<PAGE>
As filed with the Securities and Exchange Commission on May 6, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Scottish Power plc
New Scottish Power plc
(Exact Name of Registrant as Specified in its Charter)
None
Scotland 4911 (I.R.S. Employer
(State or Other (Primary Standard Identification No.)
Jurisdiction of Industrial Classification
Incorporation or Code Number)
Organization)
1 Atlantic Quay
Glasgow G2 8SP
United Kingdom
011-44-141-248-8200
(Address and telephone number of Registrant's principal executive offices)
ScottishPower Inc.
c/o The Corporation Trust Center
1209 Orange street
Wilmington, DE 19801
Attention: Alan Victor Richardson
(302) 658-7581
(Name, address and telephone number of agent for service)
---------------
Copies to:
John T. O'Connor Dexter E. Martin
Milbank, Tweed, Hadley & McCloy LLP John M. Schweitzer
1 Chase Manhattan Plaza Stoel Rives LLP
New York, New York 10005 700 NE Multonah, Suite 950
(212) 530-5000 Portland, OR 07232
--------------- (503) 294-9100
Approximate date of commencement of proposed sale to the public: As promptly
as practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class of Offering Aggregate Amount of
Securities to be Amount to be Price Per Offering Price Registration
Registered (1) Registered (2) Share (3) Fee (4)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scottish Power plc
Ordinary Shares of
nominal value 50p each
Or
New Scottish Power plc
Ordinary Shares of
nominal value 50p
each.................. 714,560,000 Not Applicable $5,017,320,000 $128,065.16
- -----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) American Depositary Shares evidenced by American Depositary Receipts
issuable upon deposit of ordinary shares, of nominal value 50p each, of the
Registrant will be registered under a separate registration statement on
Form F-6. Each American Depositary Share represents four ordinary shares.
(2) Based on (i) 308,000,000 shares of common stock, without par value
("PacifiCorp common stock"), of PacifiCorp outstanding on the record date
and shares of PacifiCorp common stock that may be issuable upon exercise of
outstanding employee stock options to purchase PacifiCorp common stock,
including those issuable prior to the expected date of consummation of the
merger described herein and (ii) the exchange ratio of 2.32 ordinary shares
for each share of PacifiCorp common stock.
(3) Pursuant to Rules 457(f)(i) and 457(c) under the Securities Act and solely
for the purpose of calculating the registration fee, the proposed maximum
aggregate offering price is equal to the market value of the approximate
number of shares of PacifiCorp common stock to be canceled in the merger
and is based upon a market value of $16.29 per share of PacifiCorp common
stock, the average of the high and low sale prices per share of PacifiCorp
common stock on the New York Stock Exchange Composite Tape on May 4, 1999.
(4) In accordance with Rule 457(b) of the Securities Act of 1933, the amount of
the registration fee was reduced by $1,266,749.80, which is the amount paid
to the Securities and Exchange Commission on January 5, 1999 in connection
with the confidential filing of the preliminary proxy statement/prospectus
included as part of this registration statement.
---------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
PACIFICORP
825 NE Multnomah, Suite 2000
Portland, Oregon 97232
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 17, 1999
To the Shareholders of PacifiCorp:
Notice is hereby given that the 1999 annual meeting of shareholders of
PacifiCorp, an Oregon corporation, will be held at 1:30 p.m. local time, on
June 17, 1999, at the Salt Lake City Hilton Hotel, 150 West 300 South, Salt
Lake City, Utah. The meeting is called:
1. To consider and vote on a proposal to approve alternate forms of an
agreement and plan of merger among PacifiCorp, Scottish Power plc and
others, pursuant to which a newly formed subsidiary in the ScottishPower
group will be merged with and into PacifiCorp, with PacifiCorp
continuing as a subsidiary in the ScottishPower group (these
alternatives are sometimes referred to in this document as the "merger
agreement" and "merger");
2. To elect two Class III directors of PacifiCorp, each to serve for a term
of three years, and until their successors are duly elected and
qualified;
3. To act on the proposed ratification of the appointment of Deloitte &
Touche LLP to serve as independent auditor of PacifiCorp for the year
1999;
4. To obtain the consent of a majority of the voting power of the three
classes of PacifiCorp preferred stock, voting together as a single
class, to an increase of $5 billion in the amount of unsecured
indebtedness permitted under PacifiCorp's Third Restated Articles of
Incorporation; and
5. To transact such other business as may properly come before the annual
meeting.
The accompanying proxy statement/prospectus contains information regarding
the business to be considered at the annual meeting. A copy of the original
merger agreement is attached as Annex A to the proxy statement/prospectus and a
copy of the restated merger agreement is attached as Annex B.
Only PacifiCorp shareholders of record at the close of business on April 30,
1999, the record date established by the Board of Directors of PacifiCorp in
connection with the annual meeting, are entitled to notice of, and to vote at,
the annual meeting. Under Oregon law, holders of PacifiCorp common stock are
not entitled to dissenters' rights in connection with the merger. Holders of
PacifiCorp preferred stock, however, do have the right to dissent from the
merger under Oregon law and receive payment of the "fair value" of their shares
of PacifiCorp preferred stock if they comply with certain requirements of
Oregon law described in the accompanying proxy statement/prospectus.
In addition, only holders of PacifiCorp preferred stock are entitled to vote
on Item 4 above. All PacifiCorp shareholders are entitled to vote on the other
items to be presented at the annual meeting.
You are cordially invited to attend the annual meeting. Whether or not you
plan to attend the annual meeting, you are requested to complete, sign and date
the accompanying proxy form and return it promptly in the enclosed envelope. If
you attend the annual meeting, you may vote in person if you wish, whether or
not you have executed and returned your proxy form. A proxy granted by the
enclosed form may be revoked at any time prior to its use.
<PAGE>
The Board of Directors of PacifiCorp, by a unanimous vote of directors
present, has determined that the merger agreement and the transactions
contemplated by the merger agreement, including the merger, are in the best
interests of PacifiCorp and its shareholders, and has adopted the merger
agreement. The Board of Directors of PacifiCorp recommends that you vote in
favor of the proposal to approve the merger agreement. The Board of Directors
of PacifiCorp also believes that the long-term interests of shareholders are
served by, and encourages holders of PacifiCorp preferred stock to vote in
favor of, the unsecured debt consent.
By Order of the Board of Directors,
LENORE M. MARTIN
Corporate Secretary
Portland, Oregon
May 6, 1999
2
<PAGE>
The Information Agent for the Merger is:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor, New York, New York 10022
Call toll free: 1-877-750-2689
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN YOUR PROXY FORM.
3
<PAGE>
PACIFICORP SCOTTISH POWER PLC
Proxy Prospectus for up to 714,560,000
Statement ordinary shares
NEW SCOTTISH POWER PLC
Prospectus for up to 714,560,000
ordinary shares
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of shareholders will also be asked to
PacifiCorp, Scottish Power plc, and approve other proposals, including
New Scottish Power plc, a newly- the election of two directors, the
formed company which ScottishPower ratification of the appointment of
intends will become its holding an independent auditor for the year
company, have unanimously agreed on 1999 and, in the case of holders of
a merger in which PacifiCorp would PacifiCorp preferred stock, an
become a wholly owned subsidiary of increase in the amount of unsecured
New ScottishPower or ScottishPower, debt permitted under PacifiCorp's
depending on whether the holding articles. The date, time and place
company proposal is implemented. of the PacifiCorp annual meeting is
as follows:
In the merger, for each share of
PacifiCorp common stock, PacifiCorp June 17, 1999 at 1:30 p.m.
common shareholders will each local time
receive: The Salt Lake City Hilton
Hotel,
. 0.58 American depositary 150 West 300 South,
shares of New ScottishPower Salt Lake City, Utah
or ScottishPower, each ADS
representing four ordinary The outstanding shares of
shares of 50 pence each and PacifiCorp's three classes of
evidenced by American preferred stock will not be
depositary receipts converted in the merger.
PacifiCorp's common stock is
or traded on the New York Stock
Exchange and the Pacific Stock
Exchange under the symbol "PPW".
ScottishPower's ordinary shares
are, and New ScottishPower's
ordinary shares will be, traded on
the London Stock Exchange Limited
under the symbol "SPW" and
ScottishPower's ADSs are, and New
ScottishPower's ADSs will be,
traded on the New York Stock
Exchange under the symbol "SPI".
. if a properly completed
election form has been
submitted to the exchange
agent on a timely basis, 2.32
ordinary shares of New
ScottishPower or
ScottishPower.
The shareholders of PacifiCorp
and ScottishPower must approve the
merger agreement at their meetings
for the merger to occur. PacifiCorp
This proxy statement/prospectus provides you with detailed information
about the proposed merger. We urge you to read this entire document carefully
before voting.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved these securities or determined if this proxy
statement/prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
This proxy statement/prospectus is dated May 6, 1999, and is first being
mailed to PacifiCorp shareholders on or about May 6, 1999.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CURRENCIES AND EXCHANGE RATES............................................ iv
QUESTIONS AND ANSWERS ABOUT THE MERGER................................... 1
SUMMARY.................................................................. 3
SELECTED HISTORICAL FINANCIAL INFORMATION OF SCOTTISHPOWER............... 10
SELECTED HISTORICAL FINANCIAL INFORMATION OF PACIFICORP.................. 11
SIGNIFICANT FACTORS AFFECTING OPERATING RESULTS.......................... 12
RECENT DEVELOPMENTS...................................................... 15
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION..... 17
COMPARATIVE PER SHARE DATA............................................... 21
COMPARATIVE MARKET PRICE AND DIVIDEND DATA............................... 22
RISK FACTORS............................................................. 24
WHERE YOU CAN FIND MORE INFORMATION...................................... 24
PACIFICORP ANNUAL MEETING, VOTING AND PROXIES............................ 26
Introduction........................................................... 26
PacifiCorp Annual Meeting.............................................. 26
Proxy Solicitation..................................................... 28
THE MERGER............................................................... 30
The Companies.......................................................... 30
Background of the Merger............................................... 30
Reasons for the Merger; Recommendations of PacifiCorp Board of
Directors and ScottishPower Board of Directors........................ 35
Opinions of Financial Advisors......................................... 39
Interests of PacifiCorp's Officers and Directors....................... 54
Conversion of PacifiCorp Common Stock in the Merger.................... 57
Fractional Shares...................................................... 57
Election; Election Procedures.......................................... 58
Exchange of Certificates in the Merger................................. 58
Terms of the Merger Agreement.......................................... 59
Regulatory Matters..................................................... 68
Dividend Policy........................................................ 72
Conduct of PacifiCorp's Business After the Merger...................... 72
New York Stock Exchange and London Stock Exchange Listing.............. 73
Material Tax Consequences.............................................. 73
United States Tax Consequences......................................... 74
Accounting Treatment................................................... 78
Dissenters' Rights..................................................... 79
Federal Securities Law Consequences.................................... 81
SCHEME OF ARRANGEMENT.................................................... 81
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION............. 82
DESCRIPTION OF ORDINARY SHARES........................................... 106
DESCRIPTION OF AMERICAN DEPOSITARY SHARES................................ 112
COMPARISON OF RIGHTS OF PACIFICORP SHAREHOLDERS AND SCOTTISHPOWER
SHAREHOLDERS............................................................ 120
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROPOSAL TO INCREASE UNSECURED DEBT LIMIT................................. 136
PROPOSAL FOR ELECTION OF DIRECTORS........................................ 140
PROPOSAL FOR APPOINTMENT OF INDEPENDENT AUDITOR........................... 155
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................... 156
ANNUAL REPORT............................................................. 156
OTHER MATTERS............................................................. 156
UK LISTING PARTICULARS AND CIRCULAR....................................... 157
LEGAL MATTERS............................................................. 157
EXPERTS................................................................... 158
</TABLE>
<TABLE>
<C> <S>
ANNEX A Agreement and Plan of Merger
ANNEX B Amended and Restated Agreement and Plan of Merger
ANNEX C Opinion of PacifiCorp Financial Advisor
ANNEX D Opinion of ScottishPower Financial Advisor
ANNEX E Dissenters' Rights Statute
ANNEX F Summary Listing Particulars
</TABLE>
iii
<PAGE>
CURRENCIES AND EXCHANGE RATES
ScottishPower publishes its consolidated financial statements in pounds
sterling. References in this proxy statement/prospectus to "U.S. dollars",
"U.S. $", "$" or "c" are to United States currency and references to "pounds
sterling", "(Pounds)", "pounds", "pence" or "p" are to United Kingdom currency
(there are 100 pence to each pound). Solely for your convenience, this document
contains translations of certain pound sterling amounts into U.S. dollars at
specified rates, or if not so specified, at 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, 1998 of (Pounds)1.00 =
$1.66. On April 27, 1999, the last practicable date for which information was
available before the printing of this proxy statement/prospectus, the noon
buying rate was (Pounds)1.00 to $1.62. No representation is made that the pound
sterling amounts have been, could have been or could be converted into U.S.
dollars at the rate indicated or at any other rates.
The following table sets forth, for each period indicated, the high and low
noon buying rates for one pound sterling expressed in U.S. dollars, the average
noon buying rate during the period, and the noon buying rate at the end of the
period, based upon information provided by the Federal Reserve Bank of New
York:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
High.................... $ 1.7222 $ 1.7035 $ 1.7123 $ 1.6440 $ 1.6368
Low..................... $ 1.6114 $ 1.5775 $ 1.4948 $ 1.5302 $ 1.4615
Average................. $ 1.6573 $ 1.6397 $ 1.5607 $ 1.5785 $ 1.5319
Period End.............. $ 1.6628 $ 1.6427 $ 1.7123 $ 1.5535 $ 1.5665
The following table sets forth, for each period indicated, the high and low
noon buying rates for one U.S. dollar expressed in pounds sterling, the average
noon buying rate during the period, and the noon buying rate at the end of the
period, based upon information provided by the Federal Reserve Bank of New
York:
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
High.................... (Pounds)0.5807 (Pounds)0.5870 (Pounds)0.5840 (Pounds)0.6083 (Pounds)0.6109
Low..................... (Pounds)0.6206 (Pounds)0.6339 (Pounds)0.6690 (Pounds)0.6535 (Pounds)0.6842
Average................. (Pounds)0.6034 (Pounds)0.6106 (Pounds)0.6408 (Pounds)0.6335 (Pounds)0.6528
Period End.............. (Pounds)0.6014 (Pounds)0.6088 (Pounds)0.5840 (Pounds)0.6437 (Pounds)0.6384
</TABLE>
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are the companies proposing to merge? How will I benefit?
A: The combination of PacifiCorp and ScottishPower will create an
international utility company with significant energy businesses in the
U.S. and U.K., and approximately seven million customers, and pro forma
revenues of approximately $10 billion. The boards of directors of
ScottishPower and PacifiCorp believe that the combined group will be more
competitive and stronger financially than either PacifiCorp or
ScottishPower would be on its own. ScottishPower's proven utility
management skills, developed in the competitive U.K. market, will aid
PacifiCorp as competition is introduced into the U.S. generation and supply
businesses. The combined group will focus on accelerating PacifiCorp's
strategy to improve the performance of its western U.S. electricity
business. PacifiCorp and ScottishPower believe that the application of best
practices of the two companies will reduce costs and increase operating
efficiencies with the goal of enhancing shareholder value.
At the time the merger was announced, the merger consideration represented a
premium of 26% over the market price of PacifiCorp common stock before
announcement. You particularly should note that the extent of any premium at
the time of the merger will depend on the market price of the PacifiCorp
common stock and ScottishPower ordinary shares, which fluctuate on a daily
basis.
Q: What is New ScottishPower?
A: On December 6, 1998, we signed a merger agreement under which PacifiCorp
would become a wholly owned subsidiary of ScottishPower. That merger
agreement provided that if ScottishPower determined to establish a holding
company structure, the parties would agree to amend the merger agreement to
effect the merger as if the holding company had originally been a party to
the merger agreement. In February 1999, ScottishPower determined that a
holding company structure would provide the most effective structure for the
ScottishPower group. It also anticipates that the creation of a new holding
company will assist the regulatory processes associated with the merger.
Accordingly, we signed an amended and restated merger agreement which will
mean that PacifiCorp and ScottishPower will become sister companies under
New ScottishPower if the holding company structure is put in place. If this
occurs, in exchange for your shares of PacifiCorp common stock, you will
receive American depositary shares or ordinary shares of New ScottishPower,
with the same economic and voting rights as the American depositary shares
and ordinary shares of ScottishPower. Adoption of the holding company
structure requires the approval of ScottishPower's shareholders and the
sanction of the Scottish courts, and is subject to other conditions which
must be satisfied or waived by the ScottishPower Board of Directors.
Q: What happens if the holding company structure for the ScottishPower group is
not adopted?
A: The original merger agreement will remain in full force and effect until New
ScottishPower is put in place as the holding company for the ScottishPower
group. If this does not occur, you will receive American depositary shares
or ordinary shares of ScottishPower rather than American depositary shares
or ordinary shares of New ScottishPower.
Q: What is an ADS?
A: An ADS, which stands for an "American depositary share", is a security
created to allow you to more easily hold and trade your ownership interest
in ScottishPower in the United States. ScottishPower ADSs are quoted and
traded on the New York Stock Exchange in U.S. dollars. Likewise, dividends
on ScottishPower ADSs are paid in U.S. dollars. Each ADS you will receive
represents ownership of four ordinary shares of ScottishPower or New
ScottishPower, depending on whether the holding company structure is
adopted.
<PAGE>
If you desire to convert your ADSs into the underlying ordinary shares, this
can be done at any time. Conversion can occur by contacting your broker or
the financial institution which acts as depositary for the ADSs. A fee is
charged by the depositary, currently $5.00 for every 100 ADSs you convert,
together with any transaction expenses, for any conversion.
Q: What do I need to do now?
A: After you have carefully read this proxy statement/prospectus, just indicate
on your proxy card how you want to vote and mail your signed and dated form
in the enclosed postage-prepaid return envelope marked "Proxy" as soon as
possible, so that your shares may be represented and voted at the PacifiCorp
annual meeting.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. If you do not return your
proxy, your shares will not be voted on the merger, which will have the same
effect as voting against the merger.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. There are three ways in which you may revoke your proxy and change your
vote. First, you may send a written notice to PacifiCorp stating that you
would like to revoke your proxy. Second, you may complete and submit a new
proxy card. Third, you may attend the PacifiCorp annual meeting and vote in
person.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, we will send you written instructions for
exchanging your PacifiCorp common stock certificates.
Q: What will happen to my PacifiCorp common stock held in PacifiCorp's Dividend
Reinvestment and Stock Purchase Plan?
A: Upon completion of the merger, the PacifiCorp Dividend Reinvestment and
Stock Purchase Plan will terminate and each share of PacifiCorp common stock
held by the plan for you will be converted into 0.58 ADSs or, at your
election, 2.32 ordinary shares. The depositary will offer a similar dividend
reinvestment plan to ADS holders after the merger.
Who can help answer questions?
If you have more questions about the merger, you should contact our Information
Agent:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor, New York, New York 10022
Call toll free: 1-877-750-2689
2
<PAGE>
SUMMARY
This summary highlights the information most significant to shareholders,
but does not contain all of the information that is important to you. To
understand the merger fully and for a complete description of the legal terms
of the merger, you should read carefully this entire document and the documents
we have referred you to. See "Where You Can Find More Information." The
original merger agreement is attached as Annex A to this document and the
restated merger agreement is attached as Annex B. To assist you in reading this
document, we have generally used the terms "ScottishPower" and "merger
agreement" to refer to New ScottishPower and the restated merger agreement if
the holding company structure is adopted and to ScottishPower and the original
merger agreement if it is not. We encourage you to read the merger agreement
and the restated merger agreement. They are the legal documents that govern the
merger.
The Companies (see page 30)
ScottishPower
1 Atlantic Quay
Glasgow G2 8SP
United Kingdom
011-44-141-248-8200
ScottishPower is a leading multi-utility business in the U.K. serving
approximately 5.5 million homes across Scotland, England and Wales.
ScottishPower's activities span the generation, transmission, distribution and
supply of electricity, gas supply, water supply and wastewater services,
telecommunications, retailing of electrical appliances, technology and
contracting services.
New ScottishPower
1 Atlantic Quay
Glasgow G2 8SP
United Kingdom
011-44-141-248-8200
New ScottishPower was incorporated in Scotland on February 19, 1999.
Following the approval and implementation of the scheme of arrangement, it will
be the holding company for ScottishPower and, following the merger, for
PacifiCorp.
PacifiCorp
825 NE Multnomah
Suite 2000
Portland, Oregon 97232
503-813-7200
PacifiCorp is a publicly held electricity company in the United States and
Australia. In the United States, PacifiCorp conducts a retail electric utility
business and engages in power production and sales on a wholesale basis.
PacifiCorp indirectly owns 100% of Powercor Australia Ltd., the largest of the
five electric distribution companies in Victoria, Australia, and a 19.9%
interest in the 1,600 megawatt, brown coal-fired thermal Hazelwood power
station and adjacent brown coal mine in Victoria.
The Merger
The merger will occur only if the ScottishPower shareholders and PacifiCorp
shareholders approve the merger and all other requirements in the merger
agreement are satisfied or waived. If the holding company structure is adopted,
a wholly owned subsidiary of New ScottishPower will merge into PacifiCorp and
3
<PAGE>
PacifiCorp and ScottishPower will become sister companies. If the holding
company structure is not adopted, a wholly owned subsidiary of ScottishPower
will merge into PacifiCorp and PacifiCorp will become a wholly owned subsidiary
of ScottishPower. The following diagrams illustrate the structure of the
ScottishPower group:
.prior to the merger
.after the merger (if the holding company structure is adopted)
.after the merger (if the holding company structure is not adopted)
PRE-MERGER
SCOTTISHPOWER PLC
- ------------------------------------------------------------------------------
held through subsidiary
(GENSCOT LTD)
- ------------------------------------------------------------------------------
SCOTTISHPOWER VARIOUS
MANWEB PLC SOUTHERN WATER PLC TELECOMMUNICATIONS IMMATERIAL
LTD SUBSIDIARIES
- ------------------------------------------------------------------------------
POST-MERGER (IF HOLDING COMPANY STRUCTURE ADOPTED)
NEW
SCOTTISHPOWER PLC
- ------------------------------------------------------------------------------
MERGER SUBSIDIARIES SCOTTISHPOWER PLC
- ------------------------------------------------------------------------------
PACIFICORP
-------------
EXISTING
PACIFICORP
GROUP
- ------------------------------------------------------------------------------
held through subsidiary
(GENSCOT LTD)
- ------------------------------------------------------------------------------
SCOTTISHPOWER VARIOUS
MANWEB PLC SOUTHERN WATER PLC TELECOMMUNICATIONS IMMATERIAL
LTD SUBSIDIARIES
- ---------- ------------------- ------------------ -------------
4
<PAGE>
POST-MERGER (IF HOLDING COMPANY STRUCTURE NOT ADOPTED)
SCOTTISHPOWER PLC
- --------------------------------------------------------------------------------
held through subsidiary
(GENSCOT LTD)
- --------------------------------------------------------------------------------
SCOTTISHPOWER VARIOUS OTHER
MERGER TELECOMMUNICATIONS IMMATERIAL
SUBSIDIARIES MANWEB PLC SOUTHERN WATER PLC LTD SUBSIDIARIES
- ------------ ---------- ------------------ ------------------ -------------
PACIFICORP
- ---------------
EXISTING
PACIFICORP
GROUP
- ---------------
What You Will Receive in the Merger (see page 57)
In the merger, each share of PacifiCorp common stock will be converted into
0.58 ADSs or, at your election, 2.32 ordinary shares, of New ScottishPower or
ScottishPower, depending on whether the holding company structure is adopted.
The ADSs will trade on the New York Stock Exchange and will be quoted in
U.S. dollars while ordinary shares will trade on the London Stock Exchange and
will be quoted in pounds sterling. The ADSs can be converted into ordinary
shares whenever the holder chooses, provided a fee is paid by the holder to the
bank that acts as a depositary for the ADSs. The fee is currently $5.00 per 100
ADSs.
ScottishPower will not issue fractional shares of ADSs or ordinary shares.
Instead, ScottishPower will pay you cash for any fractional share of
ScottishPower owed to you based on the market value of ScottishPower ADSs or
ordinary shares on the last trading day immediately preceding the merger.
The outstanding shares of PacifiCorp's three classes of preferred stock will
not be converted in the merger and will continue to have the same rights and
preferences they had before the merger. However, the merger agreement requires
PacifiCorp to redeem the $1.16, $1.18 and $1.28 series of its preferred stock
before the merger.
The PacifiCorp Annual Meeting (see page 26)
The PacifiCorp annual meeting will be held at the Salt Lake City Hilton
Hotel, 150 West 300 South, Salt Lake City, Utah, on Thursday, June 17, 1999,
commencing at 1:30 p.m., local time. At the PacifiCorp annual meeting, the
holders of record of PacifiCorp common stock and PacifiCorp preferred stock
will be asked to consider and vote upon proposals to approve the merger
agreement, elect two PacifiCorp directors and approve PacifiCorp's independent
auditor for 1999. In addition, holders of PacifiCorp preferred stock will be
asked to consent to an increase in the limit on unsecured debt under
PacifiCorp's articles of incorporation.
5
<PAGE>
The Record Date for Voting (see page 26)
The close of business on April 30, 1999 is the record date for determining
if you are entitled to vote at the PacifiCorp annual meeting. At the PacifiCorp
record date, there were 297,331,855 shares of PacifiCorp common stock, 126,463
shares of PacifiCorp 5% preferred stock, 288,469 shares of PacifiCorp serial
preferred stock, and 2,744,438 shares of PacifiCorp no par serial preferred
stock entitled to vote at the PacifiCorp annual meeting.
Voting and Revocation of Proxies (see page 27)
Oregon law requires that the merger agreement be approved by an affirmative
vote of at least a majority of the outstanding shares of PacifiCorp common
stock and a majority of the voting power of all PacifiCorp stock entitled to
vote. In addition, the articles of incorporation of PacifiCorp require the
consent to the merger of the holders of a majority of the voting power of the
PacifiCorp preferred stock, voting together as a single class. The consent of
the holders of a majority of the voting power of the PacifiCorp preferred stock
is also required to approve the proposed increase in the limit on unsecured
debt included in the PacifiCorp articles of incorporation.
Each share of PacifiCorp common stock and PacifiCorp preferred stock is
entitled to one vote, except for the 994,438 shares of PacifiCorp $1.16, $1.18
and $1.28 no par serial preferred stock, which are entitled to one-quarter vote
per share. Shares of PacifiCorp common stock and PacifiCorp preferred stock
represented by properly executed proxies received in time for the PacifiCorp
annual meeting will be voted in accordance with the instructions specified in
the proxy. If no instructions are indicated on a properly executed proxy, such
shares will be voted FOR the proposal to approve the merger agreement, FOR the
election of PacifiCorp directors, FOR the approval of PacifiCorp's independent
auditor for 1999, and FOR the unsecured debt consent.
You may revoke your proxy at any time before the PacifiCorp annual meeting
by:
. delivering to the Corporate Secretary of PacifiCorp a notice of
revocation bearing a later date,
. delivering to the Corporate Secretary of PacifiCorp a duly executed
proxy bearing a later date, or
. attending the PacifiCorp annual meeting and voting in person.
Attendance at the PacifiCorp annual meeting will not by itself constitute
revocation of a proxy.
The votes relating to the merger approval are not dependent on the results
of the votes on the proposals with respect to election of directors, approval
of PacifiCorp's independent auditor or the unsecured debt consent.
Special Cash Payments to Holders of Preferred Stock (see page 138)
If, but only if, the merger is approved at the PacifiCorp annual meeting and
all regulatory approvals for the merger required under the merger agreement
have been obtained, PacifiCorp will make a special cash payment in the
following amounts to each holder of record of PacifiCorp preferred stock on the
PacifiCorp record date that voted FOR the approval of the merger:
<TABLE>
<CAPTION>
Payment
Preferred Stock Per Share
--------------- ---------
<S> <C>
$1.16, $1.18 and $1.28 no par serial preferred stock........... $0.25
All other preferred stock...................................... $1.00
</TABLE>
These special cash payments will be made promptly after receipt of the last
regulatory approval for the merger but before the merger.
6
<PAGE>
In addition, if the unsecured debt consent is approved, PacifiCorp will make
a special cash payment in the following amounts to each holder of PacifiCorp
preferred stock on the PacifiCorp record date that voted FOR the unsecured debt
consent:
<TABLE>
<CAPTION>
Payment
Preferred Stock Per Share
--------------- ---------
<S> <C>
$1.16, $1.18 and $1.28 no par serial preferred stock........... $0.25
All other preferred stock...................................... $1.00
</TABLE>
These special cash payments will be made promptly after the PacifiCorp annual
meeting. Special cash payments are estimated to be a maximum of $5 million.
This amount will be expensed on the books of PacifiCorp when incurred.
The ScottishPower Extraordinary General Meeting in Respect of the Merger
A ScottishPower extraordinary general meeting has been convened for 10:00
a.m., local time, on June 15, 1999. At the meeting, a resolution will be
proposed to approve the merger. The resolution will require the approval of a
majority of the votes cast in person or on a poll at the meeting.
ScottishPower Court Meeting, Extraordinary General Meeting and Class Meeting in
Respect of the Scheme
A court meeting has been convened for 10:10 a.m., local time, or as soon as
the extraordinary general meeting in respect of the merger concludes or is
adjourned, on June 15, 1999, pursuant to an order of the Court of Session in
Edinburgh to enable ScottishPower shareholders to consider and approve the
scheme of arrangement, which is the process under which New ScottishPower will
be put in place as the holding company for the ScottishPower group.
An extraordinary general meeting and a class meeting have been convened at
10:20 a.m. and 10:30 a.m., local time, respectively, or as soon as the court
meeting concludes or is adjourned, on June 15, 1999 to enable ScottishPower
shareholders to consider and pass special resolutions to approve and implement
the scheme of arrangement.
It is intended that immediately upon the scheme of arrangement becoming
effective, New ScottishPower will change its name to Scottish Power plc and the
existing ScottishPower will be renamed Scottish Power U.K. plc.
How to Choose to Receive Ordinary Shares Instead of ADSs (see page 58)
Promptly after completion of the merger, which we currently expect to occur
during the Fall of 1999, each holder of PacifiCorp common stock will be sent an
election form, which will permit the holder to elect to receive ordinary shares
in exchange for all or any portion of the holder's shares of PacifiCorp common
stock. If a holder of PacifiCorp common stock does not submit a properly
completed election form in a timely fashion or if the holder revokes his or her
election form before the deadline for the submission of the election form, his
or her shares will be converted in the merger into the right to receive the
ADSs. To make the ordinary share election, a holder of PacifiCorp common stock
must complete properly and return the election form to The Bank of New York,
the exchange agent, before the date announced in a news release to be issued by
ScottishPower as the last day on which an ordinary share election may be made.
Neither PacifiCorp nor the PacifiCorp Board of Directors makes any
recommendation as to whether you should elect to receive the ordinary shares
instead of ADSs in the merger. You must make your own decision with respect to
the election.
7
<PAGE>
Recommendation of the PacifiCorp Board of Directors Concerning the Merger (see
page 35)
The PacifiCorp Board of Directors has, by a unanimous vote of directors
present, adopted and approved the merger agreement and the transactions
contemplated by the merger agreement, including the merger, and has concluded
that the terms of the merger are in your best interests. The PacifiCorp Board
of Directors recommends a vote "FOR" the approval of the merger agreement.
Opinion of PacifiCorp's Financial Advisor (see page 39)
Salomon Smith Barney Inc. has acted as financial advisor to PacifiCorp in
connection with the merger and has delivered to PacifiCorp a written opinion
dated December 6, 1998, which provides that, as of the date of the opinion and
based upon matters stated in it, the merger consideration to be received by
holders of PacifiCorp common stock under the original merger agreement is fair,
from a financial point of view, to the PacifiCorp common shareholders.
Opinion of ScottishPower's Financial Advisor (see page 46)
Morgan Stanley & Co. Limited has acted as financial advisor to ScottishPower
in connection with the merger and has delivered to ScottishPower a written
opinion dated December 6, 1998, which provides that, as of the date of the
opinion and based upon matters stated in it, the exchange ratio of 0.58 ADSs,
or 2.32 ordinary shares, for each outstanding share of PacifiCorp common stock
under the original merger agreement is fair, from a financial point of view, to
ScottishPower.
Interests of PacifiCorp Officers and Directors (see page 54)
In considering the PacifiCorp Board of Directors' recommendation that you
vote in favor of the merger, you should be aware that members of the PacifiCorp
Board of Directors and officers of PacifiCorp have benefits that provide them
with interests in the merger that are different from the interests of
PacifiCorp shareholders.
Conditions to the Merger (see page 65)
ScottishPower and PacifiCorp will complete the merger only if the conditions
set forth in the merger agreement are either satisfied or, if permitted,
waived. These conditions include, among other things:
. approval of the merger agreement by PacifiCorp's shareholders;
. approval of the merger by ScottishPower's shareholders;
. the absence of any event having a significant negative impact on
PacifiCorp or ScottishPower and their respective subsidiaries taken as a
whole;
. receipt of necessary regulatory and third-party consents and approvals;
. the absence of any governmental agency or court order prohibiting the
merger;
. the agreement by the London Stock Exchange to list the ordinary shares
and the authorization by the New York Stock Exchange to list the ADSs;
. the material accuracy of the representations and warranties and material
performance of the covenants contained in the merger agreement; and
. the delivery of written tax opinions from Milbank, Tweed, Hadley &
McCloy LLP, Stoel Rives LLP and LeBoeuf, Lamb, Greene & MacRae, LLP.
8
<PAGE>
If any of these conditions are waived by either party, ScottishPower and
PacifiCorp intend to amend this proxy statement/prospectus as required by law
and distribute the amended proxy statement/prospectus or other information
which is suitable to comply with any such laws.
Termination Fee (see page 67)
If PacifiCorp receives an alternative proposal from a third party and the
merger agreement is terminated, PacifiCorp is required to pay to ScottishPower
a termination fee of $250,000,000. If PacifiCorp terminates the merger
agreement following a change in control, other than through the scheme of
arrangement, of ScottishPower, ScottishPower is required to pay to PacifiCorp a
termination fee of $250,000,000.
In addition, the merger agreement generally requires each party to pay a
termination fee of $10,000,000 if its shareholder approval is not obtained and
the other party's shareholder approval is obtained.
Dissenters' Rights (see page 79)
Under Oregon law, holders of shares of PacifiCorp common stock do not have
dissenters' rights with respect to the merger. Holders of PacifiCorp preferred
stock, however, do have the right under Oregon law to dissent from the merger
and receive payment of the "fair value" of their shares of PacifiCorp preferred
stock if they comply with the requirements of Oregon law described in this
proxy statement/prospectus.
New York Stock Exchange and London Stock Exchange Listing (see page 73)
ScottishPower has agreed to have the ADSs issued in the merger listed for
trading on the New York Stock Exchange. The authorization for listing is a
condition to the obligations of PacifiCorp to consummate the merger. It is also
a condition that the London Stock Exchange shall have agreed to admit the
ordinary shares to be issued in the merger to the Official List of the London
Stock Exchange.
Dividends (see page 72)
After completing the merger, ScottishPower intends to adopt the practice of
paying regular dividends on a quarterly basis. Dividends on ordinary shares
underlying the ADSs will be declared in pounds sterling and converted into U.S.
dollars and dividends on all other ordinary shares will be paid in pounds
sterling. ScottishPower expects dividends to be paid in February, May, August
and November of each year. PacifiCorp plans to continue its normal dividend
policy until the merger is completed.
ScottishPower is committed to its stated aim of achieving 7% to 8% real
dividend growth annually until the U.K. regulatory reviews which take effect
from April 1, 2000, while maintaining a prudent level of dividend cover. It is
ScottishPower's current aim to deliver real dividend growth thereafter and this
will be re-examined once the outcome of these regulatory reviews is known.
Risk Factors (see page 24)
All PacifiCorp shareholders should read carefully the discussion under "Risk
Factors" for information concerning the regulation of ScottishPower's business
in the U.K.
Material Income Tax Consequences (see page 73)
All PacifiCorp shareholders should read carefully the discussion under "The
Merger--Material Income Tax Consequences" beginning on page 73 and are urged to
consult their own tax advisors as to specific consequences to them of the
merger under federal, state, local or any other applicable tax laws.
Comparison of Rights of PacifiCorp Shareholders and ScottishPower Shareholders
(see page 120)
In the merger, holders of PacifiCorp common stock will receive either ADSs
or ordinary shares. There are numerous differences between the rights of a
shareholder in PacifiCorp, an Oregon corporation, and the rights of a
shareholder in ScottishPower, a Scottish corporation. We urge you to review the
discussion under "Comparison of Rights of PacifiCorp Shareholders and
ScottishPower Shareholders" beginning on page 120 for a summary of these
differences.
9
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF SCOTTISHPOWER
The selected historical financial information set out below is extracted or
derived from the consolidated financial statements of ScottishPower for the
five years ended March 31, 1998 which have been audited by Coopers & Lybrand,
Chartered Accountants and Registered Auditors (see "Experts") and from the
unaudited Interim Accounts for the six months ended September 30, 1998. This
selected historical financial information should be read in conjunction with,
and is qualified in its entirety by reference to, such consolidated financial
statements and their accompanying notes located on pages F-1 through F-39 of
the Form 20-F filed by ScottishPower for the year ended March 31, 1998 and the
unaudited Interim Accounts for the six months ended September 30, 1998 filed on
Form 6-K, both of which are incorporated in this document by reference--see
"Where You Can Find More Information".
ScottishPower prepares the consolidated financial statements of the group in
accordance with accounting principles generally accepted in the U.K. ("U.K.
GAAP"), which differs in certain significant respects from accounting
principles generally accepted in the United States ("U.S. GAAP"). A description
of the significant differences between U.K. GAAP and U.S. GAAP applicable to
ScottishPower and a reconciliation of profit for the financial year (or net
income) and equity shareholders' funds (or shareholders' equity) under U.K.
GAAP to those under U.S. GAAP are set out in Note 33 to the consolidated
financial statements of ScottishPower included in the Form 20-F for the year
ended March 31, 1998.
In the table below, amounts for the six months ended September 30, 1998 and
for the year ended March 31, 1998 have been translated solely for the
convenience of the reader, at $1.70 to (Pounds)1.00 and $1.68 to (Pounds)1.00,
the noon buying rates in effect on September 30, 1998, and March 31, 1998
respectively.
The basic earnings per ScottishPower ADS have been calculated based on a
ratio of four ScottishPower ordinary shares to one ScottishPower ADS. Dividends
per ScottishPower ordinary share and per ScottishPower ADS exclude any
associated U.K. tax credit available to certain holders of ScottishPower
ordinary shares and ScottishPower ADSs.
Other than turnover, U.S. GAAP information for the years ended March 31,
1995 and March 31, 1994 has not been published by ScottishPower.
<TABLE>
<CAPTION>
Six months ended
September 30, Year ended March 31,
---------------------------------------- --------------------------------------------------------------------
1998 1998 1997 1998 1998 1997 1996 1995
-------- -------------- ---------------- -------- -------------- -------------- -------------- --------------
$ (Pounds) (Pounds) $ (Pounds) (Pounds) (Pounds) (Pounds)
(in millions except for per ordinary share and ADS amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.K. GAAP
information
Turnover........ 2,455 1,444 1,370 5,255 3,128 2,941 2,271 1,716
Operating
profit......... 551 324 317 1,319 785 664 434 380
Profit before
taxation....... 420 247 245 1,075 640 558 404 375
Ordinary
taxation....... (97) (57) (58) (255) (152) (137) (109) (101)
Windfall tax.... -- -- (317) (533) (317) -- -- --
Profit/(loss)
after
taxation....... 323 190 (130) 287 171 421 295 274
Earnings/(loss)
per
ScottishPower
ordinary
share.......... $0.2729 16.05 p (11.04) p $0.2421 14.41 p 38.11 p 33.12 p 32.88 p
Earnings per
ScottishPower
ordinary share
(as adjusted).. $0.2729 16.05 p 15.85 p $0.6935 41.28 p 38.11 p 33.12 p 32.88 p
Earnings/(loss)
per
ScottishPower
ADS............ $1.09 (Pounds)0.64 (Pounds)(0.44) $0.97 (Pounds)0.58 (Pounds)1.52 (Pounds)1.32 (Pounds)1.32
Earnings per
ScottishPower
ADS (as
adjusted)...... $1.09 (Pounds)0.64 (Pounds)0.63 $2.77 (Pounds)1.65 (Pounds)1.52 (Pounds)1.32 (Pounds)1.32
Dividend per
ScottishPower
ordinary share,
net............ $0.1275 7.50 p 6.80 p $0.3427 20.40 p 18.50 p 15.50 p 13.65 p
Dividend per
ScottishPower
ADS, net....... $ 0.51 (Pounds)0.30 (Pounds)0.27 $ 1.38 (Pounds)0.82 (Pounds)0.74 (Pounds)0.62 (Pounds)0.55
Total assets.... 10,149 5,970 5,355 9,369 5,577 4,848 2,861 1,844
Long term
liabilities.... 3,624 2,132 1,031 2,411 1,435 1,076 785 313
Equity
shareholders'
funds.......... 3,079 1,811 1,540 2,869 1,708 1,523 1,208 1,106
U.S. GAAP
information
Turnover........ 2,455 1,444 1,370 5,255 3,128 2,941 2,271 1,716
Profit/(loss)
after
taxation....... 284 167 (132) 218 130 353 271 --
Basic
earnings/(loss)
per
ScottishPower
ordinary
share.......... $0.2402 14.13 p (11.20)p $0.1848 11.00 p 31.94 p 30.39 p --
Basic
earnings/(loss)
per
ScottishPower
ADS............ $0.9608 (Pounds)0.57 (Pounds)(0.45) $0.7392 (Pounds)0.44 (Pounds)1.28 (Pounds)1.22 --
Diluted
earnings/(loss)
per
ScottishPower
ordinary
share.......... $0.2377 13.98 p (11.09)p $0.1830 10.89 p 31.66 p 30.14 p --
Diluted
earnings/(loss)
per
ScottishPower
ADS............ $0.9508 (Pounds)0.56 (Pounds)(0.44) $0.7320 (Pounds)0.44 (Pounds)1.27 (Pounds)1.21 --
Total assets.... 11,798 6,940 6,353 11,001 6,548 6,065 3,480 --
Equity
shareholders'
funds.......... 3,845 2,262 2,064 3,785 2,253 2,340 1,510 --
</TABLE>
- -------
--------------
1994
--------------
(Pounds)
U.K. GAAP
information
Turnover........ 1,569
Operating
profit......... 360
Profit before
taxation....... 351
Ordinary
taxation....... (93)
Windfall tax.... --
Profit/(loss)
after
taxation....... 258
Earnings/(loss)
per
ScottishPower
ordinary
share.......... 30.95 p
Earnings per
ScottishPower
ordinary share
(as adjusted).. 30.95 p
Earnings/(loss)
per
ScottishPower
ADS............(Pounds)1.24
Earnings per
ScottishPower
ADS (as
adjusted)......(Pounds)1.24
Dividend per
ScottishPower
ordinary share,
net............ 12.40 p
Dividend per
ScottishPower
ADS, net.......(Pounds)0.50
Total assets.... 1,679
Long term
liabilities.... 300
Equity
shareholders'
funds.......... 942
U.S. GAAP
information
Turnover........ 1,569
Profit/(loss)
after
taxation....... --
Basic
earnings/(loss)
per
ScottishPower
ordinary
share.......... --
Basic
earnings/(loss)
per
ScottishPower
ADS............ --
Diluted
earnings/(loss)
per
ScottishPower
ordinary
share.......... --
Diluted
earnings/(loss)
per
ScottishPower
ADS............ --
Total assets.... --
Equity
shareholders'
funds.......... --
- ------------------------------
(1) As permitted under U.K. GAAP, ScottishPower earnings per share has been
presented above including and excluding the impact of windfall tax to
provide an additional measure of underlying performance. In accordance with
U.S. GAAP, earnings per share has been presented above based on U.S. GAAP
earnings, without adjustments for the impact of windfall tax.
As such additional measures of underlying performance are not permitted under
U.S. GAAP, the inclusion of windfall tax in the determination of earnings for
the purposes of computation of earnings per share in accordance with U.S.
GAAP decreased earnings by (Pounds)317 million or 26.86 pence per
share/(Pounds)1.07 per ADS for the year ended March 31, 1998.
10
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF PACIFICORP
The selected historical financial information set out below is extracted or
derived from the consolidated financial statements of PacifiCorp for the five
years ended December 31, 1998 which have been audited by Deloitte & Touche LLP,
independent auditors (see "Experts"). This selected historical financial
information should be read in conjunction with, and is qualified in its
entirety by reference to, such consolidated financial statements and their
accompanying notes included in the Form 10-K of PacifiCorp for the year ended
December 31, 1998, which is incorporated in this document by reference--see
"Where You Can Find More Information."
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
($ million, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Income Statement information
Revenues....................... 5,580.4 4,548.9 3,792.0 2,806.8 2,839.9
Income from operations......... 680.8 810.7 1,086.3 890.6 857.6
Net income/(loss).............. (36.1) 663.7 504.9 505.0 468.0
Earnings contribution/(loss) on
common share
Continuing operations.......... 91.3 210.1 400.5 363.3 357.8
Discontinued operations........ (146.7) 446.8 74.6 103.0 70.5
Extraordinary item............. -- (16.0) -- -- --
-------- -------- -------- -------- --------
Total earnings/(losses)
contribution on common share.. (55.4) 640.9 475.1 466.3 428.3
-------- -------- -------- -------- --------
Earnings/(loss) per common
share--basic and dilutive
Continuing operations.......... $ 0.30 $ 0.71 $ 1.37 $ 1.28 $ 1.26
Discontinued operations........ $ (0.49) $ 1.50 $ 0.25 $ 0.36 $ 0.25
Extraordinary item............. -- $ (0.05) -- -- --
-------- -------- -------- -------- --------
Total earnings/(losses) per
common share.................. $ (0.19) $ 2.16 $ 1.62 $ 1.64 $ 1.51
-------- -------- -------- -------- --------
Cash dividends declared per
common share.................. $ 1.08 $ 1.08 $ 1.08 $ 1.08 $ 1.08
Balance Sheet information
Total assets................... 12,989 13,627 13,809 13,167 11,000
Long-term debt (excluding
current portion).............. 4,559 4,413 4,829 4,509 3,391
Common equity.................. 3,957 4,321 4,032 3,633 3,460
</TABLE>
Continuing Operations
PacifiCorp is an electricity company in the United States and Australia. In
the United States, PacifiCorp conducts a retail electric utility business under
the assumed business names of Pacific Power & Light Company and Utah Power &
Light Company, and engages in power production and sales on a wholesale basis
under the name PacifiCorp. PacifiCorp Group Holdings Company, a wholly owned
subsidiary of PacifiCorp, holds the stock of subsidiaries conducting businesses
not regulated as domestic electric utilities. PacifiCorp Group Holdings Company
indirectly owns 100% of Powercor Australia Ltd., the largest of the five
electric distribution companies in Victoria, Australia.
11
<PAGE>
SIGNIFICANT FACTORS AFFECTING OPERATING RESULTS
Financial results reported in accordance with U.K. GAAP or U.S. GAAP include
the impact of unusual or infrequent events and factors which are not expected
to occur regularly in the future. Significant factors and trends, which may be
helpful to review in understanding the past performance and future prospects of
ScottishPower and PacifiCorp, are described briefly below. The following
discussion should be read in conjunction with the "Selected Historical
Financial Information" of ScottishPower and PacifiCorp included in the previous
pages and with the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of ScottishPower and PacifiCorp that are contained
in the annual reports and other information that ScottishPower and PacifiCorp,
respectively, have filed with the SEC. See "Where You Can Find More
Information".
Significant Factors Affecting ScottishPower's Operating Results
Year ended March 31, 1996
On 6 October 1995, ScottishPower acquired Manweb plc a U.K. regional
electricity company, for a total consideration of (Pounds)1,115.7 million which
included a share issue of (Pounds)271.9 million (including 119.4 million
shares). There were no contingent payments which formed part of the acquisition
agreement. The acquisition method of accounting was used and the goodwill
arising on the acquisition was written off the reserves in the year to March
31, 1996 in accordance with the accounting policy adopted at that time. Manweb
contributed operating profit, before reorganization costs, of (Pounds)80.4
million in the six months from the date of acquisition to March 31, 1996 and
operating profit of (Pounds)135.0 million in the year ended March 31, 1997. Had
the acquisition taken place on April 1, 1995, Manweb would have contributed
turnover of (Pounds)812.1 million, operating profit of (Pounds)126.6 million
and profit on ordinary activities after tax of (Pounds)42.9 million in the year
to March 31, 1996. For the year to March 31, 1995 Manweb recorded turnover of
(Pounds)878.6 million, operating profit of (Pounds)101.0 million and profit on
ordinary activities after tax of (Pounds)62.8 million. Had the acquisition
taken place on April 1, 1995, the contribution to earnings per share from
Manweb's operations would have been 4.90p in the year to March 31, 1996 and
7.70p in the year to March 31, 1995.
In the year ended March 31, 1996, costs of (Pounds)42.7 million relating to
a reorganization of Manweb were charged to the profit and loss account as an
exceptional operating item. Of the total costs, (Pounds)28.2 million
represented accruals for severance costs and (Pounds)14.5 million represented
reorganization costs in areas such as contracting and retail. By March 31,
1998, operating cost savings from the acquisition of Manweb totalled (Pounds)98
million compared to pre-acquisition cost levels.
Year ended March 31, 1997
In August 1996, ScottishPower acquired Southern Water, a U.K. water company,
for a total consideration of (Pounds)1,716.5 million which included a share
issue of (Pounds)397.9 million (including 126.4 million shares). As part of the
acquisition agreement, deferred contingent consideration of (Pounds)13.4
million was included and related to the election made by participants in the
Southern Water Sharesave Scheme to be granted options over ScottishPower shares
in place of options previously granted over Southern Water shares. The
acquisition method of accounting was used and the goodwill arising on the
acquisition was written off to reserves in the year to March 31, 1997 in
accordance with the accounting policy adopted at that time. Southern Water
contributed operating profit, before reorganization costs, of (Pounds)135.6
million in the eight months from the date of acquisition to March 31, 1997 and
operating profit of (Pounds)240.7 million in the year ended March 31, 1998. Had
the acquisition taken place on April 1, 1996 Southern Water would have
contributed turnover of (Pounds)474.5 million, operating profit of
(Pounds)200.0 million and profit after ordinary tax of (Pounds)139.3 million in
the year to March 31, 1997. For the year to March 31, 1996 Southern Water
recorded turnover of (Pounds)424.7 million, operating profit
12
<PAGE>
of (Pounds)170.6 million and profit on ordinary activities after tax of
(Pounds)144.8 million. Had the acquisition taken place on April 1, 1996, the
contribution to earnings per share from Southern Water's operations would have
been 12.6p in the year to March 31, 1997 and 16.2p in the year to March 31,
1996.
In the year ended March 31, 1997, costs of (Pounds)21.2 million relating to
a reorganization of Southern Water were charged to the profit and loss account
as an exceptional operating item. By March 31, 1998, operating cost savings
from the acquisition of Southern Water totalled (Pounds)31 million.
Year ended March 31, 1998
In the year ended March 31, 1998, exceptional taxation of (Pounds)317
million was charged to the profit and loss account. This was paid in two equal
installments on December 1, 1997 and December 1, 1998. The tax related to the
group's estimated share of the windfall tax which was levied on certain utility
companies in the U.K. according to the formula contained within the Finance
(No. 2) Act 1997. The 1997 budget speech, which introduced this tax, referred
to the charge as being of a "one-off" nature.
Significant Factors Affecting PacifiCorp's Operating Results
Year ended December 31, 1995
In August 1995, Pacific Telecom, Inc. closed the sale of the stock of
Alascom, Inc. which resulted in a pre-tax gain of $66.5 million. Alascom, Inc.
contributed income before income taxes of $36.9 million in the seven months
from January 1, 1995 to date of disposition and income before income taxes of
$80.7 million in the year ended December 31, 1994.
In December 1995, PacifiCorp purchased Powercor Australia Ltd. Powercor
contributed income before income taxes of $1.2 million in the one month from
the date of acquisition to December 31, 1995 and income before income taxes of
$51.8 million in the year ended December 31, 1996.
Year ended December 31, 1996
In September 1996, a consortium, known as the Hazelwood Power Partnership,
purchased a 1,600 megawatt, coal-fired generating station and associated coal
mine in Victoria, Australia. PacifiCorp has a 19.9% interest in the partnership
through an indirect subsidiary. Hazelwood Power Partnership incurred losses
before income taxes of $1.2 million in the four months from the date of
acquisition to December 31, 1996 and losses before income taxes of $2.3 million
in the year ended December 31, 1997.
Year ended December 31, 1997
In April 1997, PacifiCorp, through a subsidiary, acquired all of the
outstanding shares of common stock of TPC Corporation. TPC Corporation incurred
losses before income taxes of $7.2 million in the nine months from the date of
acquisition to December 31, 1997 and a loss from operations before income taxes
of $15.1 million in the year ended December 31, 1998. A decision to sell TPC
Corporation was made in October 1998. PacifiCorp sold TPC Corporation in
February 1999.
In August 1997, PacifiCorp incurred a pre-tax loss of $105.6 million
associated with closing foreign currency exchange positions and option premium
costs relating to the initial tender offer for The Energy Group plc in June
1997.
On November 5, 1997, PacifiCorp completed the sale of its independent power
subsidiary, Pacific Generation Company, which resulted in a pre-tax gain of
$56.5 million. Pacific Generation Company
13
<PAGE>
contributed income before income taxes of $16.7 million in the ten months from
January 1, 1997 to the date of disposition and income before income taxes of
$12.4 million in the year ended December 31, 1996.
On December 1, 1997, PacifiCorp completed the sale of Pacific Telecom, Inc.,
realizing a pre-tax gain of $671 million. Pacific Telecom, Inc. contributed
income before income taxes of $146.8 million in the eleven months from January
1, 1997 to the date of disposition and income before income taxes of $122.2
million in the year ended December 31, 1996.
In December 1997, PacifiCorp recorded $170.4 million of pre-tax special
charges. The charges included a write off of $86.9 million of deferred
regulatory pension assets, $19.1 million of certain information system assets
associated with PacifiCorp's decision to proceed with installation of SAP
enterprise wide software and $64.5 million associated with the write down of
assets and acceleration of reclamation costs due to the early closure of the
Glenrock mine. PacifiCorp also recorded an extraordinary charge of $25.6
million pre-tax relating to the write off of allocable generation regulatory
assets in California and Montana.
Year ended December 31, 1998
In January 1998, PacifiCorp recorded a $113.1 million pre-tax charge
associated with a workforce reduction plan in the United States.
In March 1998, PacifiCorp recorded an $86.2 million pre-tax charge to write
off deferred costs related to the failed attempt to acquire The Energy Group
plc.
In October 1998, PacifiCorp decided to discontinue its eastern U.S. energy
trading business, exit its energy development business and dispose of the
Hazelwood power plant. As a result, PacifiCorp recorded a $234.5 million pre-
tax loss at December 31, 1998.
On March 4, 1999, the Utah Public Service Commission issued an order in a
general rate case under which PacifiCorp was required to refund $40 million
through a credit on customer bills. As a result of the order, PacifiCorp
recorded a $38 million reduction in revenues in 1998 and will record a $2
million reduction in 1999. The order also requires PacifiCorp to reduce
revenues by $85 million, or 12%, per year.
14
<PAGE>
RECENT DEVELOPMENTS
On May 6, 1999, ScottishPower filed with the SEC on Form 6-K an audited
Preliminary Statement for the year ended March 31, 1999. The selected
historical financial information set out below is extracted or derived from the
audited Preliminary Statement.
In the table below, amounts for the years ended March 31, 1999 and March 31,
1998 have been translated solely for the convenience of the reader, at $1.61 to
(Pounds)1.00 and at $1.68 to (Pounds)1.00, respectively, being the noon buying
rates in effect on March 31, 1999 and March 31, 1998, respectively.
Please refer to page 10 of this document which details the methods of
calculating earnings per ADS and dividends per ordinary share and per ADS. Page
10 also highlights that ScottishPower prepares its financial statements under
U.K. GAAP, which differs in certain significant respects from U.S GAAP.
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------
1999 1999 1998 1998
Notes ------- ------------ ------- ------------
$ (Pounds) $ (Pounds)
(in millions except for per ordinary
share and ADS amounts)
<S> <C> <C> <C> <C> <C>
U.K. GAAP Information
Turnover................. 5,220 3,242 5,255 3,128
Operating profit......... 1,293 803 1,319 785
Profit before taxation... 1,037 644 1,075 640
Ordinary taxation........ (229) (142) (255) (152)
Windfall tax............. -- -- (533) (317)
Profit after taxation.... 808 502 287 171
Earnings per
ScottishPower ordinary
share................... (1) $0.6830 42.42p $0.2421 14.41p
Earnings per
ScottishPower ordinary
share (as adjusted)..... (1) $0.6846 42.52p $0.6935 41.28p
Diluted earnings per
ScottishPower ordinary
share................... (1) $0.6762 42.00p $0.2397 14.27p
Diluted earnings per
ScottishPower ordinary
share (as adjusted)..... (1) $0.6778 42.10p $0.6866 40.87p
Earnings per
ScottishPower ADS....... (1) $ 2.74 (Pounds)1.70 $ 0.97 (Pounds)0.58
Earnings per
ScottishPower ADS (as
adjusted)............... (1) $ 2.74 (Pounds)1.70 $ 2.77 (Pounds)1.65
Diluted earnings per
ScottishPower ADS....... (1) $ 2.70 (Pounds)1.68 $ 0.96 (Pounds)0.57
Diluted earnings per
ScottishPower ADS (as
adjusted)............... (1) $ 2.70 (Pounds)1.68 $ 2.74 (Pounds)1.63
Dividend per
ScottishPower ordinary
share, net $0.3623 22.50p $0.3427 20.40p
Dividend per
ScottishPower ADS, net.. $ 1.45 (Pounds)0.90 $ 1.38 (Pounds)0.82
Total assets............. 10.034 6,232 9,369 5,577
Long term liabilities.... 3,394 2,108 2,411 1,435
Equity shareholders'
funds................... 3,133 1,946 2,869 1,708
U.S. GAAP Information
Turnover................. 5,220 3,242 5,255 3,128
Profit after taxation.... 733 455 218 130
Basic earnings per
ScottishPower ordinary
share (1) $ 61.81 38.39p $0.1848 11.00p
Basic earnings per
ScottishPower ADS....... (1) $2.4724 (Pounds)1.54 $0.7392 (Pounds)0.44
Diluted earnings per
ScottishPower ordinary
share (1) $0.6120 38.01p $0.1830 10.89p
Diluted earnings per
ScottishPower ADS....... (1) $2.4480 (Pounds)1.52 $0.7320 (Pounds)0.44
Total assets............. 11.582 7.194 11,001 6,548
Equity shareholders'
funds................... 3,986 2,476 3,785 2,253
</TABLE>
- --------
(1) As permitted under U.K. GAAP, ScottishPower earnings per share has been
presented above including and excluding the impact of windfall tax
((Pounds)317 million for fiscal 1998) and goodwill amortization
((Pounds)1.2 million for fiscal 1999), to provide an additional measure of
underlying performance. In accordance with U.S. GAAP, earnings per share
has been presented above based on U.S. GAAP earnings, without adjustments
for the impact of windfall tax and goodwill amortization.
As such additional measures of underlying performance are not permitted under
U.S. GAAP, the inclusion of windfall tax in the determination of earnings for
the purposes of computation of earnings per share in accordance with U.S.
GAAP decreased earnings by (Pounds)317 million or 26.86 pence per
share / (Pounds)1.07 per ADS for the year ended March 31, 1998. The inclusion
of goodwill decreased earnings by (Pounds)31.2 million or 2.63 pence per
share / 10.52 pence per ADS for the year ended March 31, 1999 and by
(Pounds)29.8 million or 2.53 pence per share / 10.12 pence per ADS for the
year ended March 31, 1998.
15
<PAGE>
Summary of financial performance on a U.K. GAAP basis for the year ended March
31, 1999
Group turnover for the year of (Pounds)3,242 million was (Pounds)114 million
higher than 1997/98, an increase of 3.6% due principally to growth in the
developing domestic gas business (gas and other energy sales were up by
(Pounds)77 million to (Pounds)240 million) and in the telecommunications
business (ScottishTelecom total turnover increased by (Pounds)107 million to
(Pounds)220 million).
Group operating profit amounted to (Pounds)803 million, an increase of 2.3%
or (Pounds)18 million compared with 1997/98, principally due to increased
profit in Power Systems and Southern Water. This increase in group operating
profit is after absorbing an additional (Pounds)28 million of costs compared to
the previous year, for capturing new energy and telecoms customers, marketing
the ScottishPower brand and depreciation of new systems required to operate in
the competitive electricity and gas markets. Earnings before interest, tax and
depreciation increased by (Pounds)66 million to (Pounds)1,017 million.
The net interest charge of (Pounds)161 million was (Pounds)14 million higher
than in 1997/98 due mainly to the full year effect of increased debt on payment
of the first installment of the windfall tax in December 1997 and the partial
year impact from the second installment paid in December 1998. Interest cover
remained prudent at 5.0 times against 5.3 times in the prior year. The
effective tax rate was reduced to 22.0% from 23.7% in the previous year largely
due to higher capital allowances on the current mix and level of capital
expenditure.
The profit after ordinary tax for the year amounted to (Pounds)502 million,
an increase of (Pounds)14 million or 2.9%. Earnings per share were 42.42p, an
increase of 2.8% (42.52p before goodwill amortization, an increase of 3.0%).
The proposed final dividend of 15.00p net per share brings the total
dividend per share for the year to 22.50p net, an increase of 10.3%. The full
year dividend was covered 1.9 times by earnings, versus 2.0 times in 1997/98.
Free cash flow for the year was (Pounds)702 million, a reduction of
(Pounds)32 million versus 1997/98, reflecting working capital increases in our
developing gas and telecommunications businesses. The group invested
(Pounds)754 million in capital projects during the year, (Pounds)97 million
more than in the previous years. This investment was primarily to improve the
quality of the infrastructure assets in our electricity and water and
wastewater services businesses and in the growth of our telecommunications
business. In addition, expenditure on improving information systems throughout
the group continued.
Net debt at March 31, 1999 was (Pounds)2,421 million, an increase of
(Pounds)468 million compared with a year ago, principally due to payments of
windfall tax and the increased program of capital expenditure. Gearing at March
31, 1999 was 124%, up from 114% at March 31, 1998.
16
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
ScottishPower and PacifiCorp (the "Combined Group") are providing the
following Summary Unaudited Pro Forma Condensed Combined Financial Information
to provide an indication of what the results of operations and financial
position of the Combined Group might have looked like had the merger occurred
on an earlier date. This information is provided for illustrative purposes only
and does not show what the results of operations or financial position of the
Combined Group would have been if the merger had actually occurred on the dates
indicated. This information also does not indicate what the Combined Group's
future operating results or consolidated financial position will be.
See "Unaudited Pro Forma Condensed Combined Financial Information" for a
more detailed explanation of this analysis.
Basis of Presentation
PacifiCorp's financial statements will continue to be kept in accordance
with U.S. GAAP. The Summary Unaudited Pro Forma Condensed Combined Financial
Information has been prepared in accordance with U.K. GAAP which differs in
some significant respects from U.S. GAAP. In the pro forma financial
information, PacifiCorp's financial position and results of operations have
been adjusted to U.K. GAAP and translated into pounds sterling, as described in
the Notes to the Unaudited Pro Forma Condensed Combined Financial Information
contained under "Unaudited Pro Forma Condensed Combined Financial Information".
The Combined Group intends to account for the merger using the acquisition
method of accounting under U.K. GAAP and the merger qualifies for the purchase
method of accounting under U.S. GAAP. The pro forma financial information has
been prepared on this basis.
Summary Unaudited Pro Forma Income Statement Information
The Summary Unaudited Pro Forma Income Statement Information assumes that
the merger took place on April 1, 1997 and reflects continuing operations only.
This is the first day of the earliest financial period of ScottishPower
presented in the pro forma financial information.
The Summary Unaudited Pro Forma Income Statement Information for the year
ended March 31, 1998 combines the audited historical consolidated income
statement of ScottishPower for the year then ended and the audited historical
consolidated income statement of PacifiCorp, as adjusted to U.K. GAAP, for the
year ended December 31, 1997.
The Summary Unaudited Pro Forma Income Statement Information for the six
months ended September 30, 1998 and September 30, 1997 combine the unaudited
historical condensed consolidated income statements of ScottishPower for those
periods then ended, and the unaudited historical condensed consolidated income
statements of PacifiCorp, as adjusted to U.K. GAAP, for the six months ended
June 30, 1998 and June 30, 1997, respectively.
The Summary Unaudited Pro Forma Income Statement Information also gives
effect to the pro forma adjustments described in the Notes to the Unaudited Pro
Forma Condensed Combined Financial Information under "Unaudited Pro Forma
Condensed Combined Financial Information".
Summary Unaudited Pro Forma Balance Sheet Information
The Summary Unaudited Pro Forma Balance Sheet Information assumes that the
merger took place on September 30, 1998.
17
<PAGE>
The Summary Unaudited Pro Forma Balance Sheet Information as at September
30, 1998 combines the unaudited historical consolidated balance sheet of
ScottishPower and the unaudited historical consolidated balance sheet of
PacifiCorp, as adjusted to U.K. GAAP, both as at September 30, 1998.
The Summary Unaudited Pro Forma Balance Sheet Information also gives effect
to the pro forma adjustments described in the Notes to the Unaudited Pro Forma
Condensed Combined Financial Information under "Unaudited Pro Forma Condensed
Combined Financial Information".
Summary Unaudited Pro Forma Income Statement Information
<TABLE>
<CAPTION>
Six months ended
September 30, Year ended March 31,
----------------------------------- --------------------
Notes 1998 1998 1997 1998 1998
----- ------- ------------ ------------- ------- ------------
$ (Pounds) (Pounds) $ (Pounds)
(in millions except for per share and ADS amounts)
<S> <C> <C> <C> <C> <C> <C>
U.K. GAAP
Turnover................ 4,886.3 2,961.4 2,621.6 9,746.2 5,942.8
Operating profit from
continuing operations.. 796.9 483.0 623.3 2,001.5 1,220.4
Profit/(loss) for the
period................. 320.6 194.4 (41.9) 418.0 254.8
Earnings/(loss) per
ScottishPower ordinary
share.................. (1) $0.17 10.37p (2.25)p $0.22 13.65p
Earnings per
ScottishPower ordinary
share
(as adjusted).......... (1) $0.20 11.97p 16.36p $0.55 33.84p
U.S. GAAP
Profit/(loss) for the
period................. 240.7 145.9 (83.1) 243.5 148.5
Earnings/(loss) per
ScottishPower ordinary
share.................. (1) $0.13 7.79p (4.46)p $0.13 7.95p
Earnings/(loss) per
ScottishPower ADS...... (1) $0.52 (Pounds)0.31 (Pounds)(0.18) $0.52 (Pounds)0.32
</TABLE>
Summary Unaudited Pro Forma Balance Sheet Information
<TABLE>
<CAPTION>
As at
September 30,
1998
-----------------
$ (Pounds)
(millions)
<S> <C> <C>
U.K. GAAP
Total assets................................................. 25,336.4 14,903.7
Loans and other borrowings due after more than one year...... 8,029.3 4,723.1
Shareholders' interest....................................... 9,242.0 5,436.5
U.S. GAAP
Shareholders' interest....................................... 11,444.9 6,732.3
</TABLE>
- --------
Notes:
(1) As permitted under U.K. GAAP, the Combined Group pro forma earnings per
share has been presented above including and excluding the impact of
windfall tax and goodwill amortization ((Pounds)30.0 million for the six
months ended September 30, 1997 and 1998, and (Pounds)60.0 million for the
year ended March 31, 1998), to provide an additional measure of underlying
performance. In accordance with U.S. GAAP, pro forma earnings per share has
been presented above based on U.S. GAAP earnings, without adjustment for
the impact of windfall tax or goodwill amortization. As such additional
measures of underlying performance are not permitted under U.S. GAAP, the
inclusion of windfall tax in the determination of earnings for the purposes
of computation of earnings per share in accordance with US GAAP decreased
earnings by (Pounds)317 million or 17.00 pence per share/68.00 pence per
ADS for the six months ended September 30, 1997 and by (Pounds)317 million
or 16.98 pence per share/67.92 pence per ADS for the year ended March 31,
1998. The inclusion of goodwill amortization decreased earnings by
(Pounds)69.6 million or 3.71 pence per share/14.84 pence per ADS for the
six months ended September 30, 1998, by (Pounds)69.3 million or 3.72 pence
per share/14.88 pence per ADS for the six months ended September 30, 1997
and by (Pounds)139.0 million or 7.44 pence per share/29.76 pence per ADS
for the year ended March 31, 1998.
18
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain per share data of ScottishPower and
PacifiCorp on both historical and pro forma combined bases and on an equivalent
pro forma basis for PacifiCorp. The historical data as of September 30, 1998
and 1997 and for the six month periods then ended, the PacifiCorp pro forma
equivalent per share data and the pro forma combined amounts for all periods
presented below are unaudited. The pro forma equivalent per share data for
PacifiCorp has been determined based on the merger consideration of 0.58
ScottishPower ADSs, representing 2.32 ScottishPower ordinary shares, for each
share of PacifiCorp common stock. This table should be read in conjunction with
the historical financial statements and pro forma financial information, and
the related notes thereto, incorporated by reference or appearing elsewhere
herein. See "Where You Can Find More Information," and "Unaudited Pro Forma
Condensed Combined Financial Information".
Unaudited pro forma condensed combined data and PacifiCorp equivalent pro
forma per share data reflect the combined results, in respect of continuing
operations only, for both ScottishPower and PacifiCorp, after giving effect to
the merger (including the issuance of the merger consideration), as if it had
occurred on September 30, 1998, in the case of book value data, and on April 1,
1997, in the case of earnings and dividend data. The pro forma data does not
reflect potential cost savings or potential synergistic benefits and
enhancements anticipated by ScottishPower's management as a result of the
merger. See "The Merger--Reasons for the Merger; Recommendations of PacifiCorp
Board of Directors and ScottishPower Board of Directors" and "--Opinions of
Financial Advisors". The unaudited pro forma financial data are presented for
informational purposes only, and are not necessarily indicative of the
operating results or financial position that would have occurred had the merger
and other transactions presented in the Unaudited Pro Forma Condensed Combined
Financial Information been completed on the dates indicated nor are they
indicative of future operating results or financial position. Pro forma
dividend per share amounts represent the aggregate of the actual historical
dividends paid by ScottishPower and PacifiCorp divided by the estimated pro
forma number of outstanding ordinary shares following the merger. The pro forma
dividend per share amounts are not necessarily indicative of the actual
dividends that will be paid following the merger.
19
<PAGE>
In the following table, as permitted under U.K. GAAP, pro forma earnings per
share has been presented including and excluding the impact of windfall tax
((Pounds)317 million for fiscal 1998) and goodwill amortization ((Pounds)30.0
million for the six months ended September 30, 1997 and 1998, and (Pounds)60.0
million for the year ended March 31, 1998), to provide an additional measure of
underlying performance. In accordance with U.S. GAAP, earnings per share has
been presented based on U.S. GAAP earnings of the Combined Group, without
adjustment for the impact of windfall tax ((Pounds)317 million for fiscal 1998)
or goodwill amortization (September 30, 1998: (Pounds)69.6 million; September
30, 1997; (Pounds)69.3 million; March 31, 1998; (Pounds)139.0 million). The
inclusion of these amounts in the determination of earnings for the purposes of
computation of earnings per share in accordance with U.S. GAAP decreased
earnings per share as follows:
<TABLE>
<CAPTION>
PacifiCorp
Pro Forma ScottishPower
Combined Group Equivalent Historical
------------------------- -------------
P $ $ P
------- ----------------- -------------
<S> <C> <C> <C> <C>
March 31, 1998
Per ordinary/common share
Windfall tax........................ 16.98 0.28 0.65 26.87
Goodwill amortisation............... 7.44 0.12 0.28 2.53
Per ADS
Windfall tax........................ 67.92 1.12 2.60 107.48
Goodwill amortisation............... 29.76 0.48 1.12 10.12
September 30, 1998
Per ordinary/common share
Windfall tax........................ -- -- -- --
Goodwill amortisation............... 3.71 0.06 0.14 1.27
Per ADS
Windfall tax........................ -- -- -- --
Goodwill amortisation............... 14.84 0.24 0.56 5.08
September 30, 1997
Per ordinary/common share
Windfall tax........................ 17.00 0.28 0.65 26.89
Goodwill amortisation............... 3.72 0.06 0.14 1.25
Per ADS
Windfall tax........................ 68.00 1.12 2.60 107.56
Goodwill amortisation............... 14.88 0.24 0.56 5.00
</TABLE>
20
<PAGE>
COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Combined PacifiCorp
Group Pro Forma PacifiCorp ScottishPower
Pro Forma Equivalent Historical Historical
------------- ---------- ---------- -------------
p $ $ $ p
Note (a)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1998
Amounts under U.K. GAAP
Earnings per
ordinary/common share
Basic...................... 13.65 0.22 0.51 0.80 14.41
Diluted.................... 13.56 0.22 0.51 0.80 14.27
Earnings per
ordinary/common share (as
adjusted)
Basic...................... 33.84 0.55 1.28 0.80 41.28
Diluted.................... 33.63 0.55 1.28 0.80 40.87
Dividends per
ordinary/common share..... 23.49 0.39 0.90 1.08 20.40
Book value per
ordinary/common share..... N/A N/A N/A N/A 141.30
Amounts under U.S. GAAP
Earnings per
ordinary/common share
Basic...................... 7.95 0.13 0.30 0.71 11.00
Diluted.................... 7.90 0.13 0.30 0.71 10.89
Dividends per
ordinary/common share..... 23.49 0.39 0.90 1.08 20.40
Book value per
ordinary/common share..... N/A N/A N/A 14.55 190.40
Six months ended September
30, 1998
Amounts under U.K. GAAP
Earnings per
ordinary/common share
Basic...................... 10.37 0.17 0.39 0.19 16.05
Diluted.................... 10.30 0.17 0.39 0.19 15.87
Earnings per
ordinary/common share (as
adjusted)
Basic...................... 11.97 0.20 0.46 0.19 16.05
Diluted.................... 11.89 0.20 0.46 0.19 15.87
Dividends per
ordinary/common share..... 10.00 0.16 0.37 0.54 7.50
Book value per
ordinary/common share..... 286.43 4.87 11.30 14.27 149.90
Amounts under U.S. GAAP
Earnings per
ordinary/common share
Basic...................... 7.79 0.13 0.30 0.18 14.13
Diluted.................... 7.73 0.13 0.30 0.18 13.98
Dividends per
ordinary/common share..... 10.00 0.16 0.37 0.54 7.50
Book value per
ordinary/common share..... 356.94 6.07 14.08 14.04 190.80
Six months ended September
30, 1997
Amounts under U.K. GAAP
Earnings per
ordinary/common share
Basic...................... (2.25) (0.04) (0.09) 0.65 (11.04)
Diluted.................... (2.23) (0.04) (0.09) 0.65 (10.93)
Earnings per
ordinary/common share (as
adjusted)
Basic...................... 16.36 0.27 0.63 0.65 15.85
Diluted.................... 16.27 0.27 0.63 0.65 15.71
Dividends per
ordinary/common share..... 9.57 0.16 0.37 0.54 6.80
Book value per
ordinary/common share..... N/A N/A N/A N/A 130.60
Amounts under U.S. GAAP
Earnings/(loss) per
ordinary/common share
Basic...................... (4.46) (0.07) (0.16) 0.57 (11.20)
Diluted.................... (4.43) (0.07) (0.16) 0.57 (11.09)
Dividends per
ordinary/common share..... 9.57 0.16 0.37 0.54 6.80
Book value per
ordinary/common share..... N/A N/A N/A 13.74 175.10
</TABLE>
- --------
Notes:
(a) PacifiCorp historical comparative per share data is given for the year
ended December 31, 1997 and for the six months ended June 30, 1998 and 1997
except for the book value per common share under U.K. GAAP which is given
as at September 30, 1998.
