOUTHERN INVESTMENTS UK PLC
By:
Name:
Title:
Exhibit 4.10
DEPOSIT AGREEMENT
BETWEEN
BANKERS TRUST COMPANY
and
SOUTHERN INVESTMENTS UK plc
Dated as of January 29, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.....................................................................1
SECTION 1.01. Definitions...................................................1
SECTION 1.02. Rules of Construction.........................................3
ARTICLE II....................................................................4
SECTION 2.01. Deposit of the Global Debenture...............................4
SECTION 2.02. Book-Entry System.............................................4
SECTION 2.03. Registration of Transfer of the Book-
Entry Interest................................................5
SECTION 2.04. Transfer of the Global Debenture..............................5
SECTION 2.05. Cancellation..................................................6
SECTION 2.06. Payments in Respect of a Book-
Entry Interest and Global Debenture...........................6
SECTION 2.07. Change in Principal Amount of the Global Debenture............7
SECTION 2.08. Record Date...................................................7
SECTION 2.09. Action in Respect of a Book-Entry Interest
or the Global Debenture.......................................7
SECTION 2.10. Surrender of the Global Debenture.............................8
SECTION 2.11. Reports.......................................................8
SECTION 2.12. Additional Amounts............................................8
ARTICLE III...................................................................9
SECTION 3.01. Certain Duties and Responsibilities...........................9
SECTION 3.02. Notice of Default............................................10
SECTION 3.03. Certain Rights of Book-Entry Depositary......................10
SECTION 3.04. Not Responsible for Recitals or Issuance
of Subordinated Debentures...................................11
SECTION 3.05. Money Held in Trust..........................................11
SECTION 3.06. Compensation and Reimbursement...............................12
SECTION 3.07. Book-Entry Depositary Required; Eligibility..................12
SECTION 3.08. Resignation and Removal; Appointment of Successor............12
SECTION 3.09. Acceptance of Appointment by Successor.......................14
SECTION 3.10. Merger, Conversion, Consolidation or Succession to Business.15
ARTICLE IV...................................................................15
SECTION 4.01. Notices to Book-Entry Depositary or Company.................15
SECTION 4.02. Notice to Depositary; Waiver................................15
SECTION 4.03. Effect of Headings and Table of Contents....................16
SECTION 4.04. Successors and Assigns......................................16
SECTION 4.05. Separability Clause.........................................16
SECTION 4.06. Benefits of Agreement.......................................16
SECTION 4.07. GOVERNING LAW...............................................16
SECTION 4.08. Jurisdiction................................................16
SECTION 4.09. Counterparts................................................17
SECTION 4.10. Inspection of Agreement.....................................17
SECTION 4.11. Satisfaction and Discharge..................................17
SECTION 4.12. Amendments..................................................17
SECTION 4.13. Book-Entry Depositary To Sign Amendments....................18
<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 January 29, 1997, is among Bankers Trust Company, a New York banking
corporation, as book-entry depositary hereunder (the "Book-Entry Depositary"),
Southern Investments UK plc, a public limited company organized under the laws
of England and Wales (the "Company"), holders of, and owners of beneficial
interests in, certificated depositary interests ("CDIs") issued hereunder in
respect of a beneficial interest in the Global Debenture (as defined below)
representing one or more Subordinated Debentures issued to Institutional
Accredited Investors (the Subordinated Debentures being issued pursuant to an
Indenture (the "Indenture"), dated as of January 29, 1997, between (inter alia)
Bankers Trust Company, as trustee (the "Trustee"), and the Company, as issuer)
and beneficial owners of Book-Entry Interests (as defined below).
ARTICLE I
Definitions and Other General Provisions
SECTION 1.01. Definitions. Terms not defined herein have the meanings
ascribed to them in the Indenture (as hereinafter defined). The following terms,
as used herein, have the following meanings:
"Beneficial Owner" means any person owning a beneficial interest in a
CDI issued hereunder but who is not the Holder of such CDI and may include any
DTC Participant (as defined below); it being understood that the term
"Beneficial Owner" shall not include any agent or financial intermediary holding
an interest in a CDI solely to the extent such interest is held for or on behalf
of any Beneficial Owner.
"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 8.23% certificateless depositary
interests that shall at all times, prior to the issuance of Definitive
Registered Debentures in respect thereof, represent the right to receive 100% of
the principal, premium (if any), interest and Additional Amounts, Additional
Sums and Additional Interest (if any) of the underlying 8.23% Global
Subordinated Debenture due 2027 and that are issued to the Trust , and should
the Trust be dissolved pursuant to the terms of the Declaration of Trust, that
percentage of the 8.23% Global Subordinated Debenture due 2027 not beneficially
owned by Institutional Accredited Investors, the Book-Entry Interests in such
case being issued to DTC or its nominee by the Book-Entry Depositary.
"Book-Entry Register" has the meaning ascribed thereto in Section 2.03
hereof.
"CDI" means a certificated depositary interest to be issued hereunder
representing an Interest in the Global Debenture issued to Institutional
Accredited Investors. For the purposes of this Deposit Agreement, CDIs shall be
deemed to be "depositary shares" (as defined in Rule 405 under the Securities
Act) that represent the interests in the Global Debenture.
"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 and Agency Group - Manager Public Utilities Group.
"Declaration of Trust" means the Amended and Restated Declaration of
Trust dated as of January 29, 1997 by the Trustees (as defined therein), the
Company and the holders, from time to time, of undivided beneficial interests in
the Trust to be issued pursuant to such Declaration of Trust.
"Definitive Registered Debentures" means the 8.23% Subordinated
Debentures due 2027 issued pursuant to the Indenture in substantially the form
of Exhibit B to the Indenture.
"Depositary" means the Trust (or DTC or any successor, in the event
that the Trust be dissolved pursuant to the terms of the Declaration of Trust)
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 Debenture" means the 8.23% Global Subordinated Debenture due
2027 in bearer form issued pursuant to the Indenture in substantially the same
form as Exhibit A to the Indenture.
"Indenture" means the Indenture dated as of January 29, 1997, between
the Company and Bankers Trust Company, as Trustee, and Bankers Trust Luxembourg
S.A. as paying and transfer agent relating to the Subordinated Debentures 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.
"Indenture Trustee" means Bankers Trust Company as trustee under the
Indenture.
"Institutional Accredited Investor" means an institutional "accredited
investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Interests" means beneficial interests in the Book-Entry Interests that
will be represented by Trust Securities until the Trust is dissolved pursuant to
the terms of the Declaration of Trust, whereafter the interests will be shown on
records maintained in book-entry form by DTC and to the extent not beneficially
owned by Institutional Accredited Investors.
"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 Trustee, means any
Managing Director, vice president, any assistant vice president, assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer in the Corporate Trust and Agency
Group 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 that officer's knowledge of and familiarity with the
particular subject.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Subordinated Debenture" means any 8.23% Subordinated Debenture due
2027 of the Company issued under the Indenture.
"Trust" means Southern Investments UK Capital Trust I, a statutory
business trust formed under the laws of the State of Delaware.
"Trust Securities" means the capital securities which represent
preferred beneficial interests in the assets of the Trust and the common
securities which represent beneficial interests in the assets of the Trust.
"Trustee" means Bankers Trust Company and its successors and assigns,
as trustee under the 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 Debenture. The Book-Entry
Depositary hereby accepts custody of the Global Debenture 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 Debenture 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 for the benefit of the Trust. If
Book-Entry Interests in the Subordinated Debentures are distributed to holders
of Trust Securities in dissolution of the Trust, such Book-Entry Interests will
be transferred by the Trust to DTC, which will operate a book-entry system for
Interests in the Book-Entry Interests in the Global Debenture held by the
Book-Entry Depositary and representing all of the Subordinated Debentures
subject to Section 2.02(c) hereof. At that time, the Book-Entry Interests in the
Subordinated Debentures will cease to be held for the benefit of the Trust and
will be held by the Book-Entry Depositary for the benefit of DTC and its
participants subject to Section 2.02(c) hereof. All of the Book-Entry Interests
in the Global Debenture will be transferred by the Trust to DTC, and to the
extent that Capital Securities are held in certificated form, such Interests
will be issued as CDIs pursuant to Section 2.02(c).