21
<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
Market Price Data
ScottishPower ADSs are listed for trading on the New York Stock Exchange
under the symbol "SPI". ScottishPower ordinary shares are listed on the
Official List of the London Stock Exchange under the symbol "SPW". PacifiCorp
common stock is listed for trading on the New York Stock Exchange and Pacific
Stock Exchange under the symbol "PPW".
The table below sets forth for the calendar quarters indicated, (1) the
range of high and low closing sale prices for the ScottishPower ADSs, as
reported over-the-counter prior to September 8, 1997 and as reported on the New
York Stock Exchange Composite Tape following that date, (2) the highest and
lowest middle market quotations for the ScottishPower ordinary shares, as
derived from the Daily Official List of the London Stock Exchange, and (3) the
range of high and low closing sale prices for the PacifiCorp common stock, as
reported on the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
PacifiCorp
ScottishPower ScottishPower Common
ADS Ordinary Shares Stock
------------- ----------------- -----------
High Low High Low High Low
------------- -------- -------- ----- -----
$ $ (Pounds) (Pounds) $ $
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.................... 24.48 21.54 3.76 3.34 21.75 20.13
Second Quarter................... 26.03 23.18 3.97 3.52 22.38 19.25
Third Quarter.................... 31.31 26.21 4.80 3.97 23.38 20.56
Fourth Quarter................... 35.63 28.13 5.40 4.20 27.31 21.44
1998
First Quarter.................... 38.50 33.00 5.82 4.85 26.75 22.81
Second Quarter................... 37.50 35.25 5.76 5.25 24.44 21.81
Third Quarter.................... 41.28 35.25 6.20 5.28 23.13 18.88
Fourth Quarter................... 44.63 37.00 6.75 5.32 22.31 18.75
1999
First Quarter.................... 44.02 34.13 6.64 5.29 21.56 17.25
Second Quarter (through April 27,
1999)........................... 35.00 33.50 5.33 5.09 17.13 15.94
</TABLE>
On December 4, 1998, the last full trading day prior to the public
announcement of the execution and delivery of the merger agreement, the closing
price per (1) ScottishPower ADS was $44.63, (2) ScottishPower ordinary share
was (Pounds)6.75, and (3) share of PacifiCorp common stock was $20.75 (or
$26.02 on an equivalent per share basis).
On April 27, 1999, the most recent date for which it was practicable to
obtain market price data before the printing of this proxy
statement/prospectus, the closing price per (1) ScottishPower ADS was $34.50,
(2) ScottishPower ordinary share was (Pounds)5.18, and (3) share of PacifiCorp
common stock was $15.94 (or $19.42 on an equivalent per share basis).
PacifiCorp shareholders are urged to obtain current market quotations for the
ScottishPower ADSs, ScottishPower ordinary shares and PacifiCorp common stock.
No assurance can be given as to the market price of ScottishPower ADSs,
ScottishPower ordinary shares or PacifiCorp common stock at the time of the
merger.
On the PacifiCorp record date, there were approximately 103,000 holders of
record of PacifiCorp common stock.
Dividend Data
ScottishPower. The following table sets forth dividends declared and paid in
respect of ScottishPower ordinary shares for the periods indicated, including
the associated U.K. tax credit available to certain beneficial
22
<PAGE>
owners of ScottishPower ordinary shares or ScottishPower ADSs who are residents
of the U.S. for tax purposes and after deduction of U.K. withholding taxes. The
dividends set forth below have been grossed up by the tax credit rates
applicable on the dates of payment. The tax credit rates were as follows: April
6, 1988 to April 5, 1993 = 25%; April 6, 1993 to April 5, 1994 = 22.5%; and
April 6, 1994 to April 5, 1999 = 20%. It should be noted that the percentage of
any dividend represented by the associated U.K. tax credit has varied over the
periods indicated. The amounts shown are not those that were actually paid to
holders of ScottishPower ordinary shares and ScottishPower ADSs. Dividends have
been translated from pounds sterling into U.S. dollars using exchange rates
prevailing on the date the dividends were paid to holders of ScottishPower
ordinary shares and, with respect to ScottishPower ADSs, multiplied by four.
Dividends Per ScottishPower
<TABLE>
<CAPTION>
Ordinary Share ADS
------------------- ---------------------
Interim Final Total Interim Final Total
------- ----- ----- ------- ------ ------
p p p c c c
<S> <C> <C> <C> <C> <C> <C>
Year ended March 31,
1993................................ 4.96 9.59 14.55 28.46 57.75 86.21
1994................................ 5.33 10.34 15.67 32.02 65.27 97.29
1995................................ 5.69 11.38 17.07 36.03 72.39 108.42
1996................................ 6.46 12.91 19.37 39.33 80.84 120.17
1997................................ 7.71 15.41 23.12 49.49 99.55 149.04
1998................................ 8.50 17.00 25.50 55.58 115.96 171.54
1999................................ 9.38 60.29
</TABLE>
PacifiCorp. PacifiCorp has historically declared and paid dividends
quarterly. The following table sets forth the quarterly dividends in respect of
the shares of PacifiCorp common stock declared and paid in each of the past
five years.
Dividends Per PacifiCorp Common Share
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1994.................................... 0.27 0.27 0.27 0.27 1.08
1995.................................... 0.27 0.27 0.27 0.27 1.08
1996.................................... 0.27 0.27 0.27 0.27 1.08
1997.................................... 0.27 0.27 0.27 0.27 1.08
1998.................................... 0.27 0.27 0.27 0.27 1.08
</TABLE>
Although dividends have historically been declared and paid semi-annually,
following the merger, ScottishPower intends to pay dividends on a quarterly
basis. As dividends paid by ScottishPower will be in pounds sterling, exchange
rate fluctuations will affect the U.S. dollar amounts received by holders of
ScottishPower ADSs on conversion by The Bank of New York, the depositary, of
such cash dividends. See "Currencies and Exchange Rates" and "The Merger--
Material Tax Consequences," "Description of Ordinary Shares--Dividends and
Other Distributions" and "Description of American Depositary Shares--Dividends,
Other Distributions, Rights and Changes Affecting Deposited Securities."
23
<PAGE>
RISK FACTORS
U.K. Regulatory Environment. ScottishPower's business is subject to
regulation in the U.K., a general description of which is set forth in
ScottishPower's Annual Report on Form 20-F which is incorporated in this
document by reference. It is expected that regulation will continue to have a
material bearing on the profitability and investment capability of
ScottishPower. ScottishPower's regulated monopoly businesses comprise
electricity transmission and distribution in ScottishPower and electricity
distribution in Manweb (together representing 44% of the 1999 operating profit)
and the water supply and waste water business in Southern Water (representing
33% of ScottishPower's 1999 operating profit). The regulatory price controls
relating to these areas of ScottishPower's business for the five year period
commencing April 1, 2000 are currently being reviewed by regulatory authorities
in the U.K., as well as those relating to supply and generation. ScottishPower
believes that it has high standards of operation and customer service.
Nevertheless, ScottishPower is unable to judge accurately the outcome of these
reviews and there can be no assurance that they will not materially affect
profits. It is expected that all the results of these reviews will be known by
November 1999.
WHERE YOU CAN FIND MORE INFORMATION
PacifiCorp and ScottishPower are and, upon completion of the scheme of
arrangement, New ScottishPower will be, subject to the informational
requirements of the Securities Exchange Act of 1934.
PacifiCorp files annual, quarterly and special reports, proxy statements and
other information with the SEC. ScottishPower files annual reports and other
information with the SEC. You may read and copy any reports, statements or
other information filed by PacifiCorp or ScottishPower at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. PacifiCorp's SEC filings are also available to the public at
the web site maintained by the SEC at http://www.sec.gov. The ADSs and
PacifiCorp common stock are listed on the New York Stock Exchange, and
consequently, the periodic reports, proxy statements and other information
filed by ScottishPower and PacifiCorp with the SEC can be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The PacifiCorp common stock is also listed on the Pacific Stock
Exchange, 301 Pine Street, San Francisco, California 94104, where such filings
by PacifiCorp may also be inspected. The primary market for ScottishPower
ordinary shares is the London Stock Exchange.
New ScottishPower and ScottishPower have filed with the SEC a registration
statement on Form F-4 to register the ordinary shares underlying the ADSs to be
issued by one of them to holders of PacifiCorp common stock in the merger. This
proxy statement/prospectus is a part of the registration statement and
constitutes a prospectus of New ScottishPower and ScottishPower, as well as
being a proxy statement of PacifiCorp.
As allowed by SEC rules, this proxy statement/prospectus does not contain
all the information you can find in the registration statement or the exhibits
to the registration statement. Statements contained or incorporated by
reference in this proxy statement/prospectus as to the contents of any contract
or other document filed as an exhibit to the registration statement or
otherwise filed with the SEC are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document so filed, each
such statement being qualified in all respects by the reference.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information
contained in this proxy statement/prospectus. This proxy statement/prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about our
companies and their financial condition.
24
<PAGE>
<TABLE>
<CAPTION>
PacifiCorp SEC Filings (File No. 1-5152) Period
---------------------------------------- ------
<C> <S>
Annual Report on Form 10-K Year ended December 31, 1998 (as amended on
April 30, 1999)
Current Report on Form 8-K Filed on February 17, 1999
<CAPTION>
ScottishPower SEC Filings (File No. 1-14676) Period
-------------------------------------------- ------
<C> <S>
Annual Report on Form 20-F Fiscal year ended March 31, 1998 (as amended
on October 14, 1998)
Reports of Foreign Private Issuer on Form 6-K Filed on April 6, 1998, April 20, 1998, May
4, 1998, June 1, 1998, July 6, 1998, July 31,
1998, September 16, 1998, November 2, 1998,
November 24, 1998, December 21, 1998,
February 9, 1999, February 23, 1999, March 1,
1999, March 8, 1999, March 23, 1999, April 6,
1999, April 12, 1999, April 19, 1999, April
20, 1999 and April 26, 1999; and dated April
26, 1999 and May 6, 1999
</TABLE>
PacifiCorp, ScottishPower and New ScottishPower also incorporate by
reference into this proxy statement/prospectus additional documents that may be
filed with the SEC from the date of this proxy statement/prospectus to the date
of the meeting. These include periodic reports, such as Annual Reports on Form
10-K and 20-F, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
Reports of Foreign Private Issuers on Form 6-K, as well as proxy statements.
Any statement contained in an incorporated document shall be deemed to be
modified or superseded for purposes of this proxy statement/prospectus to the
extent that a statement contained in this proxy statement/prospectus or in any
other subsequently filed incorporated document modifies or supersedes such
statement. Any statement that is modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this proxy
statement/prospectus.
Each of PacifiCorp and ScottishPower hereby undertakes to provide without
charge to each person, including any beneficial owner, to whom a copy of this
proxy statement/prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the incorporated documents, other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference therein. Requests should be directed to (1) PacifiCorp, 825 NE
Multnomah, Suite 2000, Portland, Oregon 97232, Attention: Lenore M. Martin,
Corporate Secretary, telephone number (503) 813-7200, or (2) ScottishPower, 1
Atlantic Quay, Glasgow G2 8SP, United Kingdom, Attention: Andrew Mitchell,
Secretary, telephone number 011-44-141-248-8200. In order to ensure timely
delivery of any such documents in advance of the PacifiCorp annual meeting, any
request should be made by June 3, 1999.
----------------
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the transactions. We
have not authorized anyone to provide you with information that is different
from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated May 6, 1999. You should not assume that the
information contained in the proxy statement/prospectus is accurate as of any
date other than that date, and neither the mailing of this proxy
statement/prospectus to shareholders nor the issuance of ADSs or ordinary
shares in the merger shall create any implication to the contrary.
----------------
Forward-Looking Statements
There are forward-looking statements in this document that are subject to
risks and uncertainties. Forward-looking statements include, but are not
limited to, information concerning possible or assumed future results of
operations of ScottishPower and PacifiCorp, as well as statements preceded by,
followed by or that include the words "believes", "expects", "estimates",
"intends", "anticipates" or similar expressions. You should understand that
certain important factors, in addition to those discussed elsewhere in this
document and in the documents we incorporate by reference, could affect the
future results of ScottishPower and PacifiCorp and could cause those results to
differ materially from those expressed in our forward-looking statements.
25
<PAGE>
PACIFICORP ANNUAL MEETING, VOTING AND PROXIES
Introduction
This proxy statement/prospectus is being furnished to the holders of
PacifiCorp common stock and PacifiCorp preferred stock in connection with the
solicitation of proxies by the PacifiCorp Board of Directors from the holders
of such securities for use at the PacifiCorp annual meeting, which is being
held to approve the merger agreement. As a result of the merger, PacifiCorp
will become an indirect, wholly owned subsidiary of ScottishPower, as set forth
in the Notice of Annual Meeting.
PacifiCorp Annual Meeting
Date, Place and Time; Record Date. The PacifiCorp 1999 annual meeting will
be held at the Salt Lake City Hilton Hotel, 150 West 300 South, Salt Lake City,
Utah, on Thursday, June 17, 1999, commencing at 1:30 p.m. local time for the
purposes set forth below. Only holders of record of PacifiCorp common stock and
PacifiCorp preferred stock at the close of business on the PacifiCorp record
date, April 30, 1999, will be entitled to notice of and to vote at the
PacifiCorp annual meeting and any adjournment thereof. The meeting may be
adjourned from time to time as the shareholders present in person or by proxy
may determine. All shareholders who find it convenient to do so are invited to
attend the meeting in person.
Purposes of PacifiCorp Annual Meeting. The purposes of the PacifiCorp annual
meeting are to:
. consider and vote upon a proposal to approve the merger agreement,
. elect two Class III directors of PacifiCorp,
. ratify the appointment of Deloitte & Touche LLP to serve as independent
auditor of PacifiCorp for the year 1999, and
. transact such other business as may properly come before the meeting.
In addition, holders of PacifiCorp preferred stock will be asked to consent to
an increase in the limit on unsecured debt under PacifiCorp's articles of
incorporation. If any other business should properly come before the annual
meeting, the shares represented by the proxies solicited hereby may be
discretionarily voted on such business in accordance with the judgment of the
persons named on the proxy form to the extent allowed by the rules of the SEC,
unless otherwise indicated in the proxy form.
Recommendation of PacifiCorp Board of Directors. The PacifiCorp Board of
Directors, by unanimous vote of directors present, has adopted and approved the
merger agreement and has concluded that the terms of the merger are in the best
interests of the PacifiCorp shareholders.
The PacifiCorp Board of Directors recommends that PacifiCorp shareholders
vote FOR approval of the merger agreement, FOR the election of PacifiCorp
directors and FOR the approval of PacifiCorp's independent auditor for 1999.
The PacifiCorp board also recommends that holders of PacifiCorp preferred stock
vote FOR the unsecured debt consent.
In considering the recommendation of the PacifiCorp Board of Directors
regarding the merger agreement and the associated transactions, the PacifiCorp
shareholders should be aware that some members of the PacifiCorp Board of
Directors and management have interests with respect to the merger that are in
addition to and/or potentially different from the interests of the other
PacifiCorp shareholders. See "The Merger--Interests of PacifiCorp's Officers
and Directors."
Required Vote; Quorum. Each holder of record of PacifiCorp common stock,
PacifiCorp 5% preferred stock, PacifiCorp serial preferred stock, PacifiCorp
$7.48 no par serial preferred stock and PacifiCorp $7.70 no par serial
preferred stock on the PacifiCorp record date is entitled to cast one vote per
share on each matter
26
<PAGE>
submitted to a vote at the PacifiCorp annual meeting. Each holder of record of
PacifiCorp $1.16, $1.18 and $1.28 no par serial preferred stock on the
PacifiCorp record date is entitled to cast one-quarter vote per share on the
approval of the merger and the unsecured debt consent at the PacifiCorp annual
meeting. The holders of at least a majority of the total number of votes
entitled to be cast by the holders of all outstanding shares of PacifiCorp
common stock and PacifiCorp preferred stock, respectively, must be present in
person or represented by proxy at the PacifiCorp annual meeting in order for
the required quorums to be present.
The merger agreement must be approved by an affirmative vote of the holders
of at least a majority of the shares of the PacifiCorp common stock and at
least a majority of the voting power of all PacifiCorp stock entitled to vote
at the meeting. In addition, the holders of at least a majority of the voting
power of the PacifiCorp preferred stock, voting together as a single class,
must approve the merger. As of the close of business on the PacifiCorp record
date, PacifiCorp's capital stock consisted of 297,331,855 shares of PacifiCorp
common stock, 126,463 shares of PacifiCorp 5% preferred stock, 288,469 shares
of PacifiCorp serial preferred stock, 750,000 shares of PacifiCorp $7.48 no par
serial preferred stock, 1,000,000 shares of PacifiCorp $7.70 no par serial
preferred stock, and an aggregate of 994,438 shares of PacifiCorp $1.16, $1.18
and $1.28 no par serial preferred stock.
Other Voting Information. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum exists at the PacifiCorp annual
meeting, but will have the effect of a vote against the approval of the merger
agreement and, with respect to holders of PacifiCorp preferred stock, against
the unsecured debt consent. The directors and executive officers of PacifiCorp,
who collectively own less than 0.3% of the outstanding shares of PacifiCorp
common stock, have indicated their intention to vote their shares in favor of
approval of the merger agreement at the PacifiCorp annual meeting.
Voting and Revocation of Proxies. The shares represented by each properly
executed proxy received before or at the PacifiCorp annual meeting will be
voted in accordance with the instructions specified in the proxy, if given. If
no instructions are indicated on a properly executed proxy, the shares will be
voted FOR the proposal to approve the merger agreement, FOR the election of
PacifiCorp directors, FOR the approval of PacifiCorp's auditor for 1999, and
FOR the unsecured debt consent. You may revoke a proxy at any time before the
PacifiCorp annual meeting by delivering to the Corporate Secretary of
PacifiCorp at Suite 2000, 825 NE Multnomah, Portland, Oregon 97232, a notice of
revocation bearing a later date, by delivering a duly executed proxy bearing a
later date or by attending the meeting and voting in person. Attendance at the
PacifiCorp annual meeting will not by itself constitute revocation of a proxy.
Any beneficial owner of shares who is not the registered holder of such
shares as of the PacifiCorp record date (as would be the case for any
beneficial owner whose shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee) must arrange with the record
holder to execute and deliver a PacifiCorp proxy form on such beneficial
owner's behalf. These record holders will not have the authority to vote with
respect to the merger approval and the unsecured debt consent unless they
receive specific instructions from beneficial owners. Accordingly, these types
of "broker non-votes" will have the same effect as voting "AGAINST" the merger
agreement and the unsecured debt consent. Beneficial owners are urged to ensure
that the record holder of their shares marks, signs, dates and returns the
accompanying proxy form as soon as possible.
Only shareholders of record on the PacifiCorp record date are eligible to
vote at the PacifiCorp annual meeting. Therefore, each shareholder is urged,
even if such shareholder has sold its shares subsequent to the PacifiCorp
record date, to vote "FOR" the approval of all the proposals on the
accompanying PacifiCorp proxy form. If special cash payments are made to
holders of PacifiCorp preferred stock, they will be made to the holders of
record on the PacifiCorp record date.
The PacifiCorp annual meeting may be adjourned to another date and/or place
for any proper purpose, including for the purpose of soliciting additional
proxies.
27
<PAGE>
Proxy Solicitation
General. In addition to soliciting proxies by mail, proxies may also be
solicited by the directors, officers and employees of PacifiCorp, who will
receive no additional compensation therefor in addition to their regular
salaries and fees, by telephone, telegram, printed advertising materials,
facsimile transmission or other electronic communication methods or in person.
All expenses of soliciting proxies from PacifiCorp shareholders will be borne
by PacifiCorp. Banks, brokerage firms and other custodians who hold shares of
PacifiCorp common stock and PacifiCorp preferred stock in their name or custody
or in the name of nominees for others will be reimbursed by PacifiCorp for
their reasonable expenses incurred in forwarding proxy solicitation materials
to those persons for whom they hold the shares. In addition, PacifiCorp has
retained Innisfree M&A Incorporated to aid in the solicitation of proxies in
connection with the PacifiCorp annual meeting. The fee of Innisfree M&A
Incorporated is not to exceed $50,000, plus reimbursement for reasonable out-
of-pocket expenses.
In connection with the merger approval and the unsecured debt consent from
holders of PacifiCorp preferred stock, solicitation fees may be payable as
described below to Soliciting Dealers that are designated as the Soliciting
Dealer soliciting a proxy from holders of PacifiCorp preferred stock as set
forth on the Notice of Solicited Proxies. A "Soliciting Dealer" is (1) any
broker or dealer in securities, including each of the Co-Solicitation Agents
named below in its capacity as a dealer or broker, that is a member of any
national securities exchange or of the NASD, (2) any foreign broker or dealer
not eligible for membership in the NASD that agrees to conform to the NASD's
Conduct Rules in making solicitations or (3) any bank or trust company. See
"Proposal to Increase Unsecured Debt Limit--Special Cash Payments" for
information concerning cash payments that may be made to holders of PacifiCorp
preferred stock who vote in favor of the merger or the unsecured debt consent.
Soliciting Dealer Fees for Merger Approval. If, but only if, the merger is
approved at the PacifiCorp annual meeting and all regulatory approvals for the
merger required under the merger agreement have been obtained, for each share
of PacifiCorp preferred stock that is voted "FOR" the merger by a beneficial
owner holding 2,500 or fewer shares of PacifiCorp preferred stock (10,000 or
fewer shares for the PacifiCorp $1.16, $1.18 or $1.28 series), PacifiCorp will
pay to the designated Soliciting Dealer, including any Co-Solicitation Agent, a
solicitation fee of $1.00 per share ($0.25 for the PacifiCorp $1.16, $1.18 or
$1.28 series). These solicitation fees will be paid promptly after the merger
is completed.
If, but only if, the merger is approved at the PacifiCorp annual meeting,
for each share of PacifiCorp preferred stock that is voted "FOR" the merger by
a beneficial owner holding more than 2,500 shares of PacifiCorp preferred stock
(10,000 shares for the PacifiCorp $1.16, $1.18 or $1.28 series), PacifiCorp
will pay to the Co-Solicitation Agents an aggregate fee of $0.25 per share
($0.0625 per share for the PacifiCorp $1.16, $1.18 or $1.28 series). These
solicitation fees will be paid promptly after the merger is completed.
Soliciting Dealer Fees for Unsecured Debt Consents. In addition, if, but
only if, the unsecured debt consent is obtained at the PacifiCorp annual
meeting, for each share of PacifiCorp preferred stock that is voted "FOR" the
unsecured debt consent by a beneficial owner holding 2,500 or fewer shares of
PacifiCorp preferred stock (10,000 or a fewer shares for the PacifiCorp $1.16,
$1.18 or $1.28 series), PacifiCorp will pay to the designated Soliciting
Dealer, including any Co-Solicitation Agent, a solicitation fee of $1.00 per
share ($0.25 per share for the PacifiCorp $1.16, $1.18 or $1.28 series). The
solicitation fee for these unsecured debt consents will be paid promptly after
the PacifiCorp annual meeting.
If, but only if, the unsecured debt consent is obtained at the PacifiCorp
annual meeting, for each share of PacifiCorp preferred stock that is voted
"FOR" the unsecured debt consent by a beneficial owner holding more than 2,500
shares of PacifiCorp preferred stock (10,000 shares for the PacifiCorp $1.16,
$1.18 or $1.28 series), PacifiCorp will pay to the Co-Solicitation Agents an
aggregate fee of $0.25 per share ($0.0625 per share for the PacifiCorp $1.16,
$1.18 or $1.28 series). The solicitation fee for these unsecured debt consents
will be paid promptly after the PacifiCorp annual meeting.
28
<PAGE>
Co-Solicitation Agents. If the merger is approved, for each share of
PacifiCorp preferred stock that is voted "FOR" the merger, PacifiCorp has also
agreed to pay to Salomon Smith Barney Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and PaineWebber Incorporated, who have been engaged by
PacifiCorp as co-solicitation agents for the solicitation of proxies from
holders of PacifiCorp preferred stock for the merger and the unsecured debt
consent (collectively, the "Co-Solicitation Agents"), in consideration for such
engagement, an additional aggregate fee of $0.25 per share ($0.0625 per share
for the PacifiCorp $1.16, $1.18 or $1.28 series). In addition, if this
unsecured debt consent is obtained, for each share of PacifiCorp preferred
stock that is voted "FOR" the unsecured debt consent, PacifiCorp has also
agreed to pay to the Co-Solicitation Agents an additional aggregate fee of
$0.25 per share ($0.0625 per share for the PacifiCorp $1.16, $1.18 or $1.28
series). The additional fees to be paid to the Co-Solicitation Agents relating
to the merger will be paid promptly after the merger is completed. The
additional fees to be paid to the Co-Solicitation Agents relating to the
unsecured debt consent will be paid promptly after the PacifiCorp annual
meeting.
PacifiCorp has also agreed to reimburse the Co-Solicitation Agents for their
reasonable out-of-pocket expenses, including the fees and expenses of their
legal counsel, and has agreed to indemnify them and related persons and
entities against certain liabilities and expenses in connection with their
engagement, including liabilities under the federal securities laws.
Soliciting Dealers. A designated Soliciting Dealer will include any
Soliciting Dealer even when the activities of the Soliciting Dealer in
connection with the PacifiCorp annual meeting consist solely of forwarding to
clients materials relating to the PacifiCorp annual meeting, and voting "FOR"
either the merger or the unsecured debt consent as directed by beneficial
owners. No Soliciting Dealer is required to make any recommendation to holders
of shares as to whether or not to vote "FOR" either proposal. No assumption is
made, in making payment to any Soliciting Dealer, that its activities in
connection with the PacifiCorp annual meeting included any activities other
than those described above, and for all purposes noted in the materials
relating to the PacifiCorp annual meeting, the term "solicit" means no more
than processing proxies or forwarding to customers materials regarding the
solicitation.
No solicitation fee, other than solicitation fees payable to the Co-
Solicitation Agents as described above, is payable to a Soliciting Dealer with
respect to a vote "FOR" the merger or the unsecured debt consent except as set
forth on a Notice of Solicited Proxies. No solicitation fee is payable to a
Soliciting Dealer in respect of shares registered in the name of the Soliciting
Dealer unless the shares are held by the Soliciting Dealer as nominee and a
vote is being made, or a proxy in respect thereof is being granted, with
respect to the shares by one or more beneficial owners identified on the Notice
of Solicited Proxies. No solicitation fee is payable to a Soliciting Dealer if
the Soliciting Dealer is required for any reason to transfer any portion of the
fee to a beneficial holder. No solicitation fee will be paid to a Soliciting
Dealer with respect to shares held for its own account or shares beneficially
owned by the Soliciting Dealer. No broker, dealer, commercial bank, trust
company or other nominee is an agent of PacifiCorp or the Co-Solicitation
Agents for purposes of this solicitation.
29
<PAGE>
THE MERGER
This section describes the proposed merger and the material provisions of
the merger agreement and the restated merger agreement, which are attached as
Annex A and Annex B. We urge you to read the merger agreements in their
entirety.
The Companies
ScottishPower. ScottishPower was incorporated in Scotland in 1989 and was
privatized in 1991. It had previously been the South of Scotland Electricity
Board which was formed in the 1950's from an amalgamation of smaller regional
electricity supply boards. ScottishPower is a leading multi-utility business in
the U.K. with approximately five million customers across Scotland, England and
Wales. ScottishPower's activities span the generation, transmission,
distribution and supply of electricity, gas supply, water supply and wastewater
services, telecommunications, retailing of electrical appliances, technology
and contracting services. ScottishPower is one of the largest industrial groups
in the U.K., positioned around the middle of the FTSE 100 Index, with a market
capitalization at December 31, 1998 of (Pounds)7.4 billion.
The mailing address of the principal executive offices of ScottishPower is 1
Atlantic Quay, Glasgow G2 8SP, United Kingdom, and its telephone number at that
address is 011-44-141-248-8200.
New ScottishPower. New ScottishPower was incorporated in Scotland on
February 19, 1999. Following the approval and implementation of the scheme of
arrangement, it will be the holding company for ScottishPower and, following
the merger, it will also be the holding company for PacifiCorp.
The mailing address of the principal executive offices of New ScottishPower
is 1 Atlantic Quay, Glasgow G2 8SP, United Kingdom, and its telephone number at
that address is 011-44-141-248-8200.
PacifiCorp. PacifiCorp is an electricity company in the United States and
Australia. In the United States, PacifiCorp conducts a retail electric utility
business under the assumed business names of Pacific Power & Light Company and
Utah Power & Light Company, and engages in power production and sales on a
wholesale basis under the name PacifiCorp. PacifiCorp Group Holdings Company, a
wholly owned subsidiary of PacifiCorp, holds the stock of subsidiaries
conducting businesses not regulated as domestic electric utilities. PacifiCorp
Group Holdings Company indirectly owns 100% of Powercor Australia Ltd., the
largest of the five electric distribution companies in Victoria, Australia, and
a 19.9% interest in the 1,600 megawatt, brown coal-fired thermal Hazelwood
power station and adjacent brown coal mine in Victoria.
The mailing address of the principal executive offices of PacifiCorp is 825
NE Multnomah, Suite 2000, Portland, Oregon 97232, and its telephone number at
that address is (503) 813-7200.
Background of the Merger
From time to time over the past twenty-four months, ScottishPower has
considered strategic alternatives relating to the United States electric
utility marketplace, including potential acquisitions and other business
combination transactions with U.S. based utilities. From mid-1997, Morgan
Stanley assisted ScottishPower in exploring various strategic alternatives,
including the acquisition of a U.S. electric and/or gas utility. Beginning in
January 1998, Morgan Stanley contacted several U.S. electric and gas utilities
on behalf of ScottishPower to explore strategic options. Although varying
degrees of interest were expressed by some of the contacted utilities, and
although preliminary discussions were undertaken with two of these utilities
regarding a possible business combination transaction, in each instance, the
ScottishPower Board of Directors determined that it would not be in the best
interests of ScottishPower to pursue a transaction with either utility.
In early July 1998, Ian Robinson, the Chief Executive of ScottishPower,
contacted by telephone Frederick Buckman, the then Chief Executive Officer of
PacifiCorp. Mr. Robinson and Mr. Buckman agreed during that conversation that
they and other representatives of their respective companies should meet to
discuss whether the parties would be interested in considering a business
combination transaction.
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On July 16, 1998, Mr. Robinson and Ian Russell, ScottishPower's Finance
Director, met in New York City with Mr. Buckman and discussed the potential for
a strategic combination between the two companies. Although substantive terms
of a proposed transaction were not discussed, the parties agreed to continue
their discussions at a later date. On August 19, 1998, Mr. Robinson, Mr.
Russell, Mr. Buckman, Verl Topham, PacifiCorp's General Counsel, Craig
Longfield, President of PacifiCorp Financial Services, Inc., and Henry Hewitt
of Stoel Rives LLP, PacifiCorp's legal advisors, met in New York City to
continue their discussions regarding a possible business combination
transaction. At the end of the August 19 meeting, Mr. Buckman stated that he
would consult with the PacifiCorp Board of Directors and advise them of the
meeting and would contact Mr. Robinson regarding PacifiCorp's interest in
further discussions.
On August 26, 1998, PacifiCorp announced Mr. Buckman's departure from
PacifiCorp, and the appointment of Keith McKennon, the then Chairman of
PacifiCorp, to the additional position of Chief Executive Officer, effective
September 1, 1998. In early September 1998, Mr. McKennon telephoned Mr.
Robinson to acknowledge that he was aware of the discussions that had taken
place between the companies, and to inform him that PacifiCorp was reviewing
its strategic plan and alternatives, which review would be completed by mid-
October. Mr. McKennon suggested that any further discussions should await the
outcome of that review.
On September 24, 1998, Mr. Robinson called Mr. McKennon to suggest that it
would be desirable to accelerate renewal of discussions regarding a possible
business combination transaction. On October 2, 1998, the ScottishPower Board
of Directors, following a report by Mr. Robinson and Mr. Russell on the
September conversations with Mr. McKennon, instructed the management of
ScottishPower to advance further discussions with PacifiCorp and its advisors.
A meeting was held in Chicago on October 5, 1998, and was attended by Messrs.
Robinson, Russell, McKennon and Hewitt and Richard O'Brien, PacifiCorp's
Executive Vice President and Chief Operating Officer.
At the October 5 meeting, the ScottishPower executives proposed a two-stage
approach to exploring a potential transaction in more detail. The initial phase
would focus on identifying and discussing the key "threshold" issues of
strategy, management and whether a range of values could be identified which
was potentially attractive to both companies. If the senior management of the
companies concluded that there was a mutual interest in a transaction, the
companies would pursue a second phase involving detailed due diligence and
negotiation of the specific terms of the proposed transaction. It was agreed
that representatives from both companies would do some preliminary valuation
work before PacifiCorp's next scheduled board meeting on October 16, 1998.
As a result of the discussions held at the October 5 meeting, on October 12,
1998, ScottishPower and PacifiCorp entered into a confidentiality and
standstill agreement. On the same date, ScottishPower formally engaged Morgan
Stanley as financial advisor to assist in the discussions with PacifiCorp.
Initial discussions regarding utility regulatory matters, including regulatory
approvals that might be required in connection with a potential transaction,
took place on October 14. On October 16, 1998, at a meeting of the PacifiCorp
Board of Directors, Mr. McKennon reported to the PacifiCorp board on the status
of management's strategic review and the discussions with ScottishPower, and
the PacifiCorp board authorized the management of PacifiCorp to continue
discussions with ScottishPower regarding a possible strategic transaction.
Later, a staff working session, headed by Mr. Russell and Mr. O'Brien, was
conducted on October 17 and 18, at which the participants reviewed threshold
regulatory, strategic and financial due diligence issues, and ScottishPower's
representatives were advised regarding PacifiCorp's intentions to refocus on
its core electricity business in the western United States.
On October 23, 1998, PacifiCorp announced that it had completed its
strategic review and that it was refocusing on its electricity business in the
western United States, selling or terminating some of its non-core businesses
and instituting a share repurchase program. The existence of the discussions
with ScottishPower did not delay or affect PacifiCorp's strategic review.
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At a meeting of the ScottishPower Board of Directors held on October 23,
1998, Mr. Robinson, Mr. Russell and other members of ScottishPower's management
reported to the ScottishPower Board of Directors on the status of the ongoing
discussions with PacifiCorp. Based on this report, the ScottishPower Board of
Directors authorized management to continue discussing a proposed business
combination transaction with PacifiCorp's management and its advisors.
On October 29, 1998, a further meeting was held in New York City, with
Messrs. Robinson, Russell, McKennon, O'Brien and Hewitt in attendance. At this
meeting the participants discussed potential transaction structures and
corporate governance issues.
On November 1, 1998, Mr. Russell was appointed Deputy Chief Executive of
ScottishPower in addition to retaining his position as Finance Director.
On November 5, 1998, Mr. McKennon and Mr. Robinson met in London, and
continued their discussion of potential transaction structures and other
specific terms upon which the companies might be willing to engage in a
combination transaction. At this meeting, it was determined that a sufficient
basis existed for the parties to commence a mutual due diligence process and
negotiation of a merger agreement.
Following the November 5 meeting, both parties began preparations for
commencing detailed due diligence investigations and negotiations regarding the
specific terms of a merger of ScottishPower and PacifiCorp. In this regard, on
November 9, 1998, ScottishPower engaged Milbank, Tweed, Hadley & McCloy to
assist in connection with the potential combination.
On November 15, 1998, ScottishPower delivered to PacifiCorp an initial draft
of a proposed merger agreement. Both companies opened data rooms in New York
City on November 16, 1998 and commenced detailed due diligence reviews. At a
meeting of the ScottishPower Board of Directors held on November 20, 1998, Mr.
Robinson, Mr. Russell and other members of ScottishPower's management reported
to the ScottishPower board on their preliminary review of the business and
financial condition of PacifiCorp, and the discussions with PacifiCorp and its
legal advisors, Stoel Rives LLP and LeBoeuf, Lamb, Greene & MacRae, regarding
the draft merger agreement. On November 21 and 22, 1998, the management of
ScottishPower and PacifiCorp each made presentations to the other and their
respective financial advisors, Morgan Stanley and Salomon Smith Barney,
regarding their businesses, financial performance, management, strategic plans
and other related matters.
On November 23, 1998, teams from both companies, including representatives
of Milbank Tweed, Stoel Rives, LeBoeuf, Lamb, Morgan Stanley and Salomon Smith
Barney, led by Mr. Russell and Mr. O'Brien, met to discuss the draft merger
agreement and specific terms upon which the parties might be willing to enter
into a definitive merger agreement. This meeting included discussions on all
aspects of the proposed merger agreement, including appropriate
representations, warranties, covenants, closing conditions and termination
provisions.
During the period from November 23, 1998 to December 6, 1998, ScottishPower,
PacifiCorp, Milbank Tweed, Stoel Rives, LeBoeuf Lamb, Morgan Stanley, Salomon
Smith Barney, and PricewaterhouseCoopers and Ernst & Young, each of whom were
advisors to ScottishPower on tax and accounting matters, continued detailed
legal and financial due diligence and, along with Freshfields, ScottishPower's
U.K. legal advisors, and Linklaters & Paines, PacifiCorp's U.K. legal advisors,
held numerous meetings and/or telephone conferences regarding the specific
terms of the proposed merger agreement. During these meetings and/or telephone
conferences some of the issues discussed included valuation ranges for the
PacifiCorp common stock, the form of consideration that might be offered to
holders of PacifiCorp common stock, corporate governance and management issues
relating to the combined enterprise and other transaction considerations.
At a meeting on December 2, 1998, the teams led by Mr. Russell and Mr.
O'Brien, together with representatives of Milbank Tweed, Stoel Rives, LeBoeuf
Lamb, Morgan Stanley and Salomon Smith Barney, again met to attempt to finalize
the terms on which the managements of ScottishPower and PacifiCorp would
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be willing to recommend a merger agreement. At this meeting, there were
discussions relating to the exchange ratio at which shares of PacifiCorp common
stock would be exchanged for ADSs or ordinary shares, as well as other
outstanding issues. At the conclusion of this meeting, while continuing to
attempt to make progress on the resolution of significant issues that remained
open regarding the proposed merger agreement, the representatives of the
parties present at the meeting agreed to discuss with their respective boards
of directors an exchange ratio of 0.58 ADSs or 2.32 ordinary shares for each
share of PacifiCorp common stock. This proposed exchange ratio was arrived at
as a result of direct negotiation between Messrs. Russell and O'Brien and,
together with other significant terms of the proposed merger agreement
discussed but not resolved at this meeting, was expressly subject to further
discussion with, and ultimate approval by, the board of directors of each of
ScottishPower and PacifiCorp.
A meeting of the PacifiCorp Board of Directors was held in Portland, Oregon
on the afternoon of December 4, 1998 to consider the proposed merger
transaction. At that meeting, the PacifiCorp Board of Directors reviewed
various materials relevant to the transaction and received presentations from
PacifiCorp's management, its legal counsel, Stoel Rives LLP, and its financial
advisor, Salomon Smith Barney. Included in the presentations were a review of
the economic and other principal terms of the transaction, including the
related tax and accounting treatment, the regulatory approvals required to
consummate the proposed merger and the fiduciary responsibilities of the
PacifiCorp Board of Directors in considering the proposed transaction. Salomon
Smith Barney advised the PacifiCorp Board of Directors that it expected to be
able to provide its opinion that the consideration in the merger agreement was
fair, from a financial point of view, to the holders of PacifiCorp common
stock.
The PacifiCorp Board of Directors considered and discussed a number of
factors relating to the merger, including:
. the proposed terms of the merger agreement;
. the proposed exchange ratio and benefit to PacifiCorp shareholders from
the transaction;
. PacifiCorp's due diligence activities with respect to ScottishPower;
. the tax risks associated with the proposed transaction structure;
. the financial strength of the combined companies;
. the likely shareholder return associated with PacifiCorp's business
plan; and
. the effect of the transaction on PacifiCorp's employees and customers
including;
. ScottishPower's record of providing excellent customer service;
. ScottishPower's commitment to employee development, training and
benefits; and
. ScottishPower's good relationship with labor unions.
Following that meeting, representatives of Milbank Tweed, Stoel Rives,
LeBoeuf Lamb, Morgan Stanley and Salomon Smith Barney continued, over the
course of December 5, 1998, to discuss and attempt to resolve specific open
issues in the proposed merger agreement, the most significant of which were the
precise terms under which a termination fee might be payable by either party
and the number of ordinary shares and ADSs that might be required to be issued
in the merger.
On the afternoon of December 6, 1998, the ScottishPower Board of Directors
met to consider the proposed merger transaction and its proposed terms. At this
meeting, management of ScottishPower made presentations to the ScottishPower
Board of Directors regarding PacifiCorp, its business and financial condition,
its assets and liabilities and other matters relating to PacifiCorp relevant to
the ScottishPower Board of Directors' consideration of the proposed
transaction. Management of ScottishPower also discussed in detail with the
ScottishPower Board of Directors the proposed financial terms of the merger,
including the proposed exchange ratio. As a part of this meeting, the
ScottishPower Board of Directors received advice from its legal counsel,
Milbank, Tweed and Freshfields, regarding the terms of the proposed merger
agreement, the U.S. federal and
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state regulatory approvals required to consummate the proposed merger and other
matters relevant to their consideration of the proposed transaction. In
addition, Morgan Stanley delivered to the ScottishPower Board of Directors its
oral opinion that the proposed exchange ratio under the original merger
agreement was fair, from a financial point of view, to ScottishPower. During
the course of this meeting, the ScottishPower Board of Directors considered and
discussed numerous factors relating to the proposed merger, including:
. the proposed terms of the merger agreement;
. the financial and other effects of the proposed merger on ScottishPower;
. the proposed exchange ratio;
. the challenge that would be presented to the management of ScottishPower
of operating an international business;
. the opportunity presented by the proposed merger for ScottishPower to
establish a significant position in the U.S. energy marketplace; and
. the effects of regulation as a registered holding company under the
Public Utility Holding Company Act of 1935.
Following these presentations and deliberations, the ScottishPower Board of
Directors unanimously approved the proposed merger and the proposed terms of
the merger agreement and established a committee, consisting of any two or more
directors, normally to include Murray Stuart, the Chairman of ScottishPower,
and at least one of Mr. Robinson or Mr. Russell (the "ScottishPower Special
Committee"), to finalize the outstanding terms of the merger agreement and to
authorize the execution and delivery of the merger agreement.
On the evening of December 6, 1998 (London time), the merger agreement was
finalized and approved by the ScottishPower Special Committee.
Also, during the afternoon of December 6, 1998 (Portland time), following
its finalization, the merger agreement was considered by the PacifiCorp Board
of Directors. The PacifiCorp Board of Directors reviewed the presentations and
discussion from its meeting on December 4. The PacifiCorp Board of Directors
also considered correspondence received by Mr. McKennon on the afternoon of
December 4 following the meeting of the PacifiCorp Board of Directors from a
U.S. electric utility with a market capitalization smaller than that of
PacifiCorp in which the utility stated that its studies indicated it could
offer up to $25 per share in value to PacifiCorp shareholders in a combination
of cash and shares in a merger with PacifiCorp. Salomon Smith Barney presented
an analysis of the financial implications of an offer if made on the terms
suggested in the correspondence. Counsel for PacifiCorp reviewed the regulatory
approvals that would be required to be obtained to effect a merger with a
domestic utility and compared those approvals and related issues with the
approvals that would be required to consummate a merger with ScottishPower. The
PacifiCorp Board of Directors discussed, among other things, the complex
regulatory issues raised in a merger between domestic utilities, the nonbinding
and conditional nature of the correspondence, the probability of completion of
a transaction if an offer were made, and the fact that the price suggested was
lower than that reflected in the proposed exchange ratio in the merger
agreement.
The PacifiCorp Board of Directors concluded that it should not defer its
consideration of the proposed transaction with ScottishPower. Salomon Smith
Barney then delivered to the PacifiCorp Board of Directors its oral opinion
that the proposed consideration in the original merger agreement was fair, from
a financial point of view, to the holders of PacifiCorp common stock. Following
presentations by management and counsel, the merger agreement was unanimously
approved and adopted by members of the PacifiCorp Board of Directors present.
Following these approvals, the merger agreement was executed and delivered
on behalf of each of ScottishPower and PacifiCorp.
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On Monday morning, December 7, 1998, ScottishPower and PacifiCorp publicly
announced the execution and delivery of the merger agreement.
The merger agreement provided that if ScottishPower determined to reorganize
and place a newly established holding company above ScottishPower, the parties
would agree to amend the merger agreement to effect the merger as if the
holding company had originally been a party to the merger agreement in place of
ScottishPower. However, the amendment was allowed only to the extent that it
would not adversely affect the relative rights, obligations and burdens of
ScottishPower and PacifiCorp or the benefits of the merger for PacifiCorp
shareholders.
During the period between February 1 and February 23, 1999, representatives
of Milbank Tweed, Freshfields, Stoel Rives, LeBoeuf Lamb and Linklaters held
numerous telephone conferences to discuss the revisions to the merger agreement
that were required to implement the holding company structure. On February 19,
1999, the ScottishPower Board of Directors determined to reorganize as a
holding company and notified PacifiCorp of its decision. On the same day, the
ScottishPower board approved the draft amended and restated merger agreement
and appointed Messrs. Robinson and Russell to finalize the restated merger
agreement on behalf of the board. On February 24, 1999, the ScottishPower board
approved the restated merger agreement.
On February 10, 1999, the PacifiCorp Board of Directors met to consider the
proposed merger pursuant to the amended merger agreement. As a part of this
meeting, the PacifiCorp Board of Directors received advice from its legal
counsel, Stoel Rives, regarding the terms of the restated merger agreement.
During the course of the meeting, the PacifiCorp Board of Directors discussed:
. the reasons for and advantages to the proposed holding company
structure;
. the terms of the restated merger agreement;
. the fact that the PacifiCorp Board of Directors had no reason to believe
that the amendments to the merger agreement as reflected in the restated
agreement would adversely affect the rights, obligations, benefits and
burdens of PacifiCorp or the benefits of the merger for PacifiCorp
shareholders; and
. the fact that the amended merger agreement would not take effect until
the scheme of arrangement had been effected and until then the original
merger agreement would continue in effect, and that, if ScottishPower
notifies PacifiCorp that the scheme of arrangement will not become
effective, the merger will proceed as provided in the original merger
agreement.
The restated merger agreement was unanimously approved and adopted by
members of the PacifiCorp Board of Directors present at the February 10, 1999
meeting.
Following these approvals, the restated merger agreement was executed and
delivered as of February 23, 1999, on behalf of each of ScottishPower and
PacifiCorp.
Reasons for the Merger; Recommendations of PacifiCorp Board of Directors and
ScottishPower Board of Directors
PacifiCorp. In 1995, PacifiCorp initiated a strategy to become a leading
international energy company. In late 1995, PacifiCorp completed the
acquisition of Powercor, an electric distribution and marketing company in the
State of Victoria, Australia. In late 1996, PacifiCorp acquired a 19.9 percent
interest in the Hazelwood power station and adjacent coal mine, also in
Victoria, Australia. In late 1996, PacifiCorp also began an internal review of
a possible acquisition of The Energy Group plc, a large U.K. based utility with
interests in electricity distribution and generation and natural resources. In
addition to efforts to acquire The Energy Group plc, throughout 1997 and early
1998, PacifiCorp pursued development projects in Turkey, the Philippines, South
America and Asia. Following the unsuccessful attempt to acquire The Energy
Group plc, PacifiCorp management undertook an in-depth review of the company's
corporate strategy and business plan. Possible
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strategies were discussed with the PacifiCorp Board of Directors at four
meetings during June and August, 1998. These included:
. PacifiCorp's then current strategy of becoming a leading international
energy company;
. the possible sale of PacifiCorp's generation assets;
. becoming a wholesale energy service company through acquisition of a gas
marketing and trading company;
. merging PacifiCorp with another domestic utility; and
. selling PacifiCorp.
On July 21, 1998, PacifiCorp disclosed losses from energy trading of
approximately $32 million and a decline in earnings. On July 31, 1998,
PacifiCorp disclosed that the Utah Division of Public Utilities proposed
adjustments as part of PacifiCorp's general rate case that, if ultimately
accepted by the Utah Public Service Commission, could result in a $57.4 million
annual reduction in customer prices. On August 26, 1998, Frederick Buckman
resigned as President and Chief Executive Officer of PacifiCorp, and Keith
McKennon, the then Chairman of PacifiCorp, was elected to the additional
position of Chief Executive Officer.
At meetings held on October 16 and October 22, 1998, the PacifiCorp Board of
Directors considered and approved a revised strategic plan recommended by
management. Management concluded that PacifiCorp's core electricity business in
the western United States required increased management attention and that
PacifiCorp should no longer pursue its goal of becoming a leading international
energy company. The revised plan included significant overhead cost reductions,
improved earnings on its regulated assets and disposition of under-earning
assets. The revised plan was believed to be preferable to other strategies
considered principally because it was considered to be more achievable, to have
lower risk and to have greater potential value to shareholders than other
alternatives. On October 23, 1998, PacifiCorp announced its intent to refocus
on its core electricity business in the western United States, divest all
businesses other than its western electric business and Powercor Australia
Ltd., and implement a $750 million share repurchase program.
On December 6, 1998, the PacifiCorp Board of Directors, by a unanimous vote
of directors present, concluded that the merger, the terms of the merger
agreement and the transactions contemplated by the merger agreement were in the
best interests of PacifiCorp and its shareholders. Accordingly, the PacifiCorp
Board of Directors adopted the merger agreement and recommended that the
shareholders of PacifiCorp approve the merger agreement. In determining to
recommend approval of the merger agreement and the transactions contemplated by
the merger agreement and in adopting the merger agreement, the PacifiCorp Board
of Directors considered each of the following material factors:
. The value of the ADS consideration and the ordinary share consideration
provided for in the merger agreement relative to the then-current market
price of PacifiCorp common stock. Based on the market prices of ordinary
shares and PacifiCorp common stock on December 4, 1998, the last trading
day prior to the date the execution of the merger agreement was
announced, PacifiCorp shareholders would receive a premium of
approximately 26% over the closing sale price of PacifiCorp common stock
of $20.75. That premium is approximately 31% over the closing sale price
of PacifiCorp common stock on November 30, 1998, one week before the
merger announcement.
. The opinion of Salomon Smith Barney that, as of the date of the opinion,
the merger consideration under the original merger agreement was fair,
from a financial point of view, to holders of PacifiCorp common stock.
. That holders of PacifiCorp common stock will receive approximately 36%
of the total issued share capital of ScottishPower following the merger,
and that ScottishPower intends to become a leading international energy
company consistent with PacifiCorp's prior strategy.
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. The federal income tax consequences of the transaction, including the
ability of holders of PacifiCorp common stock to have a tax-free
exchange of their shares of PacifiCorp common stock, with the exception
of fractional shares, and the risk that the merger might fail to qualify
as a tax-free reorganization as a result of actions outside the control
of PacifiCorp.
. The proven management expertise of ScottishPower in operating a
vertically integrated electric utility like PacifiCorp as demonstrated
by its success in reducing costs, increasing efficiency and improving
customer service at ScottishPower and at Manweb and Southern Water, two
significant utility acquisitions.
. The uncertainty and risk to PacifiCorp as the electric utility industry
in the United States moves to increased competition and deregulation,
and the value to PacifiCorp of access to ScottishPower's experience in
operating in a competitive U.K. electricity supply environment.
. That the combination of ScottishPower and PacifiCorp produces a
consolidated balance sheet at least as strong as PacifiCorp's before the
merger. The credit ratings for PacifiCorp's debt and preferred stock
securities are expected to remain at least at the levels that existed
before the merger, with both Standard & Poor's and Moody's Investors
Service initially indicating an improved outlook for PacifiCorp as a
result of the merger.
. Other strategic alternatives for PacifiCorp, including the possibility
of entering into other business combinations or remaining an independent
company.
. That the regulatory approvals required to consummate the merger are
expected to be less onerous to obtain than those that would be required
in connection with a merger between PacifiCorp and a domestic utility.
. The fact that ScottishPower will be required to register under and be
regulated by the Public Utility Holding Company Act of 1935 and
PacifiCorp will be subject to regulation as a subsidiary of a registered
holding company.
. The impact of the merger on PacifiCorp's employees and customers.
. The effect on holders of PacifiCorp common stock of receiving shares in
a Scottish company and having their holdings represented by ADSs and
ordinary shares and having a currency exchange risk as a result of
having future dividends required to be converted from pounds to dollars,
and potential for adverse movement in share prices.
. ScottishPower's existing business, including competitive and regulatory
risks, the upcoming price reviews in the electricity service sectors,
the environmental risks inherent in the business, and the risks
associated with its telecommunications business.
. The possible effect of the terms of the merger agreement with respect to
any third party proposals to acquire PacifiCorp after the execution of
the merger agreement. In particular, if any third party proposal were
made that the PacifiCorp Board of Directors determined to be a bona fide
Alternative Proposal (as defined in the merger agreement), the
PacifiCorp Board of Directors could determine to provide information to
and engage in negotiations with the third party. The PacifiCorp Board of
Directors considered that the termination payment provisions of the
merger agreement could have the effect of discouraging alternative
proposals for a business combination with PacifiCorp.
In light of the PacifiCorp Board of Directors' knowledge of the business and
operations of PacifiCorp and its business judgment, the PacifiCorp Board of
Directors considered and evaluated each of the factors listed above during the
course of its deliberations before approving the merger agreement. In view of
the wide variety of factors considered in connection with its evaluation of the
merger, the PacifiCorp Board of Directors found it impracticable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in making its determinations.
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After considering all of the foregoing factors, the PacifiCorp Board of
Directors concluded that a combination with ScottishPower, under the terms in
the merger agreement and the related documentation, is in the best interests of
PacifiCorp and its shareholders. The PacifiCorp Board of Directors believes the
factors listed above, when considered together, support the fairness of the
merger to PacifiCorp and its shareholders and the PacifiCorp Board of Directors
believes that these factors, when considered together, support its
recommendation that PacifiCorp shareholders vote for approval of the merger
agreement.
ScottishPower. The ScottishPower Board of Directors has unanimously
determined that the terms of the merger agreement and the transactions
contemplated by the merger agreement are fair to, and in the best interests of,
ScottishPower and its shareholders. In reaching its decision to recommend and
approve the merger agreement, the ScottishPower Board of Directors consulted
with management of ScottishPower, as well as financial, accounting and legal
advisors, and considered, among other things, the following material factors
that the ScottishPower Board of Directors considered in reaching its conclusion
to unanimously approve the merger agreement and the transactions contemplated
by the merger agreement:
. The merger consideration to be received by PacifiCorp shareholders, its
relationship to market price and earnings, and the fact that it will be
tax-free to PacifiCorp shareholders.
. The opinion of Morgan Stanley that, as of the date of the opinion, the
exchange ratio under the original merger agreement was fair from a
financial point of view to ScottishPower.
. The fact that the merger will further a key strategic objective of
ScottishPower, namely expansion of its core electricity business into
the rapidly evolving U.S. market.
. The strategic fit between ScottishPower and PacifiCorp, including:
. The fact that both are vertically integrated electric utilities;
. The relevance of ScottishPower's U.K. experience in the emerging
competitive market in the U.S.;
. The similarity of the companies' generation activities; and
. The potential for subsequent expansion for the combined group.
. Management's belief that the application of best practice across the
combined group has the potential to create substantial cost savings
following consummation of the merger.
. The expectation that the transaction would result in earnings accretion,
before amortization of goodwill, for ScottishPower shareholders from the
first full year after consummation of the merger compared to the
directors' present expectation for the existing ScottishPower group.
. Management's review of the business, operations and financial condition
of PacifiCorp as supported by the findings of due diligence.
. The terms of the merger agreement, including:
. The fixed exchange ratio and the absence of any mechanism for
adjusting the exchange ratio;
. The termination provisions and termination fees; and
. The covenants governing conduct of the businesses between
announcement and consummation of the merger.
. The following potential risks related to the merger:
. The fact that ScottishPower would have to register under and be
regulated by the Public Utility Holding Company Act of 1935;
. The potential for adverse movement in share prices, exchange rates
or interest rates;
. The size and international nature of the merger, and attendant
potential burdens on ScottishPower management;
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. The requirements to gain regulatory approvals from state and federal
regulators and the length of time this could take;
. Potential legal and environmental exposures beyond those identified
in due diligence;
. Possible impediments to achieving potential cost savings; and
. Potential for adverse regulatory rulings to impair the economic
rationale for the merger.
In light of the ScottishPower Board of Directors' knowledge of the business
and operations of ScottishPower and its business judgment, the ScottishPower
Board of Directors considered and evaluated each of the factors listed above
during the course of its deliberations before approving the merger agreement.
In view of the wide variety of factors considered in connection with its
evaluation of the merger, the ScottishPower Board of Directors found it
impracticable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in making its determinations.
Opinions of Financial Advisors
PacifiCorp. At the meeting of the PacifiCorp Board of Directors held on
December 6, 1998, Salomon Smith Barney delivered its oral opinion, subsequently
confirmed in writing, that, as of December 6, 1998, the merger consideration
under the original merger agreement was fair, from a financial point of view,
to holders of PacifiCorp common stock. No limitations were imposed by the
PacifiCorp board upon Salomon Smith Barney regarding the investigation made or
the procedures followed by Salomon Smith Barney in rendering its opinion. The
opinion of Salomon Smith Barney was for the use and benefit of the PacifiCorp
board in connection with its consideration of the merger.
The full text of the written opinion of Salomon Smith Barney is attached as
Annex C to this proxy statement/prospectus and explains the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken by Salomon Smith Barney. Holders of PacifiCorp common stock are
urged to read Salomon Smith Barney's opinion in its entirety. The summary of
the opinion in this proxy statement/prospectus is qualified in its entirety by
reference to the full text of the opinion, which is incorporated into this
proxy statement/prospectus by reference.
In connection with the rendering of its opinion, Salomon Smith Barney
reviewed publicly available information concerning PacifiCorp and ScottishPower
and other financial information concerning PacifiCorp and ScottishPower,
including financial forecasts, that were provided to Salomon Smith Barney by
PacifiCorp or ScottishPower. Salomon Smith Barney discussed the past and
current business operations, financial condition and prospects of PacifiCorp
and ScottishPower with officers and employees of PacifiCorp or ScottishPower.
Salomon Smith Barney also considered other information, financial studies,
analyses, investigations and financial, economic and market criteria that it
deemed relevant.
In its review and analyses and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of the information
reviewed by it for the purpose of the opinion and Salomon Smith Barney did not
assume any responsibility for independent verification of such information.
With respect to the financial forecasts, Salomon Smith Barney was advised by
the managements of PacifiCorp and ScottishPower that such forecasts had been
reasonably prepared on bases reflecting their best currently available
estimates and judgments, and Salomon Smith Barney expressed no opinion with
respect to such forecasts or the assumptions on which they were based. Salomon
Smith Barney did not assume any responsibility for any independent evaluation
or appraisal of any of the assets, including properties and facilities, or
liabilities of PacifiCorp or ScottishPower.
Salomon Smith Barney's opinion is necessarily based upon conditions as they
existed and could be evaluated on the date of the opinion and Salomon Smith
Barney did not assume any responsibility to update or revise its opinion based
upon circumstances or events occurring after the date of the opinion. Salomon
Smith
39
<PAGE>
Barney's opinion does not imply any conclusion as to the likely trading range
for ADRs or ordinary shares following the consummation of the merger, which may
vary depending upon, among other factors, changes in interest rates, dividend
rates, market conditions, general economic conditions and other factors that
generally influence the price of securities. Salomon Smith Barney's opinion did
not address PacifiCorp's underlying business decision to effect the merger, and
Salomon Smith Barney expressed no view on the effect on PacifiCorp of the
merger and related transactions. Salomon Smith Barney's opinion is directed
only to the fairness, from a financial point of view, of the merger
consideration to be received by the holders of PacifiCorp common stock under
the original merger agreement and does not constitute a recommendation
concerning how holders of PacifiCorp common stock should vote with respect to
the merger agreement or the merger.
In connection with the rendering of its opinion, Salomon Smith Barney
performed certain financial analyses, which it discussed with the PacifiCorp
board on December 4 and December 6, 1998. The material portions of the analyses
performed by Salomon Smith Barney in connection with the rendering of its
opinion dated December 6, 1998 are summarized below.
Discounted Cash Flow Analysis. Salomon Smith Barney performed a discounted
cash flow analysis of PacifiCorp to estimate a range of values for the
PacifiCorp common stock. The discounted cash flow analysis for PacifiCorp was
based upon financial forecasts (the "Plan Case forecasts") for the years ended
December 31, 1999 to December 31, 2003, prepared by the management of
PacifiCorp. The Plan Case forecasts were subsequently adjusted by the
management of PacifiCorp (the "Improvement Case forecasts"), and separate
analyses were prepared by Salomon Smith Barney based upon each of the two sets
of financial forecasts. As a substitute for the cash flows generated beyond
2003, Salomon Smith Barney calculated a terminal year value for PacifiCorp by
applying a range of common stock price to earnings per share ("EPS") multiples
("P/E multiples") of 13.5x to 17.0x (which implies firm value to earnings
before interest, taxes, depreciation and amortization ("EBITDA") multiples of
7.5x to 8.5x) to 2003 net income, and then added to those values the
outstanding debt and preferred stock balances (net of cash) as of December 31,
2003. For the purposes of this analysis, "firm value" is the value attributed
to the common shares plus the sum of the preferred stock valued at par value,
the outstanding short-term and long-term debt at book value and other financial
long-term liabilities at book value less cash. The unlevered free cash flow
amounts for the years ended December 31, 1999 to December 31, 2003, plus the
terminal values were then discounted back to the present using a range of
discount rates of 6.0%-7.5% based upon an analysis of the weighted average cost
of capital for PacifiCorp. For purposes of this analysis, "unlevered free cash
flow" was calculated as the cash available to the PacifiCorp's capital
providers (equity, debt and preferred equity) after operating expenses, taxes,
capital expenditures and changes in working capital. Analysis of the Plan Case
forecasts and the Improvement Case forecasts for PacifiCorp, without
considering any benefits derived from the merger, indicated an implied equity
value range per share of PacifiCorp common stock of approximately $15.50 to
$21.25 and $18.00 to $24.25, respectively. The following table summarizes
PacifiCorp's discounted cash flow analysis:
<TABLE>
<CAPTION>
Equity Valuation
Range
Per PacifiCorp
Common Stock
-----------------
Case Low High Methodology
---- ------- --------- ---------------------------
<S> <C> <C> <C>
6.0%-7.5% Weighted Average
Cost of Capital
PacifiCorp Plan Case 13.5x-17.0x Terminal (2003)
Discounted Cash Flow........ $ 15.50 $21.25... Net Income
6.0%-7.5% Weighted Average
PacifiCorp Cost of Capital
Improvement Case 13.5x-17.0x Terminal (2003)
Discounted Cash Flow........ $ 18.00 $24.25... Net Income
</TABLE>
Salomon Smith Barney performed a similar analysis of ScottishPower to
estimate a range of values for the ordinary shares. The discounted cash flow
analysis for ScottishPower was based upon certain financial forecasts
40
<PAGE>
provided by ScottishPower (the "Management Case forecasts"). The Management
Case forecasts were subsequently adjusted by the management of PacifiCorp (the
"Sensitivity Case forecasts"), and separate analyses were prepared based upon
each of the two sets of financial forecasts. As a substitute for cash flows
beyond 2003, Salomon Smith Barney calculated a terminal year value for
ScottishPower by applying a range of firm value to EBITDA multiples of 9.0x to
10.0x to terminal year EBITDA. The unlevered free cash flow amounts for years
ended March 31, 1999 to March 31, 2003, plus the terminal values were then
discounted back to the present using a range of discount rates of 7.25% to
7.75%. Analysis of the Management Case forecasts and the Sensitivity Case
forecasts for ScottishPower, without considering any benefits derived from the
merger, indicated an implied equity value range per share of ScottishPower
ordinary share of (Pounds)5.97 to (Pounds)7.07 and (Pounds)5.32 to
(Pounds)6.33, respectively. The following table summarizes ScottishPower's
discounted cash flow analysis:
<TABLE>
<CAPTION>
Equity Valuation Range
Per ScottishPower Ordinary
Share
---------------------------
Case Low High Methodology
---- ------------ -------------- --------------------
<S> <C> <C> <C>
7.25%-7.75% Weighted
Average Cost of
ScottishPower Management Capital
Case Discounted Cash 9.0x-10.0x Terminal
Flow.................... (Pounds)5.97 (Pounds)7.07.. (2003) EBITDA
7.25%-7.75% Weighted
ScottishPower Average Cost of
Sensitivity Capital
Case Discounted Cash 9.0x-10.0x Terminal
Flow.................... (Pounds)5.32 (Pounds)6.33.. (2003) EBITDA
</TABLE>
Public Market Valuation Analysis. Salomon Smith Barney estimated a range of
values for PacifiCorp common stock and ScottishPower ordinary shares by
reviewing and analyzing certain financial information of other publicly traded
companies that Salomon Smith Barney determined to be comparable to PacifiCorp,
ScottishPower's utilities segment and ScottishPower's telecommunications
segment.
Using publicly available information, including the EPS estimates from IBES
for the projected 1999 periods and EBITDA for the latest 12-month period as of
September 30, 1998 (the "LTM"), Salomon Smith Barney reviewed, among other
things, the range of P/E multiples and firm value to EBITDA multiples for the
companies determined to be comparable to PacifiCorp. The following table
summarizes the results of this analysis:
Companies Determined to be
Comparable to PacifiCorp
--------------------------
Allegheny Energy Inc.
Ameren Corp.
Cinergy Corp.
Dominion Resources, Inc.
DPL Inc.
Idaho Power
Montana Power Co.
New Century Energies, Inc.
OGE Energy Corp.
Potomac Electric Power Company
Puget Sound Energy Inc.
Sempra Energy
Washington Water Power Company
41
<PAGE>
<TABLE>
<CAPTION>
Estimates for the Companies Determined to be Comparable
to PacifiCorp Range
------------------------------------------------------- --------------
<S> <C>
P/E Mutliples (for the projected 12-month period
ended December 31, 1999 ("Calendar 1999").............. 13.5x to 16.5x
Firm Value to EBITDA Multiples (for the LTM)............ 7.5x to 8.5x
</TABLE>
Salomon Smith Barney applied these multiples which were derived from the
companies determined to be comparable to PacifiCorp to PacifiCorp's
corresponding financial and market statistics. Ranges of equity values were
derived by:
--mutliplying price to earnings per share multiples for Calendar 1999 by
PacifiCorp's projected earnings per share for Calendar 1999, based upon
the Plan Case forecasts and Improvement Case forecasts;
--multiplying firm value to EBITDA multiples for the LTM by PacifiCorp's
EBITDA for the LTM to derive a range of firm values.
The following table summarizes the equity valuation range derived using this
analysis.
<TABLE>
<CAPTION>
Equity Valuation Range Per
Case PacifiCorp Common Stock
---- --------------------------
<S> <C>
PacifiCorp Plan Case........................... $15.75 to $20.75
PacifiCorp Improvement Case.................... $16.50 to $21.50
</TABLE>
Salmon Smith Barney also reviewed public information, including earnings
before interest and taxes ("EBIT") for the LTM and projected Calendar 1999
period, EBITDA for the LTM and projected Calendar 1999 period, and EPS for the
projected Calendar 1999 and 2000 periods, and calculated the firm value to EBIT
multiples, the firm value to EBITDA multiples and P/E multiples for the
companies determined to be comparable to ScottishPower's utilities segment.
Salomon Smith Barney valued ScottishPower's telecommunications segment
separately based upon the range of multiples for the companies determined to be
comparable to ScottishPower's telecommunications segment. Salomon Smith Barney
reviewed public information, including net property, plant and equipment ("Net
PP&E"), and calculated the firm value to Net PP&E multiples for the companies
determined to be comparable to ScottishPower's telecommunications segment. The
following table summarizes the results of this analysis:
Companies Determined
to be Comparable to
ScottishPower's
Utilities Segment
-----------------
British Energy plc
BG plc
Centrica plc
Hyder plc
National Grid Group plc (excluding
the telecommunications company,
Energis plc)
National Power plc
PowerGen plc
Scottish and Southern Energy plc
United Utilities plc
Companies Determined
to be Comparable to
ScottishPower's
Telecommunications
Segment
- --------------------
COLT Telecom Group plc
Energis plc
Equant N.V.
NTL Incorporated
42
<PAGE>
<TABLE>
<CAPTION>
Estimates for the
Companies Determined
to be Comparable to
ScottishPower's
Utilities Segment Range
----------------- -----
<S> <C>
P/E Multiples (for Calendar
1999)........................... 13.0x to 14.0x
P/E Mutliples (for Calendar
2000)........................... 13.0x to 14.0x
Firm Value to EBIT Multiples (for
the LTM)........................ 11.0x to 12.0x
Firm Value to EBIT Multiples (for
Calendar 1999).................. 10.5x to 11.5x
Firm Value to EBITDA Multiples
(for the LTM)................... 9.0x to 10.0x
Firm Value to EBITDA Multiples
(for
Calendar 1999).................. 8.5x to 9.5x
</TABLE>
<TABLE>
<CAPTION>
Estimates for the
Companies Determined
to be Comparable to
ScottishPower's
Telecommunications
Segment Range
------------------ -----
<S> <C> <C>
Firm Value to Net PP&E
Multiples............. 7.0x to 7.5x
</TABLE>
Salomon Smith Barney applied these multiples which were derived from the
companies determined to be comparable to ScottishPower's utilities segment and
telecommunications segment to ScottishPower's corresponding financial and
market statistics. Ranges of equity values for the companies determined to be
comparable to ScottishPower's utilities segment were derived by:
--multiplying price to earnings per share multiples for Calendar 1999 by
the net income for ScottishPower's utilities segment for Calendar 1999,
based upon the Management Case forecasts;
--multiplying price to earnings per share multiples for Calendar 2000 by
the net income for ScottishPower's utilities segment for Calendar 2000,
based upon the Management Case forecasts;
--multiplying firm value to EBIT multiples for the LTM by the EBIT of
ScottishPower's utilities segment for the LTM to derive a range of firm
values;
--multiplying firm value to EBIT multiples for Calendar 1999 by the
projected EBIT for ScottishPower's utilities segment for Calendar 1999,
based upon the Management Case forecasts to derive a range of firm values;
--multiplying firm value to EBITDA multiples for the LTM by the EBITDA of
ScottishPower's utilities segment for the LTM to derive a range of firm
values;
--multiplying firm value to EBITDA multiples for Calendar 1999 by the
projected EBITDA for ScottishPower's utilities segment for Calendar 1999,
based upon the Management Case forecasts to derive a range of firm values.
Ranges of equity values for the companies determined to be comparable to
ScottishPower's telecommunications segment were determined by:
--multiplying firm value to Net PP&E multiples to derive a range of firm
values by the Net PP&E of ScottishPower's telecommunications segment as of
September 30, 1998.
This analysis, together with the analysis of ScottishPower's utilities
segment resulted in the following equity valuation range:
<TABLE>
<CAPTION>
Equity Valuation Per
ScottishPower Ordinary Share
---------------------------- ---
<S> <C> <C>
(Pounds)6.06 to (Pounds)6.71
</TABLE>
Private Market Valuation Analysis. To further estimate a range of values for
PacifiCorp's equity value per share, Salomon Smith Barney reviewed and analyzed
financial, operating and stock market information relating to selected merger
transactions involving utilities companies announced since 1997.
Salomon Smith Barney reviewed, among other things, P/E multiples for the
projected periods following the announcement of such precedent transactions and
firm value to EBITDA multiples for the latest 12-month period prior to the
announcement of such precedent transactions.The following table summarizes the
results of this analysis:
43
<PAGE>
Acquiror Company/Target Company
-------------------------------
AES Corporation/Cilcorp Inc.
CalEnergy Company, Inc./ MidAmerican Energy Holdings Company
American Electric Power Company, Inc./Central & South West Corporation
LG&E Energy Corp./ KU Energy Corporation
Enron Corp./Portland General Electric Company
<TABLE>
<CAPTION>
Estimates for the Selected Precedent Transactions Range
------------------------------------------------- --------------
<S> <C>
P/E Multiples (for the projected periods following the
announcement of such precedent transactions)........... 14.5x to 20.0x
Firm Value to EBITDA Multiples (for the latest 12-month
period prior to the announcement of such precedent
transactions).......................................... 7.5.x to 9.0x
</TABLE>
Salomon Smith Barney applied these multiples from the selected precedent
transactions to the corresponding PacifiCorp financial and market statistics.
Ranges of equity values for PacifiCorp were derived by:
--multiplying price to earnings per share multiples for the projected
periods following the announcement of such precedent transactions by
PacifiCorp's projected earnings per share for Calendar 1999, based upon
the Plan Case forecasts and Improvement Case forecasts;
--multiplying firm value to EBITDA multiples for the latest 12-month period
prior to the announcement of such precedent transactions by PacifiCorp's
projected EBITDA for Calendar 1999, based upon the Plan Case forecasts and
Improvement Case forecasts to derive a range of firm values.