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 Subordinated Debentures.
(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 Subordinated
Debenture 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.
(c) Upon deposit with the Depositary of the Global Debenture to the
extent that it represents Subordinated Debentures held by Institutional
Accredited Investors with the Depositary, the Depositary shall issue and deliver
to the Holder a CDI in respect of such Global Debenture. One CDI will be issued
in respect of each Institutional Accredited Investor's interest in such Global
Debenture and the CDIs in respect of such Global Debenture shall represent
beneficial ownership of 100% of the principal amount of such Institutional
Accredited Investor's interest in such Global Debenture. No person shall be
required to account to the Depositary for the proceeds of the sale of interests
in any CDIs.
Neither the Holder nor any Beneficial Owner of a CDI shall be entitled
to any benefits under this Deposit Agreement nor shall any CDI be valid or
obligatory for any purpose, unless such CDI shall have been properly credited on
the books of the Depositary in the name of the Holder thereof.
It shall be a condition of each CDI, and every successive Holder and
Beneficial Owner by holding or owning the same shall be deemed to have consented
and agreed, that title to such CDI, when accompanied by proper instruments of
transfer, is transferable only by appropriate entry on the books of the
Depositary and that the Depositary, notwithstanding any notice to the contrary,
may treat the Holder of a CDI on its books as the absolute owner thereof for the
purpose of determining the person entitled to payments on such CDI under this
Deposit Agreement or to any notices provided for in the Deposit Agreement and
for all other purposes.
SECTION 2.03. Registration of Transfer of the Book-Entry Interests and
CDIs. 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 the Trust as the initial registered owner
of such Book-Entry Interests and (ii) after such time that the Trust is
dissolved and the Book-Entry Interests are held by DTC, record the registration
and transfer of the Book-Entry Interests and the CDIs. (Notwithstanding anything
contained herein to the contrary, the Book-Entry Interests shall be transferred
only according to the Declaration of Trust for so long as the Trust owns the
Book-Entry Interests. ) The Book-Entry Interests and the CDIs cannot be
transferred at any time 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 and the CDIs 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 the Global Debenture. The Book-Entry
Depositary shall hold the Global Debenture in custody for the benefit of the
Depositary. The Book-Entry Depositary shall not transfer or lend the Global
Debenture or any interest therein, except that the Book-Entry Depositary may
transfer the Global Debenture 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 the Global Debenture to the Depositary). If (i) after the dissolution
of the Trust DTC (as the Depositary) notifies the Company and the Book-Entry
Depositary that it is unwilling or unable to continue to hold the Book-Entry
Interests or if at any time it ceases to be, a "clearing agency" registered
under the Exchange Act and a successor 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
unwilling or unable to continue as Book-Entry Depositary with respect to the
Global Debenture and no successor is appointed by the Company within 120 days of
such notification; (iii) the Company in its sole discretion determines that a
Definitive Registered Debenture shall be issued and executes and delivers to the
Indenture Trustee an Officer's Certificate providing that the Global Debenture
shall be so exchanged; or (iv) an Event of Default (as defined in the Indenture)
has occurred and is continuing with respect to the Subordinated Debentures and
the holders of a majority in outstanding principal amount of Interests in a
Book-Entry Interest has requested in writing that the Global Debenture be
exchanged for one or more Definitive Registered Debentures in accordance with
Section 2.07 hereof and the Indenture, in which case all of the owners of
Interests in such Book-Entry Interest and the CDIs will receive Definitive
Registered Debentures in respect of their Interests, then the Book-Entry
Depositary will promptly notify the Trustee and request the Trustee to
authenticate Definitive Registered Debentures in such names and denominations as
the Depositary shall specify in accordance with the relevant provisions of the
Indenture, and the Book-Entry Depositary agrees that in such event it will
promptly surrender the Global Debenture held by it to the Trustee in connection
with such exchange and that such Global Debenture will be canceled upon issuance
of such Definitive Registered Debentures. All costs (taxes, governmental charges
or otherwise) related to the issuance of Definitive Registered Debentures will
be borne by the Company subject to any exceptions set forth in the Indenture.