The following table summarizes the equity valuation range per PacifiCorp
Common Stock derived using this analysis:
<TABLE>
<CAPTION>
Equity Valuation
Range Per
PacifiCorp
Case Common Stock
---- ----------------
<S> <C>
PacifiCorp Plan Case........ $16.75 to $22.75
PacifiCorp Improvement
Case....................... $17.75 to $24.00
</TABLE>
Sum-of-the-Parts Valuation Analysis. Salomon Smith Barney performed a sum-
of-the-parts valuation analysis of ScottishPower to estimate a range of values
for the ScottishPower ordinary shares. The following table summarizes the
results of this analysis:
<TABLE>
<CAPTION>
Multiple
----------
Business Unit Valuation Methodology Low High
------------- --------------------- ---- -----
<C> <S> <C> <C>
ScottishPower's Generation Wholesale Unit.. Firm Value/1999 EBITDA.. 8.0x 9.0x
ScottishPower's Power Systems Unit......... Firm Value/1999 EBITDA.. 9.0x 10.0x
Scottish Power's Energy Supply Unit........ Discounted Cash Flow.... -- --
ScottishPower's Water Unit................. Firm Value/1999 EBITDA.. 7.0x 7.5x
ScottishPower's Telecom Unit............... Discounted Cash Flow.... -- --
ScottishPower's Retail Unit................ Firm Value/1999 EBITDA.. 7.5x 8.5x
</TABLE>
The following table summarizes the equity valuation range per ScottishPower
ordinary share derived using this analysis:
Equity Valuation Per Share
of ScottishPower Ordinary
Share
--------------------------
(Pounds)6.23 to (Pounds)7.17
Valuation Comparison. Salomon Smith Barney compared the valuations for
ScottishPower and PacifiCorp derived under the preceding analyses based on the
PacifiCorp Plan Case forecasts and the ScottishPower Management Case forecasts
and calculated the range of exchange ratios implied by these comparisons.
44
<PAGE>
The following table summarizes the results of this analysis:
<TABLE>
<CAPTION>
Exchange
Valuation Comparisons Ratio
--------------------- --------
<S> <C>
PacifiCorp Discounted Cash Flow/
ScottishPower Discounted Cash Flow......................... 1.52 to 1.86
PacifiCorp Public Market
Valuation/ScottishPower Public Market
Valuation.................................................. 1.54 to 1.89
PacifiCorp Public Market
Valuation/ScottishPower Sum-of-the-Parts
Valuation.................................................. 1.47 to 1.80
PacifiCorp Public Market Valuation plus a
30% premium/ScottishPower Public Market
Valuation.................................................. 2.01 to 2.45
PacifiCorp Private Market
Valuation/ScottishPower Public Market
Valuation.................................................. 1.67 to 2.04
PacifiCorp Private Market Valuation/
ScottishPower Sum-of-the-Parts Valuation................... 1.59 to 1.95
</TABLE>
Contribution Analysis. Salomon Smith Barney analyzed the pro forma financial
contributions from each of PacifiCorp and ScottishPower to the combined company
assuming the merger is consummated in accordance with the merger agreement.
Salomon Smith Barney analyzed, among other things, the relative contribution to
the combined company's net income and EBITDA from each of PacifiCorp's and
ScottishPower's net income and EBITDA for the projected fiscal years ended
March 31, 2000 and March 31, 2001 before giving effect to any merger accounting
adjustments or synergies. The following table summarizes the results of this
analysis:
<TABLE>
<CAPTION>
PacifiCorp Scottish Power Implied
Contribution Contribution Exchange Ratio
------------ -------------- --------------
<S> <C> <C> <C>
EBITDA
Fiscal Year 2000 42.4% 57.6% 2.41x
Fiscal Year 2001 43.5% 56.5% 2.59x
Net Income
Fiscal Year 2000 29.9% 70.1% 1.72x
Fiscal Year 2001 34.2% 65.8% 2.09x
</TABLE>
Pro Forma Analysis of the Merger. Salomon Smith Barney analyzed the pro
forma impact of the merger on an EPS basis to PacifiCorp's and ScottishPower's
shareholders for the fiscal years ended March 31, 2001 through 2003. The
analysis was performed utilizing stand-alone earnings estimates for the years
2001 through 2003 from the PacifiCorp Plan Case forecasts and the ScottishPower
Management Case forecasts and taking into account estimated synergies assumed
to be derived from the merger. Based on this analysis on an EPS basis, the
merger would be accretive pre-goodwill by at least 2%, and would be dilutive
post-goodwill by not more than 4%, to ScottishPower's earnings for the fiscal
years 2001 through 2003.
The preparation of a fairness opinion is a complex process not susceptible
to partial analysis or summary descriptions. The summary above is not and does
not purport to be a complete description of the analyses underlying Salomon
Smith Barney's opinion or its presentation to the PacifiCorp board. Salomon
Smith Barney believes that its analyses and the summary above must be
considered as a whole and that selecting portions of
45
<PAGE>
its analyses and the factors considered by it, without considering all such
analyses and factors, could create an incomplete view of the processes
underlying the analyses in its opinion. In addition, no company used in the
public market valuation analysis summarized above is identical to PacifiCorp or
ScottishPower or any of their business segments and no transaction used in the
private market valuation analysis summarized above is identical to the merger.
Accordingly, an analysis of the data described above necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of PacifiCorp or any of its business segments and
other facts that could affect the public trading value or the acquisition value
of the companies to which it is being compared.
In performing its analyses, Salomon Smith Barney made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
PacifiCorp. The analyses which Salomon Smith Barney performed are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by the analyses. The
analyses were prepared solely as part of Salomon Smith Barney's analysis of the
fairness, from a financial point of view, of the merger consideration under the
original merger agreement to holders of PacifiCorp common stock. The analyses
do not purport to be appraisals or to reflect the prices at which a company
might actually be sold or the prices at which any securities may trade at the
present time or at any time in the future. In addition, the opinion of Salomon
Smith Barney and Salomon Smith Barney's presentation to the PacifiCorp Board of
Directors, were among the many factors taken into consideration by the
PacifiCorp Board of Directors, in making its determination to approve the
merger.
Under a letter agreement dated October 15, 1998, PacifiCorp agreed to pay to
Salomon Smith Barney a fee of $25 million, payable as follows: (a) $6.25
million upon execution of the merger agreement; (b) $6.25 million following
shareholder approval of the merger; and (c) the balance upon the consummation
of the merger and payable at the closing. PacifiCorp also agreed, subject to
certain limitations, to reimburse Salomon Smith Barney for all reasonable fees
and disbursements of Salomon Smith Barney's counsel and all of Salomon Smith
Barney's reasonable travel and other out-of-pocket expenses incurred in
connection with its engagement, and agreed to indemnify Salomon Smith Barney
and specific related persons against various liabilities, relating to or
arising out of its engagement.
Salomon Smith Barney is an internationally recognized investment banking
firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon Smith Barney regularly
engages in the valuation of companies and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and other purposes. In the ordinary course of its business, Salomon Smith
Barney may actively trade the securities of PacifiCorp and ScottishPower for
its own account and the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, Salomon
Smith Barney and its affiliates have rendered investment banking and financial
advisory services to PacifiCorp and ScottishPower for which Salomon Smith
Barney received customary compensation. Salomon Smith Barney and its affiliates
(including Citigroup Inc.) may have other business relationships with
PacifiCorp or ScottishPower. The PacifiCorp Board of Directors, retained
Salomon Smith Barney based on Salomon Smith Barney's expertise in the valuation
of companies as well as its substantial experience in transactions such as the
merger.
ScottishPower. ScottishPower retained Morgan Stanley to act as financial
advisor to the ScottishPower Board of Directors in connection with the merger
and related matters based upon Morgan Stanley's qualifications, expertise and
reputation. On December 6, 1998, Morgan Stanley rendered an oral opinion, which
was subsequently confirmed in writing, to the ScottishPower Board of Directors,
to the effect that, as of such date, and based upon and subject to the
considerations set forth in the written opinion, the exchange ratio of 0.58
ADSs, or 2.32 ordinary shares, to be paid for each outstanding share of
PacifiCorp common stock under the original merger agreement was fair from a
financial point of view to ScottishPower.
The full text of the Morgan Stanley opinion, dated as of December 6, 1998,
explains, among other things, the assumptions made, procedures followed,
matters considered and limitations on the review undertaken, is attached as
Annex D to this proxy statement/prospectus and is incorporated by reference.
46
<PAGE>
The Morgan Stanley opinion is directed to the ScottishPower Board of Directors,
and addresses the fairness of the exchange ratio pursuant to the original
merger agreement from a financial point of view to ScottishPower as of the date
of such opinion and does not address any other aspect of the merger, nor does
it constitute a recommendation to any ScottishPower shareholder as to how such
shareholder should vote at the ScottishPower Extraordinary General Meeting held
in connection with the merger. The summary of the Morgan Stanley opinion in
this proxy statement/prospectus should not be viewed as a substitute for the
full text of the Morgan Stanley opinion attached as Annex D to this proxy
statement prospectus.
In arriving at its opinion, Morgan Stanley, among other things:
. reviewed certain publicly available financial statements and other
information of ScottishPower and PacifiCorp, respectively;
. reviewed certain internal financial statements and other financial and
operating information concerning ScottishPower and PacifiCorp prepared
by the managements of the respective companies;
. reviewed certain financial projections for ScottishPower and PacifiCorp
prepared by the managements of the respective companies;
. reviewed and discussed with the senior management of ScottishPower the
strategic rationale for the merger and the perceived benefits of the
merger to the shareholders of ScottishPower;
. reviewed the estimates by senior management of ScottishPower of the
potential cost savings if the merger is consummated;
. discussed with senior executives of ScottishPower and PacifiCorp the
past and current operations and the financial conditions and prospects
for each of their respective companies;
. discussed with the management of ScottishPower the results of the due
diligence exercise in relation to PacifiCorp conducted by ScottishPower;
. reviewed certain adjustments to the financial statements and projections
of PacifiCorp proposed by the management of ScottishPower, in relation
to the reconciliation from U.S. to U.K. GAAP;
. compared the financial performance of ScottishPower and recent reported
prices for ScottishPower ordinary shares and PacifiCorp common stock
with that of certain other comparable publicly traded companies and
their securities;
. reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
. reviewed the likely impact of the merger on the future earnings per
share for ScottishPower shareholders based on the summary financial
projections for ScottishPower and PacifiCorp;
. participated in certain discussions and negotiations among
representatives of ScottishPower and PacifiCorp and their advisors;
. reviewed the draft merger agreement and certain related documents; and
. performed such other analyses and considered such other factors as
Morgan Stanley deemed appropriate.
In arriving at its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections and other estimates supplied to Morgan Stanley, Morgan
Stanley assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of ScottishPower and PacifiCorp. In reaching its opinion, Morgan Stanley relied
upon, without independent verification, the assessment by the management of
ScottishPower of the future competitive and regulatory environment, the
opportunities for cost synergies management have
47
<PAGE>
estimated to be achievable and the ScottishPower Board of Directors' commercial
assessment of the merger. Morgan Stanley did not make any independent valuation
or appraisal of assets or liabilities, nor was Morgan Stanley furnished with
any such appraisals. With respect to tax matters and tax structures associated
with the transaction, Morgan Stanley relied upon the evaluation of
ScottishPower and its legal and tax advisors. Morgan Stanley also assumed (1)
that the merger will be completed on the bases contemplated by the original
merger agreement, and (2) that the merger will be accounted for under the
acquisition accounting rules under U.K. GAAP. The Morgan Stanley opinion is
based on economic, market and other conditions as in effect on, and the
information made available to Morgan Stanley as of, the date of the Morgan
Stanley opinion.
The following is a summary of certain analyses performed by Morgan Stanley
in connection with its rendering its opinion to the ScottishPower board on
December 6, 1998. Some of these summaries of financial analysis include
information presented in tabular format. In order fully to understand the
financial analyses used by Morgan Stanley, the tables must be read together
with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
Historical Common Stock Performance. Morgan Stanley's analysis of PacifiCorp
common stock performance consisted of an historical analysis of closing prices
and trading volumes over the period from November 30, 1995 to December 3, 1998.
During that period, based on closing prices on the New York Stock Exchange,
PacifiCorp common stock achieved a high closing price of $27.31 on December 31,
1997, a low closing price of $18.75 on November 30, 1998 and a 3-year average
closing price of $21.51.
Morgan Stanley's analysis of ScottishPower ordinary share performance
consisted of an historical analysis of closing prices and trading volumes over
the period from November 30, 1995 to November 23, 1998. During that period,
based on closing prices on the London Stock Exchange, ScottishPower ordinary
shares achieved a high closing price of (Pounds)6.62 on November 23, 1998, a
low closing price of (Pounds)2.73 on July 3, 1996 and a 3-year average closing
price of (Pounds)4.25.
Comparative Stock Price Performance. Morgan Stanley performed an historical
analysis of closing prices from January 1, 1996 to December 3, 1998 of
ScottishPower ordinary shares, the S&P Utilities Index, the FTSE 100 Index and
the FTSE Utilities Index.
The following table presents the change in performance from the beginning to
the end of the period for these groups.
<TABLE>
<CAPTION>
Percentage Change from
January 1, 1996 to
December 3, 1998
----------------------
<S> <C>
ScottishPower ordinary shares....................... +100.1%
Standard & Poor's Electric Utilities Index.......... +22.9%
FTSE 100 Index...................................... +49.3%
FTSE Utilities Index................................ +75.7%
</TABLE>
In addition, Morgan Stanley performed a historical analysis of closing
prices from November 30, 1995 to December 3, 1998 of ScottishPower ordinary
shares, the PacifiCorp common stock and the S&P Utilities Index. The following
table presents the change in performance from the beginning to the end of the
period for these groups.
<TABLE>
<CAPTION>
Percentage Change from
November 30, 1995 to
December 3, 1998
----------------------
<S> <C>
ScottishPower ordinary shares....................... +103.4%
PacifiCorp common stock............................. -4.5%
Standard & Poor's Electric Utilities Index.......... +33.2%
</TABLE>
48
<PAGE>
Morgan Stanley noted that on December 3, 1998, PacifiCorp common stock
closed at $19.4375 per share and ScottishPower ordinary shares closed at
(Pounds)6.72 per share.
Trading Ratio Analysis. Morgan Stanley also reviewed the ratio of the
trading prices of PacifiCorp common stock to ScottishPower ordinary shares over
the intervals of three months, six months, one year, two years and three years
prior to the announcement of the merger. Such ratios were in the range of 2.00
to 3.34. Morgan Stanley noted that the exchange ratio of ScottishPower ordinary
shares to PacifiCorp common stock under the original merger agreement was 2.32.
Comparable Public Company Analysis. As part of its analysis, Morgan Stanley
compared certain financial information of PacifiCorp with that of a group of
publicly-traded electric utilities. Morgan Stanley reviewed financial
information including the market equity value to forecasted fiscal 1999 and
forecasted fiscal 2000 earnings multiples, the market equity value to book
equity value multiple, and the aggregate value to EBITDA multiple for the
PacifiCorp comparable companies and PacifiCorp. The financial information was
based on a compilation of earnings projections by securities research analysts,
the book equity value as of the period ended September 30, 1998 and the LTM
EBITDA for the period ending September 30, 1998. The tables below summarize
these analyses and the relevant statistics for PacifiCorp as of December 3,
1998 and the PacifiCorp comparable companies.
PacifiCorp
Comparable Companies
Ameren Corporation
American Electric Power Company,
Inc.
Cinergy Corp.
New Century Energies, Inc.
Northern States Power Company
UtiliCorp United Inc.
<TABLE>
<CAPTION>
Multiples for
-------------------------------
PacifiCorp
Comparable Companies PacifiCorp
-------------------- ----------
<S> <C> <C>
Market Equity Value to Forecasted 1999
Earnings............................... 13.5x - 14.5x 15.6x
Market Equity Value to Forecasted 2000
Earnings............................... 13.0x - 14.0x 15.1x
Market Equity Value to Book Equity
Value.................................. 1.8x - 2.1x 1.4x
Aggregate Value to LTM EBITDA........... 7.5x - 9.0x 11.9x
</TABLE>
Morgan Stanley applied these multiples from the PacifiCorp comparable
companies to PacifiCorp's corresponding financial and market statistics. Ranges
of equity values for PacifiCorp were derived by:
--multiplying market equity value to forecasted 1999 earnings multiples by
security research analysts' projections of PacifiCorp's earnings;
--multiplying market equity value to forecasted 2000 earnings multiples by
security research analysts' projections of PacifiCorp's earnings;
--multiplying market equity value to book multiples by PacifiCorp's book
equity value as of September 30, 1998; and
--multiplying aggregate value to LTM EBITDA multiples by PacifiCorp's LTM
EBITDA for the period ending September 30, 1998 to determine a range of
aggregate values. PacifiCorp's debt and preferred stock, net of cash and
cash equivalents, as of September 30, 1998 was then subtracted from the
resulting range of aggregate values.
Ranges of equity values per share were then calculated based on the number
of shares outstanding as of October 31, 1998. The medians of the ranges of
these equity values per share were calculated. This range was
49
<PAGE>
then multiplied by an indicative 30% control premium based on precedent
transactions to determine a valuation range for the analysis as a whole. Based
on this analysis, Morgan Stanley calculated per share equity values for
PacifiCorp ranging from $22.00 - $27.00.
Morgan Stanley also compared certain financial information of ScottishPower
with that of a group of publicly traded utility companies. Morgan Stanley
reviewed financial information including the market equity value to forecasted
fiscal 1999 and forecasted fiscal 2000 earnings multiples, the market equity
value to forecasted fiscal 1999 and forecasted fiscal 2000 cash earnings
multiples (with cash earnings defined as earnings plus depreciation and
amortization), the market equity value to book equity value multiple, the
aggregate value to forecasted fiscal 1999 and forecasted fiscal 2000 EBITDA
multiples and the aggregate value to forecasted fiscal 1999 and forecasted
fiscal 2000 EBIT multiples for the ScottishPower comparable companies and
ScottishPower. The financial information was based on a compilation of
earnings, cash earnings, EBITDA and EBIT projections by securities research
analysts, and the book equity value as of the period ended March 31, 1998. The
tables below summarize these analyses and the relevant statistics for
ScottishPower as of December 3, 1998 and the ScottishPower comparable
companies.
Scottish Power
Comparable Companies
-------------------------------------------
Electric Utilities Water Companies
National Grid Group plc Anglian Water plc
Scottish and Southern Energy plc
Severn Trent plc
Viridian Group plc Pennon Group plc
Generators Thames Water plc
British Energy PLC Yorkshire Water PLC
National Power plc Multi-Utilities
PowerGen plc Hyder plc
United Utilities plc
<TABLE>
<CAPTION>
Multiples for
----------------------------------
ScottishPower
Comparable Companies ScottishPower
-------------------- -------------
<S> <C> <C>
Market Equity Value to Forecasted 1999
Earnings............................. 13.5x - 14.0x 16.4x
Market Equity Value to Forecasted 2000
Earnings............................. 13.0x - 13.5x 15.7x
Market Equity Value to Forecasted 1999
Cash Earnings........................ 9.0x - 9.5x 12.1x
Market Equity Value to Forecasted 2000
Cash Earnings........................ 8.5x - 9.0x 11.5x
Market Equity Value to Book Equity
Value................................ 3.0x - 3.5x 4.7x
Aggregate Value to Forecasted 1999
EBITDA............................... 8.0x - 8.5x 10.1x
Aggregate Value to Forecasted 2000
EBITDA............................... 7.5x - 8.0x 9.4x
Aggregate Value to Forecasted 1999
EBIT................................. 10.5x - 11.0x 12.2x
Aggregate Value to Forecasted 2000
EBIT................................. 10.0x - 10.5x 11.4x
</TABLE>
Morgan Stanley applied these multiples from the ScottishPower comparable
companies to ScottishPower's corresponding financial and market statistics.
Ranges of equity values for ScottishPower were derived by:
--multiplying market equity value to forecasted 1999 earnings multiples by
security research analysts' projections of ScottishPower's earnings;
--multiplying market equity value to forecasted 2000 earnings multiples by
security research analysts' projections of ScottishPower's earnings;
50
<PAGE>
--multiplying market equity value to forecasted 1999 cash earnings
multiples by security research analysts' projections of ScottishPower's
cash earnings;
--multiplying market equity value to forecasted 2000 cash earnings
multiples by security research analysts' projections of ScottishPower's
cash earnings; and
--multiplying market equity value to book equity value multiples by the
ScottishPower's book equity value as of March 31, 1998;
Ranges of equity values for ScottishPower were derived from ranges of
aggregate values by:
--multiplying the aggregate value to forecasted 1999 EBITDA multiples by
security research analysts' projections of ScottishPower's EBITDA to
determine a range of aggregate values;
--multiplying the aggregate value to forecasted 2000 EBITDA multiples by
security research analysts' projections of ScottishPower's EBITDA to
determine a range of aggregate values;
--multiplying the aggregate value to forecasted 1999 EBIT multiples by
security research analysts' projections of ScottishPower's EBIT to
determine a range of aggregate values; and
--multiplying the aggregate value to forecasted 2000 EBIT multiples by
security research analysts' projections of ScottishPower's EBIT to
determine a range of aggregate values.
For the ranges of aggregate values, ScottishPower's debt, net of cash and
cash equivalents, as of March 31, 1998, was then subtracted to determine equity
value ranges.
Ranges of equity values per share were then calculated based on the number
of ScottishPower shares outstanding as of March 31, 1998. The medians of the
ranges of equity values per share were calculated to serve as the valuation
range for the analysis as a whole. Based on this analysis, Morgan Stanley
calculated per share equity values for ScottishPower ranging from
(Pounds)5.50 - (Pounds)5.75.
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis of PacifiCorp and ScottishPower based on certain financial
projections provided by the respective managements for each company for the
period 1999 through 2007 for PacifiCorp and 1999 through 2005 for
ScottishPower. The discounted cash flow analysis for PacifiCorp was based on
the projections provided by the management of PacifiCorp that were revised by
the management of ScottishPower (the "conservative case"). The conservative
case forecasts were subsequently revised by the management of ScottishPower
(the "optimistic case") and separate analyses were prepared by Morgan Stanley
upon each of the two sets of financial forecasts.
Morgan Stanley calculated terminal values by applying a range of perpetual
growth rates to the unlevered free cash flow in fiscal 2007 for PacifiCorp and
2005 for ScottishPower. Morgan Stanley also calculated a terminal year value
for ScottishPower by applying a range of EBIT multiples to terminal year EBIT.
The cash-flow streams and terminal values were then discounted to the present
using an estimated range of the weighted average cost for PacifiCorp's U.S.
operations of 6.5% to 7.5% and Australian operations of 7.5% to 8.5% and for
ScottishPower of 7.8% to 8.8%. The results of this analysis are summarized in
the table below.
<TABLE>
<CAPTION>
Case Equity Value Range Per Share
---- -----------------------------
<S> <C>
PacifiCorp--Conservative Case............... $20.00 - $27.00
PacifiCorp--Optimistic Case................. $28.00 - $37.50
ScottishPower............................... (Pounds) 5.73 - (Pounds) 6.90
</TABLE>
Analysis of Selected Precedent Transactions. Using publicly available
information, Morgan Stanley considered seven announced or completed
transactions in the electric utility industry, which were deemed to be
comparable to the merger.
51
<PAGE>
These electric utility transactions are listed below.
. CalEnergy Company, Inc.'s acquisition of MidAmerican Energy Company
. Consolidated Edison, Inc.'s acquisition of Orange and Rockland
Utilities, Inc.
. Western Resources, Inc.' acquisition of Kansas City Power & Light
Company
. American Electric Power Company, Inc.'s acquisition of Central and South
West Corporation
. LG&E Energy Corp.'s acquisition of KU Energy Corporation
. Enron Corp.'s acquisition of Portland General Electric Company
. Union Electric Company's acquisition of CIPSCO Incorporated
Morgan Stanley compared certain financial and market statistics of the
electric utility transactions to the merger. The ranges of these results are
summarized below.
<TABLE>
<CAPTION>
Premium to
Market Equity
Market Equity Market Equity Value One Aggregate
Value to Value to Book Month Prior to Value to LTM
LTM Earnings Equity Value Announcement EBITDA
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Precedent Transactions.. 22.0x - 26.0x 2.0x - 2.2x 30% - 40% 7.5x - 9.5x
</TABLE>
Morgan Stanley applied these multiples and percentages from the selected
precedent transactions to the corresponding PacifiCorp financial and market
statistics. Ranges of equity values for PacifiCorp were derived by:
--multiplying market equity value to LTM earnings multiples by
PacificCorp's LTM earnings for the period ending September 30, 1998;
--multiplying market equity value to LTM earnings multiples by
PacificCorp's normalized LTM earnings for the period ending September 30,
1998;
--multiplying market equity value to book multiples by PacifiCorp's book
equity value as of September 30, 1998;
--multiplying premium to market equity value one month prior to
announcement by PacifiCorp's market equity value as of December 3, 1998;
and
--multiplying aggregate value to LTM EBITDA multiples by PacifiCorp's LTM
EBITDA for the period ending September 30, 1998 to determine a range of
aggregate values.
Based on this analysis, Morgan Stanley calculated per share equity values for
PacifiCorp ranging from $25.25 to $27.25.
Contribution Analysis. Morgan Stanley reviewed the pro forma effect of the
merger and computed the contribution attributable to PacifiCorp and
ScottishPower to the combined company's historical market performance and pro
forma projected financial results for 2000 and 2001 based on the conservative
case. Such financial results included EBITDA, EBIT, and net income and are
shown in the table below as of December 3, 1998.
<TABLE>
<CAPTION>
PacifiCorp PacifiCorp
2000 Projected 2001 Projected
Contribution Contribution
-------------- --------------
<S> <C> <C>
EBIT......................................... 40% 41%
EBITDA....................................... 44% 44%
Net Income................................... 30% 32%
</TABLE>
Morgan Stanley calculated that the exchange ratio would result in pro forma
ownership of the combined company for holders of PacifiCorp common stock equal
to approximately 36%.
52
<PAGE>
Pro Forma Analysis of the Merger. Morgan Stanley reviewed the pro forma
impact of the merger on ScottishPower's earnings per ordinary share for the
fiscal years ended 2001 through 2003. The analysis was performed assuming
completion of the merger at the beginning of this period, utilizing stand-alone
earnings estimated for the fiscal years ended 2001 through 2003 for PacifiCorp
and ScottishPower based on certain financial projections prepared by the
respective managements of each company. Based on this analysis on an EPS basis,
the merger would be accretive pre-goodwill by at least 5.6%, and would be
dilutive post-goodwill by not more than 9.1%, to ScottishPower's earnings for
the fiscal years 2001 through 2003.
Business Line Analysis. As part of its analysis, Morgan Stanley compared
certain financial and operational information of PacifiCorp by business line to
publicly available information relating to certain precedent transactions.
These business lines included (1) transmission, distribution and supply, (2)
generation, (3) coal mining, (4) Australian operations, (5) energy trading and
marketing and (6) other non-regulated businesses. The table below summarizes
these analyses.
<TABLE>
<CAPTION>
Business Statistic Range
-------- --------- -----
<S> <C> <C>
Transmission
Distribution and
Supply................. Market Equity Value to Book Equity Value 1.8x - 2.0x
Market Equity Value to 1998 Estimated Earnings 16.0x - 18.0x
Generation.............. Aggregate Value to Asset Value 1.4x - 1.8x
Aggregate Value to Capacity $400/kW - $600/kW
Aggregate Value to Output $0.08/kWh - $0.10/kWh
Coal Mining............. Aggregate Value to Output $20/ton - $30/ton
Australian Operations... Aggregate Value to EBIT 10.0x - 11.0x
</TABLE>
For the energy trading and marketing and other non-regulated businesses,
book asset values were used for the valuation. Based on such analysis, Morgan
Stanley calculated per share values for PacifiCorp ranging from $28.00 to
$35.00.
No company used in the comparable company analysis, and no transaction
utilized as a comparison in the analysis of selected precedent transactions or
comparison by business line is identical to ScottishPower, PacifiCorp or the
merger. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of PacifiCorp and ScottishPower and
other factors that would affect the acquisition value of the companies to which
it is being compared. In performing its analyses, Morgan Stanley made judgments
and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of PacifiCorp and ScottishPower, such as the impact of
competition on PacifiCorp and ScottishPower and the industry generally,
industry growth and the absence of any adverse material change in the financial
conditions and prospects of PacifiCorp and ScottishPower or the industry or in
the financial markets in general. Mathematical analysis (such as determining
the mean or median) is not, in itself, a meaningful method of using precedent
transactions data.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portion of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting
from any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of PacifiCorp or ScottishPower.
The analyses performed by Morgan Stanley are not necessarily indicative of
actual values, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as a part of Morgan
Stanley's analysis of the fairness of the exchange ratio under the original
merger agreement from a financial point of view to ScottishPower and were
provided to the ScottishPower Board of Directors in
53
<PAGE>
connection with the delivery of the Morgan Stanley opinion. The analyses do not
purport to be appraisals or to reflect the prices at which PacifiCorp or
ScottishPower might actually be sold. In addition, as described above, the
Morgan Stanley opinion was one of many factors taken into consideration by the
ScottishPower Board of Directors in making its determination to approve the
merger. The exchange ratio was determined through negotiations between the
Boards of Directors of ScottishPower and PacifiCorp.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate, estate and other purposes. In the
ordinary course of its trading, brokerage and financing activities, Morgan
Stanley and its affiliates may, at any time, have a long or short position in,
and buy and sell the debt or equity securities and senior loans of PacifiCorp
or ScottishPower for its account or the account of its customers. Morgan
Stanley and its affiliates have, in the past, provided financial advisory and
financing services to ScottishPower and to PacifiCorp and/or their respective
affiliates and have received fees for the rendering of such services.
Pursuant to a letter dated October 12, 1998, ScottishPower has agreed to pay
Morgan Stanley (1) a customary advisory fee, which is payable if the merger is
not consummated, (2) an announcement fee of $6.5 million, which is payable upon
the announcement of the merger, (3) a shareholder approval fee of $6.5 million,
which is payable upon the approval of the merger by shareholders, and (4) a
transaction fee of $26.3 million (against which any aforementioned fees paid
will be credited), which is payable upon consummation of the merger. In
addition, ScottishPower has agreed to reimburse Morgan Stanley for its expenses
related to the engagement and to indemnify Morgan Stanley and its affiliates,
their respective directors, officers, agents and employees and each person, if
any, controlling Morgan Stanley or any of its affiliates against certain
liabilities, including liabilities under federal securities laws, and expenses,
related to or arising out of Morgan Stanley's engagement and the transactions
in connection therewith.
Interests of PacifiCorp's Officers and Directors
General. Some members of PacifiCorp's senior management and the PacifiCorp
Board of Directors may be deemed to have interests in the merger that are in
addition to and/or potentially different from the interests of shareholders of
PacifiCorp generally. The PacifiCorp Board of Directors was aware of these
interests and considered them, among other matters, in approving the merger
agreement and the transaction contemplated by the merger agreement. In
considering the recommendation of the PacifiCorp Board of Directors in respect
of the merger agreement and the transactions contemplated by the merger
agreement, the PacifiCorp shareholders should be aware that these interests may
present actual or potential conflicts of interest with respect to the merger.
ScottishPower Board Appointments. ScottishPower has agreed, except as
limited by the exercise of fiduciary duties and to the extent permitted by
applicable law, to cause Keith McKennon, Chairman, Chief Executive Officer and
President of PacifiCorp, to be appointed as Deputy Chairman and a director of
ScottishPower at the time of the merger. In addition to Mr. McKennon, Nolan E.
Karras and Robert G. Miller, two non-executive members of the PacifiCorp Board
of Directors, will become members of the ScottishPower Board of Directors at
the time of the merger. The decision as to which members of the PacifiCorp
board, other than Mr. McKennon, would join the ScottishPower Board of Directors
was made after the original merger agreement was signed.
PacifiCorp Advisory Board Appointments; Appointments of Richard
O'Brien. ScottishPower has agreed that, promptly following the merger, specific
non-executive members of the PacifiCorp Board of Directors, together with Mr.
O'Brien, will be elected and appointed to a PacifiCorp Advisory Board, the
function of which shall be to advise the PacifiCorp Board of Directors
regarding general business strategy, opportunities and activities in
PacifiCorp's market area and customer relationships. The PacifiCorp Advisory
Board will meet at least semi-annually and the members of the PacifiCorp
Advisory Board shall be appointed for two year
54
<PAGE>
terms. The decision as to the membership of the PacifiCorp Advisory Board,
other than Mr. Robinson, Mr. O'Brien and Alan Richardson, ScottishPower's
Executive Director with responsibility for managing all U.S.-west coast aspects
of the merger process, will not be made until after the completion of the
merger and Mr. Robinson and Mr. McKennon will jointly designate the other
members of the advisory board. In addition, Mr. O'Brien will be appointed a
member of the PacifiCorp Board of Directors and President of PacifiCorp, in
addition to his current position as Chief Operating Officer of PacifiCorp.
Director and Officer Indemnification and Insurance. ScottishPower has agreed
that, except to the extent changes may be required by law, until the sixth
anniversary of the merger, it will not take any action to amend, modify or
repeal the existing provisions for indemnification of officers and directors of
PacifiCorp contained in the articles of incorporation and bylaws, or other
comparable charter documents, of PacifiCorp and its subsidiaries in a manner as
would adversely affect the rights of any individual who served as an officer or
director of PacifiCorp or its subsidiaries before the merger. Furthermore,
except for some specific circumstances provided for under the merger agreement,
ScottishPower has agreed that, until the sixth anniversary of the merger, it
will cause to be maintained in effect the policies of directors' and officers'
liability insurance maintained by PacifiCorp and its subsidiaries as of the
date of the merger agreement with respect to claims arising from facts or
events that occurred on or before the merger. See "--Terms of the Merger
Agreement--Indemnification; Insurance."
Employment Agreement with Keith McKennon. Upon completion of the merger,
Mr. McKennon will resign his positions as Chairman, Chief Executive Officer and
President of PacifiCorp and, as discussed above, is expected to be appointed as
Deputy Chairman and a director of ScottishPower. It is anticipated that Mr.
McKennon's employment with PacifiCorp will terminate at the later of the date
the merger is completed or September 2, 1999. Currently, Mr. McKennon is a
party to an employment agreement with PacifiCorp that provides for an annual
base salary of not less than $780,000 and a target annual bonus opportunity
equal to a percentage (20% in 1998, 40% in 1999, 50% in 2000 and 60% in 2001)
of the annual base salary. Mr. McKennon has waived participation in
PacifiCorp's Executive Severance Plan and Supplemental Executive Retirement
Plan described below; consequently, he is not eligible for severance pay; nor
will he qualify for any PacifiCorp retirement benefits upon termination of his
employment.
The Executive Severance Plan. The PacifiCorp Executive Severance Plan
("Executive Plan") provides severance benefits to terminated executives,
including enhanced change-in-control benefits in the event of certain
terminations during the 24-month period following a qualifying transaction,
including the consummation of the merger. Twenty-six PacifiCorp executives are
entitled to severance pay under the Executive Plan. Executives designated by
the PacifiCorp Board of Directors' personnel committee are eligible for change-
in-control benefits resulting from either of the following within the 24-month
period after a change in control:
. a PacifiCorp-initiated termination without "cause"; or
. a resignation within two months after a "material alteration of
position".
For this purpose, "cause" means the executive's gross misconduct or gross
negligence or conduct which indicates a reckless disregard for the consequences
and has a material adverse effect on PacifiCorp or its affiliates and "material
alteration in position" means the occurrence of any of the following:
. a change in reporting relationship to a lower level;
. a material reduction in the scope of duties and responsibilities;
. a material reduction in authority;
. a "material reduction in compensation"; or
. relocation of executive's work location to an office more than 100
miles from the executive's office or more than 60 miles from the
executive's home.
55
<PAGE>
A "material reduction in compensation" occurs when an executive's annualized
base salary is reduced by any amount or the annualized base salary and target
bonus opportunity combined is reduced by at least 15 percent of the combined
total opportunity before the change in compensation. In addition, Mr. O'Brien
also has a "walkaway" right under which he would be eligible for benefits if he
resigns for any reason effective no earlier than 12 months and no later than 14
months after the merger. If qualified, an executive would receive severance pay
in an amount equal to either two, two and one-half or three times the "annual
cash compensation" of the executive, depending on the level set by the
PacifiCorp Board of Directors' personnel committee. "Annual cash compensation"
is defined as annualized base salary, target annual incentive opportunity and
annualized auto allowance in effect on a material alteration or termination,
whichever is greater. If the payment would result in imposition of an excise
tax under Section 4999 of the Internal Revenue Code, PacifiCorp is required to
make an additional payment to compensate the executive for the effect of this
excise tax. The executive would also receive continuation of subsidized health
insurance from six to 24 months depending on length of service, and a minimum
of 12 months' executive-level outplacement services.
Effect of Change in Control on Compensation and Benefits. The merger will
constitute a "change-in-control" of PacifiCorp for the following PacifiCorp
compensation and benefit plans in which the executive officers of PacifiCorp
participate:
. after a change-in-control of PacifiCorp, the PacifiCorp Compensation
Reduction Plan, under which participating executives of PacifiCorp may
defer certain compensation, may not be terminated by PacifiCorp without
approval by participants with a majority of the aggregate balance of the
accounts thereunder;
. under the terms of the PacifiCorp Long-Term Incentive Plan and
PacifiCorp Stock Incentive Plan, and the agreements related to the
plans, any unvested restricted PacifiCorp common stock and unvested
options to purchase PacifiCorp common stock will vest at the time of the
merger, except for certain stock options and restricted stock awards
granted in February 1999, which do not automatically vest upon a change
in control, but could vest within the 24 months following a change in
control if the recipient's employment is terminated under certain
conditions;
. PacifiCorp's annual incentive plans provide for payment of no less than
target bonus awards for the year in which a transaction such as the
merger is consummated; and
. the PacifiCorp Supplemental Executive Retirement Plan ("SERP") provides
executives "involuntarily terminated" during the 24 months following the
merger, or who resign for any reason effective no earlier than 12 months
and no later than 14 months after the merger, with enhanced supplemental
retirement benefits.
For purposes of the SERP, a termination of employment is "involuntary" if
the participant is discharged or resigns under specific circumstances following
a change-in-control. A discharge or resignation is treated as an involuntary
termination when any of the following occur:
. the executive's annualized base salary or target bonus opportunity is
decreased;
. the executive is reassigned to a position in an office located more than
100 miles from the participant's then-current office or 60 miles from
the executive's residence, whichever is greater;
. the executive's reporting level in PacifiCorp is changed and is lower
after the change than it was before;
. there is a material reduction in the scope of the participant's duties
or responsibilities; or
. there is a material reduction in the participant's authority.
Mr. Verl R. Topham, formerly Senior Vice President and General Counsel,
retired as an employee of PacifiCorp (but not as a director) on May 1, 1999.
PacifiCorp has agreed to provide him with the equivalent of change of control
benefits as set forth above upon the date of the merger. The change of control
enhancements
56
<PAGE>
to the retirement benefits would apply to future retirement benefits beginning
the month following the date of the merger. The other change of control
benefits would be offset against any severance benefits he has received before
the date of the merger. It is currently anticipated that three other PacifiCorp
executives will be offered similar arrangements, although PacifiCorp may
determine that additional arrangements for a limited number of other executives
will be appropriate. The decision to make such payments was not made until
after the merger agreement was executed.
Payments to Directors. Non-employee directors of PacifiCorp have been
granted restricted stock under a non-employee directors' stock compensation
plan. Stock granted under this plan vests over the five-year plan following the
grant or shorter period to retirement, and unvested shares are forfeited if the
recipient ceases to be a director. PacifiCorp has agreed to pay each non-
employee director $50,000 promptly following the date the director's unvested
shares are forfeited following completion of the merger. See "Proposal For
Election of Directors--Director Compensation and Certain Transactions."
Retention and Bonus Incentives. PacifiCorp has provided retention incentives
to retain employees in key positions through completion of the merger. In
addition, the PacifiCorp Board of Directors has established a bonus pool to
provide incentives and rewards for employees expected to make and making
extraordinary efforts to accomplish the goals and objectives of PacifiCorp,
which may or may not be related to or conditioned upon the successful
consummation of the merger. Therefore, some executive officers of PacifiCorp
may receive bonuses or retention incentive awards. These bonuses or retention
awards shall be made at the discretion of Mr. McKennon, as Chief Executive
Officer of PacifiCorp; provided, however, that any bonus to the Chief Executive
Officer shall be in the discretion of the PacifiCorp Board of Directors.
Ongoing Employee Compensation and Benefits. The merger agreement provides
that ScottishPower will use its reasonable best efforts to cause the
compensation, incentive and employee benefit plans and arrangements in effect
on the date of the merger agreement to remain in effect for two years after the
merger or to maintain until this date plans or arrangements no less favorable
in the aggregate to the employees covered by the plans and arrangements.
Therefore, current executive officers of PacifiCorp will continue to receive
compensation, incentives and employee benefits that are at least as favorable
as those currently provided.
Conversion of PacifiCorp Common Stock in the Merger
If the shareholders of ScottishPower approve the merger at the ScottishPower
Extraordinary General Meeting, the merger agreement is approved by the
requisite vote of PacifiCorp shareholders at the PacifiCorp annual meeting and
the other conditions to the merger are satisfied or, where permissible, waived,
the merger will be consummated and become effective at the time at which
Articles of Merger meeting the requirements of Oregon law are delivered to the
Secretary of State for the State of Oregon for filing. At the time of the
merger, an indirect, wholly owned subsidiary of ScottishPower will be merged
with and into PacifiCorp, which will survive the merger as an indirect, wholly
owned subsidiary of ScottishPower.
At the time of the merger, all outstanding shares of PacifiCorp common stock
will cease to be outstanding, and subject to the terms, conditions and
procedures in the merger agreement, each share of PacifiCorp common stock,
other than shares owned directly or indirectly by ScottishPower or PacifiCorp,
will be converted into the right to receive, at the election of the holder of
PacifiCorp common stock, either:
. 0.58 fully paid and nonassessable ADSs or
. if a properly completed election form was submitted to the exchange
agent on a timely basis, 2.32 fully paid and nonassessable ordinary
shares, all in accordance with the election procedures described below.
Fractional Shares
No fractional ADSs or ordinary shares will be issued in the merger, and any
fractional ADS or ordinary share interests will not entitle the owner thereof
to vote or to any rights of a holder of ADSs or ordinary shares.
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Instead of any fractional ADS or ordinary share, each PacifiCorp shareholder
who would otherwise have been entitled to a fraction of an ADS or ordinary
share will receive from the exchange agent, as applicable:
. a cash payment instead of any fractional ADS determined by multiplying
(1) the sales price of an ADS on the last trading day immediately
preceding the merger by (2) the fractional ADS interest to which the
holder would otherwise be entitled; and/or
. a cash payment instead of such fractional ordinary share determined by
multiplying (1) the sales price of an ordinary share on the last trading
day immediately preceding the merger by (2) the fractional ordinary
share interest to which such holder would otherwise be entitled.
The term "sales price" shall mean, on any trading day, with respect to ADSs,
the closing sales price of ADSs reported on the New York Stock Exchange
Composite Tape on this day and, with respect to ordinary shares, the middle
market quotation of a ordinary share reported on the Daily Official List of the
London Stock Exchange on this date. The term "trading day" shall mean any day
on which securities are traded, with respect to ADSs, on the New York Stock
Exchange, and with respect to ordinary shares, on the London Stock Exchange.
Election; Election Procedures
Promptly after consummation of the merger, each record holder of shares of
PacifiCorp common stock will be sent an election form which will permit the
shareholder to elect to receive the ordinary shares in exchange for all or any
portion of the holder's shares of PacifiCorp common stock. A single ordinary
share election may be made for all shares of PacifiCorp common stock held by
any holder of PacifiCorp common stock or, alternatively, an ordinary share
election may be made for a portion of a holder's shares. If a shareholder
either (1) does not submit a properly completed election form in a timely
fashion or (2) revokes his or her election form before the deadline for the
submission of the election form, the shares of PacifiCorp common stock held by
the shareholder will be converted in the merger into the right to receive the
ADS consideration.
All ordinary share elections will be required to be made on an election
form. To make an effective election with respect to shares of PacifiCorp common
stock, the holder must, in accordance with the election form, complete properly
and return the election form to the exchange agent before the election
deadline. The "election deadline" will be the date announced in a news release
to be issued by ScottishPower as the last date on which an ordinary share
election may be made. The election deadline will be a business day no earlier
than five days before the merger and will be at least five and not more than
twenty business days following the date of the news release. ScottishPower has
the right, under some specific circumstances described in the merger agreement,
to change the election deadline to a later date.
ScottishPower has the right to make additional rules not inconsistent with
the merger agreement governing the validity of the election forms and the
issuance and delivery of certificates for ADSs or ordinary shares into which
shares of PacifiCorp common stock are converted in the merger. All rules and
determinations will be final and binding on all holders of PacifiCorp common
stock.
Exchange of Certificates in the Merger
Promptly after the merger, the exchange agent will mail, together with the
election form, to each holder of record of PacifiCorp common stock whose shares
are converted into the right to receive ADSs and/or ordinary shares,
appropriate transmittal materials and instructions advising the holder of the
terms of the exchange effected by the merger and the procedure to be used for
the surrender of the certificates representing PacifiCorp common stock in
exchange for the ADRs and/or ordinary shares that the holder has the right to
receive under the merger agreement. Holders of PacifiCorp common stock are
requested not to surrender their certificates for exchange until after the
merger when the transmittal form and instructions are received. Certificates
representing ADRs and/or ordinary shares shall be delivered to the holder as
promptly as practicable after proper delivery of the applicable PacifiCorp
certificates and appropriate transmittal materials to the exchange agent.
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At the time of the merger and after the merger and until surrendered as
provided above, PacifiCorp certificates will be deemed, except as required by
applicable law, to represent, for all corporate purposes of ScottishPower,
ownership of the whole number of ADSs and/or ordinary shares into which the
number of shares of PacifiCorp common stock shown thereon have been converted
in the merger. No dividends or other distributions declared, made or paid after
the merger with respect to ordinary shares with a record date on or after the
merger shall be paid to the holder of any unsurrendered PacifiCorp certificate
with respect to the ADSs and/or ordinary shares represented thereby and no cash
payment instead of fractional ADSs and/or ordinary shares shall be paid to any
holder until the holder of record of the PacifiCorp certificate shall surrender
such PacifiCorp certificate as provided above. Except as applicable law may
require otherwise, following surrender of any PacifiCorp certificate, there
will be paid to the record holder of the certificates representing ADRs and/or
ordinary shares issued in exchange for the PacifiCorp certificate, without
interest:
. at the time of the surrender, the amount of dividends or other
distributions, if any, with a record date at the time of the merger or
after the merger which became payable, but which were not paid by reason
of the immediately preceding sentence, with respect to the ADRs and/or
ordinary shares; and
. at the appropriate payment date, the amount of dividends or other
distributions with a record date at the time of the merger or after
merger but before surrender and a payment date after surrender payable
with respect to the ADRs and/or ordinary shares.
Terms of the Merger Agreement
Representations and Warranties. In the merger agreement, each of
ScottishPower and PacifiCorp have made representations and warranties, subject
to exceptions which were disclosed by the appropriate party, concerning their
businesses and assets. The representations and warranties must be true and
correct in all material respects, taken as a whole, at the time of the merger
or else the other party will not be required to complete the merger. Such
representations and warranties include, among other things:
. that the party is duly organized and validly existing, that it has
corporate power and authority to conduct its business and that its
issued and outstanding shares are fully paid and nonassessable;
. that the party has the power and authority to enter into the merger
agreement and, subject to obtaining any necessary approvals, to perform
the transactions contemplated under the merger agreement and, if
applicable, the scheme of arrangement;
. that, except as otherwise disclosed, there are no suits, or actions
filed or threatened against the party, the party is not in violation of
laws, including environmental laws and laws regulating employee benefit
plans and tax laws, and there are no undisclosed liabilities; and
. that the party has disclosed all necessary consents from governmental
and regulatory authorities and third parties required to perform the
transactions contemplated under the merger agreement and, if applicable,
the scheme of arrangement.
In addition, PacifiCorp makes representations relating to its regulation as
a utility. PacifiCorp also represents and warrants that the provisions of
Oregon laws regulating acquisitions of control shares are not applicable to the
merger agreement or any other transactions contemplated by the merger
agreement.
Conduct of Business Prior to the Merger
ScottishPower and PacifiCorp have each agreed that before the merger, unless
consented to by the other party or except as expressly contemplated or
permitted by the merger agreement or, if applicable, the scheme of arrangement,
it will:
(1) conduct its business only in the ordinary course consistent with its
past business practice;
(2) use all commercially reasonable efforts to:
. preserve intact in all material respects its present business
organization and reputation;
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. maintain in effect all existing material permits;
. keep its key personnel;
. maintain its assets and properties in good working order;
. maintain insurance;
. preserve its relationship with customers and suppliers; and
. comply in all material respects with all applicable laws and orders;
(3) confer with the other party on a regular and frequent basis with
respect to its business and other matters relevant to the merger and will
advise the other party of any material change or event;
(4) notify the other party of, and use all commercially reasonable
efforts to cure, any circumstances that will cause any of its covenants or
agreements under the merger agreement to be breached or will render untrue
in any material respect any of its representations or warranties contained
in the merger agreement;
(5) notify the other party in writing of, and use all commercially
reasonable efforts to cure, before the consummation of the merger, any
violation or breach of any representation, warranty, covenant or agreement;
and
(6) take or cause to be taken all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each
condition to its obligations contained in the merger agreement and to
consummate and make effective the transactions contemplated by the merger
agreement and not take or fail to take any action that would reasonably be
expected to result in the nonfulfillment of any such condition.
In addition, PacifiCorp has agreed that, unless otherwise consented to by
ScottishPower or except as expressly contemplated or permitted by the merger
agreement, it will not and will not permit any of its subsidiaries to:
. amend its charter documents;
. pay dividends or make distributions, except for the payment of regular
cash dividends;
. split, combine or reclassify any of its capital stock;
.adopt a plan of reorganization;
.repurchase any capital stock, other than certain series of PacifiCorp
preferred stock;
. issue, deliver or sell any share of its capital stock or any option to
purchase its capital stock, other than:
. PacifiCorp common stock pursuant to outstanding options;
.PacifiCorp common stock and options pursuant to PacifiCorp's stock
incentive plan; and
.PacifiCorp preferred stock with a stated value of up to $250 million;
.make acquisitions in excess of $25 million in any one transaction;
. dispose of or encumber any asset other than in the ordinary course of
business consistent with past practice or having an aggregate net book
value in excess of $25 million in any one transaction;
.permit any changes in their accounting methods;
. incur or guarantee any indebtedness, other than short-term indebtedness
incurred in the ordinary course of business consistent with past
practice in an aggregate amount not exceeding $500 million, long-term
indebtedness not aggregating more than $200 million and indebtedness
incurred in refinancing outstanding indebtedness or indebtedness
incurred in compliance with the merger agreement;
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. enter into, adopt, amend or terminate any employee benefit plan;
. increase the compensation of any director or employee, except for normal
increases in the ordinary course of business and consistent with past
practice that do not result in a material increase in benefit or
compensation expense, or grant to any employee any additional rights;
. enter into any contract or amend or modify any existing contract or
engage in any new transaction with any affiliate or any of its
subsidiaries outside the ordinary course of business consistent with
past practice or not on an arm's-length basis;
. make any capital expenditures, other than capital expenditures incurred
as required by applicable law, in connection with the repair or
replacement of facilities destroyed or damaged due to casualty or
accident and in an amount within 110% of the aggregate amount provided
for such purposes in PacifiCorp's budget;
. engage in any activities which would change its status, or that of any
of its subsidiaries, under the Public Utility Holding Company Act of
1935;
. agree or consent to any material agreements or modifications to existing
material agreements with any governmental or regulatory authority;
. except as required pursuant to the tariffs on file with the FERC,
commence construction of any additional generating, transmission or
delivery capacity in excess of 500 megawatts;
. except as required pursuant to the tariffs on file with FERC and as set
forth in PacifiCorp's budget, obligate itself to purchase any additional
generating, transmission or delivery plants or facilities, in an amount
in excess of $25 million in one transaction;
. take any action that would cause the merger to fail to qualify as a
reorganization described in Section 368(a) of the Internal Revenue Code;
. willfully take any action that is reasonably likely to result in a
material breach of any provision of the merger agreement or in any of
the representations and warranties being untrue as of the date the
merger is consummated;
. initiate any material actions, suits, arbitrations or proceedings;
. take any action that would be reasonably likely to jeopardize the
qualification of any material amount of outstanding revenue bonds which
qualify at the time of the merger agreement as "exempt facility bonds"
under Section 142(a) of the Internal Revenue Code or as tax-exempt
industrial development bonds under Section 103(b)(4) of the Internal
Revenue Code of 1954, prior to the enactment of the Tax Reform Act of
1986;
. except as previously disclosed, make or rescind any material express or
deemed election relating to taxes or change any of its methods of
reporting income or deductions for tax purposes from those employed in
the preparation of its tax returns for the prior taxable year, except as
required by applicable law;
. satisfy any material claims, liabilities or obligations other than in
the ordinary course of business consistent with past practice or as
reflected, or contemplated by its most recent consolidated financial
statements;
. modify, amend, terminate, renew or fail to use reasonable efforts to
renew any material contract or waive, release or assign any material
rights or claims;
. permit its subsidiaries or, within exercise of its reasonable business
efforts, its joint ventures, except in the ordinary course of business
consistent with past practice, to modify, amend, terminate, renew or
fail to use reasonable efforts to renew any material contract or waive,
release or assign any material rights or claims;
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. terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it is a party; and
. control or direct, directly or indirectly, ScottishPower's operations
before the consummation of the merger.
ScottishPower has agreed that, unless otherwise consented to by PacifiCorp
or except as permitted by the merger agreement, it will not and will not permit
any of its subsidiaries to:
. amend its charter documents;
. pay dividends or make distributions;
. reclassify any of its capital stock;
. adopt a plan or reorganization;
. repurchase any capital stock;
. issue, deliver or sell any share of its capital stock or any option to
purchase its capital stock;
. other than as provided for in ScottishPower's pre-disclosed operating
budget, make acquisitions that are in excess of (Pounds)750 million, or
that would or have a material adverse effect on ScottishPower and its
subsidiaries taken as a whole;
. other than as provided for in ScottishPower's pre-disclosed operating
budget, dispose of or encumber any asset, other than dispositions in the
ordinary course of business consistent with past practice and having an
aggregate value less than (Pounds)750 million;
. permit changes in their accounting methods;
. incur or guarantee any indebtedness;
. enter into any contract or amend or modify any existing contract or
engage in any new transaction with any affiliate or any of its
subsidiaries outside the ordinary course of business consistent with
past practice or not on an arm's-length basis;
. make any capital expenditures, other than capital expenditures incurred
as required by applicable law, in connection with the repair or
replacement of facilities destroyed or damaged due to casualty or
accident and in an amount within 110% of the aggregate amount provided
for such purposes in ScottishPower's budget;
. engage in any transaction which would change it status, or that of any
of its subsidiaries, under the 1935 Act;
. except as previously disclosed, commence construction of any additional
generating, transmission or delivery capacity in excess of 500
megawatts;
. except as previously disclosed, obligate itself to purchase any
additional generating, transmission or delivery plants or facilities, in
an amount in excess of $200 million;
. take any action that would cause the merger to fail to qualify as a
reorganization described in Section 368(a) of the Internal Revenue Code;
. willfully take or fail to take any action which is reasonably likely to
result in a material breach of any provision of the merger agreement or
in any of the representations and warranties being untrue as of the date
the merger is consummated;
. except as previously disclosed, make or rescind any material express or
deemed election relating to taxes or change any of its methods of
reporting income or deductions for tax purposes from those employed in
the preparation of its tax returns for the prior taxable year, except as
required by applicable law;
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. satisfy any material claims or liabilities other than in the ordinary
course of business consistent with past practice or as reflected, or
contemplated by its most recent consolidated financial statements;
. modify, amend, terminate, renew or fail to use reasonable efforts to
renew any material contract or waive, release or assign any material
rights or claims;
. permit it subsidiaries or, within exercise of its reasonable business
efforts, its joint ventures, except in the ordinary course of business
consistent with past practice, to modify, amend, terminate, renew or
fail to use reasonable efforts to renew any material contract or waive,
release or assign any material rights or claims;
. terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it is a party;
. control or direct, directly or indirectly, PacifiCorp's operations
before the consummation of the merger; and
. engage, nor permit any of its subsidiaries to engage, in any activities
or omit to do anything that would entitle any governmental or regulatory
authority to revoke in whole or in any material part any material
license, authorization or appointment or which would otherwise
materially change the status of ScottishPower or any of its
subsidiaries.
Indemnification; Insurance. ScottishPower has agreed that it will not,
except to the extent required by law, until the sixth anniversary of the
merger:
. amend, modify or repeal the provisions for indemnification of directors
or officers contained in the charter documents of PacifiCorp and its
subsidiaries in a manner which would adversely affect the rights of any
individual who was a director or officer of PacifiCorp or any of its
subsidiaries before the merger to be indemnified by those corporations
in respect of their serving as officers or directors before the merger;
and
. until the sixth anniversary of the merger, it will cause to be
maintained in effect, to the extent available, the policies of
directors' and officers' liability insurance maintained by PacifiCorp
and its subsidiaries as of the date of the merger agreement with respect
to claims arising from facts or events that occurred on or before the
merger.
Neither ScottishPower nor PacifiCorp shall be obligated to expend any amount
per year in excess of 200% of the aggregate premiums paid by PacifiCorp and its
subsidiaries in 1998, on an annualized basis,to maintain or procure insurance
coverage.
Benefit Arrangements. ScottishPower has agreed to use its reasonable best
efforts to cause:
. PacifiCorp's employee benefit plans in effect at the date of the signing
of the merger agreement that have been disclosed to ScottishPower before
that date, including plans for health and retirement benefits, incentive
compensation, stock compensation and severance pay, to remain in effect
until the second anniversary of the merger; or
. to maintain until that date benefit plans which are no less favorable,
in the aggregate, to the employees covered by PacifiCorp's employee
benefit plans referred to above at the date of signing of the merger
agreement.
ScottishPower will not be required to continue any specific plan nor will
it be prevented from:
. establishing any other benefit plans in respect of all or any of the
employees covered by such employee benefit plans or any other employees;
or
. amending employee benefit plans where required by applicable law or
where the amendment is with the consent of the affected employees.
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ScottishPower further has agreed to honor, and to cause its subsidiaries to
honor, each existing employment, change of control, severance and termination
agreement between PacifiCorp or any of its subsidiaries, and any officer,
director or employee of those companies.
PacifiCorp Stock Option Plans. Under the merger agreement, the parties have
agreed that each outstanding option to purchase shares of PacifiCorp common
stock under the PacifiCorp Stock Incentive Plan will be converted into an
option to acquire, on the same terms and conditions as were applicable under
such PacifiCorp stock option, a number of ADSs equal to the product of:
(1) the number of shares of PacifiCorp common stock subject to the option
immediately before the merger and
(2) 0.58.
The option exercise price per ADS at which such option is exercisable will
be the amount obtained by dividing:
(1) the option exercise price per share of PacifiCorp common stock at
which the option is exercisable immediately before the merger by
(2) 0.58.
In the case of any PacifiCorp stock option to which Section 421 of the Internal
Revenue Code applies by reason of its qualification under any of Sections 422-
424 of the Internal Revenue Code, however, the option exercise price, the
number of shares which may be acquired under the option and the terms and
conditions of exercise of the option will be determined to comply with Section
424(a) of the Internal Revenue Code. Under no circumstances will the option
exercise price per ADS be less than the aggregate par value of the ordinary
shares represented by an ADS.
ScottishPower has agreed to:
. as soon as practicable after the merger, deliver to the participants in
the PacifiCorp Stock Incentive Plan appropriate notices setting forth
the participants' rights under the plan with respect to converted
options which shall continue in effect on the same terms and conditions;
. take all corporate action necessary to have a sufficient number of ADSs
available for delivery under the PacifiCorp Stock Incentive Plan;
. as soon as practicable after the merger, file a registration statement
on Form S-8 promulgated by the SEC under the Securities Act with respect
to the ADSs subject to those options and use its reasonable best efforts
to maintain the effectiveness of the registration statement for so long
as those options remain outstanding.
PacifiCorp has agreed to take all corporate action necessary and obtain all
relevant consents to ensure that the consideration received upon the conversion
under the merger of each outstanding share of restricted PacifiCorp common
stock issued under PacifiCorp's Non-Employee Director's Stock Compensation
Plan, Stock Incentive Plan and Long Term Incentive Plan will continue to be
subject to the same restrictions that the shares were subject to under
PacifiCorp's Non-Employee Director's Stock Compensation Plan, Stock Incentive
Plan and Long Term Incentive Plan and the applicable award agreements,
including any forfeiture restrictions. These restrictions are subject to
amendment or modification of those plans or award agreements to reflect action
of the PacifiCorp Board of Directors taken before the date of the merger
agreement and disclosed to ScottishPower. See "--Interests of PacifiCorp's
Officers and Directors in the Merger--Effect of Change of Control on
Compensation and Benefits".
No Solicitation. Under the merger agreement, PacifiCorp has agreed that,
before the merger, neither it nor any of its subsidiaries or other affiliates
will, and it will use its best efforts to cause their representatives not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any alternative proposal, as defined below, or
engage in any negotiations concerning,
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or provide any information or data to, or have any discussions with, any
person or group relating to an alternative proposal, or otherwise facilitate
any effort or attempt to make or implement an alternative proposal.
The term "alternative proposal" means for these purposes any proposal or
offer, including, without limitation, any proposal or offer to PacifiCorp's
shareholders, with respect to a merger, consolidation or other business
combination including PacifiCorp or any of its subsidiaries or any acquisition
or similar transaction involving the purchase of
. all or any significant portion of the assets of PacifiCorp and its
subsidiaries taken as a whole;
. 5% or more of the outstanding shares of PacifiCorp common stock; or
. 5% or more of the outstanding shares of the capital stock of any
subsidiary of PacifiCorp.
PacifiCorp further agreed to immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any third parties
with respect to any of the foregoing. In addition, PacifiCorp agreed to notify
ScottishPower promptly if any inquiries, proposals or offers are received by,
any information is requested from, or any negotiations or discussions are
sought to be initiated or continued with, PacifiCorp or its subsidiaries or
representatives relating to an alternative proposal.
The merger agreement, however, does provide that the PacifiCorp Board of
Directors may furnish information to or enter into discussions or negotiations
with any person or group that makes an unsolicited alternative proposal if,
and to the extent that, before receipt of the PacifiCorp shareholders'
approval of the merger agreement:
. the PacifiCorp Board of Directors, based upon the advice of outside
counsel, determines in good faith that a failure to perform the action
could reasonably be expected to result in a breach of its fiduciary
duties to shareholders imposed by law;
. the PacifiCorp Board of Directors has reasonably concluded in good faith
that the person or group making the alternative proposal will have
adequate sources of financing to consummate the alternative proposal;
and
. the PacifiCorp Board of Directors has reasonably concluded in good faith
that the alternative proposal is more favorable to PacifiCorp's
shareholders than the merger.
However, before furnishing such information to, or entering into
discussions or negotiations with, any person or group, PacifiCorp must provide
written notice to ScottishPower to the effect that it is furnishing
information to, or entering into discussions or negotiations with, the party
or parties making the alternative proposal, and identify the party or parties
in reasonable detail. PacifiCorp also agreed to keep ScottishPower informed of
the status of any discussions or negotiations to the extent the disclosure
would not constitute a violation of any applicable law. In addition, the
merger agreement provides that the PacifiCorp Board of Directors will comply
with Rule 14e-2 promulgated under the Securities Exchange Act with respect to
an alternative proposal.
Conditions Precedent to the Merger. Before the merger can occur, various
conditions stated in the merger agreement must be fulfilled or, alternatively,
waived by the appropriate party or parties. In addition to the approval of the
with the merger by the shareholders of ScottishPower and the approval of the
merger agreement and the terms of the merger by the PacifiCorp shareholders,
the obligations of ScottishPower and PacifiCorp to effect the merger are
subject to the fulfillment or waiver of specified conditions, including,
. the representations and warranties made by the respective parties in the
merger agreement must be true, in all material respects, taken as a
whole, as of the date of the merger except for those representations and
warranties made as of an earlier date;
. the other party must have performed and complied with, in all material
respects, each obligation required by the merger agreement;
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. there must not have been any development having a significant negative
impact on the other party or any circumstances which could, when taken
together with any breaches or violations of the merger agreement by the
other party, have a significant negative impact on the other party and
its subsidiaries taken as a whole;
. except as provided in the merger agreement, all consents, approvals and
actions, filings with and notices to any governmental or regulatory
authority must have been obtained and become final orders, and these
final orders in the aggregate shall not have a significant negative
impact on PacifiCorp and its subsidiaries, taken as a whole;
. the consent or approval of each person, other than a governmental or
regulatory authority, whose consent or approval is required by
ScottishPower, PacifiCorp and any of their respective subsidiaries under
any material contract to consummate the merger and the other
transactions contemplated by the merger agreement having been obtained,
except for those consents and approvals which, if not obtained, would
not have a significant negative impact on PacifiCorp and its
subsidiaries taken as a whole or on the ability of ScottishPower or
PacifiCorp to consummate the transactions contemplated by the merger
agreement and, if applicable, the scheme of arrangement;
. there must not be any injunction or other order by any governmental or
regulatory authority preventing or restricting consummation of the
merger;
. the applicable period under the HSR Act must have expired or been
terminated; and
. written tax opinions from Milbank, Tweed, Stoel Rives LLP, and LeBoeuf,
Lamb must have been delivered to ScottishPower and PacifiCorp.
Termination. The merger agreement may be terminated by mutual written
agreement of the parties. The merger agreement may also be terminated by either
PacifiCorp or ScottishPower if:
. the merger has not been consummated on or before September 6, 1999 and
such failure is not caused by any breach by the terminating party of any
obligation under the merger agreement. However, if on September 6, 1999,
ScottishPower and PacifiCorp have not received all of the approvals of
governmental authorities required to satisfy the conditions in the
merger agreement but all other conditions are fulfilled or are capable
of being fulfilled, then, at the option of either ScottishPower or
PacifiCorp, the term of the merger agreement may be extended until June
6, 2000;
. the PacifiCorp shareholders have not approved the merger agreement or
the ScottishPower shareholders have not approved the merger by reason of
the failure to obtain the requisite vote on a vote of the shareholders;
. there has been a material breach of any representation, warranty,
covenant or agreement on the part of the non-terminating party in the
merger agreement, which is determined in all cases as if the terms
"material" or "materially" were not included in any such representation
or warranty, which breach is not curable or, if curable, has not been
cured within 30 days following the receipt by the non-terminating party
of notice of such breach from the terminating party and which breach,
when taken together with any other breaches of representations,
warranties, covenants and agreements of the non-terminating party
contained in the merger agreement, has or would reasonably be expected
to have a significant negative impact on PacifiCorp and its subsidiaries
taken as a whole; or
. any court of competent jurisdiction or other competent governmental or
regulatory authority shall have issued an order making illegal or
otherwise preventing or prohibiting the merger and such order shall have
become final and non-appealable.
The merger agreement may be terminated by PacifiCorp if:
. the PacifiCorp Board of Directors determines in good faith that a
failure to terminate the merger agreement could reasonably be expected
to result in a breach of its fiduciary duties to shareholders imposed by
law by reason of an unsolicited alternative proposal having been made;
or
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. the ScottishPower Board of Directors withdraws or modifies in a manner
materially adverse to PacifiCorp its approval or recommendation of the
merger agreement or the merger; or
. there has been a change in control of ScottishPower.
For purposes of the merger agreement, a "change of control" shall occur if
any of the following applies:
. Any "Person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act is or becomes the "beneficial owner", as defined
in Rule 13d-3 under the Securities Exchange Act, directly or indirectly,
of securities of ScottishPower representing 30% or more of the combined
voting power of ScottishPower's outstanding capital stock;
. the shareholders of ScottishPower approve a merger or other
consolidation of ScottishPower with any other company, other than a
merger or consolidation effected to implement a recapitalization of
ScottishPower in which no Person acquires more than 30% of the combined
voting power of ScottishPower's then outstanding securities;
. tender or exchange offer is made for the ordinary shares of
ScottishPower or securities convertible into ordinary shares of
ScottishPower and the offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is
the beneficial owner, as determined under Section 13(d) of the
Securities Exchange Act, directly or indirectly, of securities
representing at least 30% of the voting power of outstanding securities
of ScottishPower; or
. ScottishPower sells 30% or more of its operating assets or, if
applicable, New ScottishPower sells 30% or more of the shares of
ScottishPower, in each case, to a buyer that is not a member of the
ScottishPower controlled group of corporations.
The merger agreement may be terminated by ScottishPower if the PacifiCorp
Board of Directors:
. withdraws or modifies in a manner materially adverse to ScottishPower
its approval or recommendation of the merger agreement or the merger;
. fails to reaffirm its approval or recommendation upon ScottishPower's
request;
. approves, recommends or takes no position with respect to an alternative
proposal to the shareholders of PacifiCorp; or
. resolves to take any of the foregoing actions.
Termination Fee. If any person or group shall have made an alternative
proposal and thereafter:
. the merger agreement is terminated
(1) by PacifiCorp as a result of the PacifiCorp Board of Directors
determination in good faith, based upon the advice of outside
counsel, that a failure to terminate the merger agreement could
reasonably be expected to result in a breach of its fiduciary duties
to shareholders imposed by law by reason of an unsolicited
alternative proposal,
(2) by ScottishPower because PacifiCorp has materially breached any
representation, warranty, covenant or agreement or because the
PacifiCorp Board of Directors (a) withdraws or modifies in a manner
materially adverse to ScottishPower its approval or recommendation of
the merger agreement or merger, (b) fails to reaffirm its approval or
recommendation upon ScottishPower's request, (c) approves, recommends
or takes no position with respect to an alternative proposal to its
shareholders, or (d) resolves to take any of the foregoing actions,
or
(3) by either party as a result of the approval and adoption of the
merger agreement by PacifiCorp shareholders not being obtained; or
. the merger agreement is terminated for any other reason, other than by
reason of the breach of the merger agreement by ScottishPower, or a
change of control, or as a result of ScottishPower shareholder approval
of the merger not being obtained or the withdrawal or modification in a
manner
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materially adverse to PacifiCorp its approval or recommendation of the
merger agreement or the merger by ScottishPower's Board of Directors,
and a definitive agreement with respect to the alternative proposal is
executed within one year after the termination;
then PacifiCorp shall pay to ScottishPower a termination fee of $250 million.
If the merger agreement is terminated by PacifiCorp following a change of
control, other than through the scheme of arrangement, of ScottishPower, then
ScottishPower shall pay to PacifiCorp a termination fee of $250 million.
If the merger agreement is terminated by either PacifiCorp or ScottishPower
due to the failure to obtain the requisite vote of shareholders of PacifiCorp
or ScottishPower and the termination fee described above is not payable, (1) in
the case of the merger agreement not being approved by the PacifiCorp
shareholders and the merger being approved by the ScottishPower shareholders,
PacifiCorp shall pay to ScottishPower $10 million, or (2) in the case of
proposal to merge not being approved by the ScottishPower shareholders and the
merger agreement being approved by the PacifiCorp shareholders, ScottishPower
shall pay to PacifiCorp $10 million.
Amendment; Waiver. The merger agreement may be amended, supplemented or
modified by written action taken by or on behalf of the respective boards of
directors of the parties to the merger agreement at any time before the merger,
whether before or after the approval of the shareholders of PacifiCorp and
ScottishPower has been obtained, but after the adoption and approval only to
the extent permitted by applicable law.
At any time before the merger, any of the parties to the merger agreement
may, to the extent permitted by applicable law: (1) waive any inaccuracies in
the representations and warranties of the other parties; (2) extend the time
for performance of the obligations or other acts of the other parties; or (3)
waive compliance with any of the covenants, agreements or conditions of the
other parties.
Expenses. The merger agreement provides that each party to the merger
agreement will pay its own expenses in connection with the merger, except that
PacifiCorp shall not have any obligation with respect to any fee or expenses
relating to ScottishPower's obligation to demonstrate the existence of adequate
working capital in connection with the filing of listing particulars with the
London Stock Exchange.
Regulatory Matters
As indicated below, consummation of the merger is conditioned upon obtaining
numerous regulatory approvals. Set forth below is a summary of the material
regulatory requirements affecting the merger.
PacifiCorp is a public utility and, as a result, will remain subject to
regulation by the FERC and state regulatory commissions in Oregon, Washington,
California, Utah, Idaho and Wyoming with respect to rate matters, the issuance
of securities and corporate reorganization. Applications in connection with the
proposed transaction have been filed with the FERC and with the California
Public Utility Commission, the Oregon Public Utility Commission, the Washington
Utilities and Transportation Commission, the Idaho Public Utilities Commission,
the Utah Public Service Commission and the Wyoming Public Service Commission.
The Commissions are being requested to either disclaim jurisdiction over the
transaction or approve it. Generally, approval by the Commissions is
conditioned upon a finding that the transaction is consistent with the public
interest. The Commissions may attach conditions to their approval. While the
outcome of regulatory proceedings can never be predicted with certainty, it is
currently anticipated that the regulatory process can be completed in late
1999.
Testimony has been filed in Oregon, Idaho, Washington, Wyoming and Utah, and
hearings have been scheduled in those states in July and early August 1999.
Testimony has also been filed in California but a hearing has not been
scheduled as it currently appears that all matters will be resolved without the
need for hearings.
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Section 203 of the Federal Power Act provides that no public utility shall
sell or otherwise dispose of its jurisdictional facilities or directly or
indirectly merge or consolidate those facilities with those of any other person
without having first obtained authorization from the FERC. Section 203 approval
is to be granted if the FERC finds it to be "consistent with the public
interest". PacifiCorp has filed an application with the FERC seeking approval
of the proposed transaction to the extent it constitutes an indirect transfer
of control of its jurisdictional facilities and those of its subsidiaries to
ScottishPower. The FERC has established May 10, 1999 as the date by which
petitions to intervene must be filed. In recent proceedings under Section 203
of the Federal Power Act, the FERC has focused on the effect a proposed
transaction may have on:
. competition in domestic power markets;
. the applicant's wholesale power and transmission customers; and
. state and federal regulation of the applicant.
PacifiCorp also has Federal Power Act hydroelectric licenses subject to FERC
jurisdiction. However, PacifiCorp does not believe FERC approval with respect
to its hydroelectric licenses is required to consummate the merger. It is not
expected that the merger will give rise to substantial FERC concern in any of
these areas. The FERC has authority to impose conditions to its approval.
SEC approval of the merger under the Public Utility Holding Company Act of
1935 is not required. Following the completion of the merger, however,
ScottishPower plans to register as a holding company as required under Section
5 of the 1935 Act. It may be the first company domiciled outside of the United
States to do so.
As discussed earlier, ScottishPower plans to reorganize prior to the closing
of the merger to put New ScottishPower over ScottishPower as a holding company.