SECTION 2.05. Cancellation. If the Global Debenture is surrendered for
payment, or for redemption of Subordinated Debentures evidenced thereby or for
exchange for Definitive Registered Debentures to any Person other than the
Indenture Trustee, such Global Debenture shall, subject to Section 2.07, be
delivered to the Indenture Trustee for cancellation.
SECTION 2.06. Payments in Respect of a Book-Entry Interest and Global
Debenture. (a) Whenever the Book-Entry Depositary shall receive from the
Indenture Trustee (or other paying agent under the Indenture) any payment on the
Global Debenture, such payments shall be distributed promptly to the
Institutional Trustee on behalf of the Trust and following a Trust dissolution
to the Depositary on the payment date for such Global Debenture. Where 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 Institutional Trustee on
behalf of the Trust and following a Trust dissolution to the Depositary only
amounts (including Additional Amounts, Additional Sums and Additional Interests
(as defined in the Indenture)) received by the Book-Entry Depositary under the
Global Debenture.
(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 the Institutional Trustee on behalf of the
Trust and following a Trust dissolution to the Depository in respect of the
Global Debenture or the Book-Entry Interests. None of the Company, the Indenture
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 CDI 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 the Global Debenture.
Whenever the principal amount at maturity of the Global Debenture held by the
Book-Entry Depositary is changed by the Indenture Trustee, the Book-Entry
Depositary shall notify the Depositary of the corresponding change in the
principal amount of the related Book-Entry Interest or CDI.
SECTION 2.08. Record Date. Whenever any payment is to be made in
respect of the Global Debenture or the Book-Entry Depositary shall receive
notice of any action to be taken by the Depositary of the Global Debenture or
Depositary of CDIs, 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 the Global
Debenture. (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 Institutional Trustee or
following the dissolution of the Trust to the Depositary a notice containing (i)
such information as is contained in such notice, (ii) a statement that the
Institutional Trustee or Depositary at the close of business on a specified date
will be entitled, subject to the provisions of or governing such Book-Entry
Interest, CDI or Global Debenture, 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, CDI or Global Debenture, 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 Institutional Trustee or following the
dissolution of the Trust to 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, CDI or Global Debenture, 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 Debenture, 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 Debenture.
(b) The Institutional Trustee or following the dissolution of
the Trust 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 the Global Debenture. In the event of the
redemption, payment or purchase in full of all the Subordinated Debentures
represented by the Global Debenture, then such Global Debenture shall become
void and the Book-Entry Depositary shall surrender such Global Debenture 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 Institutional Trustee
or following the dissolution of the Trust to the Depositary a copy of any
notices, reports and other communications received by it relating to the
Company, the Subordinated Debentures, CDIs or the Book-Entry Interests.
SECTION 2.12. Additional Amounts. In accordance with the Indenture, 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 Institutional Trustee or following the dissolution of the Trust 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 the Institutional Trustee or
following the dissolution of the Trust to Depositary in respect of the
Subordinated Debentures, CDIs or the Book-Entry Interests. None of the Company,
the Indenture 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 CDIs 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 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.
The indemnity provided by the Company in this Section 2.12 shall survive
the satisfaction and discharge of this Agreement.
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 Institutional Trustee or following the dissolution of
the Trust 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 the Global Debenture (a "Debenture
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 Institutional Trustee or Depositary in
the manner provided in Section 4.02 hereof, notice of such Debenture Default,
unless such Debenture 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 Subordinated
Debentures. The recitals contained in the Indenture and in the Subordinated
Debentures, 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
Subordinated Debentures. The Book-Entry Depositary shall not be accountable for
the use or application by the Company of the proceeds with respect to the
Subordinated Debentures.
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 the performance of 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 Debentures in accordance with Section 2.04
or Section 2.05 hereof and the Indenture.