If the reorganization is completed, New ScottishPower would register as the
holding company under the 1935 Act. Following the reorganization, the U.S. and
U.K. utility businesses will be in separate subsidiaries and the U.K.
subsidiaries will qualify for exemption from regulation as foreign utility
companies under the 1935 Act. Because there are registered U.S. utility holding
companies that currently conduct the same types of non-utility businesses as
those currently conducted by ScottishPower, it is anticipated that registration
will not affect the conduct of ScottishPower's non-utility businesses. If the
reorganization is not completed before the merger, ScottishPower will register
as a holding company under the 1935 Act and will operate its U.S. businesses in
separate subsidiaries and its U.K. businesses, including those that are
divisions, as if they were separate subsidiaries subject to regulation under
the 1935 Act. ScottishPower will, in any event, implement a future
reorganization to place the divisions in separate subsidiaries pursuant to the
assurances given to the U.K. Secretary of State for Trade and Industry
described under "U.K. Approvals" below. A pre-merger reorganization is not
subject to SEC approval under the 1935 Act, but a post-merger reorganization
would be. While ScottishPower currently believes that the pre-merger
reorganization will become effective, it cannot predict the outcome of the
approvals needed for that reorganization or the regulatory proceedings for any
future reorganization.
Following consummation of the merger, PacifiCorp, as a public utility
company, and ScottishPower (which in the following discussion refers to the
holding company--either New ScottishPower or ScottishPower), as a holding
company, and other non-utility subsidiaries of ScottishPower will be subject to
regulation under the 1935 Act, unless specific subsidiaries or transactions are
otherwise exempt by SEC rules or orders, as follows:
. Issuances of securities by PacifiCorp and ScottishPower will be
regulated but certain exemptions may be available to PacifiCorp because
it is also regulated by state commissions as to the issuance of
securities. Foreign utility companies held as separate subsidiaries will
be exempt from regulation.
. Acquisitions of securities and utility assets by PacifiCorp and
ScottishPower will be regulated.
. Any affiliate transactions among members of the group after the merger
would be regulated. It is not expected that there will be many affiliate
transactions due to business separation requirements
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imposed by regulators in the U.K. and U.S. and because PacifiCorp
provides most of its own services. The 1935 Act regulates and, in some
cases, prohibits affiliate financing transactions and the pricing and
supply of services and goods among affiliates.
. Later acquisitions of businesses by ScottishPower and PacifiCorp must be
reasonably incidental, economically necessary or appropriate to the
operations of an integrated public utility system.
. In certain cases, the payment of dividends and the repurchase of
securities by PacifiCorp and ScottishPower would be subject to
regulation by the SEC.
While there are increased burdens imposed by 1935 Act regulation, ScottishPower
does not believe increased regulation will have a material adverse effect on
ScottishPower or its subsidiaries.
As a non-operating, 2.5% owner of the Trojan nuclear power plant, which is
in the decommissioning process, PacifiCorp must obtain approval from the
Nuclear Regulatory Commission to the extent there is a change in control of the
licensee and must assure the Commission that all safety-related matters remain
under the control of the operator or under the supervision of United States
citizens.
The completion of the merger is subject to the Foreign Acquisitions and
Takeovers Act 1975 of Australia. Under that Act, the Treasurer of Australia has
broad powers to prohibit or place conditions on the acquisition of interests in
Australian business operations by foreign investors if the acquisitions are
found to be contrary to the national interest. The parties have notified the
Australian Foreign Investment Review Board of the proposed merger as a result
of PacifiCorp's ownership of Powercor Australia Ltd. and an interest in the
Hazelwood power station and adjacent brown coal mine in Victoria. The
Australian Treasurer is precluded from taking any action in connection with the
acquisition after the expiration of a 40-day review period, although this
period may be extended for up to 90 additional days. On March 25, 1999, the
Australian Federal Treasurer confirmed that he had no objection to the merger.
Provisions promulgated under the Omnibus Trade and Competitiveness Act of
1988 ("Exon-Florio") empower the President of the United States to prohibit or
suspend an acquisition of, or investment in, a U.S. company by a foreign person
if the President finds, after investigation, credible evidence that the foreign
person might take action that threatens to impair the national security of the
U.S. and that other provisions of existing law do not provide adequate and
appropriate authority to protect the national security. Any determination that
an investigation is called for must be made within 30 days of notice of the
proposed transaction. In the event this determination is made, any
investigation must be completed within 45 days of the determination.
Thereafter, any decision to take action must be announced within 15 days of
completion of the investigation. Authority for administering Exon-Florio has
been delegated to the Committee on Foreign Investment in the United States.
PacifiCorp and ScottishPower will make a voluntary filing to CFIUS seeking a
finding that the merger does not impair the national security of the United
States.
Antitrust Considerations. The Hart-Scott-Rodino Antitrust Improvements Act
of 1976 provides that some specific transactions, including the merger, may not
be consummated until certain information has been submitted to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
specified HSR Act waiting period requirements have been satisfied. On February
12, 1999, PacifiCorp and ScottishPower were granted early termination of the
waiting period requirements of the HSR Act. However, the early termination of
the waiting period does not preclude the Antitrust Division or the Federal
Trade Commission from challenging the merger on antitrust grounds. Neither
ScottishPower nor PacifiCorp believes that the merger will violate federal
antitrust laws. If the merger is not completed within 12 months after the
expiration or earlier termination of the initial HSR Act waiting period,
ScottishPower and PacifiCorp would be required to submit new information to the
Antitrust Division and the Federal Trade Commission, and a new HSR Act waiting
period would have to expire or be earlier terminated before the merger could be
completed.
U.K. Approvals. Authorization of the merger by the U.K. Secretary of State
for Trade and Industry or any other U.K. regulatory authority is not mandatory.
The U.K. Fair Trading Act 1973 provides the U.K.
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Secretary of State with a discretion to refer some specific transactions
(including the merger) within four months following their announcement to the
U.K. Monopolies and Mergers Commission on the grounds that the relevant
transaction may operate against the public interest. The merger is conditioned
upon:
(1) the U.K. Secretary of State indicating that he does not intend to refer
the merger to the Monopolies and Mergers Commission; or
(2) if he makes this reference, the Monopolies and Mergers Commission
concluding that the merger does not or may not be expected to operate
against the public interest; or
(3) if, following this reference, the Monopolies and Mergers Commission
concludes that the merger does or may be expected to operate against the
public interest, the U.K. Secretary of State indicating in writing that it
is his intention to approve the merger provided that if any indication by
the U.K. Secretary of State referred to in (1) or (3) above is subject to
undertakings, assurances or any other terms or conditions, such
undertakings, assurances, terms or conditions would not have, or would not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the business, properties, assets, liabilities,
financial condition or results of operations of the ScottishPower group
taken as a whole.
Some of ScottishPower's businesses are regulated by the U.K. Director General
of Electricity Supply and others by the U.K. Director General of Water
Services. The merger is conditioned on the Director General of Electricity
Supply and the Director General of Water Services indicating that it is not
their intention to seek modifications to the relevant regulatory licenses which
would have, or would reasonably be expected to have, a material adverse effect
(as described above) on the ScottishPower group, that they will give consents
and/or directions (if any) as are necessary or appropriate with respect to the
regulatory licences on terms which would not have, or would not reasonably be
expected to have, a material adverse effect (as described above) on the
ScottishPower group, and that neither the Director General of Electricity
Supply nor the Director General of Water Services shall have sought
undertakings or assurances from any member of the ScottishPower group which
would have, or would reasonably be expected to have, a material adverse effect
(as described above) on the ScottishPower group.
On April 13, 1999, the U.K. Secretary of State for Trade and Industry
announced that it was not his intention to refer the merger to the Monopolies
and Merger Commission (now the Competition Commission). In making that
decision, the U.K. Secretary of State accepted certain assurances from
ScottishPower to address the regulatory concerns of the Director General of
Electricity Supply. These include assurances relating to the establishment of a
holding company for the ScottishPower group, to the financial and management
resources of ScottishPower and Manweb, and to ensuring that the Director
General of Electricity Supply continues to have access to the information which
he needs to carry out his duties.
ScottishPower has given assurances that it will secure the holding company
will restructure its business in Great Britain as soon as is reasonably
practicable, and in any event within three years, so as to place generation and
any non-electricity activities in separate group companies. ScottishPower has
assured the U.K. Secretary of State for Trade and Industry that, following
restructuring, a financial ring-fence will be placed around the electricity
supply and transmission businesses currently carried on ScottishPower, on
similar terms to the standard ring-fence terms developed by the Director
General of Electricity Supply.
To the extent that these assurances require license modifications to be
implemented, ScottishPower has assured the U.K. Secretary of State that it will
agree to the modifications and will secure that Manweb will do likewise.
Other. PacifiCorp has environmental permits and licenses with respect to
which the consent of the issuing authority may be required as a result of the
merger. In addition, PacifiCorp and its subsidiaries own aircraft subject to
regulation by the Federal Aviation Administration and hold various
communication licenses issued by the Federal Communications Commission.
Consents or approvals from these authorities also will be required as a result
of the merger. PacifiCorp does not anticipate any difficulties at the present
time in obtaining these consents and approvals in connection with the merger.
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General. Under the merger agreement, ScottishPower and PacifiCorp have
agreed to proceed cooperatively and in good faith to, as promptly as
practicable, obtain all necessary material permits, licenses, franchises and
other governmental authorizations necessary or advisable to consummate or
effect the transactions contemplated by the merger agreement. Various parties
may seek intervention in these proceedings to oppose the merger or to have
conditions imposed upon the receipt of necessary approvals. While ScottishPower
and PacifiCorp believe that they will receive the requisite regulatory
approvals for the merger, there can be no assurance as to the timing of these
approvals or the ability of ScottishPower and PacifiCorp to obtain these
approvals on satisfactory terms or otherwise. It is a condition to the
consummation of the merger that final orders approving the merger be obtained
from the various U.K. regulatory authorities and U.S. federal and state
commissions described above on terms and conditions which would not have, or
would not be reasonably likely to have, a material adverse effect on the
business, assets, financial condition or results of operations of PacifiCorp
and its subsidiaries taken as a whole. There can be no assurance that any
approvals will be forthcoming, nor that they will not contain terms or
conditions that would cause these approvals to fail to satisfy a condition to
the completion of the merger.
Dividend Policy
ScottishPower currently pays regular dividends on the ordinary shares on a
semi-annual basis. Following the merger, ScottishPower intends to adopt the
practice of paying regular dividends on a quarterly basis with respect to all
ordinary shares. ScottishPower expects to pay dividends in February, May,
August and November of each year.
ScottishPower is committed to its stated aim of achieving 7%-8% real
dividend growth annually until at least the U.K. regulatory reviews which take
effect from April 1, 2000, while maintaining a prudent level of dividend cover.
It is ScottishPower's current aim to deliver real dividend growth thereafter
and this will be re-examined once the outcome of these regulatory reviews is
known.
In addition, ScottishPower and PacifiCorp have agreed in the merger
agreement to coordinate with each other with respect to the declaration of
dividends in respect of ordinary shares and PacifiCorp common stock, with the
intention that the holders of PacifiCorp common stock receive dividends in
respect of the PacifiCorp common stock for all periods before the merger but do
not receive dividends in respect of the ADS consideration and the ordinary
share consideration after the merger in respect of periods before the merger.
Conduct of PacifiCorp's Business After the Merger
Following completion of the merger, PacifiCorp will continue to conduct its
business and be regulated as a utility by the FERC and by the relevant state
commissions of Oregon, Washington, California, Utah, Idaho and Wyoming.
Immediately following the merger, PacifiCorp will continue to conduct its
everyday business in the same way as at present. Operational management and
decision-making will take place with the same authority and at the same levels
of the organization. Regulatory oversight will be unimpaired. Some aspects of
its business will be subject to regulation by the SEC under the Public Utility
Holding Company Act of 1935 as discussed above under "--Regulatory Matters".
PacifiCorp's pre-merger Board of Directors will be replaced by a new board,
comprised of some current members of ScottishPower's board, as well as Richard
O'Brien. PacifiCorp's business planning will be brought in line with
ScottishPower's current practice, with the annual business plan prepared by
PacifiCorp executives and presented to the PacifiCorp board for approval. As
with all other ScottishPower businesses, the plan would then be presented to
the ScottishPower board for review and authorization. PacifiCorp would then be
operated within the framework outlined in the approved plan, with further
ScottishPower approval only being required for significant or unplanned
involvement.
In addition, promptly following the merger, specific non-executive members
of the PacifiCorp Board of Directors, together with Mr. O'Brien, will be
elected and appointed to a PacifiCorp advisory board, the function of which
shall be to advise the PacifiCorp Board of Directors regarding general business
strategy, opportunities and activities in PacifiCorp's market area and customer
relationships.
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ScottishPower will lead a joint integration team which will review
PacifiCorp's business and develop a plan to enhance business performance. The
joint integration planning process may propose changes to PacifiCorp's current
method of operation that could lead to improvements in the performance and
efficiency of PacifiCorp. These may include: (1) changes to organizational
accountabilities to provide greater alignment of responsibilities with service
delivery, (2) changes to planning, budgeting and reporting systems to focus on
efficiency and customer service, (3) greater use of technology to improve
productivity and respond better to customers' requirements, (4) development of
working practices at all levels in the organization to more closely match the
operating priorities of the different parts of the business, and (5)
simplifying business processes around service delivery. Additionally, certain
of the changes may involve the physical integration of similar corporate
functions. It is believed that the opportunity for such integration between the
U.K. and the U.S. is limited due to geography and regulation. Any planned
integration of activities will be designed to ensure that neither the
accountability nor operational flexibility of PacifiCorp's executives and
management is removed or impaired. Following the merger, joint teams from
ScottishPower and PacifiCorp, coordinated under a single integration program,
will undertake a review of all operations to establish the opportunity to
transfer best practices between the organizations.
ScottishPower intends to achieve cost savings which would bring PacifiCorp's
non-generation costs per customer in the U.S. in line with some of the most
efficient comparable utilities, based on FERC comparisons. Although it is
difficult to predict the source of the cost savings, ScottishPower expects
most, if not all, to come from the application of best practices in operational
and overhead areas (as discussed in items 1-5 above) rather than through
elimination of costs duplicated between PacifiCorp and ScottishPower. In
addition, ScottishPower intends to provide benefits to PacifiCorp's customers
through improvements in network performance and customer service and the
introduction of customer service guarantees. ScottishPower has also advised
PacifiCorp's regulators of its belief that employee training will be a key
component in its efforts to reduce costs and increase PacifiCorp customer
satisfaction.
New York Stock Exchange and London Stock Exchange Listing
Under the merger agreement, ScottishPower has agreed to cause (1) the ADSs
to be issued under the merger agreement to be approved for listing on the New
York Stock Exchange before the merger and (2) each of the ordinary shares
underlying the ADSs and the ordinary shares to be issued as merger
consideration to be admitted to the Official List of the London Stock Exchange.
Obtaining approvals for these listings is a condition to the obligations of
ScottishPower and PacifiCorp to consummate the merger.
Material Tax Consequences
This section describes (1) the material United States federal income tax
consequences to U.S. Holders, as defined below, of PacifiCorp common stock who
exchange such stock for ADSs or ordinary shares, (2) the material U.S. federal
income and U.K. tax consequences to U.S. Holders of the ownership and
disposition of ADSs and ordinary shares, and (3) the material U.S. federal
income tax consequences to U.S. Holders of PacifiCorp preferred stock who
dissent from the merger. This discussion assumes that U.S. Holders hold
PacifiCorp common stock, and will hold ScottishPower ordinary shares and ADSs,
as capital assets. For purposes of this section, "U.S. Holder" means a
beneficial owner of PacifiCorp common stock or ScottishPower ordinary shares or
ADSs that is:
. an individual citizen or resident of the United States;
. a corporation created or organized in or under the laws of the United
States, any state thereof or the District of Columbia;
. a domestic partnership as defined in Section 7701(a)(4) of the Internal
Revenue Code of 1986 and regulations thereunder;
. an estate other than a foreign estate as defined in Section 7701(a)(31)
of the Internal Revenue Code; or
. a trust under the primary jurisdiction of a court within the United
States and over which one or more U.S. persons have control.
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For the purposes of this section, "Eligible U.S. Holder" means a U.S. Holder
of ScottishPower's ordinary shares or ADSs and of the cash dividends paid on
those shares that:
. is resident in the U.S. for purposes of the U.S.-U.K. income tax treaty
and, in the case of a corporation, is not also resident in the U.K. for
U.K. tax purposes;
. holds the ordinary shares or ADSs in a manner which is not effectively
connected with a permanent establishment in the U.K. through which the
U.S. person carries on business or with a fixed base in the U.K. from
which the U.S. person performs independent personal services; and
. is not otherwise ineligible for benefits under the U.S.-U.K. income tax
treaty with respect to income and gains derived in connection with the
ordinary shares or ADSs.
This section does not describe all aspects of U.S. taxation or U.K. taxation
that may be relevant to a U.S. Holders in light of their particular
circumstances, such as U.S. Holders whose stock or ADS was acquired as a result
of the exercise of an employee stock option or otherwise as compensation or
U.S. Holders subject to special treatment under the U.S. federal income tax
laws (for example, U.S. Holders that hold stock or ADSs as part of a straddle,
hedge or conversion transaction, financial institutions, insurance companies,
tax-exempt organizations, dealers, traders in securities that elect to adjust
the valuation of these securities to reflect current market values and
recognize gain or loss annually based on fair market value at year end, persons
subject to alternative minimum tax, or persons that own actually or
constructively 10% or more of the voting power of ScottishPower or that are 5%
shareholders of PacifiCorp within the meaning of Section 367(a) of the Internal
Revenue Code and the regulations thereunder). This section also does not
address any aspects of state or local taxation or foreign taxation, other than
material U.K. tax consequences.
The discussion of U.S. federal income tax consequences is based on the tax
laws of the United States, including the Internal Revenue Code, its legislative
history, existing and proposed regulations thereunder, published rulings and
court decisions, as in effect on the date this proxy statement/prospectus
becomes effective, as well as on the U.S.-U.K. income tax treaty, all of which
are subject to change or changes in interpretation, possibly with retroactive
effect. The United Kingdom recently changed its taxation system with respect to
dividends, effective for dividends paid on or after April 6, 1999. The United
States and the United Kingdom have announced that they intend to enter into
negotiations to update their income tax treaty. The discussion of U.K. tax
consequences is based on the new U.K. tax law, current Inland Revenue practice
and the present U.S.-U.K. income tax treaty. The discussion of U.K. taxation
relating to dividends deals only with dividends paid with respect to
ScottishPower ADSs or ordinary shares on or after April 6, 1999 and addresses
only Eligible U.S. Holders who are not resident or, in the case of individuals,
ordinarily resident in the U.K. for U.K. tax purposes.
Each U.S. Holder is advised to consult his or her own tax advisors as to the
U.S. and U.K. tax consequences of the merger, including the facts and
circumstances that may be unique to the U.S. Holder, and as to any estate,
gift, state, local or non-U.S. tax consequences of the merger and the ownership
and disposition of ADSs or ordinary shares. These tax advisors are urged to
review the merger agreement for a full description of the technical details of
the merger.
United States Tax Consequences
United States Tax Consequences of the Merger to U.S. Holders of PacifiCorp
Common Stock
PacifiCorp has received from its counsel, Stoel Rives LLP, and its special
counsel, LeBoeuf, Lamb, Greene & MacRae, LLP, and ScottishPower has received
from its counsel, Milbank, Tweed, Hadley & McCloy LLP, tax opinions which state
that in the opinion of counsel:
. the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
. no gain or loss will be recognized by any PacifiCorp shareholder for
U.S. federal income tax purposes on the exchange of PacifiCorp common
stock for ADSs or ordinary shares except with respect to cash received
on the sale of a fractional interest in an ADS or ordinary share;
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. the aggregate tax basis of the ADSs or ordinary shares received,
including fractional units treated as received as discussed below, by
the U.S. Holder will be the same as the aggregate tax basis of the
PacifiCorp common stock surrendered in exchange therefor in the merger;
and
. the holding period of the ADSs or ordinary shares, including fractional
units treated as received as discussed below, will include the holding
period of the PacifiCorp common stock held as a capital asset and
surrendered in exchange therefor in the merger.
The tax opinions are expressly based upon the consummation of the merger
according to the merger agreement, the accuracy of representations made to
their counsel by PacifiCorp and ScottishPower, and compliance with the
covenants in the merger agreement. A breach of certain covenants in the merger
agreement could cause the merger to fail to qualify as a tax free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. In particular, it is a condition to the merger qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code and, therefore, an assumption of the tax opinions, that immediately after
the merger there be no PacifiCorp "nonvoting preferred stock", as that term is
used in Section 368 of the Internal Revenue Code, of which at least 80 percent
is not owned indirectly by ScottishPower. The PacifiCorp $1.16, $1.18 and $1.28
series of no par serial preferred stock each constitute PacifiCorp "nonvoting
preferred stock" and will be redeemed by PacifiCorp before the merger.
It is a waivable condition of the merger that PacifiCorp and ScottishPower
each receive tax opinions from their counsel that (1) the merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and (2) that no gain or loss will be recognized by any
PacifiCorp shareholder for U.S. federal income tax purposes on the exchange of
PacifiCorp common stock for ADSs or ordinary shares, except with respect to
cash received on the sale of a fractional interest in an ADS or ordinary share.
These opinions will be based on assumptions and updated representations of
PacifiCorp and ScottishPower to be delivered at the time of the merger. The tax
opinions cannot be relied upon if any of the factual representations is, or
later becomes, inaccurate. PacifiCorp does not intend to waive receipt of the
tax opinions from its counsel and will not waive receipt of both opinions
without first circulating revised proxy materials and resoliciting the vote of
its shareholders.
The tax opinions are not binding on the Internal Revenue Service or a court
and do not preclude the Internal Revenue Service or a court from adopting a
contrary position. Neither PacifiCorp nor ScottishPower will seek a ruling from
the Internal Revenue Service as to the tax treatment of the merger.
PacifiCorp shareholders will receive cash instead of fractional interests in
ADSs and ordinary shares. A U.S. Holder who receives cash instead of a
fractional ADS or ordinary share will be treated as having received the
fractional ADS or share in the merger and then as having sold the fractional
ADS or share for cash. The amount of any capital gain or loss of the U.S.
Holder attributable to that sale will be equal to the difference between the
cash received with respect to the fractional ADS or ordinary share and the tax
basis that is allocated to the fractional ADS or ordinary share. In the case of
an individual U.S. Holder, any such gain will be subject to U.S. federal income
tax at a maximum rate of 20% if the U.S. Holder has a holding period for the
fractional ADS or ordinary share of more than 12 months at the time of the
merger.
United States Tax Consequences to Dissenting U.S. Holders of PacifiCorp
Preferred Stock.
A U.S. Holder of PacifiCorp preferred stock who exercises dissenters' rights
as described below under "The Merger--Dissenters' Rights" will recognize gain
or loss for U.S. federal income tax purposes equal to the difference between
the tax basis of the PacifiCorp preferred stock with respect to which these
rights are exercised and the amount received through the exercise of these
rights. If immediately following the merger, the holder actually and
constructively owns no ADSs or ordinary shares, any gain or loss recognized
generally:
. will be capital gain or loss if the PacifiCorp preferred stock is held
as a capital asset by the shareholder at the time of the merger; and
. will be long-term capital gain or loss if the shareholder's holding
period for the PacifiCorp preferred stock is more than 12 months at the
time of the merger.
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United States Tax Consequences of the Ownership of Ordinary Shares and ADSs
Taxation of Dividends
As discussed below under "United Kingdom Tax Consequences," an Eligible U.S.
Holder is entitled to a U.K. tax credit that is offset by the U.K. withholding
tax. Under the present U.S.-U.K. income tax treaty, Eligible U.S. Holders will
include as ordinary income the amount of any dividend paid by ScottishPower out
of its current or accumulated earnings and profits, as determined for United
States federal income tax purposes (the "base dividend") plus the amount of any
U.K. credit, before reduction for U.K. withholding tax. If ScottishPower paid a
dividend of $90, for example, for U.S. federal income tax purposes an Eligible
U.S. Holder would recognize ordinary income of $90 plus the $10 U.K. tax
credit, or a total of $100. The income is recognized when the dividend is
actually or constructively received by the Eligible U.S. Holder, in the case of
ordinary shares, or by the depository, in the case of ADSs. The dividend will
not be eligible for the dividends-received deduction generally allowed to U.S.
corporations in respect of dividends received from other U.S. corporations.
Distributions in excess of ScottishPower current and accumulated earnings and
profits, as determined for U.S. federal income tax purposes, will be treated as
a return of capital to the extent of the Eligible U.S. Holder's basis in the
ordinary shares or ADSs and thereafter as capital gain. In determining the U.S.
dollar amount of dividend income, an Eligible U.S. Holder will use the spot
currency exchange rate on the date the dividend is included in income. Any
difference between that U.S. dollar amount and the dollars actually received
may constitute foreign currency gain or loss, which is ordinary gain or loss.
Individual Eligible U.S. Holders, however, are not required to recognize gain
of less than $200 from the exchange of foreign currency in a "personal
transaction" as defined in Section 988(e) of the Internal Revenue Code.
Subject to some specific limitations and requirements, an Eligible U.S.
Holder will be entitled under the U.S.-U.K. income tax treaty to credit the
U.K. withholding tax against the Eligible U.S. Holder's United States federal
income tax liability. Claiming a U.S. foreign tax credit with respect to the
U.K. withholding tax imposed under the U.S.-U.K. income tax treaty upon the
refunded U.K. tax credit may result in a lower effective U.S. federal income
tax rate on dividends paid by ScottishPower for certain Eligible U.S. Holders.
It is not clear whether inclusion of the U.K. tax credit in income and
entitlement to the U.S. foreign tax credit are dependent on the Eligible U.S.
Holder filing a claim with the U.K. Inland Revenue. Eligible U.S. Holders that
do not elect to claim foreign tax credits may instead claim a deduction for
U.K. withholding tax. For foreign tax credit limitation purposes, the dividend
will be income from sources without the U.S., but generally will be treated
separately, together with other items of "passive income" or, in the case of
certain holders, "financial services income". The rules relating to the
computation of foreign taxes are complex and Eligible U.S. Holders should
consult their own tax advisors to determine whether and to what extent a credit
would be available and whether any filings or other actions may be required to
substantiate their foreign tax credit claim.
It is possible that, in the future, ScottishPower will be at least 50% owned
by U.S. persons. Under Section 904(g) of the Internal Revenue Code, dividends
paid by a foreign corporation that is at least 50% owned by U.S. persons may be
treated as U.S. source income, rather than foreign source income, for foreign
tax credit purposes to the extent the foreign corporation has more than an
insignificant amount of U.S. source income, and the effect of this rule may be
to treat a portion of the dividends paid by ScottishPower as U.S. source
income. Under the Treaty, Section 904(g)(10) of the Internal Revenue Code would
permit an Eligible U.S. Holder to elect to treat ScottishPower dividends as
foreign source income for foreign tax credit limitation purposes, if the
dividend income is separated from other income items for purposes of
calculating the holder's foreign tax credit.
Taxation of Capital Gains
In general, for U.S. tax purposes, U.S. Holders of ADSs will be treated as
the owners of the underlying ordinary shares that are represented by the ADSs
and deposits and withdrawals of ordinary shares by U.S. Holders in exchange for
ADSs will not be treated as a sale or other disposition for U.S. federal income
tax purposes.
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Upon a sale or other disposition of ordinary shares or ADSs, a U.S. Holder
will recognize gain or loss for U.S. federal income tax purposes in an amount
equal to the difference between the U.S. dollar value of the amount realized
and the U.S. Holder's tax basis (determined in U.S. dollars) in the ordinary
shares or ADSs. Generally, the gain or loss will be a long-term capital gain or
loss if the U.S. Holder's holding period for the ordinary shares or ADSs
exceeds one year and any gain or loss generally will be income from sources
within the United States for foreign tax credit limitation purposes. Long-term
capital gain for a non-corporate U.S. Holder is generally subject to a maximum
tax rate of 20%.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividend
payments, or other taxable distributions, in respect of ordinary shares or ADSs
made within the United States to a non-corporate U.S. person. Accordingly,
individual U.S. Holders will receive an annual statement showing the amount of
taxable dividends paid to them during the year. "Backup withholding" at the
rate of 31% will apply to these payments:
. if the holder or beneficial owner fails to provide an accurate taxpayer
identification number in the manner required by United States law and
applicable regulations;
. if there has been notification from the Internal Revenue Service of a
failure by the holder or beneficial owner to report all interest or
dividends required to be shown on its federal income tax returns; or
. in some limited circumstances, if the holder or beneficial owner fails
to comply with applicable certification requirements.
In general, payment of the proceeds from the sale of ordinary shares or ADSs
to or through a U.S. office of a broker is subject to both U.S. backup
withholding and information reporting requirements, unless the holder or
beneficial owner establishes an exemption. Different rules apply to payments
made outside the U.S. through an office outside the U.S.
Amounts withheld under the backup withholding rules may be credited against
a U.S. Holder's U.S. tax liability, and a U.S. Holder may obtain a refund of
any excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the Internal Revenue Service.
United Kingdom Tax Consequences to U.S. Holders of the Ownership of Ordinary
Shares and ADSs.
For the purposes of the U.S.-U.K. income tax treaty, Eligible U.S. Holders of
ADSs will be treated as owners of the ordinary shares underlying the ADSs.
Taxation of Dividends
An Eligible U.S. Holder that receives a dividend payment of $90 from
ScottishPower on or after April 6, 1999 will be entitled under the U.S.-U.K.
income tax treaty to a U.K. tax credit amount of $10, subject to a U.K.
withholding tax of an equal amount (i.e., $10) resulting in a net receipt,
before applicable U.S. taxes, of $90 (i.e., an amount equal to the dividend).
Accordingly, an Eligible U.S. Holder who receives as beneficial owner a
dividend from ScottishPower will not be entitled under the U.S.-U.K. income tax
treaty to receive any additional payment in respect of the tax credit from the
U.K. Inland Revenue. See also "United States Tax Consequences--Taxation of
Dividends" above.
Taxation of Capital Gains
An Eligible U.S. Holder who is not resident or ordinarily resident for tax
purposes in the U.K. will not generally be liable for U.K. tax on capital gains
realized on the disposal of his ordinary shares or ADSs. This general rule does
not apply if, at the time of the disposal, the Eligible U.S. Holder carries on
a trade, profession or vocation in the U.K. through a branch or agency and the
ordinary shares or ADSs are or have been used,
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held or acquired for the purposes of such trade, profession or vocation, or for
the purposes of such branch or agency. A U.S. Holder who is an individual and
who has, on or after March 17, 1998, ceased to be resident or ordinarily
resident for tax purposes in the U.K. for a period of less than five tax years
and who disposes of ordinary shares or ADSs during that period may be liable
for U.K. tax on capital gains realized, subject to any available exemption or
relief.
Stamp Duty and Stamp Duty Reserve Tax
U.K. stamp duty is charged in respect of certain documents and U.K. stamp
duty reserve tax is imposed in respect of certain transactions in securities.
Transfers of the ordinary shares will generally be subject to U.K. stamp
duty at the rate of 50p for every (Pounds)100, or part thereof, of the
consideration given for the transfer. An agreement to transfer ordinary shares
or any interest in the ordinary shares for money or money's worth will normally
give rise to a charge of stamp duty reserve tax at the rate of 0.5% of the
consideration given. If an agreement to transfer ordinary shares is completed
by a duly stamped transfer within six years, then the charge to stamp duty
reserve tax will be cancelled or, where the stamp duty reserve tax charge has
been paid, the stamp duty reserve tax will, provided that a claim for repayment
is made, be repaid.
Transfers of shares through the electronic transfer system known as "CREST"
are generally subject to stamp duty reserve tax rather than stamp duty. A
charge to stamp duty or stamp duty reserve tax respectively at the rates of
(Pounds)1.50 for every (Pounds)100, or part thereof, or 1.5% of the value of
the consideration or, in some circumstances, the value of the ordinary shares
concerned, may arise on a transfer of the ordinary shares to, or to the
custodian of, the depositary or to certain persons providing a clearance
service or their nominees or agents and will generally be payable by the
depositary or person providing the clearance service. Any tax or duty payable
by the depositary or the custodian of the depositary on deposit of ordinary
shares will be charged by the depositary to the party to whom ADRs are
delivered against the deposits. However, any SDRT or stamp duty arising on the
issue of the ADSs constituting merger consideration will be paid by PacifiCorp.
No liability for stamp duty will arise on any transfer of an ADS or
beneficial ownership of such an ADS, provided that the ADS and any instrument
of transfer or written agreement to transfer is executed outside the U.K., and
remains at all times outside the U.K. In any other case, a charge to ad valorem
stamp duty may arise.
Stamp duty reserve tax will not be payable on any agreement to transfer the
depositary receipts representing ADSs or beneficial ownership of the depositary
receipts. A transfer of the underlying ordinary shares from the depositary to
the holder of an ADS upon cancellation of the ADS generally will be subject to
a fixed U.K. stamp duty of 50p per instrument of transfer.
Accounting Treatment
The merger will be accounted for as a "purchase," as this term is used under
generally accepted accounting principles. Accordingly, from and after the
merger, PacifiCorp's consolidated results of operations will be included in
ScottishPower's consolidated results of operations. PacifiCorp's financial
statements will be kept under U.S. GAAP. For purposes of preparing
ScottishPower's consolidated financial statements under U.K. GAAP,
ScottishPower will convert PacifiCorp's financial statements from U.S. GAAP to
U.K. GAAP and establish a new accounting basis for PacifiCorp's assets and
liabilities based upon the fair market values thereof and the purchase price
for PacifiCorp. Therefore, the purchase accounting adjustments made in
connection with the development of the Unaudited Pro Forma Condensed Combined
Financial Information appearing elsewhere in this proxy statement/prospectus
are preliminary and have been made solely for purposes of developing the
Unaudited Pro Forma Condensed Combined Financial Information to comply with the
disclosure requirements of the SEC. Although the final allocation will differ,
the Unaudited Pro Forma Condensed Combined Financial Information reflects
ScottishPower's best estimate based upon currently available information.
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Dissenters' Rights
PacifiCorp Common Stock. Under Oregon law, no holder of PacifiCorp common
stock will have dissenters' rights with respect to the merger as a result of
the holder's shares of PacifiCorp common stock.
PacifiCorp Preferred Stock. Under Sections 60.551 to 60.594 of the Business
Corporation Act of Oregon, any holder of PacifiCorp preferred stock who gives
proper notice and who does not vote in favor of the merger will, upon proper
demand, have the right under Oregon law to obtain payment of the fair value of
his or her shares of PacifiCorp preferred stock. All references in this section
to a "shareholder" are to the record holder or holders of shares of PacifiCorp
preferred stock and to "shares" are to shares of PacifiCorp preferred stock.
Sections 60.551 to 60.594 of the Business Corporation Act of Oregon are
reprinted in their entirety as Appendix E to this proxy statement/prospectus.
The following discussion is necessarily a summary of the law relating to
dissenters' rights and is qualified in its entirety by reference to Appendix E.
The discussion contained in this proxy statement/prospectus and in Appendix E
should be reviewed carefully by any holder of PacifiCorp preferred stock who
wishes to exercise statutory dissenters' rights or who wishes to preserve the
right to do so, as failure to comply with the procedures set forth in this
proxy statement/prospectus or in Appendix E will result in the loss of
dissenters' rights.
A shareholder who wishes to exercise dissenters' rights generally must
dissent with respect to all the shares the shareholder owns or over which the
shareholder has power to direct the vote. However, if a record shareholder is a
nominee for several shareholders, some of whom wish to dissent and some of whom
do not, then the record shareholder may dissent with respect to all the shares
beneficially owned by any one person by notifying PacifiCorp in writing of the
name and address of each person on whose behalf the record shareholder asserts
dissenters' rights. A beneficial holder may assert dissenters' rights directly
by submitting to PacifiCorp the record shareholder's written consent to the
dissent and by dissenting with respect to all the shares of which the
shareholder is the beneficial shareholder or over which the shareholder has
power to direct the vote.
A shareholder who does not deliver to PacifiCorp before the vote being taken
at the PacifiCorp annual meeting a written notice of the shareholder's intent
to demand payment for the fair value of the shares will lose the right to
exercise dissenters' rights. Notice must be delivered to PacifiCorp, Suite
2000, 825 NE Multnomah, Portland, Oregon 97232, Attention: William E.
Peressini, Vice President and Treasurer, before the vote on June 17, 1999. In
addition, any shareholder electing dissenters' rights must not vote his or her
shares in favor of the merger. A vote in favor of the merger will constitute a
waiver of dissenters' rights. A vote against the merger will not be regarded as
a written notice for purposes of asserting dissenters' rights.
If the merger is completed, PacifiCorp will, within 10 days after the
merger, deliver written notice to all shareholders who properly perfected their
dissenters' rights. The notice will, among other things:
. state where the payment demand must be sent and where and when
certificates must be deposited;
. inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
. supply a form for demanding payment, which includes the date of the
first announcement of the terms of the merger and requires shareholders
to certify that they acquired beneficial ownership of the shares before
the date on which the merger was first announced; and
. set a date by which PacifiCorp must receive the payment demand, which
date will be between 30 and 60 days after PacifiCorp delivers the notice
to dissenting shareholders.
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A shareholder wishing to exercise dissenters' rights must file the payment
demand, certify as to whether beneficial ownership of the shares was acquired
before the merger was announced, and deliver share certificates, in the manner
and by the time stated in the notice. Failure to do so will cause the person to
lose his or her dissenters' rights.
As soon as the merger is completed, or upon receipt of the payment demand,
PacifiCorp shall pay to each dissenter with properly perfected dissenters'
rights PacifiCorp's estimate of the fair value of the shareholder's shares,
plus accrued interest from the date of the merger. PacifiCorp will provide,
along with the payment, certain financial information with respect to
PacifiCorp, including PacifiCorp's balance sheet and income statement for or as
of a fiscal year ending not more than 16 months before the date of payment and
its latest available interim financial statements, if any, an explanation of
how PacifiCorp estimated the fair value of the shares, an explanation of how
the accrued interest was calculated and other related information. With respect
to a dissenter who did not beneficially own PacifiCorp shares before the public
announcement of the merger, PacifiCorp is required to send an offer to make
payment to the dissenter, conditioned upon the dissenter's agreement to accept
the payment in full satisfaction of the dissenter's demands.
A dissenter dissatisfied with PacifiCorp's estimate of the fair value may,
within 30 days of payment or offer for payment by PacifiCorp of PacifiCorp's
estimate of the fair value of the shareholder's shares, notify PacifiCorp in
writing of the shareholder's estimate of fair value of his or her shares and
the amount of interest due, and demand payment. If PacifiCorp does not accept
the dissenter's estimate and the parties do not otherwise settle on a fair
value, Oregon law requires that PacifiCorp commence a proceeding in Multnomah
County Circuit Court, and petition the court to determine the fair value of the
shares and accrued interest, naming all the PacifiCorp dissenting shareholders
whose demands remain unsettled as parties to the proceeding. The court may
appoint one or more persons as appraisers to receive evidence and recommend the
fair value of the PacifiCorp preferred stock. The dissenters will be entitled
to the same discovery rights as parties in other civil actions. Each dissenter
made a party to the proceeding will be entitled to judgement for the amount, if
any, by which the court finds the fair value of his or her shares, plus accrued
interest, exceeds the amount, if any, previously paid to the dissenter by
PacifiCorp.
Court costs and appraisers' fees will be assessed against PacifiCorp, except
that the court may assess these costs against some or all of the dissenters to
the extent that the court finds the dissenters acted arbitrarily, vexatiously
or not in good faith in demanding payment. The court may also assess the fees
and expenses of counsel and experts of the respective parties in amounts that
the court finds equitable (1) against PacifiCorp, if the court finds that
PacifiCorp did not substantially comply with provisions of the Business
Corporation Act of Oregon concerning dissenters' rights and (2) against either
the dissenter or PacifiCorp, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in good
faith. If the court finds that services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that fees
should not be assessed against PacifiCorp, the court may award to counsel
reasonable fees to be paid out of the amounts awarded to all dissenters who
benefited from the proceedings.
A shareholder entitled to dissent and obtain payment for the shareholder's
shares of PacifiCorp preferred stock under Sections 60.551 to 60.594 of the
Business Corporation Act of Oregon may not challenge the merger unless
PacifiCorp fails to comply with the procedural requirements imposed by the
Business Corporation Act of Oregon, the PacifiCorp articles or bylaws or is
fraudulent with respect to the shareholder or PacifiCorp.
Holders of PacifiCorp preferred stock who dissent from the merger will
generally recognize taxable gain or loss for federal income tax purposes. See
"--Material Tax Consequences--United States Tax Consequences to Dissenting U.S.
Holders of PacifiCorp Preferred Stock" above.
In view of the complexity of Sections 60.551 to 60.594 of the Business
Corporation Act of Oregon, holders of PacifiCorp preferred stock who may wish
to dissent from the merger and pursue dissenters' rights should consult their
legal advisors.
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Federal Securities Law Consequences
All ADSs to be received by PacifiCorp shareholders in the merger will be
freely transferable, except that ADSs received by persons who are deemed to be
"affiliates" as such term is defined under the Securities Act of PacifiCorp
before the merger may be resold by them only in transactions permitted by the
resale provisions of Rule 145 promulgated under the Securities Act or Rule 144
in the case of persons who become affiliates of ScottishPower or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of ScottishPower or PacifiCorp generally include individuals or entities that
control, are controlled by, or are under common control with such party and may
include officers and directors of each party as well as principal shareholders
of each party. The merger agreement requires PacifiCorp to use its best efforts
to cause each of its affiliates to execute a written agreement to the effect
that the affiliate will not offer or sell or otherwise dispose of any of the
ADSs issued to such affiliate in or under the merger in violation of the
Securities Act or the rules and regulations promulgated by the SEC thereunder.
SCHEME OF ARRANGEMENT
ScottishPower announced on February 25, 1999 its intention to recommend to
ScottishPower shareholders a proposal to introduce a new holding company for
the ScottishPower group. The holding company structure will be effected through
a "scheme of arrangement" which must be sanctioned by a Scottish court and
approved by ScottishPower's shareholders. Under the scheme, New ScottishPower
will issue one share of New ScottishPower in exchange for each outstanding
ScottishPower share. As a result, New ScottishPower will become the holding
company for ScottishPower. The special share in ScottishPower will be cancelled
and New ScottishPower will issue a special share to the holder of the
ScottishPower special share.
In addition, ordinary shares of New ScottishPower will be listed on the
London Stock Exchange, New ScottishPower ADSs will be listed on the New York
Stock Exchange and New ScottishPower will be subject to the registration and
information requirements of U.S. securities laws.
The rights attaching to the New ScottishPower ordinary shares will be
substantially the same as those currently attaching to the ScottishPower
ordinary shares. Thus, after the scheme is implemented, holders of
ScottishPower ordinary shares will have their interest in ScottishPower
replaced by an equivalent proportionate interest in New ScottishPower and,
subject to the effect of exercise of options to subscribe for ScottishPower
shares granted under ScottishPower share schemes, their proportionate interests
in the profits, net assets and dividends in the ScottishPower group will not be
affected.
If the scheme of arrangement is not implemented by June 30, 2000, the
holders of ScottishPower shares will remain as such, ScottishPower ordinary
shares will continue to be listed on the London Stock Exchange and its ADSs
will continue to be listed on the New York Stock Exchange.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introductory Note
The following Unaudited Pro Forma Condensed Combined Financial Information
gives pro forma effect to the merger, after giving effect to the pro forma
adjustments described in the accompanying notes. The Unaudited Pro Forma
Condensed Combined Financial Information has been prepared from, and should be
read in conjunction with, the respective historical consolidated financial
statements and notes thereto of ScottishPower and PacifiCorp, which are
incorporated by reference in this proxy statement/prospectus. See "Where You
Can Find More Information". The historical consolidated financial statements of
ScottishPower and PacifiCorp have been subject to certain adjustments as
detailed in Notes 1 to 4 to the Unaudited Pro Forma Condensed Combined
Financial Information.
The Unaudited Pro Forma Condensed Combined Financial Information is provided
for illustrative purposes only and does not purport to represent what the
actual results of operations or the financial position of the Combined Group
would have been had the merger occurred on the respective dates assumed, nor is
it necessarily indicative of the Combined Group's future operating results,
combined financial position or dividend payment policies. No account has been
taken, within the Unaudited Pro Forma Condensed Combined Financial Information,
of any synergies (including cost savings) or any severance and restructuring
costs, which may or are expected to occur following the merger. See "The
Merger--Reasons for the Merger".
The Combined Group intends to account for the merger using the acquisition
method of accounting under U.K. GAAP and the merger qualifies for the purchase
method of accounting under U.S. GAAP. The pro forma financial information has
been prepared on this basis. For the purposes of the acquisition method of
accounting under U.K. GAAP and the purchase method of accounting under U.S.
GAAP, ScottishPower is treated as the acquiring entity and PacifiCorp is
treated as the entity being acquired. Subsequent to the merger, PacifiCorp's
financial statements will continue to be maintained on a U.S. GAAP basis but
will be converted to U.K. GAAP upon consolidation with ScottishPower.
As described in Note 1 to the Unaudited Pro Forma Condensed Combined
Financial Information, adjustments have been made to the historical
consolidated financial statements of PacifiCorp to reflect reclassifications to
conform to ScottishPower's presentation under U.K. GAAP, and to remove the
impact of discontinued operations and extraordinary items. An adjustment has
also been made to the historical consolidated financial statements of
ScottishPower for the six months ended September 30, 1997 as described in Note
1.
The historical financial statements of PacifiCorp have been prepared in
accordance with U.S. GAAP. For the purposes of presenting the Unaudited Pro
Forma Condensed Combined Financial Information, financial information relating
to PacifiCorp has been adjusted to conform with ScottishPower's accounting
policies under U.K. GAAP as described in Note 2 to the Unaudited Pro Forma
Condensed Combined Financial Information.
The historical financial statements of PacifiCorp are presented in U.S.
dollars. For purposes of presenting the Unaudited Pro Forma Condensed Combined
Financial Information:
. the adjusted PacifiCorp results of operations for all periods presented
have been translated into pounds sterling at the average noon buying
rate for the period concerned; and
. the unaudited historical condensed combined balance sheet of PacifiCorp
at September 30, 1998 has been translated into pounds sterling at the
effective noon buying rate at September 30, 1998. See Note 3 to the
Unaudited Pro Forma Condensed Combined Financial Information.
The pro forma amounts pertaining to the Combined Group in the Unaudited Pro
Forma Condensed Combined Financial Information are presented in pounds sterling
and are also expressed in U.S. dollars at the rates detailed in Note 3 to the
Unaudited Pro Forma Condensed Combined Financial Information. The use of these
exchange rates in the Unaudited Pro Forma Condensed Combined Financial
Information should not be construed to signify that the U.S. dollar amounts
actually represent such pounds sterling amounts or could be converted into U.S.
dollars at the rate indicated or at any other rate, at any time.
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The pro forma purchase accounting adjustments reflected in the accompanying
Unaudited Pro Forma Condensed Combined Financial Information are described in
Note 4 to the Unaudited Pro Forma Condensed Combined Financial Information.
Actual amounts will differ from those reflected in the Unaudited Pro Forma
Condensed Combined Financial Information.
Holders of PacifiCorp common stock will be entitled to receive 0.58 ADSs,
each of which represents four ordinary shares, or, if so elected, 2.32 ordinary
shares for each share of PacifiCorp common stock held. The precise number of
shares of PacifiCorp common stock to be converted in the merger cannot be
determined until the time of the merger.
The Unaudited Pro Forma Condensed Combined Financial Information has been
prepared in accordance with U.K. GAAP which differs in certain significant
respects from U.S. GAAP. Note 33 to the consolidated financial statements of
ScottishPower included in ScottishPower's Form 20-F filed on October 14, 1998
provides a description of the principal differences between U.K. GAAP and U.S.
GAAP as they relate to ScottishPower for the years ended March 31, 1998, 1997
and 1996. A reconciliation of the pro forma profit and pro forma equity
shareholders' funds to U.S. GAAP is included in Note 5 to the Unaudited Pro
Forma Condensed Combined Financial Information.
83
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Six Months Ended September 30, 1998
The following Unaudited Pro Forma Condensed Combined Income Statement for
the six months ended September 30, 1998 is derived from the unaudited
historical condensed consolidated income statements of ScottishPower for the
six months then ended and of PacifiCorp for the six months ended June 30, 1998,
after giving effect to the pro forma adjustments described in Notes 1 to 4 to
the Unaudited Pro Forma Condensed Combined Financial Information. Such
adjustments have been determined as if the merger took place on April 1, 1997,
the first day of the earliest financial period of ScottishPower presented in
the Unaudited Pro Forma Condensed Combined Financial Information. The Unaudited
Pro Forma Condensed Combined Financial Information has been prepared from, and
should be read in conjunction with, and supplemental to, the respective
historical consolidated financial statements and notes thereto of ScottishPower
and PacifiCorp, which are incorporated by reference in this proxy
statement/prospectus. The pro forma amounts for the Combined Group presented in
U.S. dollars comply with U.K. GAAP.
<TABLE>
<CAPTION>
ScottishPower
Six months
ended Purchase
September 30, PacifiCorp Accounting
1998 Six months ended June 30, 1998 Adjustments Combined Group
------------- ---------------------------------------- ----------- ---------------------
U.S. U.K. U.K.
U.K. GAAP GAAP Adjustments GAAP GAAP U.K. GAAP U.K. GAAP U.K. GAAP
------------- -------- ----------- -------- -------- ----------- --------- ---------
(Pounds) $ $ $ (Pounds) (Pounds) (Pounds) $
(Note 1) (Note 2) (Note 3) (Note 4) (Note 3)
(in millions, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group turnover from
continuing operations.. 1,443.9 2,471.9 32.0 2,503.9 1,517.5 -- 2,961.4 4,886.3
Cost of sales........... (830.3) (1,591.4) 0.8 (1,590.6) (964.0) -- (1,794.3) (2,960.6)
------- -------- ----- -------- ------- ----- -------- --------
Gross profit from
continuing operations.. 613.6 880.5 32.8 913.3 553.5 -- 1,167.1 1,925.7
Transmission and
distribution costs..... (122.0) (288.1) 0.8 (287.3) (174.1) -- (296.1) (488.6)
Administrative
expenses............... (183.0) (330.9) 4.1 (326.8) (198.1) (30.0) (411.1) (678.3)
Other operating income.. 15.8 12.1 -- 12.1 7.3 -- 23.1 38.1
------- -------- ----- -------- ------- ----- -------- --------
Operating profit from
continuing operations
before merger goodwill
amortization........... 324.4 273.6 37.7 311.3 188.6 -- 513.0 846.4
Merger goodwill
amortization........... -- -- -- -- -- (30.0) (30.0) (49.5)
Operating profit from
continuing operations.. 324.4 273.6 37.7 311.3 188.6 (30.0) 483.0 796.9
Share of operating
profit in joint
ventures and
associates............. 0.2 6.0 -- 6.0 3.6 -- 3.8 6.3
------- -------- ----- -------- ------- ----- -------- --------
Profit on ordinary
activities before
interest............... 324.6 279.6 37.7 317.3 192.2 (30.0) 486.8 803.2
Net interest charge..... (77.3) (193.1) (30.5) (223.6) (135.5) -- (212.8) (351.1)
------- -------- ----- -------- ------- ----- -------- --------
Profit on ordinary
activities before
taxation............... 247.3 86.5 7.2 93.7 56.7 (30.0) 274.0 452.1
Taxation................ (56.9) (22.8) (5.2) (28.0) (17.0) -- (73.9) (122.0)
------- -------- ----- -------- ------- ----- -------- --------
Profit after ordinary
taxation............... 190.4 63.7 2.0 65.7 39.7 (30.0) 200.1 330.1
Exceptional taxation -
windfall tax........... -- -- -- -- -- -- -- --
------- -------- ----- -------- ------- ----- -------- --------
Profit after taxation... 190.4 63.7 2.0 65.7 39.7 (30.0) 200.1 330.1
Minority interests...... (0.3) 0.7 -- 0.7 0.4 (5.8) (5.7) (9.4)
------- -------- ----- -------- ------- ----- -------- --------
Profit for the period... 190.1 64.4 2.0 66.4 40.1 (35.8) 194.4 320.7
Dividends--preferred.... -- (9.6) -- (9.6) (5.8) 5.8 -- --
Dividends--ordinary..... (89.9) (160.6) -- (160.6) (97.3) -- (187.2) (308.9)
------- -------- ----- -------- ------- ----- -------- --------
Profit/(loss) retained.. 100.2 (105.8) 2.0 (103.8) (63.0) (30.0) 7.2 11.8
======= ======== ===== ======== ======= ===== ======== ========
Earnings per
ordinary/common share.. 16.05 p $ 0.19 11.54 p 10.37 p $ 0.17
Adjusting item--merger
goodwill amortization.. -- -- -- 1.60 p $ 0.03
------- -------- ------- -------- --------
Adjusted earnings per
ordinary/common share.. 16.05 p $ 0.19 11.54 p 11.97 p $ 0.20
------- -------- ------- -------- --------
Diluted earnings per
ordinary/common share.. 15.87 p $ 0.19 11.54 p 10.30 p $ 0.17
Adjusting item--merger
goodwill amortization.. -- -- -- 1.59 p $ 0.03
------- -------- ------- -------- --------
Adjusted diluted
earnings per
ordinary/common share.. 15.87 p $ 0.19 11.54 p 11.89 p $ 0.20
------- -------- ------- -------- --------
Weighted average number
of shares outstanding
(millions of shares)
Basic................... 1,184.6 297.2 297.2 1,874.1 1,874.1
Diluted................. 1,197.5 297.2 297.2 1,887.0 1,887.0
======= ======== ======= ======== ========
</TABLE>
84
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Six Months Ended September 30, 1997
The following Unaudited Pro Forma Condensed Combined Income Statement for
the six months ended September 30, 1997 is derived from the unaudited
historical condensed consolidated income statements of ScottishPower for the
six months then ended and of PacifiCorp for the six months ended June 30, 1997,
after giving effect to the pro forma adjustments described in Notes 1 to 4 to
the Unaudited Pro Forma Condensed Combined Financial Information. Such
adjustments have been determined as if the merger took place on April 1, 1997,
the first day of the earliest financial period of ScottishPower presented in
the Unaudited Pro Forma Condensed Combined Financial Information. The Unaudited
Pro Forma Condensed Combined Financial Information has been prepared from, and
should be read in conjunction with, and supplemental to, the respective
historical consolidated financial statements and notes thereto of ScottishPower
and PacifiCorp, which are incorporated by reference in this proxy
statement/prospectus. The pro forma amounts for the Combined Group presented in
U.S. dollars comply with U.K. GAAP.
<TABLE>
<CAPTION>
ScottishPower
Six months
ended Purchase
September 30, PacifiCorp Accounting
1997 Six months ended June 30, 1997 Adjustments Combined Group
------------- ------------------------------------------- ----------- ---------------------
U.K. GAAP U.S. GAAP Adjustments U.K. GAAP U.K. GAAP U.K. GAAP U.K. GAAP U.K. GAAP
------------- --------- ----------- --------- --------- ----------- --------- ---------
(Pounds) $ $ $ (Pounds) (Pounds) (Pounds) $
(Note 1) (Note 1) (Note 2) (Note 3) (Note 4) (Note 3)
(in millions, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group turnover from
continuing operations.. 1,369.6 2,007.5 33.2 2,040.7 1,252.0 -- 2,621.6 4,273.2
Cost of sales........... (798.8) (1,076.9) 1.4 (1,075.5) (659.8) -- (1,458.6) (2,377.5)
------- -------- ----- -------- ------- ----- -------- --------
Gross profit from
continuing operations.. 570.8 930.6 34.6 965.2 592.2 -- 1,163.0 1,895.7
Transmission and
distribution costs..... (113.2) (227.5) 0.9 (226.6) (139.0) -- (252.2) (411.1)
Administrative
expenses............... (157.5) (217.2) 10.1 (207.1) (127.1) (30.0) (314.6) (512.8)
Other operating income.. 16.8 16.8 -- 16.8 10.3 -- 27.1 44.2
------- -------- ----- -------- ------- ----- -------- --------
Operating profit from
continuing operations
before merger goodwill
amortization........... 316.9 502.7 45.6 548.3 336.4 -- 653.3 1,064.9
Merger goodwill
amortization........... -- -- -- -- -- (30.0) (30.0) (48.9)
Operating profit from
continuing operations.. 316.9 502.7 45.6 548.3 336.4 (30.0) 623.3 1,016.0
Share of operating
profit in joint
ventures and
associates............. 0.5 6.9 -- 6.9 4.2 -- 4.7 7.7
------- -------- ----- -------- ------- ----- -------- --------
Profit on ordinary
activities before
interest............... 317.4 509.6 45.6 555.2 340.6 (30.0) 628.0 1,023.7
Net interest charge..... (72.4) (229.1) (31.4) (260.5) (159.8) -- (232.2) (378.5)
------- -------- ----- -------- ------- ----- -------- --------
Profit on ordinary
activities before
taxation............... 245.0 280.5 14.2 294.7 180.8 (30.0) 395.8 645.2
Ordinary taxation....... (58.1) (98.1) 9.6 (88.5) (54.3) -- (112.4) (183.2)
------- -------- ----- -------- ------- ----- -------- --------
Profit after ordinary
taxation............... 186.9 182.4 23.8 206.2 126.5 (30.0) 283.4 462.0
Exceptional taxation--
windfall tax........... (317.0) -- -- -- -- -- (317.0) (516.7)
------- -------- ----- -------- ------- ----- -------- --------
Profit/(loss) after
taxation............... (130.1) 182.4 23.8 206.2 126.5 (30.0) (33.6) (54.7)
Minority interests...... -- (1.3) -- (1.3) (0.8) (7.5) (8.3) (13.5)
------- -------- ----- -------- ------- ----- -------- --------
Profit/(loss) for the
period................. (130.1) 181.1 23.8 204.9 125.7 (37.5) (41.9) (68.2)
Dividends--preferred.... -- (12.2) -- (12.2) (7.5) 7.5 -- --
Dividends--ordinary..... (80.4) (159.7) -- (159.7) (98.0) -- (178.4) (290.8)
------- -------- ----- -------- ------- ----- -------- --------
Profit/(loss) retained.. (210.5) 9.2 23.8 33.0 20.2 (30.0) (220.3) (359.0)
======= ======== ===== ======== ======= ===== ======== ========
Earnings per
ordinary/common share.. (11.04)p $0.65 39.99p (2.25)p $ (0.04)
Adjusting item--merger
goodwill amortization.. -- -- -- 1.61p $ 0.03
Adjusting item--windfall
tax.................... 26.89p -- -- 17.00p $ 0.28
------- -------- ------- -------- --------
Adjusted earnings per
ordinary/common share.. 15.85p $0.65 39.99p 16.36p $ 0.27
======= ======== ======= ======== ========
Diluted earnings per
ordinary/common share.. (10.93)p $0.65 39.99p (2.23)p $ (0.04)
Adjusting item--merger
goodwill amortization.. -- -- -- 1.60p $ 0.03
Adjusting item--windfall
tax.................... 26.64p -- -- 16.90p $ 0.28
------- -------- ------- -------- --------
Adjusted diluted
earnings per
ordinary/common share.. 15.71p $0.65 39.99p 16.27p $ 0.27
======= ======== ======= ======== ========
Weighted average number
of shares outstanding
(millions of shares)...
Basic................... 1,178.8 295.6 295.6 1,864.6 1,864.6
Diluted................. 1,189.8 295.6 295.6 1,875.6 1,875.6
======= ======== ======= ======== ========
</TABLE>
85
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Year Ended March 31, 1998
The following Unaudited Pro Forma Condensed Combined Income Statement for
the year ended March 31, 1998 is derived from the audited historical condensed
consolidated income statements of ScottishPower for the year then ended and of
PacifiCorp for the year ended December 31, 1997, after giving effect to the pro
forma adjustments described in Notes 1 to 4 to the Unaudited Pro Forma
Condensed Combined Financial Information. Such adjustments have been determined
as if the merger took place on April 1, 1997, the first day of the earliest
financial period of ScottishPower presented in the Unaudited Pro Forma
Condensed Combined Financial Information. The Unaudited Pro Forma Condensed
Combined Financial Information has been prepared from, and should be read in
conjunction with, and supplemental to, the respective historical consolidated
financial statements and notes thereto of ScottishPower and PacifiCorp, which
are incorporated by reference in this proxy statement/prospectus. The pro forma
amounts for the Combined Group presented in U.S. dollars comply with U.K. GAAP.
<TABLE>
<CAPTION>
ScottishPower
Year ended Purchase
March 31, PacifiCorp Accounting
1998 Year ended December 31, 1997 Adjustments Combined Group
------------- ------------------------------------------- ----------- --------------------
U.K. GAAP U.S. GAAP Adjustments U.K. GAAP U.K. GAAP U.K. GAAP U.K. GAAP U.K. GAAP
------------- --------- ----------- --------- --------- ----------- --------- ---------
(Pounds) $ $ $ (Pounds) (Pounds) (Pounds) $
(Note 1) (Note 2) (Note 3) (Note 4) (Note 3)
(in millions, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group turnover from
continuing operations.. 3,128.2 4,561.6 54.3 4,615.9 2,814.6 -- 5,942.8 9,746.2
Cost of sales........... (1,850.7) (2,707.0) 2.7 (2,704.3) (1,649.0) -- (3,499.7) (5,739.5)
-------- -------- ----- -------- -------- ----- -------- --------
Gross profit from
continuing operations.. 1,277.5 1,854.6 57.0 1,911.6 1,165.6 -- 2,443.1 4,006.7
Transmission and
distribution costs..... (219.1) (465.1) 1.7 (463.4) (282.6) -- (501.7) (822.8)
Administrative
expenses............... (303.0) (687.3) 20.0 (667.3) (406.9) (60.0) (769.9) (1,262.6)
Other operating income.. 29.7 31.5 -- 31.5 19.2 -- 48.9 80.2
-------- -------- ----- -------- -------- ----- -------- --------
Operating profit from
continuing operations
before merger goodwill
amortization........... 785.1 733.7 78.7 812.4 495.3 -- 1,280.4 2,099.9
Merger goodwill
amortization........... -- -- -- -- -- (60.0) (60.0) (98.4)
Operating profit from
continuing operations.. 785.1 733.7 78.7 812.4 495.3 (60.0) 1,220.4 2,001.5
Share of operating
profit in joint
ventures and
associates............. 1.9 18.1 -- 18.1 11.0 -- 12.9 21.2
-------- -------- ----- -------- -------- ----- -------- --------
Profit on ordinary
activities before
exceptional items and
interest............... 787.0 751.8 78.7 830.5 506.3 (60.0) 1,233.3 2,022.7
Exceptional item--profit
on sale of business.... -- 56.5 -- 56.5 34.5 -- 34.5 56.6
-------- -------- ----- -------- -------- ----- -------- --------
Profit on ordinary
activities before
interest............... 787.0 808.3 78.7 887.0 540.8 (60.0) 1,267.8 2,079.3
Net interest charge..... (147.4) (461.7) (50.8) (512.5) (312.5) -- (459.9) (754.2)
-------- -------- ----- -------- -------- ----- -------- --------
Profit on ordinary
activities before
taxation............... 639.6 346.6 27.9 374.5 228.3 (60.0) 807.9 1,325.1
Ordinary taxation....... (151.6) (111.8) (0.5) (112.3) (68.5) -- (220.1) (361.0)
-------- -------- ----- -------- -------- ----- -------- --------
Profit after ordinary
taxation............... 488.0 234.8 27.4 262.2 159.8 (60.0) 587.8 964.1
Exceptional taxation--
windfall tax........... (317.0) -- -- -- -- -- (317.0) (519.9)
-------- -------- ----- -------- -------- ----- -------- --------
Profit after taxation... 171.0 234.8 27.4 262.2 159.8 (60.0) 270.8 444.2
Minority interests...... (0.9) (1.9) -- (1.9) (1.2) (13.9) (16.0) (26.2)
-------- -------- ----- -------- -------- ----- -------- --------
Profit for the financial
year................... 170.1 232.9 27.4 260.3 158.6 (73.9) 254.8 418.0
Dividends--preferred.... -- (22.8) -- (22.8) (13.9) 13.9 -- --
Dividends--ordinary..... (243.3) (320.0) -- (320.0) (195.1) -- (438.4) (719.0)
-------- -------- ----- -------- -------- ----- -------- --------
Loss retained........... (73.2) (109.9) 27.4 (82.5) (50.4) (60.0) (183.6) (301.0)
======== ======== ===== ======== ======== ===== ======== ========
Earnings per
ordinary/common share.. 14.41p $ 0.80 48.87p 13.65p $ 0.22
Adjusting item--merger
goodwill amortization.. -- -- -- 3.21p $ 0.05
Adjusting item--windfall
tax.................... 26.87p -- -- 16.98p $ 0.28
-------- -------- -------- -------- --------
Adjusted earnings per
ordinary/common share.. 41.28p $ 0.80 48.87p 33.84p $ 0.55
======== ======== ======== ======== ========
Diluted earnings per
ordinary/common share.. 14.27p $ 0.80 48.87p 13.56p $ 0.22
Adjusting item--merger
goodwill amortization.. -- -- -- 3.20p $ 0.05
Adjusting item--windfall
tax.................... 26.60p -- -- 16.87p $ 0.28
-------- -------- -------- -------- --------
Adjusted diluted
earnings per
ordinary/common share.. 40.87p $ 0.80 48.87p 33.63p $ 0.55
======== ======== ======== ======== ========
Weighted average number
of shares outstanding
(millions of shares)
Basic................... 1,180.1 296.1 296.1 1,867.1 1,867.1
Diluted................. 1,191.9 296.1 296.1 1,878.9 1,878.9
======== ======== ======== ======== ========
</TABLE>
86
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
At September 30, 1998
The following Unaudited Pro Forma Condensed Combined Balance Sheet
consolidates the respective unaudited historical condensed consolidated balance
sheets of ScottishPower and PacifiCorp at September 30, 1998 and has been
prepared to reflect the merger after giving effect to the pro forma adjustments
described in Notes 1 to 4 to the Unaudited Pro Forma Condensed Combined
Financial Information. The Unaudited Pro Forma Condensed Combined Financial
Information has been prepared from, and should be read in conjunction with and
supplemental to, the respective historical consolidated financial statements
and notes thereto of ScottishPower and PacifiCorp which are incorporated by
reference in this proxy statement/prospectus. The pro forma amounts for the
Combined Group presented in U.S. dollars comply with U.K. GAAP.
<TABLE>
<CAPTION>
ScottishPower
At Purchase
September 30, PacifiCorp Accounting
1998 At September 30, 1998 Adjustments Combined Group
------------- ------------------------------------------- ----------- --------------------
U.K. GAAP U.S. GAAP Adjustments U.K. GAAP U.K. GAAP U.K. GAAP U.K. GAAP U.K. GAAP
------------- --------- ----------- --------- --------- ----------- --------- ---------
(Pounds) $ $ $ (Pounds) (Pounds) (Pounds) $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Note 1) (Note 2) (Note 3) (Note 4) (Note 3)
<CAPTION>
(in millions)
Fixed assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Intangible assets....... 72.0 468.1 (468.1) -- -- 1,199.6 1,271.6 2,161.7
Tangible assets......... 4,954.0 9,246.4 (43.5) 9,202.9 5,413.5 -- 10,367.5 17,624.8
Investments............. 73.4 283.9 -- 283.9 167.0 -- 240.4 408.7
-------- -------- -------- -------- -------- -------- -------- --------
5,099.4 9,998.4 (511.6) 9,486.8 5,580.5 1,199.6 11,879.5 20,195.2
-------- -------- -------- -------- -------- -------- -------- --------
Current assets
Stocks.................. 137.3 266.9 -- 266.9 157.0 -- 294.3 500.3
Debtors: amounts falling
due after one year..... -- 1,636.1 (191.0) 1,445.1 850.0 63.4 913.4 1,552.8
Debtors: amounts falling
due within one year.... 498.3 1,132.9 29.0 1,161.9 683.5 -- 1,181.8 2,009.1
Investments............. -- 616.0 -- 616.0 362.4 -- 362.4 616.1
Short term bank and
other deposits......... 235.0 63.4 -- 63.4 37.3 -- 272.3 462.9
-------- -------- -------- -------- -------- -------- -------- --------
870.6 3,715.3 (162.0) 3,553.3 2,090.2 63.4 3,024.2 5,141.2
-------- -------- -------- -------- -------- -------- -------- --------
Creditors: amounts
falling due within one
year
Loans and other
borrowings............. (509.0) (629.0) (29.0) (658.0) (387.1) (147.0) (1,043.1) (1,773.3)
Other creditors......... (1,515.9) (1,784.1) 13.8 (1,770.3) (1,041.4) -- (2,557.3) (4,347.4)
-------- -------- -------- -------- -------- -------- -------- --------
(2,024.9) (2,413.1) (15.2) (2,428.3) (1,428.5) (147.0) (3,600.4) (6,120.7)
-------- -------- -------- -------- -------- -------- -------- --------
Net current
assets/(liabilities)... (1,154.3) 1,302.2 (177.2) 1,125.0 661.7 (83.6) (576.2) (979.5)
-------- -------- -------- -------- -------- -------- -------- --------
Total assets less
current liabilities.... 3,945.1 11,300.6 (688.8) 10,611.8 6,242.2 1,116.0 11,303.3 19,215.7
Creditors: amounts
falling due after one
year
Loans and other
borrowings............. (1,716.8) (4,651.6) (459.1) (5,110.7) (3,006.3) -- (4,723.1) (8,029.3)
Other creditors......... -- (63.4) -- (63.4) (37.3) -- (37.3) (63.4)
Provisions for
liabilities and
charges................ (37.2) (1,856.8) 1,386.1 (470.7) (276.9) -- (314.1) (534.0)
Deferred income......... (378.2) (485.0) -- (485.0) (285.3) -- (663.5) (1,128.0)
-------- -------- -------- -------- -------- -------- -------- --------
Net assets.............. 1,812.9 4,243.8 238.2 4,482.0 2,636.4 1,116.0 5,565.3 9,461.0
======== ======== ======== ======== ======== ======== ======== ========
Called up share
capital................ 599.3 241.4 -- 241.4 142.0 208.3 949.6 1,614.3
Share premium........... 393.4 -- -- -- -- 2,882.1 3,275.5 5,568.3
Merger reserve.......... -- -- -- -- -- 393.4 393.4 668.8
Common shareholders'
capital................ -- 3,283.6 -- 3,283.6 1,931.5 (1,931.5) -- --
Revaluation reserve..... 225.6 -- -- -- -- -- 225.6 383.5
Profit and loss
account................ 592.4 720.0 238.2 958.2 563.6 (563.6) 592.4 1,007.1
-------- -------- -------- -------- -------- -------- -------- --------
Shareholders' funds..... 1,810.7 4,245.0 238.2 4,483.2 2,637.1 988.7 5,436.5 9,242.0
Minority interests...... 2.2 (1.2) -- (1.2) (0.7) 127.3 128.8 219.0
-------- -------- -------- -------- -------- -------- -------- --------
Capital employed........ 1,812.9 4,243.8 238.2 4,482.0 2,636.4 1,116.0 5,565.3 9,461.0
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
87
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
Note 1. Reclassifications, discontinued operations and restatement
(a) Reclassifications have been made to the PacifiCorp historical financial
information presented under U.S. GAAP to conform to ScottishPower's
presentation under U.K. GAAP.
(b) In accordance with SEC Regulation S-X, Rule 11-02, pro forma adjustments
have been made to eliminate the effects of an extraordinary item and
discontinued operations from the PacifiCorp income statements for all periods
presented. These pro forma adjustments can be summarized as follows:
<TABLE>
<CAPTION>
Six months ended June 30, Year ended
------------------------- December 31,
1998 1997 1997
------------ ------------- ------------
($ millions)
<S> <C> <C> <C>
Net income for the period as
reported.......................... 25.7 215.8 663.7
Pro Forma adjustments
Total net (income)/loss from
discontinued operations......... 38.7 (34.7) (446.8)
Extraordinary loss from
regulatory asset impairment..... -- -- 16.0
------------ ------------- ------
Pro Forma net income for the period
from continuing operations........ 64.4 181.1 232.9
============ ============= ======
</TABLE>
There is no change to the net assets of PacifiCorp as a result of these
adjustments.
(c) To comply with the recommendations of the U.K. Accounting Standards
Board's Statement on Interim Reports, the results for ScottishPower for the six
month period to September 30, 1997 have been restated to eliminate seasonal
adjustments in relation to accounting for the cost of electricity sales. The
Statement on Interim Reports recommends that revenues and costs, wherever
possible, should be recognised on a discrete basis for the purposes of the
Interim Reports and not treated as a component of the full year's results, as
was previously the policy adopted. The adjustments relate to the interim
figures only and do not affect the full year results.
<TABLE>
<CAPTION>
Six months
ended
September 30,
1997
-------------------
((Pounds) millions)
<S> <C>
Loss for the period as previously reported............... (133.6)
Effect of implementing new accounting policy............. 3.5
------
As restated.............................................. (130.1)
======
</TABLE>
Note 2. U.K. GAAP adjustments to historical PacifiCorp financial information
PacifiCorp prepares its financial statements in accordance with U.S. GAAP.
For the purposes of preparing the Unaudited Pro Forma Condensed Combined
Financial Information, the financial statements of PacifiCorp have been
restated to conform with ScottishPower's accounting policies under U.K. GAAP by
giving effect to the adjustments described below.
(a) Goodwill
Under U.S. GAAP, goodwill arising from the purchase of operating entities
should be held as an intangible asset in the balance sheet and amortized over
its expected useful life.
88
<PAGE>
Under U.K. GAAP, Financial Reporting Standard No. 10, "Goodwill and
Intangible Assets" has been adopted by ScottishPower in the preparation of its
financial statements for the year ended March 31, 1999 and in respect of the
six months ended September 30, 1998. Accordingly, under U.K. GAAP goodwill on
acquisitions after March 31, 1998 is capitalized and amortized through the
income statement over its useful economic life. Previously, all acquired
goodwill was written off directly to reserves; such goodwill is not required to
be reinstated.
(b) Deferred taxation
Under U.S. GAAP, full provision for deferred tax is required to the extent
that accounting profit differs from taxable profit due to temporary timing
differences. Provision is made at enacted rates.
Under U.K. GAAP, provision for deferred tax is only required to the extent
that it is probable that a taxation liability or asset will crystallize in the
foreseeable future as a result of timing differences between taxable profit and
accounting profit. Provision is made at known rates of tax.
The U.S. GAAP to U.K. GAAP adjustment of $1,389.8 million to the balance
sheet of PacifiCorp at September 30, 1998 relates mainly to deferred tax in
respect of property, plant and equipment. PacifiCorp's capital expenditure
plans indicate that, for the foreseeable future, amortization of property,
plant and equipment for taxation purposes will exceed amortization for
accounting purposes. As a result, it is unlikely that a net liability to
taxation arising from these differences will crystallize. Accordingly, for U.K.
GAAP purposes, the associated U.S. GAAP deferred tax provision has been
reversed.
(c) Pension costs
The fundamental differences between U.S. GAAP and U.K. GAAP are as follows:
(1)Under U.S. GAAP, the aim is to accrue the cost of providing pension
benefits in the year in which the employee provides the related service.
Under U.K. GAAP, the annual pension charge is determined so that it is a
substantially level percentage of the current and expected future payroll.
(2)Under U.S. GAAP, pension liabilities are discounted using the current
rates at which the pension liability could be settled. Under U.K. GAAP,
pension liabilities are usually discounted using an interest rate that
represents the expected long term return on plan assets.
(3)Under U.S. GAAP, variations from plan must be amortized separately over
remaining service lives. Under U.K. GAAP, variations can be aggregated and
amortized over the remaining employee service lives.
(4)Under U.S. GAAP, plan assets should be valued at market or at market
related values. Under U.K. GAAP, alternative bases can be used.
(d) Other post retirement benefits
SFAS 106 "Employers' Accounting for Post-retirement Benefits other than
Pensions" requires the use of a discount rate which reflects current market
rates in determining the provision for post retirement benefits. U.K. GAAP
permits the use of longer term discount rates.
(e) Debt and equity finance costs
Under U.S. GAAP, as applied by regulated electricity utilities, both the
cost of debt and the cost of equity applicable to domestic utility properties
are capitalized during construction. Under U.K. GAAP, only interest on the debt
funding attributable to capital projects may be capitalized during the period
of construction.
89
<PAGE>
(f) Leveraged leases
Under U.S. GAAP, lessors can offset borrowings used to acquire leased assets
against amounts receivable from lessees. It is also permissible to offset
finance charges receivable from lessees against the finance charges arising on
the borrowings used to fund the leased asset. This is referred to as linked
presentation.
Under U.K. GAAP, linked presentation is allowed only in specific
circumstances that are not met in respect of the assets of PacifiCorp that are
the subject of such leases. Accordingly, the amounts due from lessees and
related indebtedness are disclosed separately in the balance sheet, and the
finance charges receivable from lessees and finance charges payable are
disclosed separately in the income statement. This treatment has no impact on
net income.
(g) Regulatory assets
SFAS 71 establishes U.S. GAAP for utilities whose regulators have the power
to approve and/or regulate rates that may be charged to customers. Provided
that, through the regulatory process, the utility is substantially assured of
recovering its allowable costs by the collection of revenue from its customers,
such costs not yet recovered are deferred as regulatory assets. Due to the
different regulatory environment, no equivalent GAAP applies in the U.K.
Under U.K. GAAP, regulatory assets established in accordance with SFAS 71
are recognized where they comprise rights or other access to future economic
benefits which arise as a result of past transactions or events which have
created an obligation to transfer economic benefit to a third party.
Measurement of the past transaction or event and hence of the regulatory asset
is determined in accordance with U.K. GAAP. Where the application of U.K. GAAP
results in the non or partial recognition of an obligation compared to U.S.
GAAP, any related regulatory asset is either not or partially recognized.
The U.S. GAAP to U.K. GAAP adjustment of $650.1 million to PacifiCorp's
balance sheet at September 30, 1998 is the reversal of a FAS 71 regulatory
asset relating to deferred tax. The application of U.K. GAAP to the related
deferred tax provision (Note 2(b) above) has resulted in reversal of that
provision. Accordingly, the application of U.K. GAAP as described in this note
has resulted in reversal of the associated FAS 71 asset.
90
<PAGE>
Increases/(decreases) in profit for the period and shareholders' funds of
PacifiCorp as a result of the adjustments can be summarized as follows:
<TABLE>
<CAPTION>
PacifiCorp
--------------------------------
Six months ended
June 30, Year ended
------------------- December 31,
Notes 1998 1997 1997
----- ---- ------------- ------------
($ millions)
<S> <C> <C> <C> <C>
Net income for the period under U.S.
GAAP.................................. 64.4 181.1 232.9
U.K. GAAP adjustments:
Goodwill............................. (a) 4.9 6.2 12.1
Deferred taxation.................... (b) (5.6) 11.3 2.8
Pension costs........................ (c) (2.0) 0.4 0.9
Other post retirement benefits....... (d) 1.4 2.2 4.5
Debt and equity finance costs........ (e) 3.3 3.7 7.1
---- ------- -----
Profit for the period under U.K. GAAP.. 66.4 204.9 260.3
==== ======= =====
<CAPTION>
PacifiCorp at
September 30,
1998
-------------
($ millions)
<S> <C> <C> <C> <C>
Stockholders' equity under U.S. GAAP... 4,245.0
U.K. GAAP adjustments:
Goodwill............................. (a) (468.1)
Deferred taxation.................... (b) 1,389.8
Pension costs........................ (c) (4.1)
Other post retirement benefits....... (d) 10.2
Debt and equity finance costs........ (e) (39.5)
Regulatory assets.................... (g) (650.1)
-------
Shareholders' funds under U.K. GAAP.... 4,483.2
=======
</TABLE>
91
<PAGE>
Increases/(decreases) in profit of PacifiCorp for the period by caption
headings as a result of the adjustments are as follows:
<TABLE>
<CAPTION>
PacifiCorp
--------------------------------
Six months ended
June 30, Year ended
------------------ December 31,
Note 1998 1997 1997
---- -------- -------- ------------
($ millions)
<S> <C> <C> <C> <C>
Goodwill................................. (a)
Cost of sales.......................... -- 0.6 1.1
Administrative expenses................ 4.9 5.6 11.0
-------- -------- -----
4.9 6.2 12.1
======== ======== =====
Deferred taxation........................ (b)
Ordinary taxation...................... (5.6) 11.3 2.8
======== ======== =====
Pension costs............................ (c)
Administrative expenses................ (3.2) 0.7 1.4
Ordinary taxation...................... 1.2 (0.3) (0.5)
-------- -------- -----
(2.0) 0.4 0.9
======== ======== =====
Other post retirement benefits........... (d)
Administrative expenses................ 2.2 3.6 7.3
Ordinary taxation...................... (0.8) (1.4) (2.8)
-------- -------- -----
1.4 2.2 4.5
======== ======== =====
Debt and equity finance costs............ (e)
Cost of sales.......................... 0.8 0.8 1.6
Transmission and distribution costs.... 0.8 0.9 1.7
Administrative expenses................ 0.2 0.2 0.3
Net interest charge ................... 1.5 1.8 3.5
-------- -------- -----
3.3 3.7 7.1
======== ======== =====
Leveraged leases......................... (f)
Group turnover from continuing
operations............................ 32.0 33.2 54.3
Net interest charge.................... (32.0) (33.2) (54.3)
-------- -------- -----
-- -- --
======== ======== =====
</TABLE>
92
<PAGE>
The adjustments can be summarized by profit and loss account caption headings
as follows:
<TABLE>
<CAPTION>
PacifiCorp
--------------------------------
Six months ended
June 30, Year ended
------------------ December 31,
1998 1997 1997
-------- -------- ------------
($ millions)
<S> <C> <C> <C>
Group turnover from continuing operations
Leveraged leases............................. 32.0 33.2 54.3
======== ======== =====
Cost of sales
Goodwill..................................... -- 0.6 1.1
Debt and equity finance costs................ 0.8 0.8 1.6
-------- -------- -----
0.8 1.4 2.7
======== ======== =====
Transmission and distribution costs
Debt and equity finance costs................ 0.8 0.9 1.7
======== ======== =====
Administrative expenses
Goodwill..................................... 4.9 5.6 11.0
Pension costs................................ (3.2) 0.7 1.4
Other post retirement benefits............... 2.2 3.6 7.3
Debt and equity finance costs................ 0.2 0.2 0.3
-------- -------- -----
4.1 10.1 20.0
======== ======== =====
Net interest charge
Debt and equity finance costs................ 1.5 1.8 3.5
Leveraged leases............................. (32.0) (33.2) (54.3)
-------- -------- -----
(30.5) (31.4) (50.8)
======== ======== =====
Ordinary taxation
Deferred taxation............................ (5.6) 11.3 2.8
Pension costs................................ 1.2 (0.3) (0.5)
Other post retirement benefits............... (0.8) (1.4) (2.8)
-------- -------- -----
(5.2) 9.6 (0.5)
======== ======== =====
</TABLE>
93
<PAGE>
Increases/(decreases) in net assets or shareholders' funds of PacifiCorp by
caption heading as a result of the adjustments are as follows:
<TABLE>
<CAPTION>
PacifiCorp
-------------
At
September 30,
Note 1998
---- -------------
($ millions)
<S> <C> <C> <C> <C>
Goodwill............................................ (a)
Intangible assets................................. (468.1)
Profit and loss account........................... (468.1)
Deferred taxation................................... (b)
Provisions for liabilities and charges............ 1,389.8
Profit and loss account........................... 1,389.8
Pension costs....................................... (c)
Tangible assets................................... 3.0
Creditors: amounts falling due within one year
Other creditors................................. (9.6)
Provisions for liabilities and charges............ 2.5
Profit and loss account........................... (4.1)
Other post retirement benefits...................... (d)
Tangible assets................................... (7.0)
Creditors: amounts falling due within one year
Other creditors................................. 23.4
Provisions for liabilities and charges............ (6.2)
Profit and loss account........................... 10.2
Debt and equity finance costs....................... (e)
Tangible assets................................... (39.5)
Profit and loss account........................... (39.5)
Leveraged leases.................................... (f)
Debtors: amounts falling due within one year...... 29.0
Debtors: amounts falling due after one year....... 459.1
Creditors: amounts falling due within one year
Loans and other borrowings...................... (29.0)
Creditors: amounts falling due after one year
Loans and other borrowings...................... (459.1)
Regulatory assets................................... (g)
Debtors: amounts falling due after more than one
year............................................. (650.1)
Profit and loss account........................... (650.1)
</TABLE>
94
<PAGE>
The adjustments can be summarized by balance sheet caption heading as follows:
<TABLE>
<CAPTION>
PacifiCorp
-------------
At
September 30,
1998
-------------
($ millions)
<S> <C>
Intangible assets
Goodwill........................................................ (468.1)
=======
Tangible assets
Other post retirement benefits.................................. (7.0)
Pension costs................................................... 3.0
Debt and equity finance costs................................... (39.5)
-------
(43.5)
=======
Debtors: amounts falling due after more than one year
Leveraged leases................................................ 459.1
Regulatory assets............................................... (650.1)
-------
(191.0)
=======
Debtors: amounts falling due within one year
Leveraged leases................................................ 29.0
=======
Creditors: amounts falling due within one year
Loans and other borrowings
Leveraged leases................................................ (29.0)
=======
Creditors: amounts falling due within one year
Other creditors
Pension costs................................................... (9.6)
Other post retirement benefits.................................. 23.4
-------
13.8
=======
Creditors: amounts falling due after more than one year
Loans and other borrowings
Leveraged leases................................................ (459.1)
=======
Provision for liabilities and charges
Deferred taxation............................................... 1,389.8
Pension costs................................................... 2.5
Other post retirement benefits.................................. (6.2)
-------
1,386.1
=======
Profit and loss account
Goodwill........................................................ (468.1)
Deferred taxation............................................... 1,389.8
Pension costs................................................... (4.1)
Other post retirement benefits.................................. 10.2
Debt and equity finance costs................................... (39.5)
Regulatory assets............................................... (650.1)
-------
238.2
=======
</TABLE>
95
<PAGE>
Note 3. Translation of PacifiCorp and Unaudited Pro Forma Condensed Combined
Financial Information
PacifiCorp presents its financial statements in U.S. dollars. The results of
PacifiCorp as restated under U.K. GAAP have been translated into sterling at
the average noon buying rates of $1.65:(Pounds)1.00 for the six months ended
June 30, 1998, $1.63:(Pounds)1.00 for the six months ended June 30, 1997 and
$1.64:(Pounds)1.00 for the year ended December 31, 1997.
The Unaudited Pro Forma Condensed Combined Income Statements have been
translated into U.S. dollars, solely for the convenience of the reader, at the
average noon buying rates of $1.65:(Pounds)1.00 for the six months ended
September 30, 1998, $1.63:(Pounds)1.00 for the six months ended September 30,
1997 and $1.64:(Pounds)1.00 for the year ended March 31, 1998.
The historical PacifiCorp balance sheet at September 30, 1998 in U.S.
dollars, as restated into U.K. GAAP, and the Unaudited Pro Forma Condensed
Combined Balance Sheet at September 30, 1998 have been translated into pounds
sterling and U.S. dollars respectively at $1.70:(Pounds)1.00, the effective
noon buying rate at September 30, 1998.
Note 4. Purchase accounting adjustments to the Unaudited Pro Forma Condensed
Combined Financial Information
The purchase accounting adjustments to the pro forma financial information
reflect those adjustments detailed below. At the time of the merger,
ScottishPower will establish a new accounting basis for PacifiCorp's assets and
liabilities based upon the fair market values thereof and the purchase price
for PacifiCorp, including the direct costs of the acquisition.
A preliminary allocation of the purchase price has been reflected in the
Unaudited Pro Forma Condensed Combined Financial Information to the extent that
the excess of the purchase price over the historical net asset position of
PacifiCorp has been allocated to goodwill. A final allocation of the purchase
price is dependent upon certain valuations and other studies which have not
progressed to a stage where there is sufficient information to make such an
allocation in the Unaudited Pro Forma Condensed Combined Financial Information.
Certain valuations of significant assets and liabilities will have to be
carried out by independent valuation experts. ScottishPower will not complete
the valuations and studies of other significant assets, liabilities and the
operations of PacifiCorp until after the consummation of the merger.
ScottishPower believes that the portion of the purchase price in excess of
the existing carrying value of PacifiCorp's net assets comprises primarily
goodwill, which will be assigned an economic life, under both U.S. and U.K.
GAAP, of 20 years. Once assessments are complete, ScottishPower may allocate a
portion of the purchase price to other long-lived intangible assets such as
trademarks, operating licences and customer lists, if their value can be
measured reliably. These other long-lived intangible assets would be identified
separately from goodwill, and typically be assigned lives not significantly
different from the 20 years assigned to goodwill.
ScottishPower does not expect to make any significant purchase accounting
adjustments to the historical book value of PacifiCorp's generation,
transmission and distribution operating assets. The historical net book value
of these assets is supported by the regulatory environment in which PacifiCorp
operates. As a result, it is likely that book value will closely approximate
fair value at the date of the merger, provided the regulatory environment
remains substantially unchanged.
It is expected that once specialist valuations are completed, adjustments
will be made to other assets and liabilities in the PacifiCorp balance sheet at
the date of merger, including pensions, other post retirement benefits and
financial instruments. To comply with U.K. and U.S. GAAP rules for purchase
accounting,
financial instruments will be restated to reflect market values at the merger
date. In the case of pensions and other post retirement benefits, full
provision will be required for the transition obligations which are currently
96
<PAGE>
being recognized on a straight line basis over 12 and 20 years, respectively.
An assessment of the benefit obligation will also be required taking into
account market conditions at the date of the merger. These adjustments are not
expected to have a material impact on the income statement after taking account
of the associated change in goodwill amortization.
ScottishPower intends to implement a share buyback program of up to
(Pounds)500 million in the period between the PacifiCorp and ScottishPower
shareholder meetings and the date of the merger. It is anticipated that the
buyback will be undertaken through market purchases and is intended to achieve
further financial efficiency. For the purposes of the Unaudited Pro Forma
Condensed Combined Financial Information, no account has been taken of the
financial effect of the proposed buyback.
(a) Purchase consideration
PacifiCorp shareholders will be entitled to receive for each PacifiCorp
share held as of the time of the merger 0.58 ADSs or, if elected, 2.32 ordinary
shares. The precise number of PacifiCorp shares to be converted in the merger
cannot be determined until the time of the merger.
For the purposes of the purchase accounting adjustments within the Unaudited
Pro Forma Financial Information, the number of ordinary shares to be issued on
completion of the merger has been calculated as 700.6 million. This is based on
a diluted number of shares of PacifiCorp common stock issued and outstanding on
September 30, 1998 of 302.0 million multiplied by the agreed exchange ratio of
2.32 ordinary shares for each share of PacifiCorp common stock.
The diluted number of PacifiCorp shares comprises 297.3 million shares
issued and outstanding, and 4.7 million options granted, but not exercised, to
acquire PacifiCorp common stock. At the time of the merger, the PacifiCorp
options will be replaced by options to acquire ADSs under the same terms and
conditions on which the PacifiCorp options were originally granted, other than
acceleration of their respective vesting schedules. For the purposes of the
Unaudited Pro Forma Condensed Combined Financial Information, the fair value of
the consideration assumes that, at the time of the merger, the PacifiCorp
options are converted to ScottishPower options, which are subsequently
exercised. This will result in the issue of 10.9 million ScottishPower shares
(included in the total of 700.6 million), and the receipt, by ScottishPower, of
approximately (Pounds)63 million in total over the period of exercise, being
the exercise price of those options.
In connection with the merger, the Combined Group will incur fees and
expenses of approximately (Pounds)147 million. Share issue costs of
approximately (Pounds)65 million and the costs of redemption of PacifiCorp
preferred share capital of approximately (Pounds)15 million will be incurred by
PacifiCorp. Other costs, totalling approximately (Pounds)68 million, relate
principally to investment banking fees as well as legal, accounting and
regulatory filing fees. These other costs have been taken into account in
calculating goodwill in the Unaudited Pro Forma Condensed Combined Financial
Information.
The purchase consideration may be summarized as follows:
<TABLE>
<CAPTION>
At
September 30,
1998
-------------------
((Pounds) millions)
<S> <C>
Shares issued........................ 3,625.8
Acquisition expenses................. 67.6
Proceeds receivable from exercise of
PacifiCorp common stock options..... (63.4)
-------
Total purchase consideration......... 3,630.0
=======
</TABLE>
97
<PAGE>
(b) Amortization of goodwill
For the purposes of the Unaudited Pro Forma Condensed Combined Income
Statements, adjustments have been made to reflect the estimated amortization of
goodwill arising upon acquisition through the income statement on the basis of
an estimated useful life of 20 years. Under Financial Reporting Standard No. 10
"Goodwill and Intangible Assets," purchased goodwill is required to be
amortized over its expected useful life which generally is presumed to be
limited to a period of 20 years.
These adjustments may be summarized as follows:
<TABLE>
<CAPTION>
At
September
30, 1998
-------------------
((Pounds) millions)
<S> <C>
Purchase consideration............... 3,630.0
Net book value of assets acquired
(note (i)).......................... 2,430.4
-------
Goodwill arising on acquisition...... 1,199.6
=======
</TABLE>
--------
(i)Net of preferred share capital of (Pounds)142.0 million and share issue
costs of (Pounds)64.7 million.
The amortization of merger goodwill over its estimated expected useful life
gives rise to the following charges to net income in the Unaudited Pro Forma
Condensed Combined Income Statements:
<TABLE>
<S> <C>
Six months ended September 30, 1998.................. (Pounds)30.0 million
Six months ended September 30, 1997.................. (Pounds)30.0 million
Year ended March 31, 1998............................ (Pounds)60.0 million
</TABLE>
(c) Preferred Stock
PacifiCorp preferred stock outstanding as at September 30, 1998 has been
reclassified as minority interests in the Unaudited Pro Forma Condensed
Combined Balance Sheet. Dividends on PacifiCorp preferred stock have been
reclassified as minority interests in the Unaudited Pro Forma Condensed
Combined Income Statements.
(d) Merger reserve
New ScottishPower will be the new holding company of the Combined Group. For
the purposes of the Unaudited Pro Forma Condensed Combined Balance Sheet, this
results in the balance in the share premium account of ScottishPower at
September 30, 1998 of (Pounds)393.4 million being accounted for as a merger
reserve in the balance sheet of the Combined Group.
98
<PAGE>
(e) Purchase accounting adjustments
The adjustments can be summarized by balance sheet caption heading as
follows:
<TABLE>
<CAPTION>
Purchase
Accounting
Adjustments
-------------------
At
September 30,
1998
-------------------
((Pounds) millions)
<S> <C>
Intangible assets
Goodwill................................................... 1,199.6
========
Debtors: amounts falling due within one year
Proceeds from exercising PacifiCorp common stock options... 63.4
========
Creditors: amounts falling due within one year
Transaction fees........................................... (67.6)
Redemption of preferred share capital...................... (14.7)
Share issue costs.......................................... (64.7)
--------
(147.0)
========
Called up share capital
Shares issued at par....................................... 350.3
Preferred share capital.................................... (142.0)
--------
208.3
========
Share premium
Share premium.............................................. 3,275.5
Merger reserve............................................. (393.4)
--------
2,882.1
========
Common shareholders' capital................................ (1,931.5)
========
Merger reserve
Share premium.............................................. 393.4
========
Profit and loss account
Retained profits........................................... (563.6)
========
Minority interests
Preferred share capital.................................... 142.0
Redemption of preferred share capital...................... (14.7)
--------
127.3
========
</TABLE>
The purchase accounting adjustments to common shareholders' capital and
profit and loss account represent normal consolidation adjustments made under
both U.K. GAAP and U.S. GAAP. These adjustments eliminate the common stock and
retained profits in PacifiCorp's accounts as of the date of the merger.
99
<PAGE>
Note 5. Significant differences between U.K. GAAP and U.S. GAAP
The Unaudited Pro Forma Condensed Combined Financial Information has been
prepared in accordance with U.K. GAAP, which differs in certain significant
respects from U.S. GAAP.
The main differences between U.K. GAAP and U.S. GAAP that are relevant to
the Combined Group's Unaudited Pro Forma Condensed Combined Financial
Information relate to:
(a) Goodwill, intangible assets and business combinations
Goodwill and intangible assets
Under U.S. GAAP, goodwill and intangible assets arising from the purchase of
operating entities should be held as an intangible asset in the balance sheet
and amortized over its expected useful life.
Under U.K. GAAP, goodwill arising from the purchase of operating entities
before March 31, 1998 has been written off directly to reserves. Goodwill
arising on acquisitions after March 31, 1998 is capitalized and amortized
through the income statement over its useful economic life. Under U.K. GAAP,
intangible assets other than goodwill are recognized only where they are
separately identifiable, capable of reliable measurement and disposal
independent of the business of the entity to which they relate. Otherwise, such
amounts are included as part of purchased goodwill.
The goodwill adjustment is made to recognize goodwill previously written off
to reserves under U.K. GAAP, as an intangible asset under U.S. GAAP. This
goodwill, which is capitalized under U.S. GAAP, is then amortized over its
useful economic life with the effect being a reduction in profit reflecting the
amortization charge for the period.
Business combinations
In addition to re-instating the goodwill calculated under U.K. GAAP as
described above, goodwill must also be recalculated in accordance with U.S.
GAAP. This is required due to differences between U.K. GAAP and U.S. GAAP in
the determination of acquisition price and valuation of assets and liabilities
at the merger date. The adjustment referred to as business combinations
reflects the impact of recalculating the goodwill arising on the acquisitions
of Manweb, Southern Water and PacifiCorp under U.S. GAAP.
(b) Deferred taxation
Under U.S. GAAP, full provision for deferred tax is required to the extent
that accounting profit differs from taxable profit due to temporary timing
differences. Provision is made at future enacted rates.
Under U.K. GAAP, provision for deferred tax is only required to the extent
that it is probable that a taxation liability or asset will crystallize, in the
foreseeable future, as a result of timing differences between taxable profit
and accounting profit. Provision is made at known rates of tax.
The item "effect of differences in methodology" reflects the impact of
making full provision for deferred tax in respect of the ScottishPower and
PacifiCorp U.K. GAAP balance sheets at September 30, 1998.
The item "effect of U.S. GAAP adjustments" reflects the additional impact of
making full provision for deferred tax in respect of adjustments made in
restating the ScottishPower and PacifiCorp U.K. GAAP balance sheets at
September 30, 1998 to U.S. GAAP.
(c) Pension costs
The fundamental differences between U.S. GAAP and U.K. GAAP are as follows:
(i) Under U.S. GAAP, the aim is to accrue the cost of providing pension
benefits in the year in which the employee provides the related
service. Under U.K. GAAP, the annual pension charge is determined so
that it is a substantially level percentage of the current and
expected future payroll.
100
<PAGE>
(ii) Under U.S. GAAP, pension liabilities are discounted using the current
rates at which the pension liability could be settled. Under U.K.
GAAP, pension liabilities are usually discounted using an interest
rate that represents the expected long term return on plan assets.
(iii) Under U.S. GAAP, variations from plan must be amortized separately
over remaining service lives. Under U.K. GAAP, variations can be
aggregated and amortized over the remaining employee service lives.
(iv) Under U.S. GAAP, plan assets should be valued at market or at market
related values. Under U.K. GAAP, alternative bases can be used.
(d) Revaluation of fixed assets
The revaluation of Manweb distribution assets and Southern Water operational
assets is not permitted under U.S. GAAP. Accordingly, the reconciliation
restates fixed assets to historical cost and the depreciation charge has been
adjusted.
(e) Ordinary dividends
Previously under U.K. GAAP, final ordinary dividends and the related U.K.
advance corporation tax ("ACT") were recognized in the financial year in
respect of which they were recommended by the Board of Directors for approval
by shareholders. ACT was accounted for by the creation of a corresponding asset
and liability and, as such, had no impact on net assets or shareholders'
equity. Under U.S. GAAP, such dividends and tax are not recognized until the
dividends are formally declared by the Board of Directors.
(f) ESOP shares held in trust
Under U.K. GAAP, shares held by an Employee Share Ownership Plan ("ESOP")
are recorded as fixed asset investments at cost less amounts written off. Under
U.S. GAAP, shares held in trust are recorded at cost in the balance sheet as a
deduction from shareholders' funds. No dividends have been paid on the shares
held by the ScottishPower ESOP and future dividends have been waived.
(g) Other post retirement benefits
SFAS 106 "Employer's Accounting for Post-retirement Benefits other than
Pensions" requires the use of a discount rate which reflects current market
rates in determining the provision for post retirement benefits. U.K. GAAP
permits the use of longer term discount rates.
(h) Debt and equity finance costs
Under U.S. GAAP, as applied by regulated electricity utilities, both the
cost of debt and the cost of equity applicable to domestic utility properties
are capitalized during construction. Under U.K. GAAP, only interest on the debt
funding attributable to capital projects may be capitalized during the period
of construction.
(i) Regulatory assets
SFAS 71 establishes U.S. GAAP for utilities whose regulators have the power
to approve and/or regulate rates that may be charged to customers. Provided
that, through the regulatory process, the utility is substantially assured of
recovering its allowable costs by the collection of revenue from its customers,
such costs not yet recovered are deferred as regulatory assets. Due to the
different regulatory environment, no equivalent GAAP applies in the U.K.
Under U.K. GAAP, regulatory assets established in accordance with SFAS 71
are recognized where they comprise rights or other access to future economic
benefits which arise as a result of past transactions or events which have
created an obligation to transfer economic benefit to a third party.
Measurement of the past transaction or event and hence of the regulatory asset
is determined in accordance with U.K. GAAP.
101
<PAGE>
Where the application of U.K. GAAP results in the non or partial recognition
of an obligation compared to U.S. GAAP, any related regulatory asset is either
not or partially recognized.
(j) Earnings per share
Under U.K. GAAP, earnings per share is calculated by dividing the net profit
or loss for the period by the weighted average number of shares (for basic and
diluted number of shares) outstanding for the period. U.K. GAAP permits the
presentation of more than one measure of earnings per share provided that all
such measures are clearly explained and are given equal prominence on the face
of the income statement.
Under U.S. GAAP, earnings per share is calculated by dividing earnings from
continuing operations, excluding extraordinary items, by the weighted average
number of shares (for basic and diluted number of shares) outstanding for the
period. U.S. GAAP permits only one measure of earnings per share as a
performance measure.
Following the adoption of Financial Reporting Standard No. 10 "Goodwill and
Intangible Assets", as permitted under U.K. GAAP, ScottishPower will provide as
an additional measure of underlying performance, earnings per share calculated
excluding the impact of goodwill amortization, and pro forma earnings per share
have been calculated on this basis. Pro forma earnings per share have also been
presented using U.S. GAAP earnings which have been adjusted to exclude the
impact of goodwill amortization in addition to the exclusion of the impact of
windfall tax.
(k) Purchase consideration
Under U.K. GAAP, the fair value of the purchase consideration will be
determined by multiplying the number of ScottishPower ordinary shares to be
issued at the time of the merger by the ScottishPower share price at the close
of trading on the London Stock Exchange the day before the merger. For the
purposes of the U.K. GAAP Unaudited Pro Forma Condensed Combined Financial
Information, a value of (Pounds)5.17 1/2 has been used, this being the market
price of ScottishPower ordinary shares as at April 27, 1999, the latest
practicable date for which such information was available before the date of
this proxy statement/prospectus.
Under U.S. GAAP, the fair value of the purchase consideration will be
determined by multiplying the number of ScottishPower ordinary shares to be
issued at the time of the merger by an average of the ScottishPower ordinary
share price for a short period before and after the announcement of the
intended merger with PacifiCorp on December 7, 1998. This share price has been
calculated as (Pounds)6.38 per ordinary share.
102
<PAGE>
The following statements summarize the material adjustments which reconcile
the Combined Group unaudited pro forma profit/(loss) and equity shareholders'
interest under U.K. GAAP to the amounts that would have been reported had U.S.
GAAP been applied.
<TABLE>
<CAPTION>
Combined Group
------------------------------
Six months ended
September 30, Year ended
------------------ March 31,
Note 1998 1997 1998
---- -------- -------- ----------
((Pounds) millions)
<S> <C> <C> <C> <C>
Profit/(loss) for the period under U.K.
GAAP.................................. 194.4 (41.9) 254.8
U.S. GAAP adjustments:
Goodwill and intangible assets....... (a) (42.6) (43.1) (86.4)
Deferred tax......................... (b) (11.7) (1.3) (29.8)
Pension costs........................ (c) 10.1 10.3 21.8
Depreciation on revaluation uplift... (d) 1.7 -- 1.7
Other post retirement benefits....... (g) (1.3) (2.2) (4.5)
Debt and equity finance costs........ (h) (2.0) (2.4) (4.3)
-------- -------- -----
148.6 (80.6) 153.3
Deferred tax effect of U.S. GAAP
adjustments:
Pension costs and other post
retirement benefits................. (c),(g) (2.7) (2.5) (4.8)
-------- -------- -----
Net income/(loss) for the period under
U.S. GAAP............................. 145.9 (83.1) 148.5
======== ======== =====
</TABLE>
<TABLE>
<CAPTION>
Combined Group
at September 30,
1998
----------------
((Pounds)
millions)
<S> <C> <C>
Shareholders' funds under U.K. GAAP........................ 5,436.5
U.S. GAAP adjustments for:
Goodwill and intangible assets........................... (a) 1,312.1
Business combinations.................................... (a) 1,147.4
Amortization of goodwill................................. (a) (77.1)
Pension costs............................................ (c) 111.3
Revaluation of fixed assets.............................. (d) (229.0)
Depreciation of revaluation uplift....................... (d) 3.4
Dividends................................................ (e) 89.9
ESOP shares held in trust................................ (f) (34.2)
Other post retirement benefits........................... (g) (9.6)
Debt and equity finance costs............................ (h) 23.2
Regulatory assets........................................ (i) 382.4
Deferred tax: (b)
Effect of U.S. GAAP adjustments........................ (30.7)
Effect of differences in methodology................... (1,393.3)
--------
Stockholders' equity under U.S. GAAP....................... 6,732.3
========
</TABLE>
103
<PAGE>
Note 6. Earnings per ordinary/common share on a U.S. GAAP basis
<TABLE>
<CAPTION>
Combined Group
-----------------
Pro PacifiCorp ScottishPower
Pro forma forma Historical Historical
--------- ------- ---------- -------------
(Pounds) $ $ (Pounds)
Note (a)
(in millions except for per share and ADS
amounts)
<S> <C> <C> <C> <C>
Year ended March 31, 1998
Profit for the period from continu-
ing operations applicable to
ordinary/common shares............ 148.5 243.5 210.1 129.8
Earnings for the period from con-
tinuing operations:
Per ordinary/common share (see Note
(b))
Basic............................ 7.95p 0.13 0.71 11.00 p
Diluted.......................... 7.90p 0.13 0.71 10.89 p
Per ADS (see Note (b))
Basic............................ 0.32 0.52 N/A 0.44
Diluted.......................... 0.32 0.52 N/A 0.44
Average number of ordinary/common
shares outstanding
Basic............................ 1,867.1 1,867.1 296.1 1,180.1
Assuming dilution................ 1,878.9 1,878.9 296.1 1,191.9
Six months ended September 30, 1998
Profit for the period from continu-
ing operations applicable to
ordinary/common shares............ 145.9 240.7 54.8 167.4
Earnings for the period from con-
tinuing operations:
Per ordinary/common share (see Note
(b))
Basic............................ 7.79p 0.13 0.18 14.13 p
Diluted.......................... 7.73p 0.13 0.18 13.98 p
Per ADS (see Note (b))
Basic............................ 0.31 0.52 N/A 0.57
Diluted.......................... 0.31 0.52 N/A 0.56
Average number of ordinary/common
shares outstanding
Basic............................ 1,874.1 1,874.1 297.2 1,184.6
Assuming dilution................ 1,887.0 1,887.0 297.2 1,197.5
Six months ended September 30, 1997
Profit/(loss) for the period from
continuing operations applicable
to
ordinary/common shares............ (83.1) (135.5) 168.9 (132.0)
Earnings for the period from con-
tinuing operations:
Per ordinary/common share (see Note
(b))
Basic............................ (4.46)p (0.07) 0.57 (11.20)p
Diluted.......................... (4.43)p (0.07) 0.57 (11.09)p
Per ADS (see Note (b))
Basic............................ (0.18) (0.28) N/A 0.45
Diluted.......................... (0.18) (0.28) N/A 0.44
Average number of ordinary/common
shares outstanding
Basic............................ 1,864.6 1,864.6 295.6 1,178.8
Assuming dilution................ 1,875.6 1,875.6 295.6 1,189.8
</TABLE>
- --------
Notes:
(a) PacifiCorp historical comparative per share data are given for the year
ended December 31, 1997 and for the six months ended June 30, 1998 and June
30, 1997.
(b) In accordance with U.S. GAAP, earnings per share has been presented above
based on U.S. GAAP earnings of ScottishPower and the Combined Group,
without adjustment for the impact of windfall tax ((Pounds)317 million for
Fiscal 1998) or goodwill amortization (September 30, 1998: (Pounds)69.6
million; September 30, 1997: (Pounds)69.3 million; March 31, 1998:
(Pounds)139.0 million).
104
<PAGE>
The inclusion of these amounts in the determination of earnings for the
purposes of computation of earnings per share in accordance with U.S. GAAP
decreased earnings per share as follows:
<TABLE>
<CAPTION>
PacifiCorp
Pro Forma ScottishPower
Combined Group Equivalent Historical
------------------------- -------------
P $ $ P
<S> <C> <C> <C> <C>
March 31, 1998
Per ordinary/common share
Windfall tax.......................... 16.98 0.28 0.65 26.87
Goodwill amortisation................. 7.44 0.12 0.28 2.53
Per ADS
Windfall tax.......................... 67.92 1.12 2.60 107.48
Goodwill amortisation................. 29.76 0.48 1.12 10.12
September 30, 1998
Per ordinary/common share
Windfall tax.......................... -- -- -- --
Goodwill amortisation................. 3.71 0.06 0.14 1.27
Per ADS
Windfall tax.......................... -- -- -- --
Goodwill amortisation................. 14.84 0.24 0.56 5.08
September 30, 1997
Per ordinary/common share
Windfall tax.......................... 17.00 0.28 0.65 26.89
Goodwill amortisation................. 3.72 0.06 0.14 1.25
Per ADS
Windfall tax.......................... 68.00 1.12 2.60 107.56
Goodwill amortisation................. 14.88 0.24 0.56 5.00
</TABLE>
105
<PAGE>
DESCRIPTION OF ORDINARY SHARES
This section contains information relating to the ordinary shares of
ScottishPower, including brief summaries of parts of ScottishPower's memorandum
and articles of association and the U.K. Companies Act 1985 as amended and
modified by the Companies Act 1989, in each case as currently in effect. These
summaries do not purport to be complete and are qualified in their entirety by
reference to the ScottishPower articles, which have been filed as an exhibit to
the registration statement of which this proxy statement/prospectus is a part,
and to the Companies Act 1985. Under Scots law, holders of shares in
ScottishPower are bound by and are deemed to have notice of the ScottishPower
articles. Except where stated, the following description applies to the
ScottishPower articles and the New ScottishPower articles.
General
The presently authorized share capital of ScottishPower consists of 1.7
billion ordinary shares of 50 pence each and one special rights non-voting
redeemable preference share of (Pounds)1. As of April 27, 1999, 1,199,323,636
ordinary shares were issued and outstanding and fully paid. The ordinary shares
are held in certificated and uncertificated (paperless) form. The presently
authorized capital stock of New ScottishPower consists of 1,699,900,004
ordinary shares of 50p each, 49,998 limited voting redeemable shares of
(Pounds)1 each, and one special rights non-voting redeemable preference share
of (Pounds)1. As of April 29, 1999, four ordinary shares and 49,998 limited
voting redeemable shares were issued and outstanding and fully paid. Details of
the provisions of the articles relating to the special share are described
under "--Limitations on Holdings" below and "Comparison of Rights of PacifiCorp
Shareholders and ScottishPower Shareholders--ScottishPower Special Share".
Voting
At a general meeting of ScottishPower, subject to the restrictions referred
to under "--Restrictions on Voting" below and subject to any special rights or
restrictions as to voting attached to any class of shares, on a show of hands
every shareholder who is present in person and entitled to vote shall have one
vote, and on a poll every shareholder who is present in person or by proxy and
entitled to vote shall have one vote for every share held by each shareholder.
The expression "present in person" in the articles includes a person present as
the duly authorized representative of a corporate shareholder acting in that
capacity.
Unless otherwise required by the Companies Act or the articles, voting at
any general meeting is by ordinary resolution. An ordinary resolution, such as
a resolution for the election of directors, the declaration of a dividend, the
appointment of auditors, the increase of authorized share capital or the grant
of authority to allot shares, requires the affirmative vote of a majority of
votes cast on the resolution by members present in person, in the case of a
vote by show of hands, or present in person or by proxy, in the case of a vote
by poll. A special resolution, such as a resolution amending the articles,
changing the name of ScottishPower or waiving preemption rights under the
Companies Act 1985, or an extraordinary resolution, such as modifying the
rights of any class of shares at a meeting of the holders of the class or
relating to matters concerning the liquidation of ScottishPower, requires the
affirmative vote of not less than three-quarters of the votes cast on the
resolution by the shareholders present in person, in the case of a vote by show
of hands, or present in person or by proxy, in the case of a vote by poll. In
the case of an equality of votes, whether on a show of hands or on a poll, the
chairman of the meeting is entitled to a casting vote, in addition to any other
vote he may have.
Meetings must be convened upon 21 days' notice where a special or
extraordinary resolution is being proposed or where the meeting is an annual
general meeting, or 14 days' notice where only ordinary or extraordinary
resolutions are being proposed and the meeting is not an annual general
meeting, in each case not including the date on which the notice is served or
deemed to be served and the day on which the meeting is held. The practice
under U.K. corporate governance guidelines is for annual general meetings to be
held after at least 20 working days' notice. The quorum required to transact
business at general meetings is three shareholders who are present in person or
by proxy or by a duly authorized representative of a corporation and
106
<PAGE>
entitled to vote on the business to be transacted. In relation to the rights of
holders of ADRs in respect of general meetings of ScottishPower, see also
"Description of ScottishPower American Depositary Shares--"Future Proposals"
and "--Voting of the Underlying Deposited Securities".
Any general meeting may be convened at, or adjourned to, more than one place
provided that persons attending at any particular place shall be able to see
and hear, and be seen and heard by, persons attending at the other places at
which the meeting is convened or adjourned. The meeting shall be treated as
held at the place at which the chairman presides.
Restrictions on Voting
Any person appearing to be interested in shares may be served by
ScottishPower with a notice under Section 212 of the Companies Act requiring
confirmation as to whether or not such person is interested in the shares, and
if not holding beneficially, on whose behalf they are held and, if so, certain
information with respect to such interest. The directors may by notice direct
that no holder of ordinary shares shall be entitled in respect of any ordinary
shares held by it to vote either personally or by proxy at a general meeting or
a meeting of the holders of ordinary shares if he or any other person appearing
to be interested in the shares has been served with notice under Section 212
and has failed to give ScottishPower any information required by the notice
within 14 days from the date of the notice.
A shareholder shall not be entitled to attend or vote at any general meeting
of ScottishPower or meeting of the holders of separate classes of shares if
amounts payable in respect of the shares held by him have not been fully paid
or in the circumstances referred to under "--Limitations on Holdings" below.
Dividends and Other Distributions
ScottishPower may, by ordinary resolution, declare dividends in accordance
with the respective rights of the shareholders, provided that no dividends are
payable except out of the profits of ScottishPower available for distribution
under the provisions of the Companies Act and the ScottishPower articles and no
dividends are payable in excess of the amount recommended by the directors.
Subject to any preferential or special rights attaching to any shares of
ScottishPower, all dividends are apportioned and paid pro rata according to the
amounts paid on the shares during any portion or portions of the period in
respect of which the dividends are paid. Interim dividends may be paid, if
profits are available for distribution and if the directors so resolve. No
dividend payable in respect of an ordinary share shall bear interest. The
directors may, if authorized by an ordinary resolution at an annual general
meeting of ScottishPower, offer any holders of ordinary shares the right to
elect to receive ordinary shares, credited as fully paid, instead of cash in
respect of the whole, or some part, to be determined by the directors, of any
dividend specified by the ordinary resolution. Any dividend unclaimed for a
period of 12 years from the date it became due for payment shall be forfeited
and cease to remain owing by ScottishPower.
If any person appearing to be interested in shares representing at least
0.25% of the nominal value of their class has failed to give ScottishPower any
information required by a notice under Section 212 of the Companies Act served
upon a shareholder within 14 days, the directors may direct that, except on a
winding-up of ScottishPower, no payment shall be made by way of dividend and no
scrip shares shall be allotted in respect of the shares. Any direction shall
cease to have effect when the directors are satisfied that all the information
required by the Section 212 notice has been given to ScottishPower.
On a winding-up, the balance of the assets available for distribution after
repayment of the capital paid up or credited as paid up on the special share
and subject to any preferential or special rights attached to any other class
of shares, shall be applied in repaying to the holders of ordinary shares the
amounts paid up or credited as paid up on those shares, and any surplus assets
will belong to the holders of ordinary shares in proportion to the numbers of
ordinary shares held by them, having taken account of the amounts paid up or
credited as paid up on those shares.
107
<PAGE>
Untraced Shareholders
ScottishPower may sell any share if, for a period of 12 years during which
at least three dividends in respect of the share have been payable, no check or
warrant payable in respect of the share has been cashed and no communication in
respect of the share has been received by ScottishPower from the relevant
shareholder or other person entitled to the share. ScottishPower must advertise
notice of its intention to sell the share in a Scottish newspaper, leading
London daily newspaper and a newspaper circulating in the area to which the
checks and warrants were sent. Notice of the intention to sell must also be
given to the London Stock Exchange.
If no communication in respect of the share is received within a further
three months, ScottishPower may sell the share in a manner as the directors
think fit at the best price reasonably obtainable. ScottishPower shall be
indebted to the former shareholder or other person previously entitled to the
share for an amount equal to the net proceeds of sale, but no trust shall be
created and no interest shall be payable in respect of the proceeds of sale.
Transfer of ScottishPower Ordinary Shares--Certificated
Transfers of certificated shares shall be effected by a written instrument
of transfer in a usual form or in any other form acceptable to the directors.
The transferor is deemed to remain the holder of the shares concerned until the
name of the transferee is entered in the register of members. The directors
may, in their absolute discretion, decline to register a transfer of a share
which is not fully paid, provided that the refusal does not prevent dealings
from taking place on an open and proper basis. The directors may also refuse to
register a transfer unless it is:
. lodged and duly stamped at the registered office of ScottishPower or at
such other place as the directors may appoint and is accompanied by the
certificate for the shares to which it relates and such other evidence
as the directors may reasonably require to show the right of the
transferor to make the transfer; and
. in respect of only one class of shares; and
. in favor of not more than four transferees jointly, or if it is made in
the circumstances described under "--Limitations on Holdings" below.
If a shareholder or any other person appearing to be interested in
certificated shares representing at least 0.25% of the nominal value of their
class has been served with notice under Section 212 of the Companies Act 1985
and has failed to give ScottishPower any information required by the notice
within 14 days, the directors may, by notice, direct that no transfer of any of
those shares shall be registered. Any direction shall cease to have effect when
the directors are satisfied that all the information required by the Section
212 of the Companies Act 1985 has been given to ScottishPower, or where the
shares are transferred pursuant to a take-over offer for ScottishPower, on a
stock exchange or a market outside the United Kingdom on which the ordinary
shares are normally traded or in consequence of a bona fide sale to an
unconnected person.
Transfer of ScottishPower Ordinary Shares--Uncertificated
Transfers of uncertificated shares must be made in accordance with the U.K.
Uncertificated Securities Regulations 1995. Consequently, in relation to
uncertificated shares, it may not be possible to enforce the provisions of the
articles regarding refusal to register transfers. The regulations only permit a
company to refuse to register a transfer of uncertificated shares in very
limited circumstances, including where an order of the court prohibits the
transfer. Consequently, the articles contain provisions designed to enable
ScottishPower to direct that a shareholder take specific actions to ensure that
an uncertificated share is not effectively transferred in circumstances where a
transfer of that share would not be registered were it in certificated form.
108
<PAGE>
Variation of Class Rights and Alteration of Share Capital
Except as the provisions of the Companies Act 1985 provide otherwise,
whenever the share capital is divided into different classes of shares, as is
currently the case, the class rights, as determined in accordance with Scots
law, attached to any class may be varied or abrogated, whether or not
ScottishPower is being wound up, either with the consent in writing of the
holders of not less than three-quarters of the issued shares of the class, or
with the sanction of an extraordinary resolution passed at a separate general
meeting of such holders, but not otherwise. The quorum for any separate general
meeting shall be two persons holding or representing by proxy at least one-
third in nominal amount of the issued shares of the relevant class. Any holder
of shares of the relevant class who is present in person may demand a poll and
every holder shall on a poll have one vote for every share of the class held by
him. Unless otherwise provided by the rights attached to any shares or class of
shares, those rights shall not be deemed to be varied by the creation or issue
of further shares ranking equally with, or behind, the shares. If at any time
the above capital of ScottishPower is not divided into different classes, the
creation or issue of shares ranking in priority to the ordinary shares would
not constitute a variation of the class rights of the ordinary shares.
Subject to the provisions of the Companies Act 1985 and without prejudice to
any rights attached to any existing shares or class of shares, ScottishPower
may issue shares with such rights or restrictions as it may by ordinary
resolution determine or, if ScottishPower does not so determine, as the
directors shall determine. Redeemable shares may be issued on the terms and in
a manner as may be provided by the ScottishPower articles.
ScottishPower may by ordinary resolution increase its share capital,
consolidate and divide all or any of its share capital into shares of a larger
amount, sub-divide all or any of its share capital into shares of a smaller
amount or cancel any shares not taken or agreed to be taken by any person and
diminish the amount of its authorized share capital by the amount of the shares
so canceled.
Preemptive Rights
The articles do not contain any preemptive rights. The Companies Act 1985
confers on shareholders, to the extent not waived or disapplied, rights of
preemption in respect of equity securities that are, or are to be, issued for
cash. The term "equity securities" means in relation to ScottishPower:
. shares of ScottishPower, other than shares which, with respect to
dividends and capital, carry a right to participate only up to a specified
amount in a distribution and shares allotted under an employee's share scheme;
and
. rights to subscribe for or to convert into such shares.
Under the Companies Act 1985, these provisions may be disapplied by a
special resolution of the shareholders, either generally or specifically.
ScottishPower currently has a general disapplication in place in respect of any
future rights issue or an allotment of a number of shares equal to
approximately 5% of the issued current share capital. These general
disapplications are normally sought annually.
Limitations on Holdings
The ScottishPower articles contain provisions preventing a person or persons
acting in concert from owning or controlling 15% or more of the voting rights
of ScottishPower. Following the privatization of ScottishPower, the Secretary
of State for Scotland retained the right to hold the so-called "special share",
with a nominal value of (Pounds)1 which prevents certain arrangements,
including, in particular, the 15% ownership limitation referred to above, from
being altered or removed without the prior written consent of the holder of the
special share. The special share may only be held by a person acting on behalf
of the U.K. government and entitles the holder to attend and speak at general
meetings but not to vote. It is redeemable at the U.K. government's discretion
at any time following consultation with ScottishPower. See "Comparison of
Rights of PacifiCorp Shareholders and ScottishPower Shareholders--ScottishPower
Voting Rights; Generally" and "The ScottishPower Special Share."
109
<PAGE>
Any person holding an interest, as defined in the articles, of 3% or more in
any class of the company's issued share capital carrying rights to vote in all
circumstances at general meetings is required to notify the company of that
interest and of any percentage point change in the level of that interest.
The articles provide that if a person has, or appears to the directors to
have, an interest in shares which carry 15% or more of the total votes
attaching to the relevant share capital of all classes, taken as a whole, of
the company and capable of being cast on a poll or is deemed to have such an
interest, the directors shall give notice to all persons who appear to the
directors to have interest in the shares concerned and, if different, to the
holders of those shares. The notice shall set out the restrictions referred to
below and will call for the interest concerned to be reduced to less than 15%
by a disposal of shares within 21 days of the giving of the notice to the
holder, or a longer period as the directors consider reasonable. Until a
disposal is made or the notice is withdrawn, no transfer of any of the shares
to which the interest relates may be registered.
If the notice is not complied with in all respects to the satisfaction of
the directors and has not been withdrawn, the directors shall, so far as they
are able, make a disposal through any officer or employee of the company and
shall give written notice of the disposal to those persons on whom the notice
was served. The terms of the sale, including the price, are to be determined by
the directors on taking advice from professional advisers.
Any transfer shall be as effective as if it had been executed by the holder
of the transferred shares and the title of the transferee shall not be affected
by any irregularity or invalidity in the proceedings relating thereto. The net
proceeds of the disposal, without interest and after deduction of the expenses
of sale, shall be paid to the former holder and he shall be given, if
appropriate, a new certificate in respect of the balance of the shareholding,
on the surrender of any certificate(s) in respect of the shares sold.
The registered holder of shares to whom a notice referred to above has been
given is not, in respect of any of the shares to which the notice relates,
entitled to attend or vote at any general or class meeting of the company or to
exercise any other right conferred on him by membership in relation to any
meeting until the notice has been complied with to the satisfaction of the
directors or withdrawn. Those rights vest in the chairman of any meeting who
may exercise or refrain from exercising those rights entirely at his
discretion. The directors shall inform the chairman of any meeting of any
shares in respect of which the notice as referred to above has been given.
Any resolution or determination of, or decision or exercise of any discretion
or power by, the directors or by the chairman of any meeting under the above
provision shall be final and conclusive and any disposal or transfer made
pursuant to such provision is binding on all persons concerned and is not open
to challenge. The directors shall not be required to give any reasons for any
decision, determination or declaration taken or made in accordance with these
provisions.
The U.K. government is not subject to these limitations and there are
exceptions for a limited category of permitted persons, principally recognized
clearing houses, recognized investment exchanges, trustees of employees' share
schemes and persons whose holdings are of a fiduciary, contingent or temporary
nature.
It is proposed that if the scheme of arrangement becomes effective, these
limitations on holdings will be removed from the ScottishPower articles and
will be inserted in the New ScottishPower articles.
Purchase of Shares
Subject to the provisions of the Companies Act and with the sanction of a
special resolution of the holders of any class of shares carrying rights to
convert into equity share capital of ScottishPower, ScottishPower may purchase
a percentage of its own shares. At the annual general meeting held in July
1998, the shareholders granted authority to the directors to purchase up to
119,796,734 ordinary shares. As of April 30, 1999, the directors have not
exercised this authority. However, ScottishPower intends to implement a share
buyback
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program of up to (Pounds)500 million following approval of the merger agreement
by PacifiCorp's shareholders and approval of the proposal to merge by
ScottishPower's shareholders but prior to consummation of the merger. The
purpose of this share buyback program is to achieve an efficient capital
structure for the combined group. PacifiCorp does not intend to pursue the $750
million share repurchase program that it had announced on October 23, 1998. No
shares have been repurchased under that program. See "Summary--The
ScottishPower Extraordinary General Meeting."
Notices
A shareholder who has no registered address in the U.K. or who has not
supplied ScottishPower with an address in the U.K. for service of notices shall
not be entitled to receive notices. In some limited circumstances,
ScottishPower may give notices to shareholders by advertisement in newspapers
in the U.K.
The Redeemable Shares in New ScottishPower
The holders of the redeemable shares in New ScottishPower are not entitled
to participate in any of the profits of New ScottishPower. On a winding-up or
other return of capital the holders of the redeemable shares are entitled, in
priority to any holder of any other class of shares in New ScottishPower, other
than the special share, to receive in full the amounts paid up on such shares.
Subject to the provisions of the Companies Act 1985, New ScottishPower may
redeem the redeemable shares at any time by notice. The holders only have
voting rights in limited circumstances. New ScottishPower proposes to redeem
the redeemable shares before completion of the merger. ScottishPower holds
these redeemable shares of New ScottishPower.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
The following is a summary of all material provisions of the Amended and
Restated Deposit Agreement dated as of December 18, 1991, as amended and
restated as of September 4, 1997 among ScottishPower, The Bank of New York, as
depositary and the holders from time to time of ADRs issued thereunder. If the
holding company structure is adopted, New ScottishPower will replace
ScottishPower as a party to the deposit agreement. The deposit agreement is
governed by the laws of the State of New York.
This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the deposit agreement. Copies of the
deposit agreement, the ScottishPower articles and the New ScottishPower
articles are available for inspection at the principal executive office of the
depositary, currently located at 101 Barclay Street, New York, New York 10286.
American Depositary Receipts
ADRs evidencing ADSs are issuable by the depositary under the deposit
agreement. Each ADR will represent a specified number of ADSs. Each ADS
represents the right to receive four ordinary shares and a pro rata share in
any other deposited securities (defined below) deposited with the custodian.
Only persons in whose name ADRs are registered will be treated by ScottishPower
and the depositary as holders or owners of ADRs.
ADRs will be issued under the deposit agreement subject to the conditions
and other provisions described under "--Deposit and Withdrawal of Deposited
Securities", upon deposit with the custodian in London of ordinary shares or
rights to receive ordinary shares.
Deposited Securities
As used herein, "deposited securities" as of any time means ordinary shares
at such time deposited under the deposit agreement and any and all other
securities, property and cash received at any time by the depositary or the
custodian in respect instead of ordinary shares, other securities, property or
cash previously received by the depositary or the custodian and at such time
held under the deposit agreement.
Deposit and Withdrawal of Deposited Securities
The depositary has agreed that, upon deposit with the custodian in London of
ordinary shares, accompanied by an appropriate instrument of transfer or
endorsement, in a form satisfactory to the custodian, together with all
certifications, payments and evidence of payments as may be required by the
custodian or the depositary and a written order directing the depositary to
deliver ADRs in respect of the ordinary shares, and subject to the terms of the
deposit agreement, the depositary will, upon payment of the fees, charges and
taxes provided in the deposit agreement, execute and deliver at the
depositary's office, to or upon the order of the person or persons specified by
the depositor, ADR or ADRs, registered in the name of the person or persons,
evidencing the number of ADSs issuable in respect of the deposit. Every person
depositing ordinary shares under the deposit agreement will be deemed to
represent and warrant that the ordinary shares and each certificate therefor
are validly issued and outstanding, fully paid, non-assessable and free of
preemptive rights, and that the person making the deposit is duly authorized so
to do. Other than ScottishPower, every person will also be deemed to represent
that the deposit of ordinary shares or the sale of the ADRs issued upon the
deposit is not restricted under the securities laws of the United States. In
addition, such person will be deemed to represent that such ordinary shares or
ADRs:
. are not a holding, or part of a holding, representing an "interest" as
defined in the Article 51 of the ScottishPower articles, other than
interests permitted by the article; and
. are not liable to disenfranchisement or disposal by ScottishPower under
either Article 50 or 51 of the ScottishPower articles.
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Without limitation to the foregoing, the depositary will not knowingly
accept for deposit under the deposit agreement any ordinary shares which (a) if
sold by the holder of the ordinary shares in the United States as defined in
Regulation S, would be subject to the registration provisions of the Securities
Act, unless a registration statement is in effect as to the ordinary shares or
such sale would be exempt from such provisions or (b) would thereby infringe
any provision of the ScottishPower articles. Without limiting the generality of
the above, ordinary shares which the depositary believes have been withdrawn
from a restricted ADR facility established or maintained by a depositary bank
may be accepted for deposit under the deposit agreement only if the ordinary
shares have been acquired in a transaction:
. registered under the Securities Act;
. in compliance with Regulation S under the Securities Act; or
. in accordance with Rule 144 under the Securities Act and the depositary
may, as a condition to accepting the deposit of the ordinary shares
hereunder, require the person depositing such ordinary shares to provide
it with a certificate in writing to the foregoing effect.
The depositary will comply with written instructions of ScottishPower
not to accept for deposit hereunder any ordinary shares identified in
the instructions at times and under circumstances as may be specified in
the instructions to facilitate ScottishPower's compliance with the
securities laws of the United States.
Subject to the terms and conditions of the deposit agreement and any
limitations established by the depositary, the depositary may execute and
deliver ADRs before the receipt of ordinary shares (a "pre-release"). The
depositary will not make a pre-release of any ADRs unless:
. the person to, or upon the order of, which pre-released ADR are
delivered is obligated to deliver to the depositary or the custodian
either (a) the same number of ordinary shares as the ordinary shares
represented by the pre-released ADR or (b) ADRs representing the same
number of ordinary shares as are represented by the pre-released ADR;
and
. the obligation of such person to deliver ordinary shares, or ADRs
instead of the ordinary shares, is, at all times, fully collateralized
with cash or United States government securities.
Upon surrender of ADRs at the depositary's office, and upon payment of the
charges provided in the deposit agreement and subject to the terms of the
deposit agreement, the ScottishPower articles and the deposited securities, ADR
holders are entitled to delivery at the office of the custodian in London of
documents of title representing the deposited securities and, at such office of
the custodian or, at the discretion of the depositary, at the depositary's
office, any other property evidenced by the ADRs so surrendered. The forwarding
of share certificates, other documents of title and other property, including
cash, for delivery at the depositary's office is at the request, risk and
expense of the ADR holder. Under General Instruction I.A.1 of Form F-6,
notwithstanding any provisions of the deposit agreement or the form of ADR to
the contrary, ADR holders are entitled to withdraw the deposited securities at
any time subject only to:
. temporary delays caused by closing transfer books of the depositary or
ScottishPower of the deposited securities or the deposit of ordinary
shares in connection with voting at a shareholders' meeting, or the
payment of dividends;
. the payment of fees, taxes, and similar charges; and
. compliance with any laws or governmental regulations relating to the
ADRs or to the withdrawal of deposited securities.
Dividends, Other Distributions, Rights and Changes Affecting Deposited
Securities
Whenever the depositary receives any cash dividends or other cash
distributions by ScottishPower denominated in a currency other than U.S.
dollars, it shall, to the extent that in its judgment it can convert the
foreign currency on a reasonable basis into U.S. dollars and transfer the
resulting amount to the United States,
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convert the dividends and distributions into U.S. dollars and distribute the
amounts to the holders of ADRs in proportion to the number of ADSs representing
the deposited securities held by each of them. The amount distributed will be
reduced as appropriate by any amounts required to be withheld by ScottishPower
or the depositary on account of taxes. See "--Liability of Holder for Taxes"
below. If the depositary determines that in its judgment any foreign currency
received by it cannot be so converted and transferred, the depositary may
distribute the foreign currency received by it, or in its discretion hold such
foreign currency for the respective accounts of the ADR holders entitled to
receive the same.
Whenever the depositary shall receive any distribution other than cash or
ordinary shares upon any deposited securities, the depositary shall cause the
securities or property received by it to be distributed promptly to the ADR
holders entitled to the distribution, in proportion to the number of ADSs
representing the deposited securities held by each of them in any manner that
the depositary may deem equitable and practicable for accomplishing such
distribution; provided, however, that if in the opinion of the depositary such
distribution cannot be made proportionately among the ADR holders entitled to
the distribution, or if for any other reason the depositary deems the
distribution not to be feasible, the depositary may adopt a method as it may
deem equitable and practicable for the purpose of effecting the distribution,
including the public or private sale of the securities or property thus
received, or any part the securities or properties received, and the net
proceeds of any such sale shall be distributed by the depositary to the ADR
holders entitled to the distribution as in the case of a distribution received
in cash.
If a distribution upon any deposited securities consists of a dividend in,
or free distribution of, ordinary shares, the depositary may, in accordance
with the provisions of the deposit agreement, distribute to the holders of
outstanding ADRs, in proportion to their holdings, additional ADRs evidencing
an aggregate number of ADSs that represent the number of ordinary shares
received as a dividend or free distribution. Instead of delivering ADRs for
fractional ADSs in the event of any such distribution, the depositary will sell
the number of ordinary shares represented by the aggregate of such fractions
and distribute the net proceeds to holders of ADRs in accordance with the
deposit agreement. If additional ADRs are not so distributed, each ADS shall
thereafter also represent the additional ordinary shares distributed in respect
of the deposited securities represented by the ADS before the distribution.
If ScottishPower offers or causes to be offered to the holders of deposited
securities any rights to subscribe for additional ordinary shares or any rights
of any other nature, the depositary will, after consultation with
ScottishPower, have discretion as to the procedure to be followed in making the
rights available to holders of ADRs or in disposing of the rights for the
benefit of such holders and making the net proceeds available in U.S. dollars
or pounds sterling to the holders, provided that the depositary will, at the
request of ScottishPower, either:
. make the rights available to holders of ADRs by means of warrants or
otherwise, if the depositary determines it to be lawful and feasible; or
. if the depositary determines that making the rights available is not
lawful or feasible, or if the rights represented by the warrants or
other instruments appear to be about to lapse, sell the rights or
warrants or other instruments at public or private sale, at the place or
places and upon the terms as the depositary may deem proper, and
allocate the proceeds of such sale for the account of the holders of
ADRs otherwise entitled to the proceeds upon an averaged or other
practicable basis without regard to any distinctions among the holders
because of exchange restrictions, the date of delivery of any ADR or
otherwise.
Such a disposal of rights may reduce the equity interest in ScottishPower of
the holders of ADRs. The depositary will not be responsible for any failure to
determine that it may be unlawful or not feasible to make the rights available
to holders in general or any holder or holders in particular.
Without limiting the generality of the preceding paragraph, if a
registration statement under the Securities Act is required with respect to the
securities to which any rights relate in order for ScottishPower to offer such
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rights to holders of ADRs and sell the securities represented by the rights,
the depositary shall not offer the rights to holders of ADRs having an address
in the United States, as defined in Regulation S under the Securities Act,
unless and until a registration statement is in effect or unless the offering
and sale of the securities and the rights to holders are exempt from
registration under the Securities Act.
If the depositary determines that any distribution in property, including
ordinary shares or rights to subscribe therefor, is subject to any tax or
governmental charge that the depositary is obligated to withhold, the
depositary may dispose of all or a portion of the property in amounts and in a
manner, by public or private sale, as the depositary deems necessary and
practicable, and the depositary will distribute the net proceeds of any such
sale or the balance of any such property after deduction of such taxes to the
ADR holders entitled to the proceeds.
Upon any change in par value, split-up, consolidation or any other
reclassification of deposited securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting
ScottishPower or to which ScottishPower is a party, any securities which shall
be received by the depositary or the custodian in exchange for, in conversion
of, or in respect of, deposited securities shall be treated as new deposited
securities under the deposit agreement, and ADSs shall then represent the right
to receive the new deposited securities so received, unless additional ADRs are
delivered or unless the depositary calls for the surrender of outstanding ADRs
to be exchanged for new ADRs.
Record Dates
Whenever any cash dividend or other cash distribution shall become payable,
or any distribution other than cash shall be made, or whenever rights shall be
issued, with respect to the deposited securities, or whenever the depositary
shall receive notice of any meeting of holders of deposited securities, the
depositary shall, after consultation with ScottishPower, fix a record date,
which date shall, to the extent practicable, be the same as the record date
fixed by ScottishPower for the determination of the holders of ADRs who shall
be entitled to receive a dividend, distribution or rights, or the net proceeds
of the sale thereof, or to give instructions for the exercise of voting rights
at any meeting, subject to the provisions of the deposit agreement.
Voting of the Underlying Deposited Securities
Upon receipt of notice of any meeting of holders of ordinary shares or other
deposited securities, the depositary shall, as soon as practicable thereafter
and to the extent permitted by law, mail notice of the meeting to the holders
of ADRs. The holders of ScottishPower ADRs at the close of business on the date
specified by the depositary are entitled under the deposit agreement, subject
to any applicable provisions of law, the ScottishPower articles and the
deposited securities, to instruct the depositary as to the exercise of the
voting rights, if any, pertaining to the deposited securities represented by
the ADSs evidenced by their respective ADRs. The depositary has agreed that it
will endeavor, insofar as practicable, to vote or cause to be voted the
deposited securities so represented in accordance with any written instructions
of holders of ADRs. The depositary has agreed not to vote the deposited
securities so represented unless it has received the written instructions from
the holders of ADRs. See also "--Future Proposals."
Disclosure of Interests; Limitations on Shareholdings
Each holder of an ADR agrees that the holder is bound by, and subject to,
the ScottishPower articles and that the holder will provide within the
prescribed time period the information as ScottishPower may request in a
disclosure notice given under the ScottishPower articles and the Companies Act.
Failure of a holder to provide in a timely fashion the information requested in
any disclosure notice may result in the suspension of certain rights in respect
of the holder's ADSs, including:
. voting rights in respect of the ordinary shares represented by the ADSs;
and
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. if the ADSs represent ordinary shares which, together with all other
ordinary shares in which the holder has an interest, represent 0.25% or
more of the ordinary shares of ScottishPower, the right to transfer the
ordinary shares and the right to receive dividends and other
distributions in respect of the ordinary shares.
Each ADR holder agrees to comply with the provisions of the ScottishPower
articles and the Companies Act with regard to notification to ScottishPower of
interests in ordinary shares, which include provisions requiring a ADR holder
to disclose within a prescribed period of time (currently two days) interests
in ordinary shares equal to or in excess of the specified percentage (currently
3%) of the ordinary shares.
If, to the knowledge of the directors of ScottishPower, a person has, or
appears to have, an interest in ADSs representing ordinary shares which,
together with all other ordinary shares in which the person has an interest,
represent 15% or more of the ordinary shares of ScottishPower (a "Relevant
Holder"), the directors of ScottishPower are required to serve on the Relevant
Holder a written notice under the ScottishPower articles requiring disposal
within 21 days of the giving of the notice (or such longer period as the
directors considered reasonable) of the number of ordinary shares and/or ADSs
of the Relevant Holder representing ordinary shares the disposal of which would
cause such Relevant Holder to cease to be a Relevant Holder. If the depositary
or the custodian (or the nominee of either) as registered holder of any
ordinary shares receives a required disposal notice, it shall forward a copy of
the notice to each Relevant Holder specified in the notice. Each ADR holder
acknowledges and agrees that it will comply with the terms of any required
disposal notice it receives.
A Relevant Holder on whom a required disposal notice has been served will
not, until such time as the required disposal notice has been withdrawn or
complied with to the satisfaction of ScottishPower, be entitled to attend or
vote at any general meeting of ScottishPower or any meeting of holders of
ordinary shares of ScottishPower. If the depositary receives a required
disposal notice from ScottishPower, then until such time as the required
disposal notice has been withdrawn or complied with, the depositary will not,
except in the case of a required disposal notice, register any transfer of the
ADRs relating to the ordinary shares referred to in the required disposal
notice (the "Relevant ScottishPower ADRs") and the depositary will deny the
Relevant Holder the voting rights attaching to the Relevant ScottishPower ADRs.
If (1) a Relevant Holder surrenders any Relevant ScottishPower ADRs for the
purposes of transfer and withdrawal of all or part of the deposited securities
represented thereby, (2) the required disposal notice relating to the relevant
ADRs has not been withdrawn by ScottishPower and (3) ScottishPower has not
notified the depositary that a required disposal has been made by or on behalf
of the Relevant Holder, then, as soon as practicable after delivery to or upon
the order of such Relevant Holder of the deposited securities, the depositary
will notify ScottishPower that the delivery was made (and to whom it was made)
and provide all reasonably necessary identifying information in respect of any
the deposited securities so delivered.
If a Relevant Holder fails to comply with the terms of any disposal notice
served on it, the directors of ScottishPower, so far as they are able, are
required to procure a disposal of the ordinary shares underlying the Relevant
ScottishPower ADRs under the ScottishPower articles. If any ordinary shares
underlying the Relevant ScottishPower ADRs are so disposed of, such
ScottishPower ADRs shall thereafter represent only the right to receive any
cash received by the depositary in respect of the disposition (without any
liability for interest thereon), less any taxes or expenses incurred or paid in
selling the ordinary shares or in distributing the cash to the Relevant Holder.
Upon surrender of an ADR evidencing the ADSs, the Relevant Holder shall be
entitled to withdraw the cash and, to the extent the ADR evidences ADSs other
than those relating to excess shares, the deposited securities represented by
the ADSs.
Any holder of a ADR holding through a nominee should be aware that the
nominee may be required to provide ScottishPower with certain information as to
the identity of the nominee's beneficial holders and that, to the extent that
the nominee does not provide the information, the holders may be deemed to be
in violation of the provisions regarding restrictions on ownership and voting
referred to above. In addition to the direct effects described above,
application of the provisions may have other adverse effects on ADR holders.
The required disposal or forced sale of ordinary shares or ADSs in which
Relevant Holders have interests could adversely affect the market price of
ordinary shares and ADSs.
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Except to the extent (if at all) provided in the ScottishPower articles,
ScottishPower will not be under any obligation to give, modify or withdraw a
required disposal notice or to give any instructions to the depositary or the
custodian in connection with any of the foregoing, and ScottishPower will not
have any liability whatsoever to any person in respect of any of the foregoing.
Any resolution or determination of, or decision or exercise of any discretion
or power by, ScottishPower, its directors, the depositary or the custodian,
under the deposit agreement or under the ScottishPower articles with respect to
the limitation on holdings described in this proxy statement/prospectus, any
disposal of ordinary shares or otherwise, will be final, conclusive and binding
on any holder of ADRs thereby affected and all other persons concerned and will
not be open to challenge, whether as to its validity or otherwise, on any
ground whatsoever. Neither ScottishPower, the depositary nor the custodian will
have any liability whatsoever to any person in respect thereof, or be required
to give any reason for any decision, determination or declaration taken or made
with respect thereto.
The provisions of the ScottishPower articles regarding limitations on
shareholdings described above may be amended or deleted only by special
resolution of the shareholders of ScottishPower and will not expire
automatically upon the redemption of the special share of ScottishPower. Such
redemption may occur at any time, but only by action of the Secretary of State
for Scotland. See "Description of Ordinary Shares--Limitations On Holdings."
Reports and Other Information
The depositary will make available for inspection by ADR holders at the
depositary's office and any other designated transfer office any reports and
communications received from ScottishPower which are both:
. received by the depositary or the custodian or the nominee of either as
the holder of the deposited securities; and
. made generally available to the holders of the deposited securities by
ScottishPower.
The depositary will also mail or, when requested by ScottishPower, otherwise
make available to ADR holders, copies of such reports and communications as
provided in the deposit agreement.
Resignation and Removal of Depositary
The depositary may resign or may be removed by ScottishPower under the
deposit agreement at any time.
No resignation or termination of the appointment of the depositary under the
deposit agreement will take effect until a new depositary has been appointed by
ScottishPower on substantially the terms set out in the deposit agreement.
Notice of the change of the depositary will be given to the holders of ADRs
within 30 days of the appointment of the successor depositary thereunder.
Amendment and Termination of the Deposit Agreement
ScottishPower and the depositary may at any time, upon agreement, amend any
provision of the deposit agreement or the ADRs issued under the deposit
agreement. Any amendment to the deposit agreement which imposes or increases
any fees or charges, other than the fees of the depositary for the execution
and delivery or the cancellation of ADRs referred to below, taxes or other
governmental charges, or which otherwise prejudices any substantial existing
right of ADR holders, will not take effect as to outstanding ADRs until the
expiration of three months after notice of the amendment has been given to the
holders of outstanding ADRs; provided, however, that the parties to the deposit
agreement, including ADR holders, agree that any amendments which (1) are
reasonably necessary, as agreed by ScottishPower and the depositary, in order
for ADSs or ordinary shares to be traded solely in electronic book-entry form
and (2) do not impose or increase any fees or charges to be borne by holders,
shall be deemed not to prejudice any substantial rights of holders. Every
holder of a ADR at the time such amendment so becomes effective will be deemed
by continuing to hold such ADR to consent and agree to the amendment and to be
bound by the deposit agreement or the ADR, or both of them, as applicable, as
amended thereby. In no event shall any amendment impair the right of any ADR
holder to surrender the ADRs held by the holder and receive the deposited
securities represented by the ADRs, except to comply with mandatory provisions
of applicable law.
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Whenever so directed by ScottishPower, the depositary will terminate the
deposit agreement by mailing notice of the termination to the record holders of
all ADRs then outstanding at least 30 days before the date fixed in notice for
termination. The depositary may terminate the deposit agreement if, at any time
90 days after the depositary shall have delivered to ScottishPower a written
notice of its election to resign, a successor depositary shall not have been
appointed.
If any ADRs remain outstanding after the date of termination of the deposit
agreement, the depositary thereafter will discontinue the registration of
transfers of ADRs, will suspend the distribution of dividends to the holders of
ADRs and will not give any further notices or perform any further acts under
the deposit agreement, except:
. the collection of dividends and other distributions pertaining to the
deposited securities;
. the sale of rights and property as provided in the deposit agreement; and
. the delivery of deposited securities, together with any dividends or
other distributions received with respect to the ADRs and the net
proceeds of the sale of any rights or other property, in exchange for
surrendered ADRs.
At any time after the expiration of two years from the date of termination,
the depositary may sell the deposited securities and hold uninvested the net
proceeds, together with any other cash then held, unsegregated and without
liability for interest, for the pro rata benefit of the holders of the ADRs
that have not been surrendered and without liability for interest, for the pro
rata benefit of the holders of the ADRs that have not been surrendered, the
holders thereupon becoming general creditors of the depositary with respect to
the net proceeds.