(b) The Book-Entry Depositary may resign with respect to the Global
Debenture 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
Debentures 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 the Global Debenture 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 Debentures 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 or filing or 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 Institutional
Trustee, 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 and Agency Group ,
or at any other address previously furnished in writing by the
Book-Entry Depositary to the Depositary by the Institutional Trustee,
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 Subordinated Debentures 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 Subordinated Debentures 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
Subordinated Debentures, the Indenture or the Declaration of Trust, 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 Subordinated Debentures, 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 any New York state or Federal court sitting in the Borough of
Manhattan in New York City 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 Debentures have been issued and the Global Debenture has 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 in this Agreement;
(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 or any other applicable securities laws;
(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.
<PAGE>
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:
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions)
<TABLE>
<CAPTION>
Predecessor Company Successor Company
April 1, September 18, Pro Forma
1995 to 1995 Year Ended
Year Ended March 31, September 17, March 31, March 31,
-----------------------------
1992 1993 1994 1995 1995 1996 1996
======================================================================================================================
(pound) (pound) (pound) (pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense on debt 15.7 13.6 10.8 11.3 5.3 28.0 67.0
======================================================================================================================
Earnings:
Consolidated net income 62.3 77.7 92.9 85.9 22.3 59.0 58.0
Extraordinary loss (gain) 0.0 0.0 0.0 20.0 0.0 (6.0) (6.0)
Consolidated provision for income taxes 20.7 23.4 23.9 25.6 7.4 28.0 31.0
Discontinued operations, net 0.0 0.0 (2.1) (1.3) 0.0 0.0 2.0
Fixed charges 15.7 13.6 10.8 11.3 5.3 28.0 67.0
- ----------------------------------------------------------------------------------------------------------------------
98.7 114.7 125.5 141.5 35.0 109.0 152.0
======================================================================================================================
Ratio of earnings to fixed charges 6.3 8.4 11.6 12.5 6.6 3.9 2.3
======================================================================================================================
</TABLE>
Exhibit 16.1
The Securities and Exchange Commission May 8, 1997
450 Fifth Street, N.W.
Washington, DC 20549
United States of America
Dear Sirs:
We have read the disclosures relating to our resignation as independent auditors
of South Western Electricity plc under the caption "Experts" in the Prospectus
and Registration Statement (Form S-4) of Southern Investments UK plc and are in
agreement therewith.
Yours faithfully,
ERNST & YOUNG
Exhibit 21.1
LIST OF SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
South Western Electricity plc England and Wales
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated July 25, 1996 on the financial statements of SOUTHERN INVESTMENTS UK plc
AND SUBSIDIARIES (Successor Company) and the related financial statement
schedule included in this registration statement.
Arthur Andersen
Bristol, England
May 8, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts" and to the
use of our reports dated August 27, 1996 with respect to the financial
statements of South Western Electricity plc (Predecessor Company) in the
Registration Statement (Form S-4) of Southern Investments UK plc and Southern
Investments UK Capital Trust I, for the registration of $84,537,000 of Exchange
Subordinated Debentures due 2027, $82,000,000 of Exchange Subordinated Capital
Income Securities and the related Exchange Capital Securities Guarantee.
ERNST & YOUNG
Chartered Accountants
Bristol, England
May 8, 1997
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated August 27, 1996 on the financial statements of SOUTH WESTERN ELECTRICITY
plc AND SUBSIDIARIES (Predecessor Company) and the related financial statement
schedule included in this registration statement.
Arthur Andersen
Bristol, England
May 8, 1997
Exhibit 24.1
January 20, 1997
Mark Ogle, Wayne Boston and Richard Childs
Dear Sirs:
Southern Investments UK plc (the "Company") proposes to file one or
more registration statements under the Securities Act of 1933, as amended, with
the Securities and Exchange Commission with respect to the registration, for
exchange or otherwise, of Capital Securities of Southern Investments UK Capital
Trust I, the related Guarantee or Guarantees of the Company and Subordinated
Debentures of the Company in amounts of up to the dollar equivalent of
approximately (pound)52 million.
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 registration statement or statements and appropriate amendment or
amendments (including post-effective amendments) thereto, each to be accompanied
by a prospectus and any appropriately amended or supplemented prospectus and any
necessary exhibits.