Future Proposals
ScottishPower has agreed to include for consideration at its 2000 annual
general meeting by its shareholders and, subject to the ScottishPower Board of
Director's fiduciary duties, to recommend a special resolution to amend the
ScottishPower articles to provide, to the extent reasonably possible, that
record holders of ADRs will be entitled to attend, vote and speak at any
general meeting of holders of ordinary shares. It is intended that the
amendments to be proposed will provide for the appointment of multiple proxies
by approved depositaries, for such proxies themselves to be able to appoint a
proxy, for the holding of special and extraordinary resolution on a poll and
for certain other minor amendments to the ScottishPower articles.
In addition, ScottishPower has agreed to use its commercially reasonable
efforts to amend the deposit agreement to provide holders of ADRs with the
right to:
. participate in rights offerings;
. attend, speak at, call for a poll at and examine documents made
available at ScottishPower shareholder meetings;
. instruct the depositary to vote its ADSs in a particular fashion;
. generally be counted individually as present and/or voting with respect
to resolutions adopted at ScottishPower shareholder meetings; and
. decide at ScottishPower shareholder meetings how to vote on particular
resolutions, in each case on the same basis as the holders of ordinary
shares.
Any amendments to the deposit agreement relating to attendance, speaking and
voting at general meetings would depend, for their effectiveness, upon the
changes to the ScottishPower articles referred to above having been made.
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Charges of Depositary
The depositary may charge the party to whom ADRs are delivered against
deposits of ordinary shares up to $5.00 for each 100 ADSs or portion thereof
evidenced by the ADRs issued, and the depositary may charge the party
surrendering ADRs, including any party surrendering ADRs after termination of
the deposit agreement, for delivery of deposited securities up to $5.00 for
each 100 ADSs evidenced by the ADRs surrendered. With the exception of the
charges and expenses set out in the deposit agreements as being payable by the
holders of the ADRs, all other charges and expenses of the depositary will be
paid by ScottishPower or the depositary as provided in the deposit agreement.
Liability of Holder for Taxes
Any tax, duty or other governmental charge, including, without limitation,
any stamp tax, or expense payable by the custodian, the depositary or the
nominee of either as the registered holder of any deposited securities
underlying any ADR will be payable by the holder of the ADR who will pay the
required amount to the depositary. The depositary may refuse to effect
registration of transfer of the ADR or any transfer and withdrawal of deposited
securities underlying such ADR until the payment is made, and may withhold any
dividends or other cash distributions constituting deposited securities
underlying the ADR or may sell for the account of the holder of the ADR any
part or all of the other deposited securities underlying the ADR and may apply
the cash or the proceeds of any sale in payment of any such tax, duty or other
governmental charge or expense (and any taxes or expenses arising out of the
sale), the holder of the ADR remaining liable for any deficiency.
General
Neither the depositary nor ScottishPower nor its directors will be liable to
the holders of ScottishPower ADRs if prevented or delayed by law or by reason
of any provision, present or future, of the ScottishPower articles, the
deposited securities or any circumstances beyond its control from performing
its obligations under the deposit agreement. The obligations of ScottishPower
and the depositary under the deposit agreement are expressly limited to using
reasonable efforts and good faith in the performance of their respective
obligations under the deposit agreement.
The ADRs are transferable on the books of the depositary, provided that the
depositary may close the transfer books at any time or from time to time, after
consultation with ScottishPower, when deemed expedient by it in connection with
the performance of its duties or at the request of ScottishPower. As a
condition precedent to the execution and delivery, registration of transfer,
split-up, combination or surrender of any ADR or withdrawal of deposited
securities, the depositary or the custodian may require payment of a sum
sufficient to reimburse it for any tax, duty or other governmental charges,
including, without limitation, any amounts in respect of applicable stamp taxes
payable by a holder in accordance with the deposit agreement, and any share
transfer or registration fee and payment of any applicable fees payable by the
holders of ADRs. The depositary may refuse to deliver ADRs, to register the
transfer of any ADR or to make any distribution of, or related to, deposited
securities until it or the custodian has received such proof of citizenship,
residence, exchange control approval or other information as it may deem
necessary or proper or as ScottishPower may require by written request to the
depositary or the custodian. The delivery, transfer and surrender of ADRs
generally may be suspended during any period when the transfer books of the
depositary are closed, or if any the action is deemed necessary or advisable by
the depositary or ScottishPower, at any time or from time to time because of
any requirement of law or of any government or governmental body or commission.
The depositary will keep books, at its transfer office in the Borough of
Manhattan, The City of New York, for the registration and transfer of ADRs that
at all reasonable times will be open for inspection by the holders of ADRs and
ScottishPower; provided, however, that the inspection shall not be for the
purpose of communicating with holders of ADRs in the interest of a business or
object other than the business of the group or a matter related to the deposit
agreement, the ADRs, the ordinary shares or the ScottishPower articles.
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COMPARISON OF RIGHTS OF PACIFICORP SHAREHOLDERS
AND SCOTTISHPOWER SHAREHOLDERS
As a result of the merger, holders of PacifiCorp common stock will receive
either (a) ordinary shares or (b) ADSs, each of which represents four ordinary
shares. ScottishPower is a public limited company incorporated under the laws
of Scotland. PacifiCorp is a corporation organized under the laws of the State
of Oregon. The following is a summary of material differences between the
rights of PacifiCorp shareholders and the rights of ScottishPower shareholders
arising from the differences between the corporate laws of the State of Oregon
and Scotland, the governing instruments of the two companies, and as a result
of London Stock Exchange requirements. For information as to where the
governing instruments of ScottishPower may be obtained, see "Where You Can Find
More Information."
Rights attaching to ordinary shares underlying the ADSs are exercisable only
by the depositary, as the registered holder of those shares. Rights as between
the depositary and holders of the ADSs are set out in the deposit agreement.
For further details, including details of future proposals in relation to ADSs,
see "Description of American Depositary Shares."
Limitations on Enforceability of Civil Liabilities Under U.S. Federal
Securities Laws
ScottishPower is and will continue to be a Scottish company. Most of
ScottishPower's directors and officers and some of the experts named in this
proxy statement/prospectus are residents of the U.K. and not the U.S. In
addition, following the merger, a majority of ScottishPower's directors and
officers will be residents of the U.K. and not the U.S. A large portion of the
assets of ScottishPower are and, after consummation of the merger, will be
located outside of the U.S., although ScottishPower will indirectly have very
substantial assets in the U.S. As a result, it may be difficult for investors
to effect service within the U.S. upon persons located outside the U.S. or to
enforce in U.S. courts or outside the U.S. judgments obtained against persons
in U.S. courts, or to enforce in U.S. courts judgments obtained against such
persons in courts in jurisdictions outside the U.S., in each case, in any
action, including actions predicated upon the civil liability provisions of
U.S. securities laws. ScottishPower believes that there may be doubt as to the
enforceability against persons in the U.K., whether in original actions or in
actions for the enforcement of judgments of U.S. courts, of civil liabilities
predicated solely upon the laws of the U.S., including its federal securities
laws. Unlike directors and officers of PacifiCorp presently, directors and
officers of ScottishPower, a foreign private issuer under the Securities
Exchange Act, will not be subject to rules under the Securities Exchange Act
that under certain circumstances would require directors and officers to
forfeit to ScottishPower any "short swing" profits realized from purchases and
sales, as determined under the Securities Exchange Act and the rules
thereunder, of ScottishPower equity securities.
Proxy Statements and Reports
Under Section 14(a) of the Securities Exchange Act and the rules enacted
pursuant to Section 14(a) (the "Proxy Rules"), PacifiCorp is required to comply
with notice and disclosure requirements relating to the solicitation of proxies
in respect of shareholder meetings. As a foreign private issuer, ScottishPower
is not subject to the Proxy Rules. However, ScottishPower is, and will be,
subject to notice and disclosure requirements under the U.K. Financial Services
Act 1986, the Companies Act 1985 and the Listing Rules of the London Stock
Exchange. As a foreign private issuer with securities listed on the New York
Stock Exchange and registered under Section 12 of the Securities Exchange Act,
ScottishPower will also be required under the Securities Exchange Act to
publicly file with the SEC and the New York Stock Exchange, as the case may be,
annual reports and other information.
PacifiCorp Voting Rights; Generally
The issued and outstanding capital stock of PacifiCorp consists of the
PacifiCorp common stock and three classes of preferred stock: the 5% preferred
stock, the serial preferred stock and the no par serial preferred stock. The
holders of the 5% preferred stock, the serial preferred stock and the
PacifiCorp common stock are entitled to one vote for each share held on matters
presented to shareholders generally. The holders of the no
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par serial preferred stock are entitled to the voting rights set forth in the
PacifiCorp articles upon creation of each series of no par serial preferred
stock. During any periods when dividends on any class of PacifiCorp preferred
stock are in default in an amount equal to four full quarterly payments or
more, the holders of all classes of PacifiCorp preferred stock, voting as one
class separately from the holders of PacifiCorp common stock, have the right to
elect a majority of the full PacifiCorp Board of Directors. No PacifiCorp
preferred stock dividends are in arrears at the date of this proxy
statement/prospectus.
None of PacifiCorp's outstanding shares of capital stock has cumulative
voting rights, which means that the holders of more than 50% of all outstanding
shares entitled to vote for the election of PacifiCorp directors can elect 100%
of the directors if they choose to do so, and, in such event, the holders of
the remaining less than 50% of the shares will not be able to elect any person
or persons to the PacifiCorp Board of Directors. Nominees who receive the most
votes by shareholders are elected directors. A quorum consists of a majority of
the shares entitled to vote, unless otherwise required by law.
See "--Annual Meeting of Shareholders" for a discussion of who may call
meetings of shareholders of PacifiCorp.
ScottishPower Voting Rights; Generally
Under Scots law, the voting rights of shareholders are governed by a
company's articles of association, subject to the statutory rights of
shareholders, including the right to demand a poll (a vote by the number of
shares held) at a general meeting. Each shareholder present in person and
entitled to vote at a general meeting has one vote on a show of hands and, on a
poll, one vote for every share held by him. The ScottishPower articles provide
that a poll may be demanded by:
.the Chairman of the meeting; or
.by at least five shareholders present in person or by proxy and having the
right to vote at the meeting; or
.by any shareholder or shareholders representing at least 10% of the voting
rights of all shareholders having the right to vote at the meeting or by
any shareholder or shareholders holding shares conferring a right to vote
at the meeting on which the aggregate sum paid up on the shares is equal to
not less than 10% of the total sum paid upon all the shares conferring the
right to vote.
See "Description of American Depositary Shares--Future Proposals" for
information concerning proposed changes to the voting rights of ScottishPower
shareholders.
Cumulative voting is essentially unknown under Scots law. Under Scots law,
two shareholders present in person constitute a quorum for purposes of a
general meeting, unless the company's articles of association specify
otherwise. The ScottishPower articles specify that three shareholders present
in person or by proxy or by a duly authorized representative of a corporation
and entitled to vote constitute a quorum. See "Description of Ordinary Shares--
Voting" and "Description of American Depositary Shares--Future Proposals."
Under the ScottishPower articles, if a person, other than specified
permitted persons, including the depositary, has, or appears to the
ScottishPower Board of Directors to have, an interest, except those of a
nominee or custodian trustee, in ordinary shares which carry the right to cast
15% or more of the total votes attaching to the entire share capital of
ScottishPower, such person is not entitled to attend or vote at any general
meeting of shareholders of ScottishPower or to exercise any other right
conferred by ownership of the ordinary shares in relation to any such meeting,
and the right to attend, to speak and to demand and vote on a poll which would
have attached to the ordinary shares shall vest in the chairman of the meeting,
in whose complete discretion the ordinary shares may be voted. Such rights will
not reattach to the ordinary shares until the ScottishPower Board of Directors
is satisfied that the person has disposed of a sufficient amount of ordinary
shares. See "Description of Ordinary Shares--Voting."
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The ScottishPower Special Share
The U.K. Government (through the Secretary of State for Scotland) holds a
special rights non-voting redeemable preference share, which is redeemable at
par ((Pounds)1) only at the option of the Secretary of State for Scotland.
ScottishPower may not redeem the special share unless requested to do so by the
Secretary of State for Scotland. The special share, which may only be held by
the U.K. government, does not carry any rights to vote at general meetings, but
does entitle the holder to receive notice of, attend and speak at general
meetings. The articles specify matters, in particular the alteration of
specified provisions of the articles including the provision relating to
limitations which prevent a person from owning or having an interest in 15% or
more of ScottishPower voting shares require the written consent of the holder
of the special share. The U.K. government, as holder of the special share, does
not have a right to appoint or nominate directors to the ScottishPower Board of
Directors.
If the holding company structure is adopted, the special share in
ScottishPower will be cancelled and replaced by an equivalent special share in
New ScottishPower, which will be issued to the Secretary of State for Scotland.
The New ScottishPower special share will have the same rights as the special
share in ScottishPower, together with additional consent rights specified in
the articles, the purpose of which will be to ensure that no persons other than
New ScottishPower will be able to own or have an interest in more than 15% in
aggregate of the ScottishPower voting shares without the Secretary of State's
consent.
Shareholder Action by Written Consent
Under Oregon law and the PacifiCorp bylaws, PacifiCorp shareholders may act
by written consent instead of a meeting only if, before the action, all
shareholders entitled to vote on the action sign a written consent setting
forth the action. However, if notice is required by law to be given to non-
voting shareholders and the action is taken by unanimous consent of the voting
shareholders, the action is not effective unless, at least 10 days before the
action is taken, the non-voting shareholders have been given the notice.
Under Scots law, a company's articles of association may provide that a
resolution in writing executed by or on behalf of each shareholder who would
have been entitled to vote upon it if it had been proposed at a general meeting
at which he was present will be as valid and effectual as if it had been passed
at a general meeting properly convened and held. Such a written resolution
requires the unanimous consent of all such shareholders entitled to attend and
vote. The ScottishPower articles do not contain such a provision.
Shareholder Proposals and Shareholder Nominations of Directors
PacifiCorp shareholders wishing to present proposals for action at an annual
or other meeting of shareholders must do so in accordance with the PacifiCorp
bylaws and the Proxy Rules. A shareholder must give timely notice of the
proposed business to the Corporate Secretary of PacifiCorp. To be timely, a
shareholder's notice must be in writing, delivered to or mailed and received at
the principal executive offices of PacifiCorp not less than 60 days nor more
than 90 days before the meeting; provided, however, that if less than 70 days'
notice or prior public disclosure of the date of the meeting is given or made,
notice by the shareholder, to be timely, must be received no later than the
close of business on the tenth day following the earlier of the day on which
the notice of the date of the meeting was mailed or public disclosure was made.
For each matter the shareholder proposes to bring before the meeting, the
notice to the Corporate Secretary must include:
. a brief description of the business desired to be brought before the
meeting and the reasons for conducting the business at the meeting;
. the name and address of the shareholder proposing the business;
. the class and number of PacifiCorp shares which are beneficially owned by
the shareholder; and
. any material interest of the shareholder in the business.
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If the shareholder is not a shareholder of record at the time of giving the
notice, the notice must be accompanied by appropriate documentation of the
shareholder's claim of beneficial ownership. The officer presiding at the
shareholders meeting may, if in the officer's opinion the facts warrant,
determine that business was not properly brought before the meeting in
accordance with the PacifiCorp bylaws. If the officer does so, such officer
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
PacifiCorp shareholders wishing to directly nominate candidates for election
to the PacifiCorp Board of Directors must do so in accordance with the
PacifiCorp bylaws by giving timely notice in writing to the Corporate Secretary
of PacifiCorp. The notice must set forth:
. as to each person whom the shareholder proposes to nominate
(1) all information relating to the person that is required to be
disclosed in proxy solicitations pursuant to the Proxy Rules and
(2) the written consent of the person to be named in the proxy
statement as a nominee and to serve as a director if elected; and
. as to the shareholder giving the notice,
(1)the name and address of the shareholder and
(2)the class and number of PacifiCorp shares which are beneficially
owned by the shareholder.
If the shareholder is not a shareholder of record at the time of giving the
notice, the notice must be accompanied by appropriate documentation of the
shareholder's claim of beneficial ownership. No person is eligible to serve as
a director of PacifiCorp unless nominated in accordance with the procedures
under the PacifiCorp bylaws. The officer presiding at the meeting may, if in
the officer's opinion the facts warrant, determine that a nomination was not
made in accordance with the procedures prescribed by the PacifiCorp bylaws. If
the officer does so, the officer will so declare to the meeting and the
defective nomination will be disregarded.
Under Scots law, shareholders may requisition a resolution, including a
resolution to appoint a director-- see "--Vacancies on the Board of Directors"
below, to be voted on at a general meeting if:
. the requisition is made by the holders of shares which represent not
less than one twentieth of the voting rights of all shareholders having
at the date of the requisition a right to vote at the meeting to which
the requisition relates; or
. the requisition is made by not less than 100 shareholders holding shares
on which there has been paid up an average sum, per shareholder, of not
less than (Pounds)100.
The requisition must be deposited at the company's registered office not less
than six weeks before the general meeting to which it relates. At a general
meeting, a resolution to appoint two or more directors by a single resolution
may not be proposed unless a resolution approving that it may be proposed is
passed by the general meeting with no dissenting votes.
The ScottishPower articles provide that a person, other than a retiring
director or a person recommended by the board, is only eligible for election to
the ScottishPower Board of Directors by shareholders at a general meeting if a
shareholder who is qualified to attend and vote at that meeting directly
nominates that other person by written notice to ScottishPower signed by the
shareholder and by the nominee, and giving details in relation to the proposed
director.
Sources and Payment of Dividends
Oregon law provides that, subject to any restrictions contained in the
articles of incorporation, an Oregon corporation may make a distribution to its
shareholders unless, after giving effect to the distribution, which is defined
to include a repurchase of shares, (a) the corporation would not be able to pay
its debts as they become due in the usual course of business or (b) the
corporation's total assets would be less than the sum of its total
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liabilities plus the amount that would be needed for preferential rights upon
dissolution. The board of directors of an Oregon corporation may base a
determination that a distribution is not prohibited either on the corporation's
financial statements prepared on the basis of accounting practices and
principles that are reasonable under the circumstances, on a fair valuation, or
other method that is reasonable under the circumstances.
The PacifiCorp articles provide that each class of PacifiCorp preferred
stock is entitled, equally with each other class and in preference to the
PacifiCorp common stock, to accumulate dividends at the rate or rates, which
may be subject to adjustment, determined in accordance with the PacifiCorp
articles at the time of creation of each series. Subject to the prior rights of
each class of PacifiCorp preferred stock and to the rights of any other classes
of preferred stock subsequently authorized, the PacifiCorp common stock alone
is entitled to all dividends other than those payable in respect of each class
of PacifiCorp preferred stock.
Under Scots law, a company may pay dividends, only out of its distributable
profits and not out of share capital, which includes share premiums. Amounts
credited to the share premium account, representing the excess of the
consideration for the issue of shares over the aggregate par value of the
shares, may not be paid out as cash dividends but may be used, among other
things, to pay up unissued shares which may then be distributed to shareholders
in proportion to their holdings. In addition, a public company, such as
ScottishPower, may make a distribution at any time only if, at that time, the
amount of its net assets is not less than the aggregate of its issued and paid
up share capital and undistributable reserves. ScottishPower has historically
paid two dividends per year. The ScottishPower Board of Directors has the power
under the ScottishPower articles to declare and pay interim dividends or, in
the case of New ScottishPower, any dividends. Subject to any preferential
rights attached to any class of shares, the ordinary shares are entitled to all
dividends paid by ScottishPower. See "--Preferred Stock and Preference Stock"
and "Description of Ordinary Shares--Dividends and Other Distributions."
Rights of Purchase and Redemption
Under Oregon law , the repurchase and redemption of stock by an Oregon
corporation are subject to the same limitations as payment of dividends. See
"--Sources and Payment of Dividends." However, the PacifiCorp articles require
that if PacifiCorp purchases any of its outstanding stock subject to
redemption, the price paid therefor shall not exceed the price at which it is
redeemable.
Under Scots law and its articles, ScottishPower may issue redeemable shares.
A Scottish company may purchase its own shares, including any redeemable
shares, if so authorized by its articles of association and provided that the
purchase has been previously approved by an ordinary resolution of its
shareholders, in the case of an on-market purchase, which approval may be
general or specific, or a special resolution, in the case of an off-market
purchase. The shares may be redeemed or repurchased only if fully paid and, in
the case of public companies such as ScottishPower, only, subject as provided
below, out of distributable profits or the proceeds of a new issue of shares
issued for the purpose of the repurchase or redemption. The ScottishPower
articles do permit the purchase of its own shares. As with many other companies
listed on the London Stock Exchange, ScottishPower customarily seeks an annual
special resolution generally to approve on-market purchases subject to
specified limitations. When a company purchases its own shares wholly out of
profits, an amount equal to the nominal amount of the share purchased and
subsequently cancelled must be transferred to the capital redemption reserve,
which is generally treated as paid-up share capital. In addition, any amount
payable by the company on purchase of its shares in excess of the par value may
be paid out of the proceeds of a fresh issue of shares up to an amount equal to
whichever is the lesser of the aggregate of the original premiums received by
the company on the issue of those shares or the amount of the company's share
premium account as at the time of the repurchase including any sum transferred
to that account in respect of premiums on the new issue. The London Stock
Exchange, on which the ordinary shares are listed, usually requires that on-
market purchases of 15% or more of a company's equity share capital pursuant to
a general shareholder authority must be made by way of either a tender or
partial offer to all shareholders, and in the case of a tender
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offer, at a stated maximum or fixed price. Purchases pursuant to a general
shareholder authority below the 15% threshold may be made through the market in
the ordinary way provided that the price may not usually be more than 5% above
the average of the middle market quotations taken from the Daily Official List
of the London Stock Exchange for the five business days before the purchase
date.
Regulation Under Public Utility Holding Company Act of 1935
Following completion of the merger, ScottishPower will be the holding
company of PacifiCorp, a public utility company. Therefore, both ScottishPower
and PacifiCorp will be subject to regulation under the 1935 Act. This
regulation may affect ScottishPower's and PacifiCorp's ability to issue, sell,
purchase or repurchase securities, pay dividends or engage in affiliate
transactions. See "The Merger--Regulatory Matters" above.
Special Meeting of Shareholders
The PacifiCorp bylaws provide that special meetings of shareholders may be
called by the Chairman of the Board, the President or the PacifiCorp Board of
Directors. In addition, the Chairman of the Board shall call a special meeting
of the shareholders if the holders of not less than one-tenth of all the
outstanding votes of PacifiCorp entitled to be cast on any issues proposed to
be considered at the meeting sign, date and deliver, to the Corporate
Secretary, a written demand for the meeting describing the purposes for which
it is to be held. Moreover, the business permitted to be conducted at any
special meeting of shareholders is limited to the business specified in the
notice of the meeting.
Under Scots law, an extraordinary general meeting of shareholders may be
called by the board of directors or, notwithstanding any provision to the
contrary in a company's articles of association, by a requisition of
shareholders holding not less than one-tenth of the paid-up capital of the
company carrying voting rights at general meetings. An ordinary resolution
requires 14 clear days' notice. An extraordinary resolution (as defined below)
also requires 14 clear days' notice. A special resolution requires 21 clear
days' notice. Extraordinary resolutions are relatively unusual and are confined
to matters out of the ordinary course of business such as a proposal to wind up
the affairs of the company. Special resolutions generally involve proposals to
change the name of the company, to alter its capital structure, to change or
amend the rights of shareholders, to permit the company to issue new shares for
cash without applying the shareholders' pre-emptive rights, to amend the
company's objects (purpose) clause in its memorandum of association, to amend
the company's articles of association, or to carry out certain other matters
where either the company's articles of association or the Companies Act 1985
prescribe that a special resolution is required. All other proposals relating
to the ordinary course of the company's business, such as the election of
directors, would be the subject of an ordinary resolution. An annual general
meeting requires 21 clear days' notice, although best practice under certain
U.K. corporate governance guidelines would be to give at least 20 working days'
notice.
Dissenters' Rights
Under Oregon law, with certain exceptions, a shareholder is entitled to
dissent from, and obtain payment of the fair value of the shareholder's shares
in the event of a merger, stock exchange, sale or exchange of all or
substantially all of the property of the corporation other than in the usual
and regular course of business, or certain specified charter amendments. Under
Oregon law, unless the articles of incorporation of an Oregon corporation
provide otherwise (which the PacifiCorp articles do not), dissenters' rights do
not apply to the holders of shares of any class or series if the shares of the
class or series are registered on a national securities exchange or quoted on
the Nasdaq as a National Market System issue on the record date for the meeting
of shareholders at which the corporate action giving rise to dissenters' rights
is to be approved. PacifiCorp's common stock is listed on the New York Stock
Exchange and the Pacific Stock Exchange and, therefore, PacifiCorp common stock
holders have no dissenters' rights of appraisal with respect to the merger. As
to the dissenters' rights of the holders of PacifiCorp preferred stock, see
"The Merger--Dissenters' Rights."
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Scots law does not generally provide for dissenters' rights. However, see
"--Shareholders' Voting Rights on Certain Transactions" and "--Shareholders'
Suits" below.
Pre-emptive Rights
The PacifiCorp articles expressly eliminate pre-emptive rights in accordance
with Oregon law.
Under Scots law, the issue for cash of equity securities or rights to
subscribe for or convert into equity securities must be offered in the first
instance to the existing equity shareholders in proportion to the respective
nominal values of their holdings, unless a special resolution has been passed
in a general meeting of shareholders disapplying (whether generally or
specifically) this requirement. As is the custom of many companies listed on
the London Stock Exchange, at its annual general meeting each year,
ScottishPower proposes a resolution to authorize the ScottishPower Board to
allot up to a specified amount of share capital for cash otherwise than pro
rata to its existing shareholders. See "Description of Ordinary Shares--
Preemptive Rights."
Amendment of Governing Instruments
Under Oregon law, an Oregon corporation's board of directors may propose,
and its shareholders may adopt, one or more amendments to its articles if the
votes cast by a voting group entitled to vote favoring the amendment exceed the
votes cast by the voting group opposing the action, except that a charter
amendment that would result in a voting group having dissenters' rights
requires the affirmative vote of a majority of the shares of such voting group.
Oregon law requires, among other things, a class vote if the articles of
incorporation are amended to create a new class of shares having rights or
preferences prior to or on a parity with the shares of the class or to increase
the rights or preferences of another authorized class so that the other class
becomes prior to or on a parity with the shares of a class. Oregon law provides
that directors of an Oregon corporation may make amendments to the articles of
incorporation without shareholder approval in some limited circumstances,
including making changes to the corporation's name or extending the duration of
the corporation.
PacifiCorp's articles require a consent, given by a vote at a meeting called
for that purpose, of the holders of at least two-thirds of the total number of
votes entitled to be cast by the shares of the (a) 5% preferred stock, (b)
serial preferred stock and (c) no par serial preferred stock then outstanding
to amend, alter, change or repeal any of the express terms of the securities
then outstanding in a manner substantially prejudicial to the holders of the
securities. The PacifiCorp articles further provide that amending, altering,
changing or repealing the provisions thereof relating to the removal or
classification of directors requires the affirmative vote of holders of at
least 80% of the shares entitled to vote on the election of directors.
The PacifiCorp bylaws provide that they may be amended or repealed, or new
bylaws made, by the affirmative vote of either:
. the holders of record of a majority of the outstanding capital stock of
PacifiCorp; or
. a majority of the entire PacifiCorp Board of Directors, in each case
upon required notice.
Under Scots law, the shareholders have the authority to alter, delete
substitute or add to the objects clause in a company's memorandum of
association and all provisions of its articles of association by a special
resolution subject, in the case of alterations to the objects clause in the
memorandum of association, to the right of dissenting shareholders to apply to
the courts to cancel the alterations. Under Scots law, the board of directors
is not authorized to change the memorandum of association or the articles of
association. Amendments affecting the rights of the holders of any class of
shares may, depending on the rights attached to the class and the nature of the
amendments, also require approval of the classes affected in separate class
meetings.
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Preferred Stock and Preference Stock
PacifiCorp's articles provide that serial preferred stock and no par serial
preferred stock each may be issued in one or more series and that all series of
each class shall constitute one and the same class of stock, shall be of equal
rank and shall be identical in all respects except as to the designation
thereof and except that each series may vary, as fixed and determined by the
PacifiCorp Board of Directors at the time of its creation and expressed in a
resolution, as to:
. the dividend rate or rates, which may be subject to adjustment;
. the date or dates from which dividends shall be cumulative;
. the dividend payment dates;
. the amount to be paid upon redemption, if redeemable, or in the event of
voluntary liquidation, dissolution or winding up of PacifiCorp;
. the rights of conversion, if any, into shares of PacifiCorp common stock
and the terms and conditions of any conversion;
. provisions, if any, for the redemption or purchase of shares, which may
be at the option of PacifiCorp or upon the happening of a specified
event or events, including the times, prices or rates, which may be
subject to adjustment; and
. with respect to the no par serial preferred stock, voting rights.
The PacifiCorp articles prohibit the issuance of additional PacifiCorp
preferred stock, without first obtaining the consent of a majority of the
voting power of the 5% preferred stock, the serial preferred stock and the no
par serial preferred stock, unless three tests are met. Under the first test,
the net income of PacifiCorp for a period of 12 consecutive months within the
15 months immediately preceding the issuance, after deducting depreciation and
all taxes, available for the payment of dividends must be at least twice the
annual dividend requirements on all outstanding shares of PacifiCorp preferred
stock, including the new issue. Under the second test, the gross income of
PacifiCorp for a period of 12 consecutive months within the 15 months
immediately preceding such issuance, after deducting depreciation and all
taxes, available for the payment of interest, must be at least one and one-half
times the sum of (1) the annual interest charges on all interest bearing
indebtedness of PacifiCorp and (2) the annual dividend requirements on all
outstanding shares of PacifiCorp preferred stock, including the new issue.
Finally, the third test requires that the sum of (1) the aggregate capital of
PacifiCorp applicable to the PacifiCorp common stock and (2) the surplus of
PacifiCorp must not be less than the aggregate amount payable on the
involuntary dissolution, liquidation or winding up of PacifiCorp in respect of
all outstanding shares of PacifiCorp preferred stock, including the new issue.
Subject to Scots law and without prejudice to any rights attached to any
existing shares or class of shares, ScottishPower may issue shares, including
preferred shares, with the rights or restrictions that its shareholders may by
ordinary resolution determine or, if its shareholders do not so determine, the
directors determine. See "Description of Ordinary Shares--Variation of Class
Rights and Alteration of Share Capital."
Debt Limitations
The PacifiCorp articles currently limit the amount of unsecured debt that
PacifiCorp may issue to the equivalent of 30% of the total of PacifiCorp's
secured indebtedness and its capital and surplus. See "Proposal to Increase
Unsecured Debt Limit."
With specified exceptions, the ScottishPower articles provide that the
borrowings of ScottishPower should not exceed a sum equal to two and a half
times ScottishPower's adjusted capital and reserves (as defined in the
ScottishPower articles), unless approved by an ordinary resolution of the
shareholders.
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Shareholders' Voting Rights on Certain Transactions
Under Oregon law, the vote of a majority of the outstanding shares of
capital stock entitled to vote thereon generally is necessary to approve a
merger or other reorganization or a sale of all or substantially all of the
assets of the corporation out of the ordinary course of business. After
adoption by the board of directors, a merger agreement must be submitted to the
shareholders of an Oregon corporation for approval.
Under the rules of the New York Stock Exchange, acquisitions involving
substantial security holders or the issuance of additional shares of common
stock of a listed company aggregating 20% or more of the outstanding shares of
common stock require the approval of the holders of a majority of the shares
voting thereon.
The Oregon Business Combination Law generally prohibits an Oregon
corporation, such as PacifiCorp, from engaging in certain "business
combinations" with an "interested shareholder" for a period of three years from
the date the person becomes an interested shareholder unless;
. before the person became an interested shareholder, the board of
directors of the corporation approved either the business combination or
the transaction which resulted in the shareholder becoming an interested
shareholder;
. upon consummation of the transaction that resulted in the person
becoming an interested shareholder, that person owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are both directors and
officers and shares owned by employee stock plans in which participants
do not have the right to determine whether shares will be tendered in a
tender or exchange offer; or
. the business combination is approved by the board of directors and
authorized by the affirmative vote of at least two-thirds of the
outstanding voting stock not owned by the interested shareholder.
"Interested shareholder" is defined as any person that is the beneficial
owner, directly or indirectly, of 15% or more of the outstanding voting stock
of the corporation, or an affiliate or associate of the corporation who within
the past three years was a beneficial owner of 15% or more of the outstanding
voting stock of the corporation. Although an Oregon corporation may elect,
under its articles of incorporation or bylaws, not to be governed by these
provisions, neither the PacifiCorp articles nor the PacifiCorp bylaws contain
such an election.
Under the PacifiCorp articles, certain business transactions with a Related
Person (as defined below), including a merger, consolidation or plan of
exchange of PacifiCorp or its subsidiaries, or certain recapitalizations, or
the sale or exchange of a substantial part of the assets of PacifiCorp or its
subsidiaries, or any issuance of voting securities of PacifiCorp, require in
addition to existing voting requirements, approval by at least 80% of the
outstanding voting stock. For purposes of this provision, voting stock is
defined as all of the outstanding shares of capital stock of PacifiCorp
entitled to vote generally in the election of directors, considered as one
class. A Related Person includes any shareholder that is, directly or
indirectly, the beneficial owner of 20% or more of the voting stock. The 80%
voting requirement will not apply in the following instances:
. The Related Person has no direct or indirect interest in the proposed
transaction except as a shareholder;
. The shareholders, other than the Related Person, will receive
consideration for their Voting Stock having a fair market value per
share at least equal to, or in the opinion of a majority of the
continuing directors at least equivalent to, the highest per-share price
paid by the Related Person for any voting stock acquired by it;
. At least two-thirds of the continuing directors expressly approved in
advance the acquisition of the Voting Stock that caused the Related
Person to become a Related Person; or
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. The transaction is approved by at least two-thirds of the Continuing
Directors.
This provision of the PacifiCorp articles may be amended or replaced only
upon the approval of the holders of at least 80% of the voting stock.
Under the rules of the London Stock Exchange, shareholder approval is
usually required for an acquisition or disposal by a listed company, if the
gross assets of the company or business to be acquired or disposed of represent
25% or more of the gross assets of the company or if various other size ratios
prescribed by the Listing Rules of the London Stock Exchange are satisfied, and
is also required in some circumstances relating to the giving by the listed
company of indemnities and similar arrangements. Where the size of the
acquisition or disposal falls below that level, information may nevertheless be
required to be published. Shareholder approval may also be required for an
acquisition or disposal of assets between a listed company and related parties
including:
(1)directors of the company or its subsidiaries;
(2)holders of 10% of the nominal value of any class of the company's or any
holding company's or subsidiary's shares having the right to vote in all
circumstances at general meetings of the relevant company; or
(3)any associate of persons described in (1) or (2) above.
See also "--Certain Provisions Relating to Share Acquisitions" below.
Scots law provides for schemes of arrangement, which are arrangements or
compromises between a company and its shareholders or creditors or any class of
its shareholders, or any class of its creditors, and are used for certain types
of reconstructions, amalgamations, capital reorganizations or takeovers. They
require the approval at a meeting of the company convened by an order of the
Court of Session of a majority in number of the shareholders or creditors or
class of shareholders or creditors representing 75% in value of the capital or
debt held by the creditors or shareholders or class of shareholders or
creditors present and voting, either in person or by proxy, and the sanction of
the court. Once the scheme becomes effective, all creditors and shareholders
(or, if it applies to a class, the creditors or shareholders of the relevant
class) are bound by the terms of the scheme; a dissenting shareholder would not
have rights comparable to dissenters' rights described above.
Scots law also provides that where a takeover offer is made for the shares
of a company incorporated in the U.K. and, within four months of the date of
the offer the offeror has, by virtue of acceptances of the offer, acquired or
contracted to acquire not less than nine-tenths in value of the shares of any
class to which the offer relates, the offeror may, within two months of
reaching the nine-tenths level, by notice require shareholders who do not
accept the offer to transfer their shares on the terms of the offer. A
dissenting shareholder may apply to the court within six weeks of the date on
which the notice was given objecting to the transfer or its proposed terms. The
court is unlikely, absent unfair treatment, fraud or oppression, to exercise
its discretion to order that the acquisition not take effect, but it may
specify the terms of the transfer as it finds appropriate. A minority
shareholder is also entitled in these circumstances to require the offeror to
acquire his shares on the terms of the offer.
Mergers are sometimes effected through the use of a voluntary liquidation of
a company pursuant to the U.K. Insolvency Act 1986, which provides for the
transfer of the whole or part of the assets of that company to another company
in return for shares in the transferee company. To effect the transfer, a
resolution passed by 75% of shareholders conferring authority on the liquidator
is required. Any shareholder who does not vote in favour of the resolution may
express his dissent by writing to the liquidator within seven days after the
passing of the resolution, requiring the liquidator either to abstain from
carrying the resolution into effect or to purchase the shareholder's interest
at a price to be determined by agreement or by arbitration. The liquidator may
apply to the court if it disputes the shareholder's contention and the court
may make such order on the application as it thinks just.
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Rights of Inspection
Oregon law allows any shareholder of an Oregon corporation, upon five
business days' written notice to the corporation, to have the right, during
regular business hours, to inspect the corporation's shareholder list, minutes
of board and shareholder meetings, records of action taken by the board or
shareholders without a meeting, accounting records and other corporate records.
With respect to records of director and shareholder actions, the shareholder
list and accounting records, the shareholder's notice must:
. be made in good faith and for a proper purpose;
. must describe with reasonable particularity the shareholder's purpose and
the records the shareholder desires to inspect; and
. the records must be directly connected with the shareholder's purpose.
Except when closed in accordance with Scots law, the register and index of
names of shareholders of a Scottish company may be inspected during business
hours by its shareholders, without charge and by other persons upon payment of
a fee, and copies may be obtained on payment of a fee. The shareholders of a
Scottish public company may, without charge also inspect the minutes of
meetings of the shareholders during business hours and obtain copies upon
payment of a fee. The published annual accounts of a public company are
required to be laid before the shareholders in a general meeting and a
shareholder is entitled to a copy of the accounts. The shareholders of
ScottishPower have no rights to inspect its accounting records or minutes of
meetings of its directors. Some registers required to be kept by the company
are open to public inspection and service contracts of directors of the
company, which have more than 12 months unexpired or require more than 12
months notice to terminate, must be available for inspection during normal
business hours and each business day at specific times for periods longer than
two hours.
Standard of Conduct for Directors
Oregon law provides that directors of an Oregon corporation are obligated as
fiduciaries to discharge their duties in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances and in a manner the director reasonably believes to be the best
interests of the corporation. Decisions made on that basis are protected by the
so-called "business judgment rule." In discharging their duties, directors are
entitled to rely on information prepared or presented by certain officers or
employees of the corporation whom the director reasonably believes to be
reliable and competent in the matters presented, legal counsel, public
accountants and certain other professionals as to matters within the person's
professional or expert competence, and any committee of the board of directors
if the director reasonably believes the committee merits confidence.
Under general Scots law, a director of a company is under a number of duties
to that company, including: a duty to act in the company's bona fide best
interests; a duty not to put himself in a position where there is an actual or
potential conflict between his duty to his company and his duties to any other
person or his personal interests; and a duty to act for a proper purpose and to
exercise his powers only in accordance with the articles of association of the
company. In addition, directors are under a duty to exercise reasonable skill
and care in the performance of their duties. Various duties, including
disclosure obligations, are also imposed upon directors of a company by statute
and by the Listing Rules of the London Stock Exchange, where applicable.
Executive directors will also have duties under their service contracts.
Classification of the Board of Directors
Under Oregon law, the articles of incorporation of an Oregon corporation may
provide for the classification of the board of directors to stagger the terms
of directors. The term "classified board" generally means the specification of
selected board seats for a term of more than one year but not more than three
years, with different classes of board seats coming up for election each year.
The PacifiCorp articles and PacifiCorp bylaws provide for a classified board of
directors consisting of three classes of directors, each class elected for
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a term of three years. The PacifiCorp articles also provide that amending,
altering, changing or repealing the director classification provision of the
PacifiCorp articles requires the affirmative vote of holders of at least 80% of
the shares entitled to vote on the election of directors.
Scots law permits a company to provide for the classification of the board
of directors with respect to the time for which directors severally hold
office. The ScottishPower articles provide that there shall not be less than
four directors and not more than sixteen. All directors are subject to the
general corporation law requirements concerning the removal of directors. At
each annual general meeting one-third of the directors shall retire from office
by rotation. The directors concerned may be re-appointed or deemed to be re-
appointed under the articles. The directors to retire are selected on the basis
of time in office since their last election but, in the case of the New
ScottishPower articles, if any director has at the start of the annual general
meeting been in office for more than three years since his last appointment or
re-appointment, he must retire and if there is only one director who is subject
to retirement by rotation he must retire. Any director appointed by the
directors since the last annual general meeting is required to retire at the
next following annual general meeting and then is eligible for election, but is
not taken into account in determining which directors are to retire by rotation
at the meeting.
Removal of Directors
Under Oregon law, directors of an Oregon corporation may be removed with or
without cause, unless the articles of incorporation provide only for for-cause
removal. The PacifiCorp articles provide that directors may be removed:
. without cause, at a meeting of shareholders called expressly for that
purpose, by the vote of 80% of the outstanding shares entitled to vote at
an election of directors; or
. with cause, at a meeting of shareholders called expressly for that
purpose by the vote of two-thirds of the outstanding shares entitled to
vote at an election of directors.
Under Scots law, shareholders have the right to remove a director without
cause by ordinary resolution of which special notice (28 clear days' notice)
has been given to the company. The ScottishPower articles provide that a
director may be removed from office by notice in writing served upon him signed
by all his co-directors.
Vacancies on the Board of Directors
Under Oregon law, the board of directors or the shareholders of an Oregon
corporation may fill any vacancy on the board of directors, including vacancies
resulting from an increase in the number of directors unless the articles of
incorporation provide otherwise. Under the PacifiCorp bylaws, in case of a
vacancy among the directors, the remaining directors, although less than a
quorum, by an affirmative vote of a majority of the directors or a sole
remaining director, may fill the vacancy.
Under Scots law, shareholders of a public company may, by ordinary
resolution, appoint a person who is willing to be a director either to fill a
vacancy or, subject to any maximum provided in the company's articles of
association, as an additional director. The board of directors also has the
power to appoint a director to fill a vacancy or as an additional director,
subject to such conditions as may be set out in the company's articles of
association, provided that such appointment will only last until the next
following annual general meeting of the company, at which the director
concerned may be re-elected.
Liability of Directors and Officers
Under Oregon law, neither a director nor an officer of an Oregon corporation
is liable for any action taken as a director or officer, or any failure to take
any action, if the person performed their duties in compliance with Oregon law.
Under the PacifiCorp articles, no director of PacifiCorp shall be personally
liable to PacifiCorp or
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its shareholders for monetary damages for conduct as a director; but such
provision does not eliminate the liability of a director for any act or
omission for which such elimination of liability is not permitted under Oregon
law.
Scots law does not permit a company to exempt any director or other officer
of the company or any person employed by the company as auditor from any
liability which by virtue of any rule of law would otherwise attach to him in
respect of any negligence, default, breach of duty or breach of trust of which
he may be guilty in relation to the company.
Indemnification of Directors and Officers
Oregon law permits an Oregon corporation to indemnify directors, officers,
employees and agents made party to a proceeding because the individual holds or
held such capacity, against liabilities and expenses incurred in such
proceeding if the individual acted in good faith and reasonably believed that
his conduct was in the corporation's best interests, or at least not opposed to
its best interests. In the case of any criminal proceeding, the individual must
have had no reasonable cause to believe such individual's conduct was unlawful.
Oregon law provides that statutory indemnification is not exclusive of rights
to indemnification which may be provided in a corporation's articles of
incorporation or bylaws, any agreement, or through resolutions of its board of
directors or shareholders or otherwise.
The PacifiCorp articles and PacifiCorp bylaws provide that PacifiCorp shall
indemnify to the fullest extent not prohibited by law any person who is made,
or threatened to be made, a party to an action, suit or proceeding of any kind,
including a derivative proceeding, by reason of the fact such person is or was
a director, officer, employee or agent, or ERISA fiduciary of PacifiCorp, or
serves or served, at the request of PacifiCorp, in such capacity for another
entity. PacifiCorp will advance expenses in any such proceeding to the fullest
extent not prohibited by law.
Scots law does not permit a company to indemnify a director or an officer of
the company or any person employed by the company as auditor against any
liability which by virtue of any rule of law would otherwise attach to him in
respect of negligence, default, breach of duty or breach of trust in relation
to the company, except as liability incurred by such director, officer or
auditor in defending any legal proceedings in which judgement is given in his
favor or in which he is acquitted or in certain instances where, although he is
liable, a court finds that such director, officer or auditor acted honestly and
reasonably and that having regard to all the circumstances he ought fairly to
be excused and relief is granted by the court. Scots law enables companies to
purchase and maintain insurance for directors, officers and auditors against
any liability which would otherwise attach them in respect of any negligence,
default, breach of duty or breach of trust in relation to the company.
ScottishPower maintains director's and officer's insurance.
Additional Provisions of Oregon Law
Oregon law specifically authorizes directors of an Oregon corporation, in
considering whether a tender offer, merger, or sale of all or substantially all
of the assets of the corporation is in the best interests of the corporation,
to consider: the social, legal and economic effects of any such action on
employees, suppliers, and customers of the corporation and communities and
geographic areas in which the corporation operates; the economy of the state
and nation; the long-term and short-term interests of the corporation and its
shareholders, including the possibility that these interests may be best served
by the continual independence of the corporation; and other relevant factors.
Shareholders' Suits
Under Oregon law, a shareholder of an Oregon corporation may institute a
lawsuit against one or more directors, either on his own behalf or derivatively
on behalf of the corporation. A shareholder's derivative complaint must include
details of any demand made on the board of directors, or the reason or reasons
why a
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demand was not made. The board of directors may conduct an investigation of any
action. No discontinuance or settlement of the proceeding may occur without
court approval.
In addition to having the right to institute a lawsuit on behalf of and in
the name of the company in certain limited circumstances, Scots law permits a
shareholder whose name is on the register of shareholders of the company,
including U.S. persons, to petition the court for an order when the company's
affairs are being or have been conducted in a manner unfairly prejudicial to
the interests of the shareholders generally or some part of the shareholders,
including at least such shareholder, or when any actual or proposed act or
omission of the company is or would be so prejudicial. A court when granting
relief by making an order in respect of the matters complained of has wide
discretion, including authorizing civil proceedings to be brought in the name
of the company by a shareholder on terms as the court may direct and providing
for the purchase of the shares of any shareholders by other shareholders or by
the company. To become a shareholder and enforce such rights under Scots law,
holders of ADRs will be required to convert at least one of the ADRs into
ordinary shares in accordance with the terms of the deposit agreement. Except
in these limited respects, Scots law does not permit class action lawsuits by
shareholders on behalf of the company or on behalf of other shareholders.
Certain Provisions Relating to Share Acquisitions
Oregon law also includes a control share acquisition statute, which
generally provides that any person or group of persons that acquires the power
to vote more than one-fifth, one-third, or one-half of certain Oregon
corporations' shares in a transaction not approved by the corporation's board
of directors will not have the right to vote the shares unless granted voting
rights by the holders of a majority of all the votes entitled to be cast,
excluding "interested shares." Interested shares are those shares held by the
acquiring persons and by officers of the corporation and employees of the
corporation who are also directors of the corporation. If the approval of
voting power for the shares is obtained at one of the specified levels,
additional shareholder approvals are required when a shareholder seeks to
acquire the power to vote shares at the next level. In the absence of approval,
the additional shares acquired by the shareholder may not be voted. The Oregon
control share acquisition statute is applicable only to a corporation that has:
.one hundred or more shareholders;
.its principal place of business, its principal office, or substantial
assets within Oregon; and
. either (a) more than ten percent of its shareholders resident in Oregon;
(b) more than ten percent of its shares owned by Oregon residents; or (c)
ten thousand shareholders resident in Oregon. Although an Oregon
corporation may elect, under its articles of incorporation or bylaws, not
to be governed by this provision, neither the PacifiCorp articles nor the
PacifiCorp bylaws contains such an election.
In the case of a company listed on the London Stock Exchange, shareholder
approval must be obtained for certain acquisitions or disposals of assets
involving directors or substantial shareholders or their associates. See "--
Shareholders' Voting Rights on Certain Transactions". In addition, takeovers of
public companies are regulated by the City Code, non-statutory rules not
enforceable at law but administered by the Takeover Panel, a body comprising
representatives of certain City of London financial and professional
institutions which oversees the conduct of such takeovers. One of the
provisions of the City Code provides that, unless shareholders otherwise
approve by ordinary resolution:
. when any person acquires, whether by a series of transactions over a
period of time or not, shares which, taken together with shares held or
acquired by persons acting in concert with him, carry 30% or more of the
voting rights of a public company; or
. when any person, together with persons acting in concert with him, holds
not less than 30% but not more than 50% of the voting rights and such
person, or any person acting in concert with him, acquires additional
shares carrying voting rights, such person must generally make an offer
for all of the equity shares of the company, whether voting or non-
voting, and any class of voting non-equity
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shares of the company held by the person or any person acting in concert
with him, for cash, or accompanied by a cash alternative, at not less
than the highest price paid for the relevant shares during the 12 months
preceding the date of the offer.
Disclosure of Interests
Acquirors of PacifiCorp shares are subject to disclosure requirements under
Section 13(d)(1) of the Securities Exchange Act and Rule 13d-1 thereunder,
which provide that any person who becomes the beneficial owner of more than
five percent of the issued and outstanding PacifiCorp shares shall, within ten
days after such acquisition, file a Schedule 13D with the SEC disclosing
certain specified information, and send a copy of the Schedule 13D to
PacifiCorp and to the securities exchanges on which the security is traded.
After the merger, acquirors of ADSs will be required to comply with, among
other things, the provisions of Section 13(d) of the Securities Exchange Act
and Rule 13d-1 thereunder with respect to their attributed ownership of the
underlying ordinary shares.
Scots law provides that a person, including a company and other legal
entities, who acquires an interest or becomes aware that he has acquired an
interest of three percent or more of any class of shares comprised in a public
company's "relevant share capital", which, for these purposes, means that
company's issued share capital carrying rights to vote in all circumstances at
general meetings of the company, is obliged to notify that company of his
interest within two days following the day on which the obligation arises.
Thereafter any changes in respect of whole percentage figure increases or
decreases rounded down to the next whole number or which reduce the interest
below three percent, must be notified to the company. The ordinary shares are
"relevant share capital" for this purpose.
In addition, Scots law provides that a public company may, by giving a
Section 212 notice, require a person whom the company knows or has reasonable
cause to believe to be, or to have been at any time during the three years
immediately preceding the date on which the notice is issued, interested in
shares comprised in the company's "relevant share capital" to confirm that fact
or, as the case may be, to indicate whether or not that is the case, and when
he or she holds or has during relevant time held an interest in such shares, to
give further information as may be required by ScottishPower relating to his
interest and any other interest in the share of which he is aware. The
disclosure must be made within a reasonable period as may be specified in the
relevant notice, which may, depending on the circumstances, be as short as one
or two days.
For the purpose of the above obligations, the interest of a person in shares
means any kind of interest in shares including interests in any shares:
. in which his spouse, or his child or stepchild under the age of 18 is
interested;
. if a corporate body is interested in them and either (a) that corporate
body is or its directors are accustomed to act in accordance with that
person's directors or instructions or (b) that person is entitled to
control or controls one-third or more of the voting power of that
corporate body; or
. if another party is interested in shares and the person and that other
party are parties to an agreement which provides for one or more parties
to it to acquire interests in shares of a particular public company, and
which imposes obligations or restrictions on any one or more of the
parties as to the use, retention or disposal of the interests acquired
under the agreement, and any interest in the company's shares is in fact
acquired by any of the parties under the agreement.
The holding of an ADR would generally constitute an interest in the
underlying ordinary shares.
When a Section 212 Notice is served by a company on a person who is or was
interested in shares of the company and that person fails to give the company
any information required by the notice within the time specified in the notice,
the company may apply to the court for an order directing that the shares in
question be subject to restrictions prohibiting, inter alia, any transfer of
those shares, the exercise of voting rights in respect of the shares, the issue
of further shares in respect of the shares and, other than in a liquidation,
payments,
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including dividends, in respect of the shares. Such restrictions may also avoid
any agreement to transfer the shares. In addition, a person who fails to
fulfill the obligations described above is subject to criminal penalties in the
U.K. Under the ScottishPower articles, certain of the powers of imposing
restrictions granted to the courts may be exercised by the ScottishPower Board
of Directors in certain circumstances.
Certain London Stock Exchange Listing Requirements
In addition to the provisions of the ScottishPower articles and the
Companies Act 1985, ScottishPower is subject to the Listing Rules of the London
Stock Exchange made under Section 142 of the U.K. Financial Services Act 1986
and in particular to the continuing obligations under those rules. Among other
things these require a listed company to notify the London Stock Exchange of
any major new developments in its sphere of activities which are not public
knowledge which may by virtue of the effect of these developments on its assets
and liabilities of financial positions on the general course of its business,
lead to a substantial movement in the price of its listed securities. The
company must usually ensure equality of treatment for all holders of listed
securities who are in the same position and, when its securities are listed on
more than one stock exchange, must usually ensure that equivalent information
is made available to the market on each exchange on which its securities are
listed. In addition, the ScottishPower articles, the general law and/or the
Listing Rules impose obligations on listed companies to send the following
information to shareholders:
. details relating to certain acquisitions, disposals, takeovers, mergers
and offers either made by or in respect of the company, and
. an explanatory circular, whenever a general meeting of the shareholders
is convened.
If the meeting includes any business other than routine business at an
annual general meeting, it must specify the general nature of such business.
In addition to the above requirements, a company is required to notify the
London Stock Exchange of certain notifications received by the company of
persons holding an interest in 3% or more of any class of the company's
relevant share capital, any changes on the company's board of directors, any
purchase or redemption by the company of its own equity securities, any
interests, including changes, in the shares or the debentures of their company
and changes in the capital structure of the company. Unaudited half yearly
reports of results for the first six months of any fiscal year and an unaudited
preliminary announcement of results for each full fiscal year must also be
published.
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PROPOSAL TO INCREASE UNSECURED DEBT LIMIT
Introduction
The PacifiCorp articles provide that the consent of the holders of a
majority of the total voting power of PacifiCorp's preferred stock, voting
together as a single class separate from the PacifiCorp common stock, is
required before PacifiCorp may merge or consolidate with or into any other
corporation. A vote in favor of the merger proposal will constitute a consent
for this purpose. A similar consent is also required under the PacifiCorp
articles before PacifiCorp may issue unsecured indebtedness in excess of the
amount permitted by a formula set forth in the PacifiCorp articles. At the
PacifiCorp annual meeting, holders of the PacifiCorp preferred stock will be
asked to approve the merger and separately to consent to an increase in the
unsecured debt limitation. In certain circumstances described below, PacifiCorp
will make cash payments to holders of PacifiCorp preferred stock who vote "FOR"
the merger or "FOR" the unsecured debt consent. See "Special Cash Payments"
below.
The consent of the holders of a majority of the total voting power of the
PacifiCorp preferred stock, voting together as one class (the "Required
Majority Preferred Vote"), is required for the unsecured debt consent to become
effective. The three classes of PacifiCorp preferred stock are the only classes
of securities entitled to vote with respect to the unsecured debt consent.
There were approximately 3,275 holders of record of shares of PacifiCorp
preferred stock as of April 30, 1999. To the knowledge of PacifiCorp, as of the
PacifiCorp record date, there are no beneficial owners of more than five
percent of the outstanding shares of any class of PacifiCorp preferred stock
and none of PacifiCorp's directors or executive officers own any shares of
PacifiCorp preferred stock.
Increase in Unsecured Debt Limit
General. PacifiCorp is seeking the consent of the holders of the PacifiCorp
preferred stock to increase the amount of unsecured indebtedness which
PacifiCorp may issue from time-to-time under Article III, Section (18)(b) of
the PacifiCorp articles. Under the PacifiCorp articles, PacifiCorp cannot,
without the Required Majority Preferred Vote, issue unsecured notes, debentures
or other securities representing unsecured indebtedness if immediately
following such issuance the total principal amount of all unsecured notes,
debentures or other securities representing unsecured indebtedness issued or
assumed by PacifiCorp would exceed 30% of the aggregate of (a) the total
principal amount of all outstanding secured indebtedness of PacifiCorp and (b)
the capital and surplus of PacifiCorp as then stated on its books of account.
The unsecured debt consent is not dependent upon the vote on any other matter
presented at the PacifiCorp annual meeting.
Reasons for the Unsecured Debt Consent. PacifiCorp is seeking the consent of
the holders of the PacifiCorp preferred stock to issue up to $5 billion of
unsecured indebtedness in addition to the amount permitted to be issued under
the present unsecured debt limit. As of March 31, 1999, PacifiCorp had
approximately $4.1 billion of indebtedness outstanding, of which approximately
$1.2 billion was unsecured. Under the present limit, PacifiCorp could issue
approximately $1.0 billion of additional unsecured indebtedness. In recent
years, PacifiCorp has used subordinated and short-term unsecured debt to
finance its utility operations in order to achieve certain capital structure
and cost advantages over traditional sources of long-term capital, including
first mortgage bonds and preferred stock.
As competition intensifies in the electric utility industry, as a result of
regulatory, legislative and market developments, flexibility and cost structure
will be even more crucial to success in the future. Given that the electric
industry is extremely capital intensive, controlling and optimizing financing
costs are essential ingredients to operating effectively in the new competitive
environment.
PacifiCorp believes that the unsecured debt consent is key to meeting the
objectives of flexibility and favorable cost structure. Historically,
PacifiCorp's debt financing generally has been accomplished through the
issuance of long-term first mortgage bonds. First mortgage bonds represent
secured indebtedness because
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PacifiCorp's mortgage, under which its first mortgage bonds are issued, creates
a first priority lien on substantially all of PacifiCorp's utility assets.
PacifiCorp's mortgage contains certain covenants that restrict, among other
things, the disposition of its assets and its ability to issue additional first
mortgage bonds. PacifiCorp expects to continue to rely on first mortgage bond
financings, but approval of the unsecured debt consent will provide PacifiCorp
with greater flexibility in matching its financing requirements to prevailing
capital market conditions. PacifiCorp has managed, and expects to continue to
manage, its capital structure through policies intended to result in an "A"
rating for its long-term secured debt.
For the above reasons, the PacifiCorp Board of Directors believes the best
long-term interests of shareholders are served by, and encourages holders of
PacifiCorp preferred stock to approve, the unsecured debt consent.
Certain Effects of the Unsecured Debt Consent. At present, PacifiCorp cannot
incur more than approximately $2.15 billion of unsecured indebtedness without
the Required Majority Preferred Vote, but can incur secured indebtedness
without that vote, subject to the restrictive covenants contained in
PacifiCorp's mortgage. While PacifiCorp's debt instruments contain restrictions
on the amount of indebtedness, both secured and unsecured, that may be
incurred, these restrictions could be waived. Both secured and unsecured
indebtedness rank prior to the position of the PacifiCorp preferred stock.
Accordingly, to the extent the unsecured debt consent allows PacifiCorp to
incur a greater amount of total indebtedness, and that indebtedness increases
the credit risks of PacifiCorp, the market price and credit rating of the
PacifiCorp preferred stock could decline.
Rating Agencies. Moody's Investors Service and Standard & Poor's Ratings
Services have been advised of the unsecured debt consent. The rating agencies
have advised PacifiCorp that approval of the unsecured debt consent, in and of
itself, will not result in a reduction of the current ratings of the PacifiCorp
preferred stock. Ratings are not recommendations to purchase, hold or sell
shares of the PacifiCorp preferred stock inasmuch as the ratings do not comment
as to market price or suitability for a particular investor. The ratings are
based on current information furnished to the rating agencies by PacifiCorp and
obtained from other sources. The ratings may be changed, suspended or withdrawn
as a result of changes in, or the unavailability of, such information.
137
<PAGE>
Consent Procedures
Voting Securities. Record holders of the PacifiCorp preferred stock on the
PacifiCorp record date will vote together as one class with respect to the
unsecured debt consent. The shares of PacifiCorp preferred stock outstanding on
the PacifiCorp record date and the vote to which each share is entitled with
respect to the consent are set forth in the following table:
<TABLE>
<CAPTION>
Stated
CUSIP Value Per Shares Votes Aggregate
Series Number Share Outstanding Per Share Votes
------ ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Serial Preferred Stock
4.52% Series........... 695114-20-7 $100 2,065 1 2,065
4.56% Series........... 695114-30-6 $100 84,592 1 84,592
4.72% Series........... 695114-40-5 $100 69,890 1 69,890
5.00% Series........... 695114-60-3 $100 41,970 1 41,970
5.40% Series........... 695114-70-2 $100 65,960 1 65,960
6.00% Series........... 695114-80-1 $100 5,932 1 5,932
7.00% Series........... 695114-88-4 $100 18,060 1 18,060
No Par Serial Preferred
Stock
$7.48 Series........... 695114-65-2 $100 750,000 1 750,000
$7.70 Series........... 695114-67-8 $100 1,000,000 1 1,000,000
$1.16 Series(1)........ 695114-73-6 $ 25 193,102 1/4 48,275
$1.18 Series(1)........ 695114-74-4 $ 25 420,116 1/4 105,029
$1.28 Series(1)........ 695114-75-1 $ 25 381,220 1/4 95,305
5% Preferred Stock....... 695114-50-4 $100 126,463 1 126,463
---------
Total Votes Entitled to
be Cast................. 2,413,541
=========
</TABLE>
- --------
(1) Under the merger agreement, PacifiCorp is required to redeem these series
prior to the merger.
Required Majority Preferred Vote. The unsecured debt consent will become
effective only if it is approved by a majority of the total voting power of the
PacifiCorp preferred stock on the PacifiCorp record date. Failing to execute,
date and return the proxy form for holders of PacifiCorp preferred stock will
have the same effect as executing, dating and returning a proxy form marked
"AGAINST" or "ABSTAIN" as to the consent. If no instructions are indicated on a
properly executed proxy form, the relevant shares will be voted FOR the
unsecured debt consent.
Revocation of Consents. Executed proxies may be revoked as described above
under "PacifiCorp Annual Meeting, Voting and Proxies--PacifiCorp Annual
Meeting--Voting and Revocation of Proxies."
Dissenters' Rights. No dissenters' rights are or will be available under
Oregon law in connection with the unsecured debt consent.
Special Cash Payments
If, but only if, the merger is approved at the PacifiCorp annual meeting and
all regulatory approvals for the merger required under the merger agreement
have been obtained, PacifiCorp will make a special cash payment in the amount
of $1.00 per share ($0.25 per share for $1.16, $1.18 and $1.28 series) to each
holder of
record of PacifiCorp preferred stock on the PacifiCorp record date that voted
FOR the merger. These special cash payments will be paid out of PacifiCorp's
general funds, promptly after receipt of the last regulatory approval for the
merger but prior to the merger. However, no accrued interest will be paid on
the special cash payments regardless of any delay in making payments.
138
<PAGE>
In addition, if, but only if, the unsecured debt consent is approved,
PacifiCorp will make a special cash payment in the amount of $1.00 per share
($0.25 per share for $1.16, $1.18 and $1.28 series) to each holder of record of
PacifiCorp preferred stock on the PacifiCorp record date that voted FOR the
unsecured debt consent. These special cash payments will be made irrespective
of the vote on any other matters presented at the PacifiCorp annual meeting. If
the unsecured debt consent is approved, special cash payments will be paid out
of PacifiCorp's general funds, promptly after the PacifiCorp annual meeting.
However, no accrued interest will be paid on the special cash payments
regardless of any delay in making payments. Special cash payments are estimated
to be a maximum of $5 million. This amount will be expensed on the books of
PacifiCorp when incurred.
Only holders of PacifiCorp preferred stock on the PacifiCorp record date (or
their legal representatives or attorneys-in-fact) are entitled to receive
special cash payments. Any beneficial owner of shares who is not the registered
holder of such shares as of the PacifiCorp record date must arrange with the
record holder to receive his or her proportionate interest in the special cash
payments made to such record holder. PacifiCorp will have no responsibility or
liability for any aspect of the records relating to, or payments made on
account of, any beneficial owner's interest in the special cash payment made to
a record holder of PacifiCorp preferred stock.
United States Income Tax Considerations
Holders of PacifiCorp preferred stock should consult their own tax advisors
in light of their particular circumstances as to the application of United
States income tax laws, as well as the effect of any state, local, or foreign
tax laws, to the special cash payments.
Special Cash Payments. PacifiCorp believes that the special cash payments
are dividends for U.S. income tax purposes, and will treat such payments
accordingly.
Backup Withholding and Information Reporting. The amount of the special cash
payment paid to a holder of PacifiCorp preferred stock will be reported to the
holder and to the Internal Revenue Service in the same way all cash dividends
are reported. Backup withholding at a rate of 31% will apply to any such
payments made to holders for whom backup withholding applies with regards to
the payment of regular cash dividends.
139
<PAGE>
PROPOSAL FOR ELECTION OF DIRECTORS
The persons named in the proxy form will vote your stock for the election of
two directors to serve in Class III of the PacifiCorp Board of Directors for
terms expiring at the annual meeting in the year 2002 and until their
successors are duly elected and qualified. If any of the nominees becomes
unavailable for election for any reason (although none are currently known),
the proxy holders will have discretionary authority to vote pursuant to the
proxy form for a suitable substitute. Each nominee for director to serve in
Class III is now serving on the PacifiCorp board. There are no family
relationships among the directors and executive officers of PacifiCorp.
Directors are elected by a simple majority of the votes cast by holders of
the shares entitled to vote at the PacifiCorp annual meeting if a quorum is
present. Abstentions and broker non-votes are counted for purposes of
determining whether a quorum exists at the meeting with respect to election of
directors, but have no effect on the determination of whether a simple majority
exists with respect to a given nominee.
The PacifiCorp board is divided into three classes: Class I, Class II and
Class III, each class as nearly equal in number as possible. The directors in
each class hold office for three-year terms. The two current Class III
directors, whose present terms expire in 1999, are being proposed for election
at the PacifiCorp annual meeting for new three-year terms expiring in 2002. The
tables that follow include information with respect to each director's business
experience for the past five years. See "Security Ownership of Certain
Beneficial Owners and Management" for information concerning share ownership of
nominees and directors.
140
<PAGE>
The PacifiCorp board recommends a vote FOR the election of these nominees.
Nominees for Election at the PacifiCorp Annual Meeting
<TABLE>
<CAPTION>
Director
Name, Age, Class, Principal Occupation and Other Directorships Since
- ---------------------------------------------------------------------- --------
<S> <C>
Nancy Wilgenbusch, 51 (Class III, 2002)............................... 1986
President, Marylhurst University, Portland, Oregon, since 1984;
Director of Federal Reserve Bank of San Francisco, Portland Branch,
Cascade Corporation; PacifiCorp Group Holdings Company and Powercor
Australia Ltd.
Peter I. Wold, 51, (Class III, 2002).................................. 1995
Partner, Wold Oil & Gas Company, an oil and gas exploration and
production company, Casper, Wyoming, since 1981; Director of Federal
Reserve Bank of Kansas City, Denver Branch, and PacifiCorp Group
Holdings Company.
Directors Whose Terms Continue
<CAPTION>
Director
Name, Age, Class, Principal Occupation and Other Directorships Since
- ---------------------------------------------------------------------- --------
<S> <C>
W. Charles Armstrong, 54 (Class I, 2000).............................. 1996
Consultant, East Sound, Washington; formerly Chief Executive Officer
of Epitope, Inc., May-November 1997; Chief Executive Officer, Bank
of America Oregon, 1992-1996; Director of Epitope, Inc., Agritope,
Inc. and PacifiCorp Group Holdings Company
C. Todd Conover, 59 (Class I, 2000)................................... 1991
Managing Director, Starmont Asset Management, LLC, San Francisco,
California since 1998 and President and Chief Executive Officer, The
Vantage Company, a business consulting firm, Los Altos, California,
since 1992; formerly General Manager, Finance Industry Group, Tandem
Computers Incorporated, 1994-1995; Director of Blount International,
Inc., Tracy Bankshares, Inc. and PacifiCorp Group Holdings Company.
Nolan E. Karras, 54 (Class I, 2000)................................... 1993
President, The Karras Company, Inc., investment advisers, Roy, Utah,
since 1983; formerly Member of Utah House of Representatives, 1981-
1990; Speaker of the House, 1989-1990; Director of PacifiCorp Group
Holdings Company.
Kathryn Braun Lewis, 47 (Class II, 2001).............................. 1994
formerly President and Chief Operating Officer, Storage Division,
since 1997, and Executive Vice President, Western Digital
Corporation, a computer equipment company, Irvine, California, 1978-
1998; Director of PacifiCorp Group Holdings Company and Artisoft,
Inc.
Keith R. McKennon, 65 (Class I, 2000)................................. 1990
Chairman of the PacifiCorp Board, since 1994, and President and
Chief Executive Officer, since 1998; formerly Chairman (1992-1994)
and Chief Executive Officer (1992-1993), Dow Corning Corporation,
Midland, Michigan; Chairman of the Board, PacifiCorp Group Holdings
Company.
Robert G. Miller, 54 (Class II, 2001)................................. 1994
Vice Chairman and Chief Executive Officer, since 1998, formerly
President and Chief Executive Officer, since 1997, and Chairman,
Fred Meyer, Inc., a retail merchandising company, Portland, Oregon,
since 1991; Director of PacifiCorp Group Holdings Company, SMG II
Holdings Corporation and Path Mark Stores, Inc.
Alan K. Simpson, 67 (Class II, 2001).................................. 1997
formerly U.S. Senator, 1976-1996; Director of PacifiCorp Group
Holdings Company, IDS Mutual Fund Group and Biogen Corporation.
Verl R. Topham, 64 (Class II, 2001)................................... 1994
Senior Vice President and General Counsel of PacifiCorp since 1994;
formerly President, Utah Power & Light Company, 1990-1994; Director
of PacifiCorp Group Holdings Company and Powercor Australia, Ltd.
</TABLE>
141
<PAGE>
Director Compensation and Certain Transactions
PacifiCorp's non-officer directors are compensated for their board service
by a combination of cash and PacifiCorp common stock under a non-employee
directors' stock compensation plan that seeks to increase the community of
interest between PacifiCorp's shareholders and its directors. Under this plan,
non-employee directors of PacifiCorp are granted approximately $75,000 worth of
PacifiCorp common stock every five years. Non-employee directors having fewer
than five years of service remaining before reaching retirement age receive
stock valued at approximately $15,000 for each remaining year. Stock granted
under this plan vests over the five-year period following the grant or shorter
period to retirement, and unvested shares are forfeited if the recipient ceases
to be a director. The shares are purchased in the market with funds supplied by
PacifiCorp, and the certificates are then held by PacifiCorp until the shares
vest. During 1998, an aggregate of 13,894 shares previously granted under the
plan vested.
PacifiCorp's non-officer directors receive the balance of their compensation
in cash. They are paid $16,000 per year plus $1,000 for each PacifiCorp board
or committee meeting attended. Until his election as President and Chief
Executive Officer in 1998, Mr. McKennon was paid annually with PacifiCorp
common stock valued at $155,000 for his service as Chairman of the Board, plus
his $15,000 per year participation in the non-employee directors' stock
compensation plan. Members of the Executive Committee and chairs of the other
committees of the PacifiCorp board are paid an additional $2,500 per year. Non-
employee members of the regional boards are paid $9,000 per year plus $1,000
for each board or subcommittee meeting attended. See "Regional Boards." In
addition, members of the Utah Board who are former directors of Utah Power &
Light Company, including Dr. Peterson, participate in a retirement plan under
which they are eligible to receive benefits of $560 per month upon retirement
at age 65 or older and certain death benefits.
During 1998, Messrs. Conover and Karras received $11,000 and $12,000 in
directors' fees, respectively, from PacifiCorp Group Holdings Company; Dr.
Wilgenbusch received $7,500 in directors' fees from Powercor Australia Ltd.
Don M. Wheeler, who retired as a PacifiCorp director on February 10, 1999,
was Chairman and Chief Executive Officer of Wheeler Machinery Company, a
company engaged in sales and service of large earth-moving and grading
equipment, engines and related machinery, until July 1996 when he became
Chairman and Chief Executive Officer of ICM Equipment Company ("ICM"). ICM is a
materials handling and rental services company serving industrial construction
and mining markets in the intermountain area and a former division of Wheeler
Machinery Company. Mr. Wheeler continued to serve as a director of Wheeler
Machinery Company until his resignation in April 1998. In January 1998, the
assets of ICM were sold to ICM Equipment Company L.L.C. Mr. Wheeler owns a
significant interest in ICM Equipment Company and serves as its Chairman and
Chief Executive Officer.
During 1998, PacifiCorp and its subsidiaries purchased equipment and
services from Wheeler Machinery Company in the ordinary course of business for
a total of approximately $757,904. Of this amount, $336,526 was purchased from
ICM and $421,378 was purchased from Wheeler Machinery Company. Richard E.
Wheeler, Mr. Wheeler's brother, is the owner of Wyoming Machinery Company.
During 1998, PacifiCorp and its subsidiaries purchased equipment and services
from Wyoming Machinery Company in the ordinary course of business for a total
of approximately $9,012,874. PacifiCorp believes that the terms of these
transactions were no less favorable to PacifiCorp than those available from
other parties. Similar purchases have been made by PacifiCorp or its
predecessors from these companies since 1951.
142
<PAGE>
Board Committees
The PacifiCorp Board of Directors is responsible for the overall affairs of
PacifiCorp. To assist in carrying out its responsibilities, the PacifiCorp
board has delegated certain authority to several standing committees. The
PacifiCorp board generally appoints members of committees at its annual meeting
in May of each year. The membership of these committees as of April 30, 1999 is
as follows:
<TABLE>
<CAPTION>
Executive Audit Committee on
Committee Committee Directors
--------- --------- ------------
<S> <C> <C>
Keith R. McKennon* Nancy Wilgenbusch* C. Todd Conover*
C. Todd Conover Nolan E. Karras W. Charles Armstrong
Nolan E. Karras Kathryn Braun Lewis Alan K. Simpson
Robert G. Miller Alan K. Simpson Peter I. Wold
Nancy Wilgenbusch Peter I. Wold
<CAPTION>
Personnel Finance Pricing
Committee Committee Committee
--------- --------- ---------
<S> <C> <C>
Nolan E. Karras* Robert G. Miller* Keith R. McKennon
W. Charles Armstrong W. Charles Armstrong Verl R. Topham
Kathryn Braun Lewis C. Todd Conover
Robert G. Miller Keith R. McKennon
Nancy Wilgenbusch Peter I. Wold
</TABLE>
- --------
* Chair
The Executive Committee took action by consent on one occasion in 1998. The
committee has and may exercise all of the powers of the PacifiCorp board during
the intervals between its meetings that may be lawfully delegated, subject to
such limitations as may be provided by resolution of the PacifiCorp board.
The Committee on Directors, which held four meetings in 1998, does the
following:
. seeks and recommends specific candidates for directors;
. reviews and recommends to the PacifiCorp board policies on the
qualifications, tenure, compensation and retirement of directors; and
. monitors compliance by individual directors with the policies adopted by
the PacifiCorp board.
Shareholders who wish to submit names to the Committee on Directors for
consideration should do so in writing addressed to the Committee on Directors,
c/o Corporate Secretary, PacifiCorp, 825 NE Multnomah, Portland, Oregon 97232.
The Audit Committee, which held five meetings in 1998, does the following:
. nominates the independent auditor of PacifiCorp for approval by the
PacifiCorp board and shareholders;
. reviews the planned scope and results of the annual audit;
. confers with the independent auditor and reviews its recommendations
with respect to accounting, internal controls and other matters;
. confers periodically with accounting officers of PacifiCorp;
. reviews assessments of risk within each organizational unit and
important regulatory and accounting pronouncements;
. meets with management and the internal auditors to review the scope and
results of internal audit activity, as appropriate;
. periodically reviews the adequacy of PacifiCorp's accounting and
financial personnel resources; and
143
<PAGE>
. reports the results of its reviews and meetings to the PacifiCorp board.
The Personnel Committee, which held six meetings in 1998, does the
following:
. makes recommendations to the PacifiCorp board on executive compensation
plans;
. approves salaries for officers of PacifiCorp and significant
compensation and benefit changes; and
. administers the Long-Term Incentive Plan, Supplemental Executive
Retirement Plan, Compensation Reduction Plan, Stock Incentive Plan and
Executive Severance Plan.
The Personnel Committee consists of five directors who are not current or
former officers or employees of PacifiCorp or any of its subsidiaries. See
"Personnel Committee Report on Executive Compensation" below.
The Finance Committee, to the extent authority is delegated to it by the
PacifiCorp board with respect to each issuance of securities, approves the
final terms of issuance. The committee, which held six meetings in 1998, also
does the following:
. consults with appropriate officers of PacifiCorp concerning requirements
for capital, the condition of the capital markets and the most
appropriate means of obtaining capital as needed from time to time;
. reviews the general terms of proposed financings when requested by the
Chairman of the Board, the President or any Vice President, and reports
thereon to the PacifiCorp board;
. reviews and approves PacifiCorp's interest, currency rate and other
hedging arrangements; and
. oversees PacifiCorp's use of derivative products involving electricity
and other commodities.
The Pricing Committee, to the extent authority is delegated to it by the
PacifiCorp board with respect to each issuance of securities, approves the
final terms of issuance within parameters set by the PacifiCorp board. The
Pricing Committee also authorizes redemption of PacifiCorp's debt and equity
securities in accordance with their terms. The Pricing Committee did not meet
during 1998, but approved one transaction by consent.
The PacifiCorp board held seventeen meetings in 1998, and it took action by
written consent on one occasion. All board members attended at least 75% of the
aggregate of the meetings of the PacifiCorp board and the committees of which
they were members.
Regional Boards
In February 1995, the PacifiCorp board established the Pacific Board, the
Utah Board and the Wyoming Board, each of which has been requested to review
the business and operations of PacifiCorp in a designated service territory,
including policies and practices with respect to customer service and strategic
planning. Membership of these boards includes persons who are not directors of
PacifiCorp. In 1998, each of these boards held four meetings. The Australian
Regional Board was organized during 1997 but has not yet held a meeting.
<TABLE>
<CAPTION>
Pacific Board Utah Board Wyoming Board
------------- ---------- -------------
<S> <C> <C>
John A. Bohling,* Chair John A. Bohling,* Chair John A. Bohling,* Chair
William B. Douglas* Nolan E. Karras Deborah Healy Hammons*
Michael D. Naumes* Chase N. Peterson* John W. Hay III*
Linda Shelk* Peggy A. Stock* Brent R. Kunz*
Ethel Simon-McWilliams* Verl R. Topham Maggi Maier Murdock*
Verl R. Topham Verl R. Topham
Peter I. Wold
<CAPTION>
Australian Board
----------------
<S> <C> <C>
Megan Cornelius*
Grant Latta*
</TABLE>
--------
* Not a director of PacifiCorp
144
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of April 30, 1999
regarding the beneficial ownership of PacifiCorp common stock by (1) each
director or nominee for director of PacifiCorp, (2) each of the executive
officers named in the Summary Compensation Table below and (3) all executive
officers and directors of PacifiCorp as a group. As of April 30, 1999, each of
the directors and executive officers identified below and all executive
officers and directors of PacifiCorp as a group owned less than 0.3% of the
PacifiCorp common stock outstanding. PacifiCorp knows of no person who
beneficially owns more than 5% of any class of PacifiCorp's stock.
<TABLE>
<CAPTION>
Number of Shares (1)
Beneficial Owner -------------------
<S> <C>
Directors and Nominees
W. Charles Armstrong............................. 3,887
Kathryn Braun Lewis.............................. 4,260
C. Todd Conover.................................. 13,249
Nolan E. Karras.................................. 9,119
Keith R. McKennon................................ 46,804
Robert G. Miller................................. 4,286
Alan K. Simpson.................................. 5,604
Verl R. Topham................................... 75,172
Nancy Wilgenbusch................................ 9,943
Peter I. Wold.................................... 11,567
Nondirector Executive Officers
John A. Bohling.................................. 56,706
Paul G. Lorenzini................................ 31,202
Richard T. O'Brien............................... 55,095
Dennis P. Steinberg.............................. 60,172
All executive officers and directors as a group (23
persons).......................................... 603,183
</TABLE>
--------
(1) Includes ownership of (a) shares held by family members even
though beneficial ownership of such shares may be disclaimed, (b)
shares granted and subject to vesting as to which the individual
has voting but not investment power under individual compensation
arrangements or one or more of the stock-based compensation plans
of PacifiCorp and (c) shares held for the account of such persons
pursuant to the Compensation Reduction Plan.
Personnel Committee Report on Executive Compensation
The Personnel Committee of the PacifiCorp board, which is composed entirely
of independent, non-employee directors, is responsible for approving
compensation levels for officers of PacifiCorp, administering executive
compensation plans as authorized by the PacifiCorp board and recommending
executive compensation plans and compensation of the Chief Executive Officer to
the PacifiCorp board for approval. The committee is also responsible for
approving incentive plans for all employees, salary structure and merit
programs for senior management and changes in policy relating to employee
benefits. The following report of the Personnel Committee describes the
components of PacifiCorp's executive compensation program and the basis upon
which 1998 compensation determinations were made.
Compensation Philosophy
PacifiCorp's philosophy is that executive compensation should be linked
closely to corporate performance and increases in shareholder value.
PacifiCorp's compensation program has the following objectives:
. Provide competitive total compensation that enables PacifiCorp to
attract and retain key executives.
145
<PAGE>
. Provide variable compensation opportunities that are linked to company
and individual performance.
. Establish an appropriate balance between incentives focused on short-
term objectives and those encouraging sustained earnings performance and
increases in shareholder value.
Qualifying compensation for deductibility under IRC Section 162(m) is one of
the factors the committee considers in designing its incentive compensation
arrangements. IRC Section 162(m) limits to $1,000,000 the annual deduction by a
publicly held corporation of compensation paid to any executive, except with
respect to certain forms of incentive compensation that qualify for exclusion.
Although it is the committee's intent to design and administer compensation
programs that maximize deductibility, the committee views the objectives
outlined above as more important than compliance with the technical
requirements necessary to exclude compensation from the deductibility limit of
IRC Section 162(m). Nevertheless, the committee believes that nearly all
compensation paid to the current executive officers for services rendered in
1998 is fully deductible.
Compensation Program Components
The Personnel Committee, assisted by its outside consultant, evaluates the
total compensation package of executives annually in relation to competitive
pay levels. Given the increasingly competitive global environment in which
PacifiCorp must operate and the competitive marketplace for executive talent
required for future success, in 1996 PacifiCorp reevaluated its historical
practice of using the electric utility industry as its primary market reference
point. In 1997, the committee began using the general industry as the market
reference base for long-term incentive purposes. The transition of base salary
and annual incentives to the relevant industry was expected to be accomplished
over a three-year time frame.
In 1998, the committee continued the transition by focusing its market-based
comparisons on the relevant industry for each officer. The committee utilized
the electric utility industry as its exclusive basis for market comparison for
positions with a principal focus on electric operations. For positions with a
corporate-wide focus, the committee began the transition toward general
industry comparisons by using a weighting of approximately 67% general industry
and 33% electric utility industry.
Although most of the electric utility companies represented in the
performance graph set forth below are part of PacifiCorp's comparison group,
not all of these companies are considered PacifiCorp's competitors for
executive talent. For officers with responsibilities outside the electric
operations, relevant industry data were used for comparison. In all cases,
compensation is targeted at market median levels, with a recognition that total
compensation greater than market median requires, in any specific time period,
that company performance exceed the median performance of peer companies.
PacifiCorp's executive compensation programs have three principal elements:
base salary, annual incentive compensation and long-term incentive
compensation, as described below.
Base Salaries
Base salaries and target incentive amounts are reviewed for adjustment at
least annually based upon competitive pay levels, individual performance and
potential, and changes in duties and responsibilities. Base salary and the
incentive target are set at a level such that total annual compensation for
satisfactory performance would approximate the midpoint of pay levels in the
comparison group used to develop competitive data. In 1998, the base salaries
of executive officers were increased, based on market analysis, within a range
of zero to 20% to reflect competitive market changes and changes in the
responsibilities of some officers.
Annual Incentives
All electric operations employees participated in an annual incentive plan
during 1998. Awards under the plan were to be earned based upon such factors as
company earnings per share and business unit performance in relation to
established objectives. The relative weights of the performance criteria varied
among organizational units in accordance with the nature of their operations.
146
<PAGE>
All corporate officers, including those listed in the Summary Compensation
Table, participated in the PacifiCorp executive incentive program. Performance
goals included company earnings per share. All executive incentive program
participants may have their incentive awards modified (in the range of zero to
120%) by their individual performance, relative to established objectives, as
evaluated by their immediate supervisor. The maximum allowable award from the
executive incentive program for all participants is 150% of their guideline
award. As PacifiCorp did not achieve the earnings per share target established
for the year, neither the Chief Executive Officer nor the Chief Operating
Officer received an award for 1998 performance. Other executive officers listed
in the Summary Compensation Table received from 10% to about 32% of their
guideline awards based upon achieving certain business unit performance
objectives for the year. Other executive officers also received partial target
incentive awards based upon achieving business unit performance objectives.
Long-Term Incentives
The Personnel Committee approved grants of restricted stock and stock
options in early 1998 under the Stock Incentive Plan. The committee considered
such criteria as:
. total shareholder return relative to peer companies;
. earnings per share growth over time relative to peer companies;
. achievement of long-term goals, strategies and plan; and
. maintenance of competitive position.
Based on a subjective assessment of these criteria, PacifiCorp established a
pool of restricted stock equal to 100% of competitive award levels. The shares
in the pool were allocated to participants based on individual performance. The
committee also approved grants of stock options based upon competitive award
levels and special stock option awards based on achievement of significant
stock appreciation during 1997. The committee concluded that the use of stock
options to reward performance contributing to the stock appreciation was
appropriate and would result in long-term benefit to the recipients only if the
stock price increased.
Restricted stock awards under the Stock Incentive Plan are subject to terms,
conditions and restrictions as may be determined by the committee to be
consistent with the plan and the best interests of the shareholders. The
restrictions include stock transfer restrictions and forfeiture provisions
designed to facilitate the participants' achievement of specified stock
ownership goals. Participants are also required to invest their own personal
resources in PacifiCorp common stock in order to meet the vesting requirements
associated with these grants. The Summary Compensation Table below shows the
grants of restricted stock made to the listed executive officers under the plan
in 1998 and under the PacifiCorp Long-Term Incentive Plan for 1996 and 1997.
During 1998, the committee established a restricted stock program that would
govern future grants of restricted stock. This program includes objective
performance criteria and involves a two-part process. The first part involves
establishing a pool of shares by adjusting competitive award levels by a
formula which includes a measure of three-year average total shareholder return
performance relative to a peer group and a subjective assessment by the
committee of performance relative to established strategic goals and
objectives, other than shareholder return. Total shareholder return accounts
for 75% of the formula and the remaining 25% will be subjectively determined.
The peer group is comprised of the companies that make up the S & P Electrics
Index. Once the size of the pool is established, restricted stock awards, if
any, will be allocated considering individual performance.
All stock options awarded to officers and senior management of PacifiCorp in
1998 are non-statutory, non-discounted options with a three-year vesting
requirement and a ten-year term to exercise from the date of the grant. Grants
of stock options in 1997 and 1998 to named executives are shown in the table
below.
In May 1998, the committee also approved a grant of non-statutory and non-
discounted stock options to all employees except officers and senior managers.
Full-time employees received options for 100 shares while part-time employees
were granted options for 75 shares. These grants become fully vested two years
from the grant, and employees have ten years to exercise option shares.
147
<PAGE>
Change-in-Control
In 1998, the Personnel Committee, with the assistance of outside
consultants, reviewed the change-in-control provisions in all of PacifiCorp's
compensation and benefit plans and found that the definition of change-in-
control, as well as the provisions associated with the change-in-control,
varied significantly from plan to plan. The committee recommended adoption of a
common definition of change-in-control, which was approved by the PacifiCorp
board. The PacifiCorp board also amended several plans to change the provisions
relating to change-in-control. These amendments include changes to the annual
and long-term incentive programs summarized below:
. Executives would receive a payment of a bonus in an amount no less than
their target bonus award in the year of a qualifying change-in-control.
. Stock options and restricted stock awards granted prior to 1999 would
become fully vested upon a qualifying change-in-control.
Amendments to the PacifiCorp executive severance plan and the supplemental
executive retirement plan are described under "Executive Compensation" below.
Compensation of the Chief Executive Officer
In February 1998, the PacifiCorp board approved a grant of 21,000 restricted
shares of PacifiCorp common stock to Mr. Buckman under the Stock Incentive Plan
based upon a review of company performance during 1997. The PacifiCorp board
also granted to Mr. Buckman, in February 1998, non-qualified stock options for
276,000 shares of PacifiCorp common stock as part of its effort to provide
motivation for future stock price appreciation. Additionally, the PacifiCorp
board approved a special grant to Mr. Buckman of non-qualified stock options
for 80,000 shares of PacifiCorp common stock to reward achievement of strategic
initiatives during 1997 that resulted in added shareholder value, as reflected
in increased total shareholder return. In May 1998, the PacifiCorp board
approved a salary increase of 14.72% for Mr. Buckman.
On September 1, 1998, Mr. Buckman resigned as Chief Executive Officer and
President after discussions with the PacifiCorp board about disappointing
company performance. The committee approved severance pay and benefits as part
of Mr. Buckman's separation package. The details of these arrangements are
provided in the compensation tables that follow this report.
In September 1998, Mr. McKennon assumed Mr. Buckman's responsibilities as
Chief Executive Officer and, later, President in addition to his role as
Chairman of the Board. The Personnel Committee approved an employment agreement
with Mr. McKennon that provided him with a base salary of $780,000 and set a
target incentive award for 1998 of 20% of his prorated salary for 1998. No
incentive award was earned by Mr. McKennon for 1998. Mr. McKennon's employment
agreement supersedes and replaces his agreement for compensation as Chairman of
the Board for so long as he remains Chief Executive Officer. Mr. McKennon's
employment agreement provides for participation in the executive long-term
incentive programs described above, although no restricted shares or stock
options were granted to him in 1998.
Mr. McKennon has waived participation in the executive severance plan and
the supplemental executive retirement plan as part of his employment agreement.
The Personnel Committee believes that Mr. McKennon's compensation pursuant to
his employment agreement provides a competitive base salary based on market
comparisons. However, as a result of Mr. McKennon's decision to waive
participation in the executive severance and supplemental executive retirement
plans, the committee believes that his total compensation is below PacifiCorp's
goal of providing competitive total compensation.
PERSONNEL COMMITTEE
Nolan E. Karras, Chair
W. Charles Armstrong
Kathryn Braun Lewis
Robert G. Miller
Nancy Wilgenbusch
148
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Comparison of Five Year Cumulative Total Return
Among PacifiCorp, S&P 500 Index and the S&P Electrics Index
The following graph provides comparisons of the annual percentage change in
the cumulative total shareholder return on PacifiCorp common stock, with the
cumulative total return of (a) the S&P 500 Index, and (b) the S&P Electrics
Index. The comparisons assume that $100 was invested on December 31, 1993 in
PacifiCorp common stock and in each of the foregoing indices and assumes the
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------
PACIFICORP $100.00 100.15 123.32 125.95 175.81 142.45
S&P 500 $100.00 101.36 139.31 171.21 228.26 293.36
S&P ELECTRICS $100.00 87.04 113.97 113.56 143.16 165.02
- ---------------------------------------------------------------------------
149
<PAGE>
Executive Compensation
The following table sets forth information concerning compensation for
services in all capacities to PacifiCorp and its subsidiaries for fiscal years
ended December 31, 1998, 1997 and 1996 of those persons who were the Chief
Executive Officer of PacifiCorp during any portion of 1998 and the four other
most highly compensated executive officers of PacifiCorp during 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1) Long-Term Compensation
-------------------------- -----------------------
Restricted Securities All Other
Name and Principal Stock Underlying Compensation
Position Year Salary($)(2) Bonus($)(3) Awards($)(4) Options(#) ($)(5)
------------------ ---- ------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Keith R. McKennon...... 1998 $ 363,349 -- (7) -- $ 1,785
President and Chief
Executive Officer(6)
Frederick W. Buckman... 1998 $1,474,602(9) -- $ 509,250 356,000 $ 9,326
President and Chief 1997 635,004 -- 469,848 165,000 9,022
Executive Officer(8) 1996 590,000 $486,750 498,419 -- 8,350
Richard T. O'Brien..... 1998 $ 348,046 -- $ 194,000 111,000 $ 8,252
Executive Vice 1997 287,500 -- 127,530 41,000 7,690
President and Chief 1996 215,627 $135,000 505,557 -- 7,811
Operating Officer
Dennis P. Steinberg.... 1998 $ 317,502 $ 13,400 $ 169,750 86,000 $ 8,628
Senior Vice President 1997 280,002 -- 145,429 41,000 8,010
1996 220,008 132,000 469,292 -- 7,817
John A. Bohling........ 1998 $ 307,500 $ 40,257 $ 121,250 66,000 $12,050
Senior Vice President 1997 285,000 -- 145,429 41,000 10,092
1996 240,000 144,000 169,292 -- 7,846
Verl R. Topham......... 1998 $ 300,000 $ 31,500 $ 138,225 80,000 $ 9,404
Senior Vice President 1997 277,500 -- 127,530 35,000 8,737
and General Counsel 1996 270,000 162,000 281,190 -- 7,889
</TABLE>
- --------
(1) May include amounts deferred pursuant to the Compensation Reduction Plan,
under which key executives and directors may defer, until retirement or a
preset future date, receipt of cash compensation to a stock account to be
invested in PacifiCorp common stock or to a cash account on which interest
is paid at a rate equal to the Moody's Intermediate Corporate Bond Yield
for Aa rated Public Utility Bonds.
(2) Base salary for named officers did not increase in 1996. 1997 increases in
annual compensation include both increases in base salary and lump sum
payments that were effective July 1, 1997. Allocations between a base
salary increase and a lump sum payment differed among officers.
(3) Please refer to the Personnel Committee Report on Executive Compensation
for a description of PacifiCorp's annual executive incentive plans.
Incentive amounts are reported for the year in which the related services
were performed.
(4) Includes restricted stock grants made in (a) February 1998, 1997 and 1996
pursuant to the Long-Term Plan, (b) March 1996 as special recognition for
1995 performance and (c) August 1996 under the Stock Incentive Plan. In
general, restricted stock awards vest over a four-year period from the date
of grant, subject to compliance with the stock ownership and other terms of
the grant. At December 31, 1998, the aggregate value of all restricted
stock holdings, based on the market value of the shares at December 31,
1998, without giving effect to the diminution of value attributed to the
restrictions on such stock, and the aggregate number of restricted share
holdings of Messrs. O'Brien, Steinberg, Bohling and Topham were $717,974,
$679,387, $321,316 and $439,880 and 34,087, 32,255, 15,255 and 20,884,
respectively. Mr. Buckman resigned on September 1, 1998 and, thereafter,
his 51,963 shares of restricted stock became fully vested. These shares had
a market value of $1,043,417 as of October 23, 1998. Regular quarterly
dividends are paid on the restricted stock. Participants may defer receipt
of restricted stock awards to their stock accounts under the Compensation
Reduction Plan.
150
<PAGE>
(5) Amounts shown for 1998 include (a) contributions of $8,000 to the
PacifiCorp K Plus Employee Savings and Stock Ownership Plan for each of
Messrs. Buckman, O'Brien, Steinberg, Bohling and Topham and (b) portions of
premiums on term life insurance policies which PacifiCorp paid for Messrs.
McKennon, Buckman, O'Brien, Steinberg, Bohling and Topham in the amounts of
$1,785, $1,326, $252, $628, $4,050 and $1,404, respectively. These benefits
are available to all employees.
(6) Mr. McKennon became President and Chief Executive Officer after Mr.
Buckman's resignation in September 1998. The amount listed under "Salary"
for Mr. McKennon includes $109,538 paid in PacifiCorp common stock for his
service as Chairman of the PacifiCorp board prior to his election as
President and Chief Executive Officer, and $18,159 paid in PacifiCorp
common stock as a result of his participation in the non-employee
directors' stock compensation plan through September 1, 1998.
(7) Mr. McKennon was compensated as Chairman of the Board in restricted shares
of PacifiCorp common stock. In September 1998, when Mr. McKennon accepted
the position of Chief Executive Officer, his unvested restricted stock
granted under the non-employee directors' stock compensation plan was
forfeited.
(8) Mr. Buckman resigned as President and Chief Executive Officer on September
1, 1998.
(9) Includes $939,600 of severance compensation. Mr. Buckman's restricted stock
awards vested as a consequence of his employment separation. He will
receive additional cash severance payments in 1999 and 2000 of $1,098,000
and $1,000,000, respectively.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
---------------------------------------------- ------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ---------- ------------ ----------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Frederick W.
Buckman(2)............. 356,000 10.26% $24.00 2/10/08 N/A N/A
Keith R. McKennon....... -- -- -- -- -- --
Richard T. O'Brien...... 111,000 3.20% $24.00 2/10/08 $1,675,375 $4,245,730
Dennis P. Steinberg..... 86,000 2.48% $24.00 2/10/08 $1,298,039 $3,289,484
John A. Bohling......... 66,000 1.90% $24.00 2/10/08 $996,169 $2,524,488
Verl R. Topham.......... 80,000 2.31% $24.00 2/10/08 $1,207,478 $3,059,986
</TABLE>
- --------
(1) All options become exercisable for one-third of the shares covered by the
option on each of the first three anniversaries of the grant date. The
grant date for each option shown in the table above was February 10, 1998.
All options become fully exercisable upon a qualifying "change in control"
of PacifiCorp or an "employer disposition," each as defined in the
applicable option agreement. A "change in control" generally includes (a)
the acquisition by any person of 20% or more of PacifiCorp common stock and
(b) the election of a new majority of PacifiCorp's directors. An "employer
disposition" generally includes a disposition by PacifiCorp of all of its
equity ownership in the optionee's employer.
(2) Mr. Buckman forfeited all of the options granted on February 10, 1998 upon
his resignation.
151
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options at
Shares at FY-End (#) FY-End ($)
Acquired on Value -------------- ---------------
Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
Name ----------- --------- -------------- --------------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Frederick W.
Buckman(1)............. 55,000 19,421.58 -- --
Keith R. McKennon....... -- -- -- --
Richard T. O'Brien...... -- -- 13,667/152,000 $17,945/$53,833
Dennis P. Steinberg..... -- -- 13,667/127,000 $17,945/$53,833
John A. Bohling......... -- -- 13,667/107,000 $17,945/$53,833
Verl R. Topham.......... -- -- 11,667/115,000 $15,319/$45,955
</TABLE>
- --------
(1) Mr. Buckman forfeited all unvested options upon his resignation.
Severance Arrangements
The Severance Plan provides severance benefits to certain executive level
employees who are designated by the Personnel Committee, in its sole
discretion, including the executive officers named in the Summary Compensation
Table, other than Mr. McKennon. To qualify for severance benefits, the
executive must have terminated employment for one of the following reasons:
(1) voluntary termination as a result of a material alteration in the
executive's assignment that has a detrimental impact on the executive's
employment. A "material alteration in assignment" includes any of the
following:
(a)a material reduction in the scope of the executive's duties and
responsibilities;
(b)a material reduction in the executive's authority; or
(c)any reduction in base pay or a reduction in annualized base salary
and target bonus of at least 15%, if the change is not due to a general
reduction unrelated to the change in assignment; or
(2)involuntary termination (including a company-initiated resignation) for
reasons other than for cause.
In addition, the Severance Plan provides enhanced severance benefits in the
event of certain terminations during the 24-month period following a qualifying
change-in-control transaction, including the consummation of the proposed
merger with ScottishPower described elsewhere in this proxy
statement/prospectus. Executives designated by the Personnel Committee are
eligible for change-in-control benefits resulting from either a PacifiCorp-
initiated termination without "cause", or a resignation within two months after
a "material alteration of position". During the 24-month protection period
under the Severance Plan, "cause" means the executive's gross misconduct or
gross negligence or conduct which indicates a reckless disregard for the
consequences and has a material adverse effect on PacifiCorp or its affiliates,
and "material alteration in position" means the occurrence of any of the
following:
(1)a change in reporting relationship to a lower level;
(2)a material reduction in the scope of duties and responsibilities;
(3)a material reduction in authority;
(4)a "material reduction in compensation"; or
(5) relocation of executive's work location to an office more than 100
miles from the executive's office or more than 60 miles from the
executive's home.
152
<PAGE>
A "material reduction in compensation" occurs when an executive's annualized
base salary is reduced by any amount or the annualized base salary and target
bonus opportunity combined is reduced by at least 15 percent of the combined
total opportunity before the change in compensation. In addition, for the Chief
Operating Officer, the Severance Plan has a "walkaway" right under which he
would be eligible for benefits if he resigns for any reason effective no
earlier than 12 months and no later than 14 months after the proposed merger
with ScottishPower becomes effective.
If qualified, an executive would receive severance pay in an amount equal to
either two, two and one-half or three times the "annual cash compensation" of
such executive, depending on the level set by the Personnel Committee. "Annual
cash compensation" is defined as annualized base salary, target annual
incentive opportunity and annualized auto allowance in effect on a material
alteration or termination, whichever is greater. If the payment would result in
imposition of an excise tax under IRC Section 4999, PacifiCorp is required to
make an additional payment to compensate the executive for the effect of such
excise tax. The executive would also receive continuation of subsidized health
insurance from six to 24 months depending on length of service, and a minimum
of 12 months' executive-level outplacement services.
Other than in connection with a change-in-control, the definition of cause
is determined by PacifiCorp in its discretion and by the Personnel Committee in
the event of an appeal by the employee. The Severance Plan does not apply to
the termination of an executive for reasons of normal retirement, death or
total disability or to a termination for cause or for voluntary termination
other than as specified above. Other than in connection with a change-in-
control, executives named in the Summary Compensation Table (other than Mr.
McKennon) are eligible for a severance payment equal to twice the executive's
total cash compensation, three months of health insurance benefits and
outplacement benefits. Total cash compensation is defined as the annualized
base salary, target annual incentive opportunity and the annualized auto
allowance in effect on the earlier of a material alteration or termination.
During 1998, the Personnel Committee negotiated additional severance
benefits for Mr. Buckman, the details of which are set forth in the Summary
Compensation Table.
Retirement Plans
PacifiCorp and most of its subsidiaries have adopted noncontributory defined
benefit retirement plans for their employees, other than employees subject to
collective bargaining agreements that do not provide for coverage. Certain
executive officers, including the executive officers named in the Summary
Compensation Table (other than Mr. McKennon), are also eligible to participate
in PacifiCorp's non-qualified supplemental executive retirement plan. The
following description assumes participation in both the retirement plans and
the supplemental plan. Participants receive benefits at retirement payable for
life based on length of service with PacifiCorp or its subsidiaries and average
pay in the 60 consecutive months of highest pay out of the last 120 months, and
pay for this purpose would include salary and bonuses as reflected in the
Summary Compensation Table above. Benefits are based on 50% of final average
pay plus up to an additional 15% of final average pay depending upon whether
PacifiCorp meets certain performance goals set for each calendar year by the
Personnel Committee. Participants may also elect actuarially equivalent
alternative forms of benefits. Retirement benefits are reduced to reflect
Social Security benefits as well as certain prior employer retirement benefits.
Participants are entitled to receive full benefits upon retirement after age 60
with at least 15 years of service. Participants are also entitled to receive
reduced benefits upon early retirement after age 55 or after age 50 with at
least 15 years of service.
153
<PAGE>
The supplemental plan provides executives "involuntarily terminated" during
the 24 months following the proposed ScottishPower merger, or who resign for
any reason effective no earlier than 12 months and no later than 14 months
after the merger, with enhanced supplemental retirement benefits. For purposes
of the plan, a termination of employment is "involuntary" if the participant is
discharged for reasons other than cause or resigns under certain circumstances
following a change-in-control. A resignation is treated as an involuntary
termination when any of the following occur:
(1)the executive's annualized base salary or target bonus opportunity is
decreased;
(2) the executive is reassigned to a position in an office located more
than 100 miles from the executive's then-current office or 60 miles
from the executive's residence, whichever is greater;
(3) the executive's reporting level in PacifiCorp is changed and is lower
after the change than it was before;
(4)there is a material reduction in the scope of the executive's duties or
responsibilities; or
(5)there is a material reduction in the executive's authority.
See "The Merger--Interests of PacifiCorp's Officers and Directors--Effect of
Change in Control on Compensation and Benefits" for additional information with
respect to the retirement of Mr. Topham.
The following table shows the estimated annual retirement benefit payable
upon retirement at age 60 as of January 1, 1999. Amounts in the table reflect
payments from the retirement plans and the supplemental plan combined.
Estimated Annual Pension at Retirement(1)
Years of Service(2)
<TABLE>
<CAPTION>
Annual Pay at
Retirement Date 5 15 25 30
- --------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 200,000 $ 43,333 $130,000 $130,000 $130,000
400,000 86,667 260,000 260,000 260,000
600,000 130,000 390,000 390,000 390,000
800,000 173,333 520,000 520,000 520,000
1,000,000 216,667 650,000 650,000 650,000
</TABLE>
- --------
(1) The benefits shown in this table assume that the individual will remain in
the employ of PacifiCorp until retirement at age 60, that the plans will
continue in their present form and that PacifiCorp achieves its performance
goals under the supplemental plan in all years. Amounts shown do not
reflect the Social Security offset.
(2) The number of credited years of service used to compute benefits under the
plans for Messrs. Buckman, O'Brien, Steinberg, Bohling and Topham are 4,
15, 20, 34 and 26, respectively. Mr. Buckman was not vested in any
retirement benefits at the time of separation of employment. Mr. McKennon
is not a participant in this plan.
154
<PAGE>
PROPOSAL FOR
APPOINTMENT OF INDEPENDENT AUDITOR
The PacifiCorp Board of Directors, on recommendation of the Audit Committee
and subject to ratification by shareholders, has appointed Deloitte & Touche
LLP to perform an examination of the consolidated financial statements of
PacifiCorp and its subsidiaries for the year 1999 and to render its opinion
thereon.
Deloitte & Touche LLP is an international accounting firm with substantial
experience in public utility accounting matters, an accounting area subject to
detailed regulation at both the national and state levels. The firm has acted
as independent auditor for PacifiCorp since 1933 and has competent,
professionally qualified personnel who are familiar with the history and
operations of PacifiCorp. Deloitte & Touche LLP follows the established
guidelines for periodic rotation of audit personnel for companies that are
reporting companies under the Securities and Exchange Act of 1934, as amended.
The purpose of this planned rotation is to periodically introduce a fresh view
of the client's operations without losing the benefits of continuity. The
PacifiCorp board believes that the firm is well qualified to serve as
PacifiCorp's independent auditor for 1999.
Representatives of the firm are expected to be present at the PacifiCorp
annual meeting with an opportunity to make a statement if they desire to do so
and to be available to respond to appropriate questions.
The PacifiCorp board recommends a vote FOR this proposal.
155
<PAGE>
SECTION 16(a)
BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires PacifiCorp's
executive officers and directors, and persons who own more than 10% of the
PacifiCorp common stock outstanding, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Based solely on reports and other information submitted by executive
officers and directors, PacifiCorp believes that during the year ended December
31, 1998, each of its executive officers, directors and persons who own more
than 10% of the PacifiCorp common stock outstanding filed all reports required
by Section 16(a).
ANNUAL REPORT
PacifiCorp's annual report on Form 10-K for the year 1998 is being mailed to
shareholders with this proxy statement/prospectus.
OTHER MATTERS
Shareholder Proposals to be Included in PacifiCorp's Proxy Statement. A
shareholder proposal to be considered for inclusion in proxy material for
PacifiCorp's 2000 annual meeting must be received by PacifiCorp not later than
December 1, 1999.
Shareholder Proposals Not in PacifiCorp's Proxy Statement. Shareholders
wishing to present proposals for action at the PacifiCorp special meeting or at
another shareholders' meeting must do so in accordance with PacifiCorp's
bylaws. A shareholder must give timely notice of the proposed business to the
Secretary of PacifiCorp. For annual meetings, notice must be received not less
than 45 days nor more than 75 days prior to the date in the current year
corresponding to the day and month of mailing of PacifiCorp's proxy statement
for the prior year's annual meeting. For other meetings, such notice must be
given not less than 90 days nor more than 120 days prior to the date of the
meeting; provided, however, that in the event that less than 100 days' notice
or prior public disclosure of the date of such meeting is given or made, notice
by the shareholder to be timely must be received no later than the close of
business on the 10th day following the day on which such notice of the date of
such other meeting was mailed or such public disclosure was made. For each
matter the shareholder proposes to bring before the meeting, the notice to the
Secretary must include the following:
(1) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting;
(2) the name and address of the shareholder proposing such business;
(3) the class and number of shares of PacifiCorp which are beneficially
owned by the shareholder; and
(4) any material interest of the shareholder in such business.
If the shareholder is not a shareholder of record at the time of giving the
notice, the notice must be accompanied by appropriate documentation of the
shareholder's claim of beneficial ownership. The officer presiding at the
meeting may, if in the officer's opinion the facts warrant, determine that
business was not properly brought before the meeting in accordance with
PacifiCorp's bylaws. If such officer does so, such officer shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted.
156
<PAGE>
Shareholder Nominations for Directors. Shareholders wishing to directly
nominate candidates for election to the PacifiCorp board must do so in
accordance with PacifiCorp's bylaws by giving timely notice in writing to the
Secretary as described above. The notice must set forth the following:
(1) as to each person whom the shareholder proposes to nominate:
(a) all information relating to such person that is required to be
disclosed in proxy solicitations pursuant to Regulation 14A under
the Exchange Act; and
(b) the written consent of such person to be named in the proxy
statement as a nominee and to serve as a director if elected; and
(2) as to the shareholder giving the notice:
(a) the name and address of such shareholder; and
(b) the class and number of shares of PacifiCorp which are beneficially
owned by such shareholder.
If the shareholder is not a shareholder of record at the time of giving the
notice, the notice must be accompanied by appropriate documentation of the
shareholder's claim of beneficial ownership. No person shall be eligible to
serve as a director of PacifiCorp unless nominated in accordance with the
procedures set forth in PacifiCorp's bylaws. The officer presiding at the
meeting may, if in the officer's opinion the facts warrant, determine that a
nomination was not made in accordance with the procedures prescribed by
PacifiCorp's bylaws. If such officer does so, such officer shall so declare to
the meeting and the defective nomination shall be disregarded.
Other Business. While the notice of PacifiCorp's annual meeting provides for
the transaction of such other business as may properly come before the meeting,
the PacifiCorp board has no knowledge of any other matters to be presented at
the meeting. If any other business should properly come before the meeting, the
shares represented by the proxies solicited hereby may be discretionarily voted
on such business in accordance with the judgment of the persons named in the
proxy form to the extent allowed by the rules of the SEC, unless otherwise
indicated on the proxy form.
Whether or not you expect to be present at the meeting, please sign the
accompanying form of proxy and return it promptly in the enclosed stamped
return envelope.
UK LISTING PARTICULARS AND CIRCULAR
A copy of a document comprising the U.K. listing particulars relating to New
ScottishPower in accordance with the Listing Rules will be delivered to the
Registrar of Companies in Scotland for registration and will be available for
inspection at the offices of Freshfields, 65 Fleet Street, London EC4Y 1HS,
England, until the date on which the merger becomes effective. Summary listing
particulars are attached as Annex F to this proxy statement/prospectus. Neither
the listing particulars nor the documents listed in the summary listing
particulars as available for inspection form part of, or are incorporated into,
this proxy statement/prospectus, except to the extent specifically provided in
this proxy statement/prospectus. In addition, ScottishPower is convening the
ScottishPower Extraordinary General Meeting, and distributing to its
shareholders a circular relating to the merger, a copy of which will also be
available for inspection at the offices of Freshfields at the above address
until the date on which the merger becomes effective and at the ScottishPower
Extraordinary General Meeting. The contents of the circular do not form part
of, nor are they incorporated into, this proxy statement/prospectus.
LEGAL MATTERS
The legality of the ordinary shares to be issued under the merger agreement
is being passed upon for ScottishPower by Shepherd & Wedderburn WS. Certain tax
matters in connection with the merger are being passed upon for ScottishPower
by Milbank, Tweed, Hadley & McCloy LLP, and for PacifiCorp by Stoel Rives LLP
and LeBoeuf, Lamb, Greene & MacRae, LLP.
157
<PAGE>
EXPERTS
The consolidated financial statements incorporated in this proxy
statement/prospectus by reference from PacifiCorp's Annual Report on Form 10-K
for the year ended December 31, 1998 and the consolidated financial statements
from which the Selected Historical Financial Information of PacifiCorp included
in this proxy statement/prospectus have been derived, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
With respect to the unaudited interim financial information which is
incorporated into this proxy statement/prospectus by reference, Deloitte &
Touche LLP have applied limited procedures in accordance with professional
standards for a review of such information. However, as stated in their reports
included in the PacifiCorp's Quarterly Reports on Form 10-Q and incorporated by
reference into this proxy statement/prospectus, they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on the information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act for their reports on the unaudited interim financial information because
those reports are not "reports" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Securities Act.
The consolidated financial statements of ScottishPower as of March 31, 1998
and 1997 and for each of the three years in the period ended March 31, 1998
included or incorporated by reference in this proxy statement/prospectus have
been audited by Coopers & Lybrand Chartered Accountants and Registered Auditors
("C&L"), independent auditors, as stated in their reports appearing or
incorporated into this proxy statement/prospectus and elsewhere in this
registration statement, and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
Following the merger in the U.K. of C&L and Price Waterhouse, which was
completed on July 1, 1998, the resulting partnership is conducting business
under the name of PricewaterhouseCoopers. References in this document to C&L
are in respect of the roles, opinions given, procedures undertaken and other
matters arising prior to July 1, 1998 and in their capacity as auditors of
ScottishPower, before October 2, 1998, the date on which PricewaterhouseCoopers
were appointed auditors and references to PricewaterhouseCoopers are in respect
of roles, opinions given, procedures undertaken and other matters arising in
their capacity as auditors of ScottishPower on or after their appointment as
auditors on October 2, 1998 and in any other respect on or after July 1, 1998.
158
<PAGE>
ANNEX A
Execution Copy
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of December 6, 1998
by and among
SCOTTISH POWER PLC,
NA GENERAL PARTNERSHIP,
and
PACIFICORP
December 6, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
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ARTICLE I THE MERGER...................................................... 1
1.01 The Merger......................................................... 1
1.02 Closing............................................................ 2
1.03 Effective Time..................................................... 2
1.04 Governing Instrument............................................... 2
1.05 Directors and Officers of the Surviving Corporation................ 2
1.06 Effects of the Merger.............................................. 2
1.07 Further Assurances................................................. 2
ARTICLE II CONVERSION OF SHARES........................................... 2
2.01 Conversion of Capital Stock........................................ 2
2.02 Procedure for Election............................................. 4
2.03 Exchange of Certificates........................................... 5
2.04 Withholding Rights................................................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 7
3.01 Organization and Qualification..................................... 7
3.02 Capital Stock...................................................... 8
3.03 Authority Relative to this Agreement............................... 9
3.04 Non-Contravention; Approvals and Consents.......................... 10
3.05 SEC Reports, Financial Statements and Utility Reports.............. 11
3.06 Absence of Certain Changes or Events............................... 11
3.07 Absence of Undisclosed Liabilities................................. 12
3.08 Legal Proceedings.................................................. 12
3.09 Information Supplied............................................... 12
3.10 Permits; Compliance with Laws and Orders........................... 13
3.11 Compliance with Agreements......................................... 13
3.12 Taxes.............................................................. 13
3.13 Employee Benefit Plans; ERISA...................................... 14
3.14 Labor Matters...................................................... 16
3.15 Environmental Matters.............................................. 16
3.16 Intellectual Property Rights....................................... 18
3.17 Regulation as a Utility............................................ 18
3.18 Insurance.......................................................... 18
3.19 Vote Required...................................................... 19
3.20 Opinion of Financial Advisor....................................... 19
3.21 Ownership of Parent Common Stock................................... 19
3.22 Article VII of the Company's Articles of Incorporation and Sections
60.825-60.845 of the BCA Not Applicable............................. 19
3.23 Certain Contracts.................................................. 19
3.24 Year 2000.......................................................... 19
3.25 Joint Venture Representations...................................... 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PARTNERSHIP... 20
4.01 Organization and Qualification..................................... 20
4.02 Capital Stock...................................................... 20
4.03 Authority Relative to this Agreement............................... 21
</TABLE>
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4.04 Non-Contravention; Approvals and Consents........................... 22
4.05 SEC Reports and Financial Statements................................ 23
4.06 Absence of Certain Changes or Events................................ 23
4.07 Absence of Undisclosed Liabilities.................................. 23
4.08 Legal Proceedings................................................... 24
4.09 Information Supplied................................................ 24
4.10 Permits; Compliance with Laws and Orders............................ 24
4.11 Compliance with Agreements.......................................... 25
4.12 Taxes............................................................... 25
4.13 Parent Employee Benefit Plans....................................... 26
4.14 Labor Matters....................................................... 27
4.15 Environmental Matters............................................... 27
4.16 Intellectual Property Rights........................................ 28
4.17 Vote Required....................................................... 29
4.18 Opinion of Financial Advisor........................................ 29
4.19 Ownership of Company Common Stock................................... 29
4.20 Insurance........................................................... 29
4.21 Year 2000........................................................... 29
4.22 Joint Venture Representations....................................... 29
ARTICLE V COVENANTS........................................................ 30
5.01 Covenants of the Company............................................ 30
5.02 Covenants of Parent................................................. 33
5.03 Joint Executive Committee........................................... 36
5.04 Tax Matters......................................................... 36
5.05 Discharge of Liabilities............................................ 36
5.06 Contracts........................................................... 36
5.07 No Solicitations.................................................... 37
5.08 Conduct of Business of Merger Sub................................... 37
5.09 Third Party Standstill Agreements................................... 38
5.10 Control of Other Party's Business................................... 38
ARTICLE VI ADDITIONAL AGREEMENTS........................................... 38
6.01 Access to Information............................................... 38
6.02 Preparation of Registration Statement and Proxy Statement........... 38
6.03 Approval of Shareholders............................................ 39
6.04 Company Affiliates.................................................. 40
6.05 Auditors' Letters................................................... 40
6.06 Stock Exchange Listing; Deposit Agreement........................... 40
6.07 Restructuring of Merger............................................. 41
6.08 Regulatory and Other Approvals...................................... 41
6.09 Employee Benefit Plans.............................................. 41
6.10 Company Stock Plan.................................................. 42
6.11 Directors' and Officers' Indemnification and Insurance.............. 43
6.12 Parent Governance; Additional Matters............................... 43
6.13 Expenses............................................................ 43
6.14 Brokers or Finders.................................................. 44
6.15 Takeover Statutes................................................... 44
6.16 Conveyance Taxes.................................................... 44
6.17 Rate Matters........................................................ 44
6.18 Tax Matters......................................................... 44
6.19 Dividends........................................................... 45
</TABLE>
ii
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ARTICLE VII CONDITIONS.................................................... 45
7.01 Conditions to Each Party's Obligation to Effect the Merger......... 45
7.02 Conditions to Obligation of Parent and the Merger Sub to Effect the
Merger.............................................................. 47
7.03 Conditions to Obligation of the Company to Effect the Merger....... 48
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................ 49
8.01 Termination........................................................ 49
8.02 Effect of Termination.............................................. 50
8.03 Amendment.......................................................... 51
8.04 Waiver............................................................. 51
ARTICLE IX GENERAL PROVISIONS............................................. 52
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements.......................................................... 52
9.02 Notices............................................................ 52
9.03 Entire Agreement; Incorporation of Exhibits........................ 53
9.04 Public Announcements............................................... 53
9.05 No Third Party Beneficiary......................................... 53
9.06 No Assignment; Binding Effect...................................... 53
9.07 Headings........................................................... 53
9.08 Invalid Provisions................................................. 53
9.09 Governing Law...................................................... 54
9.10 Submission to Jurisdiction; Waivers................................ 54
9.11 Enforcement of Agreement........................................... 54
9.12 Certain Definitions................................................ 54
9.13 Counterparts....................................................... 55
9.14 WAIVER OF JURY TRIAL............................................... 55
EXHIBITS
EXHIBIT A Allotment of Shares............................................. A-1
EXHIBIT B Form of Affiliate Agreement.....................................
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
<TABLE>
<S> <C>
"1935 Act"............................................. Section 3.02(c)
"ADR Depositary"....................................... Section 2.01(e)
"ADR Holder Proposal".................................. Section 6.03(c)
"ADS Consideration".................................... Section 2.01(c)(i)
"Advisory Board"....................................... Section 6.12(b)
"affiliate"............................................ Section 9.12(a)
"Affiliate Agreement".................................. Section 6.04
"Agreement"............................................ Preamble
"Alternative Proposal"................................. Section 5.08
"Antitrust Division"................................... Section 6.08
"Articles of Merger"................................... Section 1.03
"BCA".................................................. Section 1.01
"beneficially"......................................... Section 9.12(b)
"business day"......................................... Section 9.12(c)
"Certificates"......................................... Section 2.03(b)
"Circular"............................................. Section 3.09(b)
"Closing".............................................. Section 1.02
"Closing Date"......................................... Section 1.02
"Code"................................................. Preamble
"Companies Act"........................................ Section 4.02(a)
"Company".............................................. Preamble
"Company Affiliates"................................... Section 6.04
"Company Budget"....................................... Section 5.01(e)
"Company Common Stock"................................. Preamble
"Company Disclosure Letter"............................ Section 3.01(a)
"Company Employee Benefit Plan"........................ Section 3.13(b)(i)
"Company Financial Statements"......................... Section 3.05(a)
"Company Joint Venture"................................ Section 3.01(b)(ii)
"Company Option"....................................... Section 2.01(f)
"Company Option Plan".................................. Section 2.01(f)
"Company Permits"...................................... Section 3.10
"Company Preferred Stock".............................. Section 3.02(a)
"Company SEC Reports".................................. Section 3.05(a)
"Company Stock Option"................................. Section 6.10(a)
"Company Stockholders' Approval"....................... Section 6.03(b)
"Company Stockholders' Meeting"........................ Section 6.03(b)
"Confidentiality Agreement"............................ Section 6.01
"Constituent Corporations"............................. Section 1.01
"Contracts"............................................ Section 3.04(a)
"control," "controlling," "controlled by" and
"under common control with"........................... Section 9.12(a)
"Converted Shares"..................................... Section 2.01(c)(i)
"DOE".................................................. Section 3.05(b)
"Effective Time"....................................... Section 1.03
"Election Date"........................................ Section 2.02(a)
"Environmental Claims"................................. Section 3.15(g)(i)
"Environmental Laws"................................... Section 3.15(g)(ii)
</TABLE>
iv
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<S> <C>
"Environmental Permits"............................... Section 3.15(b)
"ERISA"............................................... Section 3.13(b)(i)
"ERISA Affiliate"..................................... Section 3.13(b)(iii)
"Exchange Act"........................................ Section 3.04(b)
"Exchange Agent"...................................... Section 2.03(a)
"Exchange Fund"....................................... Section 2.03(a)
"FERC"................................................ Section 3.05(b)
"FSA"................................................. Section 3.09(b)
"FTA"................................................. Section 7.01(k)
"FTC"................................................. Section 6.08
"Governmental or Regulatory Authority"................ Section 3.04(a)
"group"............................................... Section 9.12(f)
"Hazardous Materials"................................. Section 3.15(g)(iii)
"HSR Act"............................................. Section 3.04(b)
"Intellectual Property"............................... Section 3.16
"Joint Executive Committee"........................... Section 5.03(a)
"Joint Venture"....................................... Section 301(b)(i)
"knowledge"........................................... Section 9.13(d)
"laws"................................................ Section 3.04(a)
"Lien"................................................ Section 3.02(b)
"Listing Particulars"................................. Section 3.09(b)
"LSE"................................................. Section 2.03(e)
"material adverse effect"............................. Section 9.12(e)
"Merger".............................................. Preamble
"Merger Consideration"................................ Section 2.01(c)(i)
"Merger Ordinary Shares".............................. Preamble
"Merger Sub".......................................... Preamble
"Merger Sub Common Stock"............................. Section 2.01
"MMC"................................................. Section 7.01(k)
"NYSE"................................................ Section 2.03(e)
"OFFER"............................................... Section 7.01(l)
"OFT"................................................. Section 7.01(k)
"OFWAT"............................................... Section 7.01(l)
"Options"............................................. Section 3.02(a)
"orders".............................................. Section 3.04(a)
"Ordinary Share Consideration"........................ Section 2.01(c)(i)
"Ordinary Share Election"............................. Section 2.02
"Ordinary Share Election Form"........................ Section 2.02
"Parent".............................................. Preamble
"Parent ADRs"......................................... Preamble
"Parent ADSs"......................................... Preamble
"Parent Budget"....................................... Section 5.02(e)
"Parent Disclosure Documents"......................... Section 3.09(b)
"Parent Disclosure Letter"............................ Section 4.01(a)
"Parent Employee Benefit Plans"....................... Section 4.13
"Parent Financial Statements"......................... Section 4.05
"Parent Group"........................................ Section 5.02(k)
"Parent Joint Venture"................................ Section 3.01(b)(iii)
"Parent Ordinary Shares".............................. Preamble
"Parent Permits"...................................... Section 4.10
"Parent SEC Reports".................................. Section 4.05
"Parent Share Schemes"................................ Section 4.02(a)
</TABLE>
v
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"Parent Shareholders' Approval"........................ Section 6.03(a)
"Parent Shareholders' Meeting"......................... Section 6.03(a)
"Partnership".......................................... Preamble
"Partnership Agreement"................................ Section 4.01(a)
"Partnership Loan Note"................................ Section 2.01(e)
"person"............................................... Section 9.12(f)
"Plan"................................................. Section 3.12(b)(ii)
"Policies"............................................. Section 4.14(b)
"Power Act"............................................ Section 3.05(b)
"Proxy Statement"...................................... Section 3.09(a)
"qualified stock options".............................. Section 6.10(a)
"Registration Statement"............................... Section 4.09
"Release".............................................. Section 3.15(g)(iv)
"Representatives"...................................... Section 9.12(g)
"Review Material"...................................... Section 6.01
"Sales Price".......................................... Section 2.03(e)
"SEC".................................................. Section 3.04(b)
"Secretary of State"................................... Section 1.03
"Securities Act"....................................... Section 3.04(b)
"SOS".................................................. Section 7.01(k)
"Special Share"........................................ Section 4.02(a)
"Subsidiary"........................................... Section 9.13(h)
"Surviving Corporation"................................ Section 1.01
"Surviving Corporation Common Stock"................... Section 2.01
"taxes"................................................ Section 3.12(g)
"Trading Day".......................................... Section 2.03(e)
"UK Code".............................................. Section 6.03(a)
</TABLE>
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<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated as of December 6, 1998 (this
"Agreement"), is made and entered into by and among SCOTTISH POWER PLC, a
public limited company incorporated under the laws of Scotland ("Parent"), NA
GENERAL PARTNERSHIP, a Nevada general partnership indirectly wholly owned by
Parent (the "Partnership"), and PACIFICORP, an Oregon corporation (the
"Company"), and, with respect to Section 2.01 hereof only, Scottish Power NA 1
Limited, a limited liability company incorporated under the laws of Scotland
("UKSub1") and Scottish Power NA 2 Limited, a limited liability company
incorporated under the laws of Scotland ("UKSub2").
WHEREAS, the Boards of Directors of Parent and the Company and the
partners of the Partnership, have each determined that it is advisable and in
the best interests of their respective stockholders and partners, as the case
may be, to consummate, and have approved, the business combination transaction
provided for herein in which Merger Sub (as defined below) would merge with
and into the Company and the Company would become an indirect, wholly-owned
subsidiary of Parent (the "Merger") pursuant to the terms of this Agreement,
whereby each issued and outstanding share of common stock of the Company (the
"Company Common Stock"), other than shares owned directly or indirectly by
Parent, the Partnership, Merger Sub or the Company, will be converted into the
right to receive either (i) ordinary shares of Parent represented by American
Depositary Shares of Parent ("Parent ADSs"), each representing four (4)
ordinary shares of 50 pence each of Parent ("Parent Ordinary Shares") and
evidenced by American Depositary Receipts ("Parent ADRs"); or (ii) Parent
Ordinary Shares (the "Merger Ordinary Shares");
WHEREAS, immediately prior to the Closing Date (as defined in Section
1.02), an Oregon corporation wholly-owned by the Partnership ("Merger Sub")
will be formed for the purpose of effectuating the Merger;
WHEREAS, the respective Boards of Directors of Parent and the Company,
and the partners of the Partnership, have determined that the Merger is in
furtherance of and consistent with their respective long-term business
strategies and is fair to and in the best interests of their respective
shareholders and stockholders, Parent has approved this Agreement and the
Merger, UKSub1 and UKSub2 in their capacity as general partners of the
Partnership and as parties to Section 2.01 have approved this Agreement and
the Merger, and the Partnership has agreed that, immediately following the
formation of Merger Sub, it will approve this Agreement and the Merger as the
sole stockholder of Merger Sub;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent, the Partnership and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.03), Merger Sub
shall be merged with and into the Company in accordance with the Business
Corporation Act of the State of Oregon (the "BCA"). At the Effective Time, the
separate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation in the Merger (the "Surviving Corporation"). Merger
Sub and the Company are sometimes referred to herein as the "Constituent
Corporations". As a result of the Merger, the outstanding shares of capital
stock of the Constituent Corporations shall be converted and cancelled in the
manner provided in Article II.
<PAGE>
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, and subject to the satisfaction or waiver (where applicable) of the
conditions set forth in Article VII, the consummation of the Merger (the
"Closing") will take place at the offices of Milbank, Tweed, Hadley & McCloy,
1 Chase Manhattan Plaza, New York, New York 10005, at 10:00 a.m., local time,
on the fifth business day following satisfaction or waiver (where applicable)
of the conditions set forth in Article VII, unless another date, time or place
is agreed to in writing by the parties hereto (the "Closing Date"). At the
Closing there shall be delivered to Parent, the Partnership, Merger Sub and
the Company the certificates and other documents and instruments required to
be delivered under Article VII.
1.03 Effective Time. At the Closing, the parties shall cause to be duly
prepared and executed by the Company as the Surviving Corporation and Merger
Sub articles of merger (the "Articles of Merger") for filing on, or as soon as
practicable after, the Closing Date with the Secretary of State of the State
of Oregon (the "Secretary of State"), as provided in Section 60.494 of the
BCA. The Merger shall become effective at the time of the filing of the
Articles of Merger with the Secretary of State (such date and time being
referred to herein as the "Effective Time").
1.04 Governing Instrument. At the Effective Time, (i) the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation, and
(ii) the Bylaws of the Company as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided by law, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
1.05 Directors and Officers of the Surviving Corporation. The individuals
listed on Schedule I shall, from and after the Effective Time, be the
directors and executive officers, respectively, of the Company as the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.
1.06 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the BCA.
1.07 Further Assurances. Each party hereto will, either prior to or after
the Effective Time, execute such further documents, instruments, deeds, bills
of sale, assignments and assurances and take such further actions as may
reasonably be requested by one or more of the other parties hereto to
consummate the Merger, to vest the Surviving Corporation with full title to
all assets, properties, privileges, rights, approvals, immunities and
franchises of either of the Constituent Corporations or to effect the other
purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and, with respect to clauses (a)-(c), (f) and (g) hereof, without any
action on the part of the holder thereof:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of the
common stock of Merger Sub ("Merger Sub Common Stock") outstanding
immediately prior to the Effective Time shall be cancelled and the
Surviving Corporation shall issue to the Partnership at the Effective Time
such number of shares of common stock as is equal to the number of shares
of Merger Sub Common Stock, with the same rights, powers and privileges as
the Merger Sub Common Stock, and shall constitute the only outstanding
shares of common stock of the Surviving Corporation ("Surviving Corporation
Common Stock").
2
<PAGE>
(b) Cancellation of Treasury Stock and Stock Owned by Parent and
Subsidiaries. All shares of Company Common Stock that are owned by the
Company as treasury stock and any shares of Company Common Stock owned by
Parent, the Partnership, Merger Sub or any other wholly-owned Subsidiary
(as defined in Section 9.12) of Parent shall be canceled and retired and
shall cease to exist and no stock of Parent or other consideration shall be
delivered in exchange therefor.
(c) Conversion of Company Common Stock. (i) Each issued and outstanding
share of Company Common Stock (other than shares to be cancelled in
accordance with Section 2.01(b)), shall be converted into the right to
receive (A) .58 Parent ADSs (the "ADS Consideration"), or (B) if a properly
completed Ordinary Share Election Form (as defined in Section 2.02) shall
have been submitted to the Exchange Agent (as defined in Section 2.02) on a
timely basis with respect to such share of Company Common Stock, 2.32 fully
paid and nonassessable Merger Ordinary Shares (the "Ordinary Share
Consideration"; the Ordinary Share Consideration and the ADS Consideration
are each sometimes referred to herein as the "Merger Consideration"). All
shares of Company Common Stock to be converted into shares of Parent ADSs
or Merger Ordinary Shares pursuant to this Section 2.01(c) are hereinafter
referred to as "Converted Shares."
(ii) If, prior to the Effective Time, Parent shall pay a dividend in,
subdivide, consolidate or issue by capitalization of its reserves, any
Parent Ordinary Shares, the Merger Consideration shall be multiplied by
a fraction, the numerator of which shall be the number of Parent
Ordinary Shares outstanding immediately after, and the denominator of
which shall be the number of such shares outstanding immediately
before, the occurrence of such event, and the resulting product shall
from and after the date of such event be the Merger Consideration
subject to further adjustment in accordance with this sentence.
(iii) All shares of Company Common Stock converted in accordance with
paragraph (i) of this Section 2.01(c) shall no longer be outstanding
and shall, as part of the consideration for the allotment and issue by
Parent referred to in Section 2.01(e) below, automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
and any cash in lieu of fractional Parent ADSs or Merger Ordinary
Shares (determined in accordance with Section 2.03(e)), upon the
surrender of such certificate in accordance with Section 2.03, without
interest.
(d) UKSub 1 shall continue to be the owner of a 90% general partnership
interest in the Partnership, and UKSub 2 shall continue to be the owner of
a 10% general partnership interest in the Partnership.
(e) As consideration for the acquisition by the Partnership of the
Surviving Corporation Common Stock in accordance with Section 2.01(a): (i)
the Partnership agrees to issue a loan note to Parent in the form and in an
amount to be mutually agreed upon by Parent and the Partnership (the
"Partnership Loan Note"), (ii) UKSub 1 agrees to allot and issue to Parent
fully paid ordinary shares of 1 each and (iii) UKSub 2 agrees to allot and
issue to Parent fully paid ordinary shares of 1 each. In consideration of
the other steps referred to in this Section 2.01 (including, to the extent
set out in column A of Exhibit A attached hereto, the issue of the
Partnership Loan Note by the Partnership), Parent shall allot and issue (i)
the number of Parent Ordinary Shares represented by Parent ADSs to be
issued in the Merger to Parent's United States Depositary (the "ADR
Depositary") on behalf of the holders of Company Common Stock entitled
thereto for the purposes of giving effect to the conversion and exchange
referred to in this Article II, and (ii) the number of Merger Ordinary
Shares to be issued in the Merger. In consideration of the other steps
referred to in this Section 2.01, (including, to the extent set out in
column B of Exhibit A, the issues of ordinary shares by UKSub 1 and UKSub 2
referred to above), Parent shall allot and issue (i) the number of Parent
Ordinary Shares represented by Parent ADSs to be issued in the Merger to
the ADR Depositary on behalf of the holders of Company Common Stock
entitled thereto for the purposes of giving effect to the conversion and
exchange referred to in this Article II, and (ii) the number of Merger
Ordinary Shares to be issued in the Merger.
3
<PAGE>
(f) Subject to the terms and conditions of the Company's Stock Incentive
Plan (the "Company Option Plan") and the stock option agreements executed
pursuant thereto, each option to purchase Company Common Stock granted
thereunder that is outstanding at the Effective Time (a "Company Option")
shall be converted into an option to acquire, on the same terms and
conditions as were applicable under the Company Option Plan at the
Effective Time, a number of (i) Parent ADSs equal to the ADS Consideration,
or (ii) Merger Ordinary Shares equal to the Ordinary Share Consideration,
in each case multiplied by the number of shares of Company Common Stock
subject to such option immediately prior to the Effective Time, on the
basis described in Section 6.10. The Company as the Surviving Corporation
and Parent shall take all action necessary to ensure that Parent has
control of the operation of the Company Option Plan and the Company
Restricted Stock Plans.
(g) Subject to Section 5.01 (c)(iv)(C), the Company Preferred Stock (as
defined below) shall not be affected by the Merger and shall continue to
have the same rights and preferences as were in effect prior to
consummation of the Merger.
2.02 Procedure for Election. At such time as shall be sufficient to
permit the holders of Company Common Stock to exercise their right to make an
election pursuant to this Section 2.02, Parent will make available to all
holders of Company Common Stock of record a letter of transmittal and election
form and other appropriate materials (collectively, the "Ordinary Share
Election Form") providing for such holder to elect to receive the Ordinary
Share Consideration with respect to all or any portion of such holder's shares
of Company Common Stock ("Ordinary Share Election"). As of the Election Date
(as hereinafter defined), any share of Company Common Stock with respect to
which there shall not have been effected such election by submission to the
Exchange Agent (as defined in Section 2.03) of an effective, properly
completed Ordinary Share Election Form shall be converted in the Merger into
the right to receive the ADS Consideration.
(a) Any election to receive the Ordinary Share Consideration shall have
been validly made only if the Exchange Agent shall have received by 5:00
p.m., New York City time, on or prior to the Election Date, an Ordinary
Share Election Form properly completed and executed (with the signature or
signatures thereon guaranteed if required by the Ordinary Share Election
Form) by such holder of shares of Company Common Stock. As used herein,
"Election Date" means a date announced by Parent, in a news release
delivered to the Dow Jones News Service, as the last day on which an
Ordinary Share Election Form will be accepted; provided, however, that such
date shall be a business day no earlier than five (5) business days prior
to the date on which the Effective Time occurs and shall be at least five
(5), and not more than 20, business days following the date of such news
release; provided further, that, subsequent to such announcement, Parent
shall have the right to change such Election Date to a later date so long
as such later date is (i) at least five (5) business days following the
date of notice of such change and (ii) not later than the date on which the
Effective Time occurs. Parent shall have the right to make reasonable
determinations and to establish reasonable procedures (not inconsistent
with the terms of this Agreement) in guiding the Exchange Agent in its
determination as to the validity of Ordinary Share Election Forms and of
any revision, revocation or withdrawal thereof.
(b) Two or more holders of shares of Company Common Stock who are
determined to constructively own such shares owned by each other by virtue
of Section 318(a) of the Code and who so certify to Parent's reasonable
satisfaction, and any single holder of shares of Company Common Stock who
holds such shares in two or more different names and who so certifies to
Parent's reasonable satisfaction, may submit a joint Ordinary Share
Election Form covering the aggregate shares of Company Common Stock owned
by all such holders or by such single holder, as the case may be. For all
purposes of this Agreement, each such group of holders which, and each such
single holder who, submits a joint Ordinary Share Election Form shall be
treated as a single holder of shares of Company Common Stock.
(c) Record holders of shares of Company Common Stock who are nominees
only may submit a separate Ordinary Share Election Form for each beneficial
owner for whom such record holder is a nominee; provided, however, that, at
the request of Parent, such record holder shall certify to the reasonable
satisfaction of Parent that such record holder holds such shares as nominee
for the beneficial owner thereof.
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For purposes of this Agreement, each beneficial owner for which an Ordinary
Share Election Form is submitted will be treated as a separate holder of
shares of Company Common Stock subject, however, to Section 2.02(b).
(d) Any holder of shares of Company Common Stock may at any time prior to
5:00 p.m. New York City time, on the Election Date revoke such holder's
election by written notice to the Exchange Agent received at any time prior
to 5:00 p.m., New York City time, on the Election Date.
2.03 Exchange of Certificates. (a) Exchange Agent. Promptly following the
Effective Time, (i) Parent shall issue to and deposit with the ADR Depositary,
for the benefit of the holders of shares of Company Common Stock converted
into the ADS Consideration in accordance with Section 2.01(c), Parent Ordinary
Shares in an amount sufficient to permit the ADR Depositary to issue Parent
ADRs representing the number of Parent ADSs issuable pursuant to Section
2.01(c) and (ii) Parent shall, for the benefit of the holders of the shares of
Company Common Stock converted into Merger Ordinary Shares in the Merger, make
available to the Surviving Corporation for deposit with a bank or trust
company designated before the Closing Date by Parent and reasonably acceptable
to the Company (the "Exchange Agent"), (A) certificates representing the
number of duly authorized whole Merger Ordinary Shares issuable in accordance
with Section 2.01(c), and (B) an amount of cash equal to the aggregate amount
payable in lieu of fractional Parent ADSs and Merger Ordinary Shares in
accordance with Section 2.03(e) (such cash, certificates representing Merger
Ordinary Shares and Parent ADRs representing Parent ADSs, together with any
dividends or distributions with respect thereto being hereinafter referred to
as the "Exchange Fund"), to be held for the benefit of and distributed to the
holders of Converted Shares in accordance with this Section. The Exchange
Agent shall agree to hold such Merger Ordinary Shares and funds for delivery
as contemplated by this Section and upon such additional terms as may be
agreed upon by the Exchange Agent, the Company and Parent. Parent shall cause
the ADR Depositary to issue through and upon the instructions of the Exchange
Agent, for the benefit of the holders of shares of the Company Common Stock
converted into the ADS Consideration in accordance with Section 2.01(c),
Parent ADRs representing the number of Parent ADSs issuable pursuant to
Section 2.01(c). Neither Parent, Parent's affiliates nor holders of Converted
Shares shall be responsible for any stamp duty reserve tax payable in
connection with the ADS Consideration. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by the Surviving Corporation on
a daily basis. Any interest and other income resulting from such investments
shall promptly be paid to the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares are converted pursuant
to this Article II into the right to receive Parent ADSs or Merger Ordinary
Shares (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form
and have such other provisions as the Surviving Corporation or Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing Parent ADRs
which represent Parent ADSs, and Merger Ordinary Shares and cash in lieu of
fractional Parent ADSs or Merger Ordinary Shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal duly executed and completed in accordance with its terms, the
holder of such Certificate shall be entitled to receive in exchange therefor
(i) one or more Parent ADRs representing, in the aggregate, that whole number
of Parent ADSs and/or a certificate or certificates representing that whole
number of Merger Ordinary Shares elected to be received in accordance with
Section 2.02, (ii) the amount of dividends or other distributions, if any,
with a record date on or after the Effective Time which theretofore became
payable with respect to such Parent ADSs and Merger Ordinary Shares, and (iii)
the cash amount payable in lieu of fractional Parent ADSs and Merger Ordinary
Shares in accordance with Section 2.03(e), in each case which such holder has
the right to receive pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received in the Merger. In the event of a transfer of ownership of Company
Common
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Stock which is not registered in the transfer records of the Company, one or
more Parent ADRs representing, in the aggregate, that whole number of Parent
ADSs and/or a certificate or certificates representing that whole number of
Merger Ordinary Shares elected to be received in accordance with Section 2.02,
plus the cash amount payable in lieu of fractional Parent ADSs and Merger
Ordinary Shares in accordance with Section 2.03(e), may be issued to a
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.03(b), each Certificate shall be deemed at any time after the
Effective Time for all corporate purposes of Parent, except as limited by
Section 2.03(c) below and subject to applicable law, to represent ownership of
the whole number of Parent ADSs and/or Merger Ordinary Shares into which the
number of shares of Company Common Stock shown thereon have been converted as
contemplated by this Article II. Notwithstanding the foregoing, Certificates
representing Company Common Stock surrendered for exchange by any person
constituting an "affiliate" of the Company for purposes of Section 6.04 shall
not be exchanged until Parent has received an Affiliate Agreement (as defined
in Section 6.04) as provided in Section 6.04.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared, made or paid after the Effective Time with
respect to Parent Ordinary Shares with a record date on or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the Parent ADSs and Merger Ordinary Shares represented thereby and no cash
payment in lieu of fractional Parent ADSs and Merger Ordinary Shares shall be
paid to any such holder pursuant to Section 2.03(e) until the holder of record
of such Certificate shall surrender such Certificate in accordance with this
Section. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the record holder of the certificates
representing the Parent ADRs which represent Parent ADSs and Merger Ordinary
Shares issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions, if any, with a
record date on or after the Effective Time which theretofore became payable,
but which were not paid by reason of the immediately preceding sentence, with
respect to such Parent ADSs and Merger Ordinary Shares and (ii) at the
appropriate payment date, the amount of dividends or other distributions with
a record date on or after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such Parent ADSs
and Merger Ordinary Shares.
(d) No Further Ownership Rights in Company Common Stock. All Parent ADSs
and Merger Ordinary Shares issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 2.03(e)) shall be deemed to have been issued at the
Effective Time in full satisfaction of all rights pertaining to the Converted
Shares represented thereby, subject, however, to the Surviving Corporation's
obligation to pay any dividends which may have been declared by the Company on
the shares of Company Common Stock in accordance with the terms of this
Agreement and which remained unpaid at the Effective Time. From and after the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers thereon of the shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section.
(e) No Fractional Shares. No certificate or scrip representing fractional
Parent ADSs or Merger Ordinary Shares will be issued in the Merger upon the
surrender for exchange of Certificates, and such fractional Parent ADS or
Merger Ordinary Share interests will not entitle the owner thereof to vote or
to any rights of a holder of Parent ADSs or Merger Ordinary Shares. In lieu of
any such fractional Parent ADS or Merger Ordinary Share, each holder of
Certificates who would otherwise have been entitled to a fraction of a Parent
ADS or Merger Ordinary Share in exchange for such Certificates pursuant to
this Section shall receive from the Exchange Agent, as applicable, (i) a cash
payment in lieu of such fractional Parent ADS determined by multiplying (A)
the Sales Price (as defined below) of a Parent ADS on the last Trading Day (as
defined below) immediately preceding the Closing Date by (B) the fractional
Parent ADS interest to which such holder would otherwise be entitled, and/or
(ii) a cash payment in lieu of such fractional Merger Ordinary Share
determined by multiplying (A) the Sales Price of a Parent Ordinary Share on
the last Trading Day immediately preceding the Closing Date
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by (B) the fractional Merger Ordinary Share interest to which such holder
would otherwise be entitled. The term "Sales Price" shall mean, on any Trading
Day, with respect to Parent ADSs, the closing sales price of Parent ADSs
reported on the New York Stock Exchange, Inc. ("NYSE") Composite Tape on such
day and, with respect to Merger Ordinary Shares, the closing middle market
quotation of a Parent Ordinary Share as reported in the Daily Official List of
the London Stock Exchange ("LSE") for such date. The term "Trading Day" shall
mean any day on which securities are traded, with respect to Parent ADSs, on
the NYSE, and with respect to Parent Ordinary Shares, on the LSE.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of the Company for one (1) year
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Certificates who have not theretofore complied with this Article II
shall thereafter look only to Parent (subject to abandoned property, escheat
and other similar laws) as general creditors for payment of their claim for
Parent ADSs, Merger Ordinary Shares, any cash in lieu of fractional Parent
ADSs and Merger Ordinary Shares and any dividends or distributions with
respect to Parent ADSs and Merger Ordinary Shares. Neither Parent nor the
Surviving Corporation shall be liable to any holder of any Certificate for
Parent ADSs or Merger Ordinary Shares (or dividends or distributions with
respect to either), or cash payable in respect of fractional Parent ADSs or
Merger Ordinary Shares, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent,
the posting by such person of a bond in such reasonable amount as Parent may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed Certificate the applicable Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby,
any cash in lieu of fractional Parent ADSs or Merger Ordinary Shares, and
unpaid dividends and distributions in respect of or on Parent ADSs or Merger
Ordinary Shares deliverable in respect thereof, pursuant to this Agreement.
2.04 Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign tax law, including the tax laws of the United Kingdom. To the extent
that amounts are so withheld by the Surviving Corporation or Parent, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, the Partnership and Merger
Sub as follows:
3.01 Organization and Qualification. (a) Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize the concept of good standing) under
the laws of its jurisdiction of organization and has full corporate or
partnership, as the case may be, power and authority to conduct its business
as and to the extent now conducted and to own, use and lease its assets and
properties, except for such failures to be so organized, existing and in good
standing (with respect to jurisdictions which recognize the concept of good
standing) or to have such power and authority which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect (as defined in Section 9.12) on the Company and its
Subsidiaries taken as a whole. Each of the Company and its Subsidiaries is
duly qualified, licensed or admitted to do business and is in good standing
(with respect to jurisdictions which recognize the concept of good standing)
in each jurisdiction in which the ownership, use or leasing of its assets
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and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to
be so qualified, licensed or admitted and in good standing (with respect to
jurisdictions that recognize the concept of good standing) which, individually
or in the aggregate, are not having and would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. Section 3.01 of the letter dated the date hereof and delivered to
Parent, the Partnership and Merger Sub by the Company concurrently with the
execution and delivery of this Agreement (the "Company Disclosure Letter")
sets forth (i) the name and jurisdiction of organization of each Subsidiary of
the Company and (x) with respect to Subsidiaries that are corporations, (a)
such Subsidiary's authorized capital stock, (b) the number of issued and
outstanding shares of such Subsidiary's capital stock and (c) the record
owners of such Subsidiary's shares and, (y) with respect to Subsidiaries that
are partnerships, the names and ownership interests of the partners thereof.