Yours very truly,
SOUTHERN INVESTMENTS UK plc
By _____________________________
Richard J. Pershing
Director and Chief Executive Officer
<PAGE>
Thomas G. Boren
C. B. Harreld
Allan W. Harrelson
Gale E. Klappa
C. Phillip Sanders
Charles W. Whitney
Accentacross Limited
By:
Name:
Title: Director
Mighteager Limited
By:
Name:
Title: Director
Exhibit 24.2
The following is an extract from a Unanimous Written Consent of the Board of
Directors of Southern Investments UK plc to the Adoption of Certain Action and
Resolution in Lieu of Meeting:
"RESOLVED FURTHER, that for the purpose of signing the Registration
Statement under the Securities Act of 1933, as amended, to be filed with
the Securities and Exchange Commission with respect to the foregoing,
the 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 Richards Childs."
Effective January 20, 1997.
Exhbit 25.1
----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
Southern Investments UK plc Southern Investments UK Capital Trust I
(Exact name of Registrant as (Exact Name of Registrant as
specified in its charter) specified in its charter)
Engalnd and Wales None Delaware 52-2032200
(State or other (I.R.S. Employer (State or other (I.R.S. Employer
jurisdiction of idenification No.) jurisdiction of idenification No.)
Incorporation or Incorporation or
organization) organization)
800 Park Avenue c o Bankers Trust (Delaware)
Aztec West 1001 Jefferson Street, Suite 550
Almondsberry Wilmington,Delaware 19801-1457
Bristol BS124SE, England (302)576-3305
(Address, including zip code (Address, including zip code
of principal executive offices) of principal executive offices)
Exchange Capital Securities of Southern Investments UK Capital Trust I
Exchange Subordinated Debentures of Southern Investments UK plc
Southern Investments UK plc Exchange Guarantee with respect to
Exchange Capital Securities
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority
to which it is subject.
Name Address
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
Item 3. -15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of
Bankers Trust Company dated August 7, 1990,
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171, and
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
March 20, 1996, copy attached.
Exhibit 2 - Certificate of Authority to commence
business - Incorporated herein by reference
to Exhibit 2 filed with Form T-1 Statement,
Registration No.
33-21047.
Exhibit 3 - Authorization of the Trustee to exercise
corporate trust powers Incorporated herein
by reference to Exhibit 2 filed with Form
T-1 Statement, Registration No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust
Company, as amended on September 17, 1996
Incorporated herein by reference to Exhibit
4 filed with Form T-1 Statement,
Registration No. 333-15263.
-2-
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company
required by Section 321(b) of the Act.
Incorporated herein by reference to Exhibit
4 filed with Form T-1 Statement,
Registration No. 22-18864.
Exhibit 7 - A copy of the latest report of condition of
Bankers Trust Company dated as of
September 30, 1996.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of May, 1997.
BANKERS TRUST COMPANY
By: James C. McDonough
James C. McDonough
Vice President
-4-
<PAGE>
Legal Title of Bank:Bankers Trust Company Call Date:93096 ST-BK:36-4840FFIEC 031
Address: 130 Liberty Street Vendor ID:D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks September 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
---------------
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1).0081 809,000 1.a.
b. Interest-bearing balances(2) .........................0071 4,453,000 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B,
column A) ............................................1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B,
column D).............................................1773 4,133,000 2.b.
3 Federal funds sold and securities purchased under
agreements to resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
a. Federal funds sold ...................................0276 5,933,000 3.a.
b. Securities purchased under agreements to resell ......0277 413,000 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C)..........RCFD 2122 27,239,000 4.a.
b. LESS: Allowance for loan
and lease losses........RCFD 3123 917,000 4.b.
c. LESS: Allocated transfer
risk reserve ...........RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c) .............2125 26,322,000 4.d.
5. Assets held in trading accounts .........................3545 36,669,000 5.
6. Premises and fixed assets (including capitalized leases).2145 870,000 6.
7. Other real estate owned (from Schedule RC-M) ............2150 215,000 7.
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M)................2130 212,000 8.
9. Customers' liability to this bank on acceptances
outstanding .............................................2155 577,000 9.
10.Intangible assets (from Schedule RC-M) ..................2143 18,000 10.
11.Other assets (from Schedule RC-F) .......................2160 8,808,000 11.
12.Total assets (sum of items 1 through 11) ................2170 89,432,000 12.
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
Legal Title of Bank:Bankers Trust Company Call Date:93096 ST-BK:36-4840FFIEC 031
Address: 130 Liberty Street Vendor ID:D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
Schedule RC--Continued ___________________________________
Dollar Amounts in Thousands Bil Mil Thou
- -------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E, part I)RCON 2200 9,391,000 13.a.
(1) Noninterest-bearing(1) ................RCON 6631 2,734,000 13.a.(1)
(2) Interest-bearing ......................RCON 6636 6,657,000 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule RC-E
part II)...................................RCFN 2200 23,385,000 13.b.
(1) Noninterest-bearing.RCFN 6631 654,000 13.b.(1)
(2) Interest-bearing....RCFN 6636 22,731,000 13.b.(2)
14. Federal funds purchased and securities sold
under agreements to repurchase in domestic
offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
a. Federal funds purchased ...................RCFD 0278 3,090,000 14.a.
b. Securities sold under agreements
to repurchase .............................RCFD 0279 99,000 14.b.
15. a. Demand notes issued to the U.S. Treasury...RCON 2840 0 15.a.
b. Trading liabilities .......................RCFD 3548 18,326,000 15.b.
16. Other borrowed money:
a. With original maturity of one year or less RCFD 2332 17,476,000 16.a.
b. With original maturity of more than
one year ..................................RCFD 2333 2,771,000 16.b.
17. Mortgage indebtedness and obligations under
capitalized leases ...........................RCFD 2910 31,000 17.
18. Bank's liability on acceptances executed
and outstanding ..............................RCFD 2920 577,000 18.
19. Subordinated notes and debentures ............RCFD 3200 1,228,000 19.
20. Other liabilities (from Schedule RC-G) .......RCFD 2930 8,398,000 20.
21. Total liabilities (sum of items 13 through 20)RCFD 2948 84,772,000 21.
22. Limited-life preferred stock and
related surplus ..............................RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.RCFD 3838 500,000 23.
24. Common stock .................................RCFD 3230 1,002,000 24.
25. Surplus (exclude all surplus related to
preferred stock) .............................RCFD 3839 527,000 25.
26. a. Undivided profits and capital reserves ....RCFD 3632 3,017,000 26.a.
b. Net unrealized holding gains (losses)
on available-for-sale securities ..........RCFD 8434 (16,000)26.b.
27. Cumulative foreign currency translation
adjustments ..................................RCFD 3284 (370,000)27.
28. Total equity capital (sum of items 23
through 27) ..................................RCFD 3210 4,660,000 28.
29. Total liabilities, limited-life preferred
stock, and equity capital (sum of items 21,
22, and 28) ..................................RCFD 3300 89,432,000 29.
- ---------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the
number of the statement below that
best describes the most comprehensive
level of auditing work performed
for the bank by independent external Number
auditors as of any date during 1995.......RCFD 6724 N A M.1
1 = Independent audit of the bank conducted in accordance
with generally accepted auditing standards by a certified
public accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company
conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which
submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other
external auditors (may be required by state chartering
authority)
5 = Review of the bank's financial statements by external
auditors
6 = Compilation of the bank's financial statements by external
auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
<PAGE>
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated March 20, 1996, providing for an increase in
authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares
with a par value of $10 each designated as Common Stock and 500 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of New
York, this 21st day of March in the Year of our Lord one thousand nine hundred
and ninety-six.
Peter M. Philbin
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended to
increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Three Hundred Fifty One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670),
divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six
Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into
One Hundred Million, One Hundred Sixty Six Thousand, Six Hundred
Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
<PAGE>
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
20th day of March , 1996.
James T. Byrne, Jr.
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
Lea Lahtinen
Lea Lahtinen
Sworn to before me this 20th day of March, 1996.
Sandra L. West
Notary Public
SANDRA L. WEST Counterpart filed in the
Notary Public State of New York Office of the Superintendent of
No. 31-4942101 Banks, State of New York,
Qualified in New York County This 21st day of March, 1996
Commission Expires September 19, 1996