The Company has previously delivered to Parent correct and complete copies of
the certificate or articles of incorporation and bylaws (or other comparable
charter documents) of the Company and its Subsidiaries.
(b) Section 3.01 of the Company Disclosure Letter sets forth a
description as of the date hereof, of all Company Joint Ventures, including
(i) the name of each such entity and the Company's interest therein, and (ii)
a brief description of the principal line or lines of business conducted by
each such entity. For purposes of this Agreement:
(i) "Joint Venture" of a person or entity shall mean any corporation or
other entity (including partnerships and other business associations) that
is not a Subsidiary of such person or entity, in which such person or one
or more of its Subsidiaries owns directly or indirectly an equity interest,
other than equity interests which are less than 5% of each class of the
outstanding voting securities or equity interests of any such entity;
(ii) "Company Joint Venture" shall mean any Joint Venture of the Company
or any of its Subsidiaries; and
(iii) "Parent Joint Venture" shall mean any Joint Venture of Parent or
any of its Subsidiaries.
(c) Except for interests in the Subsidiaries of the Company, the Company
Joint Ventures and as disclosed in the Company SEC Reports (as defined in
Section 3.05) filed prior to the date of this Agreement or Section 3.01 of the
Company Disclosure Letter, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
material corporation, partnership, limited liability company, joint venture or
other business association or entity (other than non-controlling investments
in the ordinary course of business and corporate partnering, development,
cooperative marketing and similar undertakings and arrangements entered into
in the ordinary course of business).
3.02 Capital Stock. (a) The authorized capital stock of the Company
consists of:
(i) 750 million shares of Company Common Stock, of which 297,335,056
shares were issued and outstanding as of November 30, 1998, and
(ii) 126,533 shares of 5% preferred stock, of which 126,533 were issued
and outstanding as of November 30, 1998, 3.5 million shares of serial
preferred stock, of which 288,499 were issued and outstanding as of
November 30, 1998 and of which 2,065 shares were designated the 4.52%
Series, 18,060 shares were designated the 7.00% Series, 5,932 shares were
designated the 6.00% Series, 42,000 were designated the 5.00% Series,
65,960 were designated the 5.40% Series, 69,890 were designated the 4.72%
Series, and 84,592 were designated the 4.56% Series, respectively; and 16
million shares of no par serial preferred stock, of which 2,744,438 were
issued and outstanding as of November 30, 1998 and of which 381,220 shares
were designated the $1.28 Series, 420,116 shares were designated the $1.18
Series, 193,102 shares were designated the $1.16 Series, 1,000,000 shares
were designated the $7.70 Series, and 750,000 shares were designated the
$7.48 Series, respectively (collectively, the "Company Preferred Stock").
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As of November 30, 1998, 28,817,971 shares of Company Common Stock were
reserved or held for issuance under the PacifiCorp Stock Incentive Plan, the
PacifiCorp Long Term Incentive Plan, the PacifiCorp K-Plus Employee Savings
and Stock Ownership Plan and the PacifiCorp Dividend Reinvestment and Stock
Purchase Plan. All of the issued and outstanding shares of Company Common
Stock are, and all shares reserved for issuance will be, upon issuance in
accordance with the terms specified in the instruments or agreements pursuant
to which they are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and except as described in
Section 3.02 of the Company Disclosure Letter, on the date hereof there are no
outstanding subscriptions, options, warrants, rights (including stock
appreciation rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion or exchange
under any outstanding security, instrument or agreement (together, "Options"),
obligating the Company or any of its Subsidiaries to issue or sell any shares
of capital stock of the Company or to grant, extend or enter into any Option
with respect thereto.
(b) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or Section 3.02 of the Company Disclosure Letter, all
of the outstanding shares of capital stock of each Subsidiary of the Company
are duly authorized, validly issued, fully paid and nonassessable and are
owned, beneficially and of record, by the Company or a Subsidiary wholly
owned, directly or indirectly, by the Company, free and clear of any liens,
claims, mortgages, encumbrances, pledges, security interests, equities and
charges of any kind (each a "Lien"), other than Liens or failures to so own
which are immaterial. Each outstanding share of Company Preferred Stock, other
than shares of the $1.28 Series, $1.18 Series and $1.16 Series of no par
serial preferred stock, is entitled to one vote per share, voting together
with the holders of Company Common Stock as a single class, on all matters
generally submitted to the stockholders of the Company for a vote. Except as
disclosed in the Company SEC Reports filed prior to the date of this Agreement
or Section 3.02 of the Company Disclosure Letter, there are no (i) outstanding
Options obligating the Company or any of its Subsidiaries to issue or sell any
shares of capital stock of any Subsidiary of the Company or to grant, extend
or enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any
person other than the Company or a Subsidiary wholly owned, directly or
indirectly, by the Company with respect to the voting of or the right to
participate in dividends or other earnings on any capital stock of any
Subsidiary of the Company.
(c) None of the Subsidiaries of the Company or the Company Joint Ventures
is a "public utility company," a "holding company," a "subsidiary company" or
an "affiliate" of any public utility company within the meaning of Section
2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company
Act of 1935, as amended (the "1935 Act"), respectively.
(d) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or Section 3.02 of the Company Disclosure Letter, there
are no outstanding contractual obligations of the Company or any Subsidiary of
the Company to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any material capital stock of any Subsidiary of the Company or
to provide any material amount of funds to, or make any material investment
(in the form of a loan, capital contribution or otherwise) in, any Subsidiary
of the Company or any other person.
3.03 Authority Relative to this Agreement. The Company has full corporate
power and authority to enter into this Agreement, and, subject to obtaining
the Company Stockholders' Approval (as defined in Section 6.03 (b)), to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Company, the Board of Directors of the Company has
recommended approval of this Agreement by the stockholders of the Company and
directed that this Agreement be submitted to the stockholders of the Company
for their consideration, and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby, other than obtaining the
Company Stockholders' Approval. This Agreement has been duly and validly
executed and delivered by the Company and
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constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach
of, constitute (with or without notice or lapse of time or both) a default
under, result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of the
Company or any of its Subsidiaries or any of the Company Joint Ventures under,
any of the terms, conditions or provisions of (i) the certificates or articles
of incorporation or bylaws (or other comparable charter documents) of the
Company or any of its Subsidiaries, or (ii) subject to the obtaining of the
Company Stockholders' Approval and the taking of the actions described in
Section 3.04(b), (x) any statute, law, rule, regulation or ordinance
(together, "laws"), or any judgment, decree, order, writ, permit or license
(together, "orders"), of any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision (a "Governmental or Regulatory Authority") applicable to
the Company or any of its Subsidiaries or any of the Company Joint Ventures or
any of their respective assets or properties, or (y) any note, bond, mortgage,
security agreement, indenture, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind
(together, "Contracts") to which the Company or any of its Subsidiaries or any
of the Company Joint Ventures is a party or by which the Company or any of its
Subsidiaries or any of the Company Joint Ventures or any of their respective
assets or properties is bound, excluding from the foregoing clauses (x) and
(y) conflicts, violations, breaches, defaults, rights of payment and
reimbursement, terminations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement.
(b)Except (i) for the filing of a premerger notification report by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (ii) for
the filing of the Proxy Statement (as defined in Section 3.09) and the
Registration Statement (as defined in Section 4.09) with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange
Act"), and the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), the declaration of the
effectiveness of the Registration Statement by the SEC and filings with
various state securities authorities that are required in connection with
the transactions contemplated by this Agreement, (iii) for the filing of an
application under Section 203 and any directly related Section of, or
regulation under, the Power Act (as defined in Section 3.05(b)) for the
sale or disposition of jurisdictional facilities of the Company; (iv) for
the filing of the Articles of Merger and other appropriate merger documents
required by the BCA with the Secretary of State and appropriate documents
with the relevant authorities of other states in which the Constituent
Corporations are qualified to do business; and (v) as disclosed in Section
3.04 of the Company Disclosure Letter, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority or other
public or private third party is necessary or required under any of the
terms, conditions or provisions of any law or order of any Governmental or
Regulatory Authority or any Contract to which the Company or any of its
Subsidiaries or any of the Company Joint Ventures is a party or by which
the Company or any of its Subsidiaries or any of the Company Joint Ventures
or any of their respective assets or properties is bound for the execution
and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder or the consummation of the
transactions contemplated hereby, other than such consents, approvals,
actions, filings and notices which the failure to make or obtain, as the
case may be, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company and its
Subsidiaries
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taken as a whole or on the ability of the Company to consummate the
transactions contemplated by this Agreement.
3.05 SEC Reports, Financial Statements and Utility Reports. (a) The
Company delivered to Parent prior to the execution of this Agreement a true
and complete copy of each form, report, schedule, registration statement,
registration exemption, if applicable, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed
by the Company or any of its Subsidiaries with the SEC since December 31, 1995
(as such documents have since the time of their filing been amended or
supplemented, the "Company SEC Reports"), which are all the documents (other
than preliminary materials) that the Company and its Subsidiaries were
required to file with the SEC since such date. As of their respective dates,
the Company SEC Reports (i) complied as to form in all material respects with
the requirements of the Securities Act or the Exchange Act, if applicable, as
the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in
the Company SEC Reports (the "Company Financial Statements") complied as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-Q of
the SEC) and fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments (which
are not expected to be, individually or in the aggregate, materially adverse
to the Company and its Subsidiaries taken as a whole)) the consolidated
financial position of the Company and its consolidated subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
cash flows for the respective periods then ended. Except as set forth in
Section 3.05 of the Company Disclosure Letter, each Subsidiary of the Company
is treated as a consolidated subsidiary of the Company in the Company
Financial Statements for all periods covered thereby.
(b)All material filings required to be made by the Company or any of its
Subsidiaries since December 31, 1995, under the Federal Power Act (the
"Power Act") and applicable state laws and regulations, have been filed
with the Federal Energy Regulatory Commission (the "FERC"), the Department
of Energy (the "DOE") or any appropriate state public utilities commission
(including, without limitation, the state utility regulatory agencies of
California, Idaho, Montana, Oregon, Utah, Washington and Wyoming), as the
case may be, including all material written forms, statements, reports,
agreements and all material documents, exhibits, amendments and supplements
appertaining thereto, including but not limited to all material rates,
tariffs, franchises, service agreements and related documents, complied, as
of their respective dates, in all material respects with all applicable
requirements of the appropriate statute and the rules and regulations
thereunder.
3.06 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or Section 3.06
of the Company Disclosure Letter, (a) between December 31, 1997 and the date
hereof, there has not been any change, event or development having, or that
would reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries taken as a whole
(other than those changes, events or developments occurring as a result of
general economic or financial conditions or which are not unique to the
Company and its Subsidiaries but also affect other entities who participate or
are engaged in the lines of business in which the Company and its Subsidiaries
are engaged), and (b) between December 31, 1997 and the date hereof (i) the
Company, its Subsidiaries and the Company Joint Ventures have conducted their
respective businesses only in the ordinary course substantially consistent
with past practice and (ii) neither the Company nor any of its Subsidiaries
nor any of the Company Joint Ventures has (x) acquired or agreed to acquire
(by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner)
any business or any corporation, partnership, association or other business
organization or division thereof for a purchase price (including the amount of
any indebtedness assumed in connection therewith) of $25 million or more in
any one
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transaction or (y) sold, leased or otherwise disposed of any of its assets or
properties (or agreed to do so) other than dispositions in the ordinary course
of business consistent with past practice or having a net book value of $25
million or less in any one transaction.
3.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period ended December 31, 1997
included in the Company Financial Statements or as disclosed in the Company
SEC Reports filed prior to the date hereof or in Section 3.07 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries had at such
date, or has incurred since such date, any liabilities or obligations (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to become
due) of any nature that would be required by U.S. generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company and its consolidated subsidiaries (including the notes thereto),
except liabilities or obligations (i) which were incurred in the ordinary
course of business consistent with past practice or (ii) which are not having,
and would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Company and its Subsidiaries taken
as a whole.
3.08 Legal Proceedings. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement or in Section 3.08 of the Company
Disclosure Letter and except for environmental matters which are governed by
Section 3.15, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of the Company, threatened against, nor to the
knowledge of the Company are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, the Company or any of
its Subsidiaries or any of the Company Joint Ventures or any of their
respective assets and properties which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement, and (ii) neither
the Company nor any of its Subsidiaries is subject to any order of any
Governmental or Regulatory Authority which, individually or in the aggregate,
is having or would reasonably be expected to have a material adverse effect on
the Company and its Subsidiaries taken as a whole or on the ability of the
Company to consummate the transactions contemplated by this Agreement.
3.09 Information Supplied. (a) The proxy statement relating to the
Company Stockholders' Meeting (as defined in Section 6.03(b)), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by the Company with the SEC
(including, without limitation, under the 1935 Act) in connection with the
Merger and the other transactions contemplated hereby will (in the case of the
Proxy Statement and any such other documents filed with the SEC under the
Exchange Act or the Securities Act), comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act,
respectively, and will not, on the date of its filing or, in the case of the
Proxy Statement, at the date it is mailed to stockholders of the Company and
at the time of the Company Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to information supplied in
writing by or on behalf of Parent, the Partnership or Merger Sub expressly for
inclusion therein and information incorporated by reference therein from
documents filed by Parent or any of its Subsidiaries with the SEC.
(b) The information supplied or to be supplied by the Company for
inclusion in any filing by Parent with the LSE in respect of the Merger
(including, without limitation, the Super Class 1 circular to be issued to
shareholders of Parent (the "Circular") and the listing particulars under Part
IV of the Financial Services Act 1986 of the United Kingdom (the "FSA")
relating to Parent Ordinary Shares (the "Listing Particulars")) (together with
any amendments or supplements thereto, the "Parent Disclosure Documents")
will, at all relevant times, include all information relating to the Company,
and information which is within the knowledge of each of the directors of the
Company (or which it would be reasonable for them to obtain by making
enquiries), which, in each case, is required to enable the Parent Disclosure
Documents and the parties hereto to comply in all material respects with all
United Kingdom statutory and other legal and regulatory provisions (including,
without limitation, the Companies Act (as defined in Section 4.02(a), the FSA
and the rules and regulations made
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thereunder, and the rules and requirements of the LSE) and all such
information contained in such documents will be substantially in accordance
with the facts and will not omit anything material likely to affect the import
of such information.
(c) Notwithstanding the foregoing provisions of this Section 3.09, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Registration Statement, the Proxy
Statement or the Parent Disclosure Documents based on information supplied by
Parent expressly for inclusion or incorporation by reference therein or based
on information which is not incorporated by reference in such documents but
should have been disclosed pursuant to Section 4.09.
3.10 Permits; Compliance with Laws and Orders. The Company, its
Subsidiaries and the Company Joint Ventures hold all permits, licenses,
franchises, variances, exemptions, orders and approvals of all Governmental
and Regulatory Authorities (other than environmental permits which are
governed by Section 3.15) necessary for the lawful conduct of their respective
businesses (the "Company Permits"), except for failures to hold such Company
Permits which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole. The Company, its Subsidiaries and the
Company Joint Ventures are in compliance with the terms of the Company
Permits, except failures so to comply which, individually or in the aggregate,
are not having and would not reasonably be expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole. Except as
disclosed in the Company SEC Reports filed prior to the date of this Agreement
or Section 3.10 of the Company Disclosure Letter, the Company, its
Subsidiaries and the Company Joint Ventures are not in violation of or default
under any law or order of any Governmental or Regulatory Authority, except for
such violations or defaults which, individually or in the aggregate, are not
having and would not reasonably be expected to have a material adverse effect
on the Company and its Subsidiaries taken as a whole.
3.11 Compliance with Agreements. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or Section 3.11 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries nor
any of the Company Joint Ventures nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has
occurred which, with notice or lapse of time or both, would reasonably be
expected to result in a default under, (i) the certificates or articles of
incorporation or bylaws (or other comparable charter documents) of the Company
or any of its Subsidiaries or (ii) any Contract to which the Company or any of
its Subsidiaries or any of the Company Joint Ventures is a party or by which
the Company or any of its Subsidiaries, or any of the Company Joint Ventures
or any of their respective assets or properties is bound, except in the case
of clause (ii) for breaches, violations and defaults which, individually or in
the aggregate, are not having and would not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
3.12 Taxes. Except as disclosed in the Company SEC Reports filed prior to
the date hereof or Section 3.12 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has filed all material tax
returns and reports required to be filed by it, or requests for extensions
to file such returns or reports have been timely filed or granted and have
not expired, and all tax returns and reports are complete and accurate in
all respects, except to the extent that such failures to either file, to
have extensions granted that remain in effect or to file returns complete
and accurate in all respects, as applicable, would not reasonably be
expected to have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries taken as a whole. The Company
and each of its Subsidiaries has paid (or the Company has paid on its
behalf) all taxes shown as due on such tax returns and reports. The most
recent financial statements contained in the Company SEC Reports reflect an
adequate reserve for all taxes payable by the Company and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of
such financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its
Subsidiaries that are not adequately reserved for, except for inadequately
reserved taxes and inadequately reserved deficiencies that would not
reasonably be expected to, individually or in the aggregate, have a
material adverse effect on
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the Company and its Subsidiaries taken as a whole. No requests for waivers
of the time to assess any taxes against the Company or any of its
Subsidiaries have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most
recent financial statements contained in the Company SEC Reports, or, to
the extent not adequately reserved, the assessment of which would not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries taken as a
whole.
(b) Neither the Company nor any of its Subsidiaries has taken any action
or has any knowledge of any fact or circumstance that is reasonably likely
to prevent the Merger from qualifying as a tax-free reorganization within
the meaning of Code Section 368(a).
(c) Neither the Company nor any of its Subsidiaries has filed a consent
under Code Section 341(f) concerning collapsible corporations, neither the
Company nor any of its Subsidiaries has made any payments, is obligated to
make any payment, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
(d) Each of the Company and its Subsidiaries has disclosed on its federal
income tax returns all positions taken therein that could give rise to a
substantial understatement of United States federal income tax within the
meaning of Code Section 6662.
(e) Neither the Company nor any of its Subsidiaries is a party to any tax
allocation or sharing agreement. Neither the Company nor any of its
Subsidiaries (i) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which was the Company) or (ii) has any material liability for the
taxes of any person (other than any of the Company and its Subsidiaries)
under United States Treasury Regulation Section 1.1502-6 (or any similar
provision or state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(f) As used in this Section 3.12 and in Section 4.12, "taxes" shall
include all federal, state, local and foreign income, franchise, gross
receipts, property, sales, use, excise, alternative-minimum, estimated and
other taxes and duties of any jurisdiction, including obligations for
withholding taxes from payments due or made to any other person and any
interest, penalties or additions to tax.
3.13 Employee Benefit Plans; ERISA. (a) Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or Section 3.13
of the Company Disclosure Letter or as would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole, (i) all Company Employee Benefit Plans (as defined below) are in
compliance with all applicable requirements of law, including without
limitation ERISA (as defined below) and the Code, and (ii) neither the Company
nor any of its Subsidiaries has any liabilities or obligations with respect to
any such Company Employee Benefit Plans, whether accrued, contingent or
otherwise, nor to the knowledge of the Company are any such liabilities or
obligations expected to be incurred. Except as specifically set forth in
Section 3.13 of the Company Disclosure Letter, the execution of, and
performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Benefit Plan that will or would
reasonably be expected to result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee. The only severance agreements or severance policies applicable to
the Company or any of its Subsidiaries are the agreements and policies
specifically referred to in Section 3.13 of the Company Disclosure Letter.
(b) As used herein:
(i) "Company Employee Benefit Plan" means any Plan (other than any
"multiemployer plan," as that term is defined in Section 4001 of ERISA)
entered into, established, maintained, sponsored, contributed to or
required to be contributed to by the Company or any of its Subsidiaries for
the benefit of the current or former employees or directors of the Company
or any of its Subsidiaries and existing on the date of this Agreement or at
any time subsequent thereto and on or prior to the Effective Time and, in
the case of a Plan which is subject to Part 3 of Title I of the Employee
Retirement Income Security Act of 1974, as
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amended, and the rules and regulations thereunder ("ERISA"), Section 412 of
the Code or Title IV of ERISA, at any time during the five-year period
immediately preceding the date of this Agreement; and
(ii) "Plan" means any employment, bonus, incentive compensation, deferred
compensation, long term incentive, pension, profit sharing, retirement,
stock purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, medical, accident, disability,
severance, separation, termination, change of control or other benefit
plan, agreement, practice, policy, program, scheme or arrangement, whether
written or oral, and whether applicable to only one individual or a group
of individuals, including, but not limited to any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
(iii) "ERISA Affiliate" means any person, who on or before the Effective
Time, is under common control with the Company within the meaning of
Section 414 of the Code.
(c) Complete and correct copies of the following documents have been made
available to Parent, as of the date of this Agreement: (i) all material
Company Employee Benefit Plans and any related trust agreements or related
insurance contracts and pro forma option agreements, (ii) the most current
summary plan descriptions of each Company Employee Benefit Plan subject to the
requirement to give a summary plan description under ERISA, (iii) the most
recent Form 5500 and Schedules thereto for each Company Employee Benefit Plan
subject to such reporting, (iv) the most recent determination of the Internal
Revenue Service with respect to the qualified status of each Company Employee
Benefit Plan that is intended to qualify under Section 401(a) of the Code, (v)
the most recent accountings with respect to each Company Employee Benefit Plan
funded through a trust, (vi) the most recent actuarial report of the qualified
actuary of each Company Employee Benefit Plan with respect to which actuarial
valuations are conducted.
(d) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or Section 3.13 of the Company Disclosure Letter,
neither the Company nor any Subsidiary maintains or is obligated to provide
benefits under any life, medical or health Plan (other than as an incidental
benefit under a Plan qualified under Section 401(a) of the Code) which
provides benefits to retirees or other terminated employees other than benefit
continuations rights under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
(e) Except as set forth in Section 3.13 of the Company Disclosure Letter,
each Company Employee Benefit Plan covers only employees who are employed by
the Company or a Subsidiary (or former employees or beneficiaries with respect
to service with the Company or a Subsidiary), so that the transactions
contemplated by this Agreement will require no spin-off of assets and
liabilities or other division or transfer of rights with respect to any such
plan.
(f) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or Section 3.13 of the Company Disclosure Letter,
neither the Company, any Subsidiary, any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has at any time
during the five (5) year period preceding the date hereof contributed to any
"multiemployer plan", as that term is defined in Section 4001 of ERISA. With
respect to each "multiemployer plan", as defined above, in which the Company,
any Subsidiary or any ERISA Affiliate participates or has participated, (i)
neither the Company, any Subsidiary nor any ERISA Affiliate has incurred, any
material withdrawal liability, (ii) neither the Company, any Subsidiary nor
any ERISA Affiliate has received any notice that (A) any such plan is being
reorganized in a manner that will result, or would reasonably be expected to
result, in material liability, (B) increased contributions of a material
amount may be required to avoid a reduction in plan benefits or the imposition
of an excise tax, or (C) any such plan is, or would reasonably be expected to
become, insolvent, and (iii) to the knowledge of the Company, there are no
PBGC (as defined below) proceedings against any such plan.
(g) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or Section 3.13 of the Company Disclosure Letter, no
event has occurred, and there exists no condition or set of circumstances in
connection with any Company Employee Benefit Plan, under which the Company or
any
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Subsidiary, directly or indirectly (through any indemnification agreement or
otherwise), could reasonably be expected to be subject to any risk of material
liability under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of
ERISA or Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in
liability to the Pension Benefit Guaranty Corporation ("PBGC") under Section
302(c)(11), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to
the Company, any Subsidiary, Parent or any corporation or organization
controlled by or under common control with any of the foregoing within the
meaning of Section 4001 of ERISA, and, to the knowledge of the Company, no
event or condition exists or has existed which would reasonably be expected to
result in any material liability to the PBGC with respect to Parent, the
Company, any Subsidiary or any such corporation or organization. Except as set
forth in Section 3.13 of the Company Disclosure Schedule, no "reportable
event" within the meaning of Section 4043 of ERISA has occurred with respect
to any Company Employee Benefit Plan that is a defined benefit plan under
Section 3(35) of ERISA other than "reportable events" as to which the
requirement of notice to the PBGC within thirty days has been waived.
(i) Except as set forth in Section 3.13 of the Company Disclosure
Schedule, no employer securities, employer real property or other employer
property is included in the assets of any Company Employee Benefit Plan.
(j) No stock appreciation rights are outstanding under the Company Stock
Incentive Plan or any other plan or arrangement maintained by the Company or
any affiliate of the Company.
3.14 Labor Matters. (a) Except as set forth in Section 3.14 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or other labor agreement with
any union or labor organization. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 3.14 of the
Company Disclosure Letter, there are no disputes pending or, to the knowledge
of the Company, threatened between the Company or any of its Subsidiaries or
any of the Company Joint Ventures and any trade union or other representatives
of its employees, except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole, and, to the knowledge of the Company,
except as set forth in Section 3.14 of the Company Disclosure Letter, there
are no material organizational efforts presently being made involving any of
the now unorganized employees of the Company or any of its Subsidiaries or any
of the Company Joint Ventures. Since December 31, 1995, there has been no work
stoppage, or strike by employees of the Company or any of its Subsidiaries or
any of the Company Joint Ventures except as would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(b) To the knowledge of the Company, neither the Company nor any of its
Subsidiaries nor any of the Company Joint Ventures is in material violation of
any labor laws in any country (or political subdivision thereof) in which they
transact business except for such violations as would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
3.15 Environmental Matters. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 3.15 of the
Company Disclosure Letter and except as would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole:
(a) (i) Each of the Company, its Subsidiaries and the Company Joint
Ventures is in compliance with all applicable Environmental Laws (as
hereinafter defined); and
(ii) Neither the Company nor any of its Subsidiaries nor any of the
Company Joint Ventures has received any written communication from any
person or Governmental or Regulatory Authority that alleges that the
Company or any of its Subsidiaries or any of the Company Joint Ventures is
not in such compliance with applicable Environmental Laws.
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(b) Each of the Company, its Subsidiaries and the Company Joint Ventures
has obtained all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary for the
construction of its facilities and the conduct of its operations, as
applicable, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the Company, its Subsidiaries and the Company Joint Ventures are
in compliance with all terms and conditions of the Environmental Permits.
(c) There is no Environmental Claim (as hereinafter defined) pending
(i) against the Company or any of its Subsidiaries or any of the Company
Joint Ventures;
(ii) to the knowledge of the Company, against any person or entity whose
liability for any such Environmental Claim the Company or any of its
Subsidiaries or any of the Company Joint Ventures has or may have retained
or assumed either contractually or by operation of law; or
(iii) against any real or personal property or operations which the
Company or any of its Subsidiaries or any of the Company Joint Ventures
owns, leases or manages, in whole or in part.
(d) To the knowledge of the Company, there have not been any Releases (as
hereinafter defined) of any Hazardous Material (as hereinafter defined) that
would be reasonably likely to form the basis of any material Environmental
Claim against the Company or any of its Subsidiaries or any of the Company
Joint Ventures, or against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries or any of the
Company Joint Ventures has or may have been retained or assumed either
contractually or by operation of law.
(e) To the knowledge of the Company, with respect to any predecessor of
the Company or any of its Subsidiaries, there is no Environmental Claim
pending or threatened in writing, and there has been no Release of Hazardous
Materials that would be reasonably likely to form the basis of any
Environmental Claim.
(f) There are no material facts specific to the Company that have not
been disclosed to Parent which the Company reasonably believes are likely to
form the basis of a Environmental Claim against the Company or any of its
Subsidiaries or any of the Company Joint Ventures arising from (x) current
environmental remediation or mining reclamation costs of the Company, its
Subsidiaries and the Company Joint Ventures or such
remediation or reclamation costs known to be required in the future, or (y)
any other environmental matter affecting the Company or its Subsidiaries or
any of the Company Joint Ventures.
(g) As used in this Section 3.15:
(i) "Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or written notices of noncompliance,
liability or violation by any person or entity (including any Governmental
or Regulatory Authority) alleging potential liability (including, without
limitation, potential responsibility or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its
Subsidiaries or any of the Company Joint Ventures; or
(B) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials;
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(ii) "Environmental Laws" means all Federal, state and local laws, rules
and regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials;
(iii) "Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls; and (b) any chemicals, materials or substances which are now
defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants", or
words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its Subsidiaries or any of the
Company Joint Ventures operates or any jurisdiction which has received such
chemical, material, substance or waste from the Company or its
Subsidiaries; and
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
3.16 Intellectual Property Rights. The Company and its Subsidiaries have
all right, title and interest in, or a valid and binding license to use, all
Intellectual Property (as defined below) individually or in the aggregate
material to the conduct of the businesses of the Company and its Subsidiaries
taken as a whole. Neither the Company nor any Subsidiary of the Company is in
default (or with the giving of notice or lapse of time or both, would be in
default) under any license to use such Intellectual Property and, to the
knowledge of the Company, such Intellectual Property is not being infringed by
any third party, and neither the Company nor any Subsidiary of the Company is
infringing any Intellectual Property of any third party, except for such
defaults and infringements which, individually or in the aggregate, are not
having and would not reasonably be expected to have a material adverse effect
on the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, "Intellectual Property" means patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names and service name rights, copyrights and
copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing.
3.17 Regulation as a Utility. (a) The Company is not regulated as a
public utility by any state other than the States of California, Idaho,
Montana, Oregon, Utah, Washington and Wyoming. Section 3.17 of the Company
Disclosure Letter lists each Subsidiary of the Company which is a public
utility or is otherwise engaged in the regulated supply (including generation,
transmission or distribution) of electricity, natural gas and/or
telecommunications. Except as set forth in Section 3.17 of the Company
Disclosure Letter, neither the Company nor any "subsidiary company" or
"affiliate" of the Company is subject to regulation as a public utility or
public service company (or similar designation) by any state in the United
States or any foreign country. The Company is not a public utility holding
company under the 1935 Act.
(b) As used in this Section 3.17, the terms "subsidiary company" and
"affiliate" shall have the respective meanings ascribed to them in the 1935
Act.
3.18 Insurance. Except as set forth in Section 3.18 of the Company
Disclosure letter, each of the Company and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business conducted by the
Company and its Subsidiaries during such time period. Except as set forth in
Section 3.18 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries has received any notice of cancellation or termination with
respect to any material insurance policy of the Company or any of its
Subsidiaries. The material insurance policies of the Company and each of its
Subsidiaries are valid and enforceable policies.
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3.19 Vote Required. Assuming the accuracy of the representation and
warranty contained in Section 4.19, the affirmative vote of the holders of
record of at least (i) a majority of voting power of the outstanding shares of
Company Common Stock and Company Preferred Stock voting together and (ii) a
majority of the voting power of the Company Preferred Stock voting separately
from the Company Common Stock as a single class with respect to the approval
of this Agreement are the only votes of the holders of any class or series of
the capital stock of the Company or its Subsidiaries required to approve this
Agreement and approve the Merger and the other transactions contemplated
hereby.
3.20 Opinion of Financial Advisor. The Company has received the opinion
of Salomon Smith Barney, dated the date hereof, to the effect that, as of the
date hereof, the consideration to be received in the Merger by the
stockholders of the Company is fair from a financial point of view to the
stockholders of the Company, and a true and complete copy of such opinion has
been delivered to Parent prior to the execution of this Agreement.
3.21 Ownership of Parent Common Stock. Neither the Company nor any of its
Subsidiaries beneficially owns any Parent Ordinary Shares or Parent ADSs.
3.22 Article VII of the Company's Articles of Incorporation and Sections
60.825-60.845 of the BCA Not Applicable. The Company has taken all necessary
actions so that neither the provisions of Article VII of the Company's
Articles of Incorporation nor the provisions of Sections 60.825-60.845 of the
BCA (i.e., affiliated transactions and fair price provisions) will, before the
termination of this Agreement, apply to this Agreement or the Merger or the
other transactions contemplated hereby.
3.23 Certain Contracts. Except as set forth in Section 3.23 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries or
Joint Ventures is a party to, or bound by, any Contract containing any
provision or covenant prohibiting or materially limiting the ability of the
Company or any Company Subsidiary to engage in any business activity or
compete with any person.
3.24 Year 2000. The Company and its Subsidiaries have put into effect
practices and programs which the Company reasonably believes will enable all
material software, hardware and equipment (including microprocessors) that is
owned or utilized by the Company or any of its Subsidiaries in the operations
of its or their respective business to be capable, by December 31, 1999, of
accounting for all calculations using a century and date sensitive algorithm
for the year 2000 and the fact that the year 2000 is a leap year and to
otherwise continue to function without any material interruption caused by the
occurrence of the year 2000.
3.25 Joint Venture Representations. Each representation or warranty made
by the Company in this Article III relating to a Company Joint Venture that is
neither operated nor managed by the Company or a Subsidiary of the Company
shall be deemed to be made only to the Company's knowledge.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PARTNERSHIP
Parent (on behalf of itself and on behalf of Merger Sub) and the
Partnership represent and warrant to the Company as follows (which
representations and warranties of Parent on behalf of Merger Sub shall only be
true and correct as of the Closing Date):
4.01 Organization and Qualification. (a) Each of Parent and its
Subsidiaries (other than the Partnership) is a corporation duly incorporated,
validly existing and in good standing (with respect to jurisdictions which
recognize the concept of good standing) under the laws of its jurisdiction of
incorporation and has full corporate power and authority to conduct its
business as and to the extent now conducted and to own, use and lease its
assets and properties, except for such failures to be so incorporated,
existing and in good standing (with respect to jurisdictions which recognize
the concept of good standing) or to have such power and authority which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on Parent and its Subsidiaries
taken as a whole. The Partnership is a general partnership validly existing
under the laws of the State of Nevada. Each of the Partnership and Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement (other than, with respect to the Partnership, in connection
with the investment of the initial partnership capital pursuant to or in
accordance with the Partnership Agreement, dated December 3, 1998, by and
between UKSub 1 and UKSub 2 (the "Partnership Agreement")), has engaged in no
other business activities and has conducted its operations only as
contemplated hereby (or, with respect to the Partnership, as contemplated by
the Partnership Agreement). Except as disclosed in Section 4.01 of the Parent
Disclosure Letter (as defined below), each of UKSub 1 and UKSub 2 was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated hereby. Each of Parent and its Subsidiaries is
duly qualified, licensed or admitted to do business and is in good standing
(with respect to jurisdictions which recognize the concept of good standing)
in each jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such
qualification, licensing, admission or good standing necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
(with respect to jurisdictions which recognize the concept of good standing)
which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole. Section 4.01 of the letter dated the date
hereof and delivered by Parent and Merger Sub to the Company concurrently with
the execution and delivery of this Agreement (the "Parent Disclosure Letter")
sets forth (i) the name and jurisdiction of incorporation of each Subsidiary
of Parent, (ii) its authorized capital stock, (iii) the number of issued and
outstanding shares of its capital stock and (iv) the record owners of such
shares. Parent has previously delivered to the Company correct and complete
copies of the memorandum and articles of association and bylaws (or other
comparable charter documents) of Parent and each of its Subsidiaries, and the
Partnership Agreement.
(b) Section 4.01 of the Parent Disclosure Letter sets forth a description
as of the date hereof, of all Parent Joint Ventures, including (i) the name of
each such party and Parent's interest therein, and (ii) a brief description of
the principal line or lines of business conducted by each such entity.
(c) Except for interests in the Subsidiaries of Parent and as disclosed
in Section 4.01 of the Parent Disclosure Letter, Parent does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, (i)
any material corporation, partnership, joint venture or other business
association or entity (other than non-controlling investments in the ordinary
course of business and corporate partnering, development, cooperative
marketing and similar undertakings and arrangements entered into in the
ordinary course of business) or (ii) any other business association or entity
the effect of which is having or could reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole.
4.02 Capital Stock. (a) The authorized share capital of Parent consists
solely of (i) 1,700,000,000 Parent Ordinary Shares, of which 1,198,629,102
shares were issued as of November 30, 1998, and (ii) one
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Special Rights Non-Voting Redeemable Preference Share of (Pounds)1 (the
"Special Share") which was issued as of such date. Since November 30, 1998,
except as disclosed in the Parent SEC Reports filed prior to the date of this
Agreement or Section 4.02 of the Parent Disclosure Letter, there has been no
change in the number of issued Parent Ordinary Shares other than the issuance
of Parent Ordinary Shares pursuant to options or rights outstanding as of such
date to subscribe or purchase Parent Ordinary Shares, which options or rights
are described in Section 4.02 of the Parent Disclosure Letter. All of the
issued Parent Ordinary Shares are, and all Merger Ordinary Shares and all
Parent Ordinary Shares to be issued to the ADR Depositary pursuant to Section
2.01 will be, upon issuance, duly authorized, validly issued and fully paid
and voting, and no class of shares is entitled to preemptive rights, except as
provided in Section 89 of the Companies Act of 1985 of the United Kingdom (the
"Companies Act"). Except pursuant to this Agreement, the Parent employee share
schemes listed in Section 4.02 of the Parent Disclosure Letter (the "Parent
Share Schemes") and except as disclosed in the Parent SEC Reports filed prior
to the date of this Agreement or Section 4.02 of the Parent Disclosure Letter,
on the date hereof there are no outstanding Options obligating Parent or any
of its Subsidiaries to issue or sell any capital or other shares of Parent or
to grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in the Parent SEC Reports filed prior to the date
of this Agreement or Section 4.02 of the Parent Disclosure Letter, all of the
outstanding shares of each Subsidiary of Parent are duly authorized, validly
issued, fully paid and nonassessable and are owned, beneficially and of
record, by Parent or a Subsidiary wholly owned, directly or indirectly, by
Parent, free and clear of any Liens. Except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement or Section 4.02 of the
Parent Disclosure Letter, there are no (i) outstanding Options obligating
Parent or any of its Subsidiaries to issue or sell any shares of any
Subsidiary of Parent or to grant, extend or enter into any such Option or (ii)
voting trusts, proxies or other commitments, understandings, restrictions or
arrangements in favor of any person other than Parent or a Subsidiary wholly
owned, directly or indirectly, by Parent with respect to the voting of or the
right to participate in dividends or other earnings in respect of any shares
of any Subsidiary of Parent.
(c) Except as disclosed in the Parent SEC Reports filed prior to the date
of this Agreement or Section 4.02 of the Parent Disclosure Letter and except
for the right of the holder of the Special Share to require Parent to redeem
the Special Share pursuant to the Articles of Association of Parent, there are
no outstanding contractual obligations of Parent or any Subsidiary of Parent
to repurchase, redeem or otherwise acquire any Parent Ordinary Shares or any
shares of any Subsidiary of Parent or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary of Parent or any other person.
(d) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of Parent having the right to vote on any matters on which
shareholders may vote are issued or outstanding.
4.03 Authority Relative to this Agreement. Each of Parent, the
Partnership and Merger Sub (and, with respect to Section 2.01 only, UKSub 1
and UKSub 2) has full power and authority to enter into this Agreement, and,
subject (in the case of this Agreement) to obtaining the Parent Shareholders'
Approval (as defined in Section 6.03(a)), to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by each of Parent, the
Partnership and Merger Sub (and, with respect to Section 2.01 only, UKSub 1
and UKSub 2) and the consummation by each of Parent, the Partnership and
Merger Sub (and, with respect to Section 2.01 only, UKSub 1 and UKSub 2) of
the transactions contemplated hereby have been duly and validly approved by
the Board of Directors of Parent and Merger Sub (and, with respect to Section
2.01 only, UKSub 1 and UKSub 2) and the general partners of the Partnership,
and by the Partnership in its capacity as sole stockholder of Merger Sub, the
Board of Directors of Parent has passed a resolution declaring the
advisability of the Merger and resolving that the Merger and the creation of,
and the authorization of the Board of Directors to allot, the Parent Ordinary
Shares in connection with the Merger be submitted for consideration by the
shareholders of Parent, and no other corporate proceedings on the part of
Parent or Merger Sub or their shareholders, or the Partnership or its general
partners are necessary to authorize the execution, delivery and performance of
this Agreement by Parent, the Partnership or Merger Sub (and, with respect to
Section 2.01 only, UKSub 1 and UKSub 2) and the consummation by Parent, the
Partnership and Merger Sub (and, with respect to Section 2.01 only, UKSub 1
and UKSub 2) of the transactions contemplated hereby, other than obtaining the
Parent Shareholders' Approval. This
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Agreement has been duly and validly executed and delivered by each of Parent,
the Partnership and Merger Sub (and, with respect to Section 2.01 only, UKSub
1 and UKSub 2) and constitutes a legal, valid and binding obligation of each
of Parent, the Partnership and Merger Sub (and, with respect to Section 2.01
only, UKSub 1 and UKSub 2) enforceable against each of Parent, the Partnership
and Merger Sub (and, with respect to Section 2.01 only, UKSub 1 and UKSub 2)
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents. The execution and
delivery of this Agreement by each of Parent, the Partnership and Merger Sub
(and, with respect to Section 2.01 only, UKSub 1 and UKSub 2) do not, and the
performance by each of Parent, the Partnership and Merger Sub (and, with
respect to Section 2.01 only, UKSub 1 and UKSub 2) of its obligations
hereunder and the consummation of the transactions contemplated hereby will
not, conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in or give to
any person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of
any Lien upon any of the assets or properties of Parent or any of its
Subsidiaries or any of the Parent Joint Ventures under, any of the terms,
conditions or provisions of (i) the memorandum or articles of association or
bylaws (or other comparable charter documents) of Parent or any of its
Subsidiaries or any of the Parent Joint Ventures, (ii) the Partnership
Agreement; or (iii) subject to the obtaining of the Parent Shareholders'
Approval and the taking of the actions described in paragraph (b) of this
Section, (x) any laws or orders of any Governmental or Regulatory Authority
applicable to Parent or any of its Subsidiaries or any of the Parent Joint
Ventures or any of their respective assets or properties, or (y) any Contracts
to which Parent or any of its Subsidiaries or any of the Parent Joint Ventures
is a party or by which Parent or any of its Subsidiaries or any of the Parent
Joint Ventures or any of their respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, rights of payment or reimbursement, terminations,
modifications, accelerations and creations and impositions of Liens which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole or on
the ability of Parent, the Partnership and Merger Sub to consummate the
transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by
Parent under the HSR Act, (ii) for the filing of the Registration Statement
with the SEC pursuant to the Securities Act, the declaration of the
effectiveness of the Registration Statement by the SEC and filings with
various state securities authorities that are required in connection with the
transactions contemplated by this Agreement, (iii) for the filing of the
Articles of Merger and other appropriate merger documents required by the BCA
with the Secretary of State and appropriate documents with the relevant
authorities of other states in which the Constituent Corporations are
qualified to do business, (iv) for the filings with, notices to, and approvals
of, the LSE and NYSE, (v) the filing of a notice pursuant to Section 721 of
the Defense Production Act of 1950, or any successor thereto ("Exon-Florio"),
(vi) the approval of the FERC pursuant to the Power Act, (vii) the approval of
any jurisdictional state regulating agencies, (viii) the giving of indications
by the OFT, SOS, OFFER and OFWAT as described in Sections 7.01(k) and (l) and
(ix) as disclosed in Section 4.04 of the Parent Disclosure Letter, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority or other public or private third party is necessary or required
under any of the terms, conditions or provisions of any law or order of any
Governmental or Regulatory Authority or any Contract to which Parent or any of
its Subsidiaries or any of the Parent Joint Ventures is a party or by which
Parent or any of its Subsidiaries or any of the Parent Joint Ventures or any
of their respective assets or properties is bound for the execution and
delivery of this Agreement by each of Parent, the Partnership and Merger Sub,
the performance by each of Parent, the Partnership and Merger Sub of its
obligations hereunder or the consummation of the transactions contemplated
hereby, other than such consents, approvals, actions, filings and notices
which the failure to make or obtain, as the case may be, individually or in
the aggregate, would not reasonably be expected to have a material adverse
effect on Parent and its Subsidiaries taken as a whole or on the ability of
Parent, the Partnership and Merger Sub to consummate the transactions
contemplated by this Agreement.
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4.05 SEC Reports and Financial Statements. (a) Parent delivered to the
Company prior to the execution of this Agreement a true and complete copy of
each form, report, schedule, registration statement, definitive proxy
statement and other document (together with all amendments thereof and
supplements thereto) filed by Parent or any of its Subsidiaries with the SEC
since December 31, 1995 (as such documents have since the time of their filing
been amended or supplemented, the "Parent SEC Reports"), which are all the
documents (other than preliminary materials) that Parent and its Subsidiaries
were required to file with the SEC since such date. As of their respective
dates, the Parent SEC Reports (i) complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim consolidated financial statements (including,
in each case, the notes, if any, thereto) included in the Parent SEC Reports
(the "Parent Financial Statements") complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles in the United Kingdom applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements) and fairly present (subject,
in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments (which are not expected to be,
individually or in the aggregate, materially adverse to Parent and its
Subsidiaries taken as a whole)) the consolidated financial position of Parent
and its consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. Except as set forth in Section 4.05 of the Parent
Disclosure Letter, each Subsidiary of Parent is treated as a consolidated
subsidiary of Parent in the Parent Financial Statements for all periods
covered thereby.
(b) All material filings required to be made by Parent or any of its
Subsidiaries since December 31, 1995 in the United Kingdom under the
Electricity Act 1989, the Water Industry Act 1991, the Water Resources Act
1991 and the Telecommunications Act 1984 have been filed with OFFER, OFWAT and
the Office of Telecommunications Services or any other appropriate
Governmental or Regulatory Authority, as the case may be, including all
material forms, statements, reports, agreements and all material documents,
exhibits, amendments and supplements appertaining thereto, including but not
limited to all material rates, tariffs, franchises, service agreements and
related documents, complied, as of their respective dates, in all material
respects with all applicable requirements of the statute and the rules and
regulations thereunder.
4.06 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement or Section 4.06
of the Parent Disclosure Letter, (a) since March 31, 1998 there has not been
any change, event or development having, or that would reasonably be expected
to have, individually or in the aggregate, a material adverse effect on Parent
and its Subsidiaries taken as a whole (other than those changes, events, or
developments occurring as a result of general economic or financial conditions
or which are not unique to Parent and its Subsidiaries but also affect other
entities who participate or are engaged in the lines of business in which
Parent and its Subsidiaries are engaged), and (b) between March 31, 1998 and
the date hereof (i) Parent, its Subsidiaries and the Parent Joint Ventures
have conducted their respective businesses only in the ordinary course
substantially consistent with past practice.
4.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period ended March 31, 1998
included in the Parent Financial Statements or as disclosed in Section 4.07 of
the Parent Disclosure Letter, neither Parent nor any of its Subsidiaries had
at such date, or has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent, fixed or otherwise, or whether due or
to become due) of any nature that would be required by generally accepted
accounting principles in the United Kingdom to be reflected on a consolidated
balance sheet of Parent and its consolidated subsidiaries (including the notes
thereto), except liabilities or obligations (i) which were incurred in the
ordinary course of business consistent with past practice or (ii) which have
not been, and would not reasonably be expected to be, individually or in the
aggregate, materially adverse to Parent and its Subsidiaries taken as a whole.
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4.08 Legal Proceedings. Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement or in Section 4.08 of the Parent
Disclosure Letter and except for environmental matters which are governed by
Section 4.15, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of Parent, threatened against, nor to the
knowledge of Parent are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, Parent or any of its
Subsidiaries or any of the Parent Joint Ventures or any of their respective
assets and properties which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on Parent, and its
Subsidiaries taken as a whole or on the ability of Parent, the Partnership and
Merger Sub to consummate the transactions contemplated by this Agreement, and
(ii) neither Parent nor any of its Subsidiaries nor any of the Parent Joint
Ventures is subject to any order of any Governmental or Regulatory Authority
which, individually or in the aggregate, is having or would reasonably be
expected to have a material adverse effect on Parent and its Subsidiaries
taken as a whole or on the ability of Parent, the Partnership and Merger Sub
to consummate the transactions contemplated by this Agreement.
4.09 Information Supplied. (a) The registration statement on Form F-4 to
be filed with the SEC by Parent in connection with the issuance of Parent ADSs
in the Merger, as amended or supplemented from time to time (as so amended and
supplemented, the "Registration Statement"), and any other documents to be
filed by Parent with the SEC or any other Governmental or Regulatory Authority
in connection with the Merger and the other transactions contemplated hereby
will (in the case of the Registration Statement and any such other documents
filed with the SEC under the Securities Act or the Exchange Act) comply as to
form in all material respects with the requirements of the Exchange Act and
the Securities Act, respectively, and will not, on the date of its filing or,
in the case of the Registration Statement, at the time it becomes effective
under the Securities Act, or at the date the Proxy Statement is mailed to
stockholders of the Company and at the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by Parent, the
Partnership or Merger Sub with respect to information supplied in writing by
or on behalf of the Company expressly for inclusion therein and information
incorporated by reference therein from documents filed by the Company or any
of its Subsidiaries with the SEC.
(b) The Parent Disclosure Documents will, at all relevant times, include
all information relating to Parent, and information which is within the
knowledge of each of the directors of Parent (or which it would be reasonable
for them to obtain by making enquiries), which, in each case, is required to
enable the Parent Disclosure Documents and the parties hereto to comply in all
material respects with all United Kingdom statutory and other legal and
regulatory provisions (including, without limitation, the Companies Act, the
FSA and the rules and regulations made thereunder, and the rules and
requirements of the LSE) and all such information contained in such documents
will be substantially in accordance with the facts and will not omit anything
material likely to affect the import of such information.
(c) Notwithstanding the foregoing provisions of this Section 4.09, no
representation or warranty is made by Parent with respect to statements made
or incorporated by reference in the Registration Statement, the Proxy
Statement, the Listing Particulars or the Circular based on information
supplied by the Company expressly for inclusion or incorporation by reference
therein or based on information which is not made in or incorporated by
reference in such documents but which should have been disclosed pursuant to
Section 3.09.
4.10 Permits; Compliance with Laws and Orders. Parent. its Subsidiaries
and the Parent Joint Ventures hold all permits, licenses, franchises
variances, exemptions, orders and approvals of all Governmental and Regulatory
Authorities (other than environmental permits which are governed by Section
4.15) necessary for the lawful conduct of their respective businesses (the
"Parent Permits"), except for failures to hold such Parent Permits which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on Parent and its Subsidiaries
taken as a whole. Parent, its Subsidiaries and the Parent Joint Ventures are
in compliance with the terms of the Parent Permits, except failures so to
comply which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse
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effect on Parent and its Subsidiaries taken as a whole. Except as disclosed in
the Parent SEC Reports filed prior to the date of this Agreement, Parent and
its Subsidiaries and the Parent Joint Ventures are not in violation of or
default under any law or order of any Governmental or Regulatory Authority,
except for such violations or defaults which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole.
4.11 Compliance with Agreements. Except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement or Section 4.11 of the
Parent Disclosure Letter, neither Parent nor any of its Subsidiaries nor, to
the knowledge of Parent, any other party thereto is in breach or violation of,
or in default in the performance or observance of any term or provision of,
and no event has occurred which, with notice or lapse of time or both, would
reasonably be expected to result in a default under, (i) the memorandum or
articles of association (or other comparable charter documents) of Parent or
any of its material Subsidiaries or (ii) any Contract to which Parent or any
of its Subsidiaries is a party or by which Parent or any of its Subsidiaries
or any of their respective assets or properties is bound, except in the case
of clause (ii) for breaches, violations and defaults which, individually or in
the aggregate, are not having and would not reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole.
4.12 Taxes. (a) Each of Parent and its Subsidiaries has filed all
material tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed or granted
and have not expired and all tax returns and reports are complete and accurate
in all material respects. Parent and each of its Subsidiaries has paid (or
Parent has paid on its behalf) all taxes shown as due on such tax returns and
reports. The most recent financial statements contained in the Parent SEC
Reports reflect an adequate reserve for all taxes payable by Parent and its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against Parent or any of its Subsidiaries that
are not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a material adverse effect on Parent and its Subsidiaries taken
as a whole. No requests for waivers of the time to assess any taxes against
Parent or any of its Subsidiaries have been granted or are pending, except for
requests with respect to such taxes that have been adequately reserved for in
the most recent financial statements contained in the Parent SEC Reports, or,
to the extent not adequately reserved, the assessment of which would not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
(b) Neither Parent nor any of its Subsidiaries has taken any action or
has any knowledge of any fact or circumstance that is reasonably likely to
prevent the Merger from qualifying as a tax-free reorganization within the
meaning of Code Section 368(a).
(c) UKSub 1 and UKSub 2 are not public limited corporations.
(d) Parent directly owns the whole of the issued share capital of UKSub 1
and UKSub 2.
(e) UKSub 1 and UKSub 2 directly own all of the equity interests in the
Partnership.
(f) Prior to the Closing Date, Parent will make an election pursuant to
Section 301.7701-3 of the U.S. Treasury regulations promulgated under the Code
to treat UKSub 1 and UKSub 2 as entities disregarded as separate from Parent
and will make an election under Section 301.7701-3 of the U.S. Treasury
regulations to treat the Partnership as an association taxable as a
corporation. Neither Parent nor any of its Subsidiaries has taken any action
that (or has failed to take any action if such failure) would reasonably be
likely to cause UKSub 1 or UKSub 2 to be characterized as an association
taxable as a corporation for U.S. federal income tax purposes.
(g) Parent has satisfied, and until the Closing Date will satisfy, the
active trade or business test specified in Section 1.367(a)-3(c)(3) of the
U.S. Treasury regulations for a minimum period of three years prior to the
Closing Date.
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(h) None of Parent, UKSub 1, UKSub 2, the Partnership, nor any other
affiliate of Parent has any intention to redeem, acquire, or to cause the
Company or any affiliate of the Company to acquire, or to arrange for another
person to acquire, any of the ADS Consideration or the Ordinary Share
Consideration.
(i) Neither Parent nor any Parent affiliate, directly or indirectly, has
paid any expense incurred by the Company, any Company affiliate or any Company
stockholder in connection with the transactions contemplated by this
Agreement.
(j) Neither Parent nor any Parent affiliate, directly or indirectly, has
loaned any funds to any escrow account, trust or other fund established to pay
any expenses incurred by the Company, any Company affiliate or any Company
stockholder in connection with the transactions contemplated by this
Agreement.
(k) Neither Parent nor any Parent affiliate, directly or indirectly, owns
any stock issued by the Company unless acquired directly from the Company.
4.13 Parent Employee Benefit Plans. (a) Parent has made available to the
Company complete and correct copies, as of the date of this Agreement, of: (i)
the current trust deeds and rules of each of the material employee benefit
plans to which Parent and its Subsidiaries make or could become liable to make
payments for providing retirement, death, disability or life assurance
benefits (the "Parent Employee Benefit Plans") (including any draft
amendments); (ii) the most recently prepared explanatory booklets and
announcements relating to each of the Parent Employee Benefit Plans; (iii) a
copy of the actuary's report on the latest actuarial valuation of the Parent
Employee Benefit Plans, if applicable; and (iv) the rules of the Parent Share
Schemes.
(b) The Parent Employee Benefit Plans are the only material schemes to
which Parent and its Subsidiaries make or could become liable to make payments
for providing retirement, death, disability or life assurance benefits.
(c) To the extent such exemption is intended by Parent, the Parent
Employee Benefit Plans are exempt approved schemes within the meaning of
Chapter 1 Part XIV of the Income and Corporation Taxes Act 1988. Except as
specifically set forth in Section 4.13 of the Parent Disclosure Letter,
members of the Parent Employee Benefit Plans are contracted-out of the State
Earnings Related Pension Scheme.
(d) To the knowledge of Parent, there is no amount which is treated by
Section 144 of the Pension Schemes Act 1993 or Section 75 of the Pensions Act
1995 as a debt due to the trustees of the Parent Employee Benefit Plans or
from Parent or any of its Subsidiaries to the trustees of any other benefit
plan except for such debts which would not reasonably be expected to have a
material adverse effect on the Parent and its Subsidiaries taken as a whole.
The Parent Employee Benefit Plans have not ceased to admit new members.
(e) Except as set forth in Section 4.13 of the Parent Disclosure Letter
and except for disputes which would not reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole, there
is no dispute about the benefits payable under the Parent Employee Benefit
Plans and, to the knowledge of Parent, there are no circumstances which might
give rise to any such dispute.
(f) To the knowledge of Parent, the actuary's report on the latest
actuarial valuation accurately describes the financial position of each Parent
Employee Benefit Plan for which an actuarial valuation is required by law at
its effective date and in accordance with the assumptions employed for that
valuation. Except as set forth in Section 4.13 of the Parent Disclosure
Letter, nothing has happened since that date which would, to a material
extent, affect the level of funding of any Parent Employee Benefit Plan and,
since that date, contributions have been paid to each Parent Employee Benefit
Plan at the rate recommended by the actuary. Except as set forth in Section
4.13 of the Parent Disclosure Letter, no assets have been withdrawn by Parent
or any of its Subsidiaries from any Parent Employee Benefit Plan (except to
pay benefits or by way of reimbursement of expenses) since the effective date
of the latest actuarial valuation of that plan.
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(g) Except as set forth in Section 4.13 of the Parent Disclosure Letter
or as would not reasonably be expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole, the Parent Employee Benefit
Plans comply with and have been administered in accordance with all applicable
laws, regulations and requirements. All amounts due to the Parent Employee
Benefit Plans at any time prior to the month in which this Agreement is signed
have been paid.
4.14 Labor Matters. (a) Except as set forth in Section 4.14 of the Parent
Disclosure Letter, neither Parent nor any of its Subsidiaries is a party to
any collective bargaining agreement, recognition agreement, European Works
Council or other labor agreement with any union, labor organization or other
responsible body. Except as disclosed in the Parent SEC Reports filed prior to
the date of this Agreement or in Section 4.14 of the Parent Disclosure Letter,
there are no disputes pending or, to the knowledge of Parent, threatened
between Parent or any of its Subsidiaries or any of the Parent Joint Ventures
and any trade union or other representatives of its employees, except as would
not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole, and,
to the knowledge of Parent, there are no material organization efforts
presently being made involving any of the now unorganized employees of the
Parent or any of its Subsidiaries or any of the Parent Joint Ventures. Since
December 31, 1995, there has been no work stoppage, strike or other concerted
action by employees of Parent or any of its Subsidiaries except as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
(b) To the knowledge of Parent, neither Parent nor any of its
Subsidiaries nor any of the Parent Joint Ventures is in violation of any labor
laws in any country (or political subdivision thereof) in which they transact
business, except for such violations as would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on Parent
and its Subsidiaries taken as a whole.
4.15 Environmental Matters. Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement or in Section 4.15 of the Parent
Disclosure Letter and except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole:
(a) (i) Each of Parent, its Subsidiaries and the Parent Joint Ventures is
in compliance with all applicable Environmental Laws (as hereinafter
defined); and
(ii) Neither Parent nor any of its Subsidiaries nor any of the Parent
Joint Ventures has received any written communication from any person
or Governmental or Regulatory Authority that alleges that Parent or any
of its Subsidiaries or Joint Ventures is not in such compliance with
applicable Environmental Laws.
(b) Each of Parent, its Subsidiaries and the Parent Joint Ventures has
obtained all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary for
the construction of its facilities and the conduct of their operations, as
applicable, and all such Environmental Permits are in full force and effect
or, where applicable, a renewal application has been timely filed and is
pending agency approval, and Parent, its Subsidiaries and the Parent Joint
Venture are in compliance with all terms and conditions of the
Environmental Permits.
(c) There is no Environmental Claim (as hereinafter defined) pending
(i) against Parent or any of its Subsidiaries or any of the Parent
Joint Ventures;
(ii) to the knowledge of Parent, against any person or entity whose
liability for any Environmental Claim Parent or any of its Subsidiaries
or any of the Parent Joint Ventures has or may have retained or assumed
either contractually or by operation of law; or
(iii) against any real or personal property or operations which
Parent or any of its Subsidiaries or any of the Parent Joint Ventures
owns, leases or manages in whole or in part.
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(d) To Parent's knowledge, there have not been any Releases (as
hereinafter defined) of any Hazardous Material (as hereinafter defined)
that would be reasonably likely to form the basis of any Environmental
Claim against Parent or any of its Subsidiaries or any of the Parent Joint
Ventures, or against any person or entity whose liability for any
Environmental Claim Parent or any of its Subsidiaries or any of the Parent
Joint Ventures has or may have retained or assumed either contractually or
by operation of law.
(e) As used in this Section 4.15:
(i) "Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance, liability or violation (written or oral) by any person
or entity (including any Governmental or Regulatory Authority) alleging
potential liability (including, without limitation, potential
responsibility or liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial
costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from
(A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or
not owned, operated, leased or managed by the Parent or any of its
Subsidiaries or any of the Parent Joint Ventures; or
(B) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials;
(ii) "Environmental Laws" means all European Union, national,
regional, or local laws, rules and regulations relating to pollution,
the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or protection of
human health as its relates to the environmental including, without
limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials including,
without limitation, Part II and paragraphs 161 and 162 of Schedule 22
of the Environment Act 1995 and the Department of the Environment
Transport and the Regions Consultation Draft Guidance on Contaminated
Land dated October 1998 but not to the extent that any modification
thereof introduced in the final form of this guidance imposes
materially more onerous or stringent requirements in respect of
contaminated land or pollution.
(iii) "Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing
polychlorinated biphenyls; and (b) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under
any Environmental Law in a jurisdiction in which Parent or any of its
Subsidiaries or any of the Parent Joint Ventures operates or any
jurisdiction which has received such chemical, material, substance or
waste from Parent or its Subsidiaries; and
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
4.16 Intellectual Property Rights. Parent and its Subsidiaries have all
right, title and interest in, or a valid and binding license to use, all
Intellectual Property individually or in the aggregate material to the conduct
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of the businesses of Parent and its Subsidiaries taken as a whole. Neither
Parent nor any Subsidiary of Parent is in default (or with the giving of
notice or lapse of time or both, would be in default) under any license to use
such Intellectual Property, to the knowledge of Parent, such Intellectual
Property is not being infringed by any third party, and neither Parent nor any
Subsidiary of Parent is infringing any Intellectual Property of any third
party, except for such defaults and infringements which, individually or in
the aggregate, are not having and would not reasonably be expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole.
4.17 Vote Required. The only votes of the holders of any class of shares
of Parent required to approve the Merger and the other transactions
contemplated hereby (other than any vote which may be required in order to
give effect to the conversion of the Company Stock Options in accordance with
Section 6.10) are the affirmative vote of a majority of such ordinary
shareholders of Parent as (being entitled to do so) are present and vote (or,
in the case of a vote taken on a poll, the affirmative vote by shareholders or
their proxies representing a majority of the Parent Ordinary Shares in respect
of which votes were validly exercised) at the Parent Shareholders Meeting in
relation to the approval of the Merger, the creation of, and authorization of
the Board of Directors of Parent to allot, the Parent Ordinary Shares in
connection with the Merger.
4.18 Opinion of Financial Advisor. Parent has received the opinion of
Morgan Stanley Dean Witter Discover Inc., dated the date hereof, to the effect
that, as of the date hereof, the consideration to be paid in the Merger by
Parent is fair from a financial point of view to Parent, and a true and
complete copy of such opinion has been delivered to the Company prior to the
execution of this Agreement.
4.19 Ownership of Company Common Stock. Neither Parent nor any of its
Subsidiaries or other affiliates beneficially owns any shares of Company
Common Stock.
4.20 Insurance. Except as set forth in Section 4.20 of the Parent
Disclosure Letter, each of Parent and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business conducted by
Parent and its Subsidiaries during such time period. Except as set forth in
Section 4.20 of the Parent Disclosure Letter, neither Parent nor any of its
Subsidiaries has received any notice of cancellation or termination with
respect to any material insurance policy of Parent or any of its Subsidiaries.
The insurance policies of Parent and each of its Subsidiaries are valid and
enforceable policies.
4.21 Year 2000. Parent and its Subsidiaries have put into effect
practices and programs which Parent reasonably believes will enable all
material software, hardware and equipment (including microprocessors) that are
owned or utilized by Parent or any of its Subsidiaries in the operations of
its or their respective business to be capable, by December 31, 1999 of
accounting for all calculations using a century and date sensitive algorithm
for the year 2000, and the fact that the year 2000 is a leap year and to
otherwise continue to function without material interruption caused by the
occurrence of the year 2000.
4.22 Joint Venture Representations. Each representation and warranty made
by Parent in this Article IV relating to a Parent Joint Venture that is
neither operated nor managed by Parent or a Subsidiary of Parent shall be
deemed to be made only to Parent's knowledge.
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ARTICLE V
COVENANTS
5.01 Covenants of the Company. At all times from and after the date
hereof until the Effective Time, the Company covenants and agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by
this Agreement, or to the extent that Parent shall otherwise previously
consent in writing, which consent shall not be unreasonably withheld or
delayed):
(a) Ordinary Course. The Company and each of its Subsidiaries shall
conduct their businesses only in, and the Company and each of its
Subsidiaries shall not take any action except in, the ordinary course
substantially consistent with past business practice. Without limiting the
generality of the foregoing, the Company and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations, to maintain in effect all existing
material permits, to keep available the services of their key officers and
employees, to maintain their assets and properties in good working order
and condition, ordinary wear and tear excepted, to maintain insurance on
their tangible assets and businesses in substantially the same amounts and
against substantially the same risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or
Regulatory Authorities applicable to them.
(b) Charter Documents. The Company shall not, nor shall it permit any of
its Subsidiaries to, amend or propose to amend its certificate or articles
of incorporation or bylaws or its memorandum and articles of association
(or other comparable corporate charter documents).
(c) Dividends. The Company shall not, nor shall it permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock or share
capital, except:
(A) that the Company may continue the declaration and payment of
regular cash dividends (including increases consistent with past
practice) on Company Common Stock and the Company Preferred Stock, with
usual record and payment dates for such dividends in accordance with
past dividend practice; provided, that no such dividend on the Company
Common Stock shall exceed the amount budgeted therefor in the Company
Budget (as hereinafter defined), and
(B) for the declaration and payment of dividends by (x) a wholly-
owned Subsidiary solely to its parent corporation, (y) Bridger Coal
Company in accordance with past practice and (z) Subsidiaries of
regular cash dividends with usual record and payment dates (including
increases consistent with past practice) in accordance with past
dividend practice, and
(ii) split, combine, reclassify or take similar action with respect to
any of its capital stock or share capital or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or comprised in its share
capital, (iii) except as disclosed in Section 5.01(c) of the Company
Disclosure Letter, adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization or (iv) except as disclosed in Section 5.01(c) of the
Company Disclosure Letter, directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock or comprised in its share
capital or any Option with respect thereto except:
(A) in connection with intercompany purchases of capital stock or
share capital,
(B) for the purpose of funding employee stock ownership or dividend
reinvestment, stock purchase plans and other incentive plans disclosed
in Section 5.01(d) of the Company Disclosure Letter in accordance with
past practice, and
(C) Prior to the Closing Date, the Company shall redeem all
outstanding shares of its $1.28 Series, $1.18 Series and $1.16 Series
of no par serial preferred stock.
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(d) Share Issuances. The Company shall not, nor shall it permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or comprised
in its share capital or any Option with respect thereto (other than (i) the
issuance of Company Common Stock upon the exercise of Options issued
pursuant to the Company's Stock Incentive Plan outstanding on the date of
this Agreement and in accordance with their present terms, (ii) except as
specifically set forth under the heading "Long-Term Incentive Awards" on
the Schedule of Ongoing Compensation Obligations attached to Section
5.01(d) of the Company Disclosure Letter, the issuance of options or awards
pursuant to the Company's Stock Incentive Plan in accordance with its
present terms and only in connection with the hiring of new employees, and
the issuance of shares of Company Common Stock upon exercise of such
options or awards, (iii) the issuance by a wholly-owned Subsidiary of its
capital stock to its parent corporation, or modify or amend any right of
any holder of outstanding shares of capital stock or Options with respect
thereto) and (iv) shares of Company Preferred Stock with a stated value of
up to an aggregate of $250 million.
(e) Acquisitions. Except as set forth in Section 5.01(e) of the Company
Disclosure Letter and other than as provided in the 1999 operating budget
of the Company, a copy of which has been disclosed to and discussed with
Parent, or any other budget of the Company thereafter approved by Parent,
which approval shall not be unreasonably withheld (collectively, the
"Company Budget"), the Company shall not, nor shall it permit any of its
Subsidiaries to, acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner) any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets in excess of $25
million in any one transaction; provided, that this Section 5.01(e) shall
not prohibit any capital expenditures made in accordance with Section
5.01(j).
(f) Dispositions. Other than as set forth in Section 5.01(f) of the
Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries to, sell, lease, grant any security interest in or
otherwise dispose of or encumber any of its assets or properties, other
than dispositions in the ordinary course of its business consistent with
past practice or having an aggregate net book value of $25 million or less
in any one transaction.
(g) Indebtedness. Other than as expressly provided in the Company Budget,
the Company shall not, nor shall it permit any of its Subsidiaries to,
incur or guarantee any indebtedness (including any debt borrowed or
guaranteed or otherwise assumed, including, without limitation, the
issuance of debt securities or warrants or rights to acquire debt) or enter
into any "keep well" or other agreement to maintain any financial condition
of another person or enter into any arrangement having the economic effect
of any of the foregoing other than (i) short-term indebtedness in the
ordinary course of business consistent with past practice (such as the
issuance of commercial paper or the use of existing credit facilities) in
an aggregate amount not exceeding $500 million; (ii) long-term indebtedness
not aggregating more than $200 million and (iii) indebtedness entered into
in connection with the refinancing of indebtedness outstanding on the date
of this Agreement or incurred in compliance with this Section 5.01(g).
(h) Employee Benefits. Except as set forth on Section 5.01(h) of the
Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries to, enter into, adopt, amend (except as may be required
by applicable law) or terminate any Company Employee Benefit Plan, or
increase in any manner the compensation or fringe benefits of any director
or executive officer, or, except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Company and its Subsidiaries taken as a whole, increase in any manner
the compensation or fringe benefits of any employee, or pay any benefit not
required by any plan or arrangement in effect as of the date hereof and, in
no event shall the Company or its Subsidiaries be permitted to grant to any
employee any rights that are not in effect on the date hereof to any
payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or increase in
obligations to fund benefits with respect to that employee resulting from a
change in control or change in ownership of the Company or any of its
Subsidiaries.
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(i) Affiliate Contracts. Except as disclosed in Section 5.01(i) of the
Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries or, within the exercise of its reasonable commercial
efforts, its Joint Ventures to, except as otherwise expressly provided for
in this Agreement, enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's length basis,
with any affiliate of such party or any of its Subsidiaries.
(j) Capital Expenditures. The Company shall not, nor shall it permit any
of its Subsidiaries to, make any capital expenditures or commitments other
than (i) as required by applicable law, (ii) capital expenditures incurred
in connection with the repair or replacement of facilities destroyed or
damaged due to casualty or accident (whether or not covered by insurance),
and (iii) other capital expenditures in excess of 110% of the aggregate
amount provided for such purposes in the Company Budget.
(k) 1935 Act. The Company shall not, nor shall it permit any of its
Subsidiaries to, engage in any activities which would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act, including any
action or inaction that would cause the prior approval of the SEC under the
1935 Act to be required for the consummation of the transactions
contemplated hereby.
(l) Regulatory Status. The Company shall not, nor shall it permit any of
its Subsidiaries to, agree or consent to any material agreements or
modifications of material existing agreements with any Government or
Regulatory Authority in respect of the operations of their businesses
except where following discussion with the relevant authority such
agreements or modifications are imposed upon the Company.
(m) Transmission, Generation. Except as required pursuant to tariffs on
file with the FERC as of the date hereof, or as set forth in Section
5.02(m) of the Company Disclosure Letter, the Company shall not, nor shall
it permit its Subsidiaries to:
(i) commence construction of any additional generating, transmission
or delivery capacity in excess of 500 megawatts, or
(ii) obligate itself to purchase or otherwise acquire, or to sell or
otherwise dispose of, or to share, any additional generating,
transmission or delivery plants or facilities, in an amount in excess
of $25 million in any one transaction, except as set forth in the
Company Budget. Any regulatory order potentially imposing any such
obligation shall be immediately forwarded to Parent.
(n) Accounting. The Company shall not, nor shall it permit any of its
Subsidiaries to, make any material changes in their accounting methods,
except as required by law, rule, regulation or applicable generally
accepted accounting principles.
(o) Tax Matters. The Company shall not take any action which (or fail to
take any action if such failure) would cause the Merger to fail to qualify
as a reorganization described in Code Section 368(a).
(p) No Breach. The Company shall not, nor shall it permit any of its
Subsidiaries to willfully take or fail to take any action that would or is
reasonably likely to result (i) in a material breach of any provision of
this Agreement, or (ii) in any of its representations and warranties set
forth in this Agreement being untrue on and as of the Closing Date.
(q) No Litigation. The Company shall not, nor shall it permits any of its
Subsidiaries to, initiate any material actions, suits, arbitrations or
proceedings.
(r) Tax-Exempt Status. The Company shall not, nor shall it permit any of
its Subsidiaries to, except as otherwise expressly provided for in this
Agreement, take any action that would be reasonably likely to jeopardize
the qualification of any material amount of outstanding revenue bonds which
qualify on the date hereof under Section 142(a) of the Code as "exempt
facility bonds" or as tax-exempt industrial development bonds under Section
103(b)(4) of the Internal Revenue Code of 1954, as amended, prior to the
enactment of the Tax Reform Act of 1986.
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(s) Advice of Changes. The Company shall confer with Parent on a regular
and frequent basis with respect to the Company's business and operations
and other matters relevant to the Merger, and shall promptly advise Parent,
orally and in writing, of any material change or event, including, without
limitation, any complaint, investigation or hearing by any Governmental or
Regulatory Authority (or communication indicating the same may be
contemplated) or the institution or threat of material litigation; provided
that the Company shall not be required to make any disclosure to the extent
such disclosure would constitute a violation of any applicable law or
regulation.
(t) Notice and Cure. The Company will notify Parent in writing of, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance, as soon as practical after it
becomes known to the Company, that causes or will cause any covenant or
agreement of the Company under this Agreement to be breached or that
renders or will render untrue in any material respect any representation or
warranty of the Company contained in this Agreement. The Company also will
notify Parent in writing of, and will use all commercially reasonable
efforts to cure, before the Closing, any violation or breach, as soon as
practical after it becomes known to the Company, of any representation,
warranty, covenant or agreement made by the Company. No notice given
pursuant to this paragraph shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for
purposes of determining satisfaction of any condition contained herein.
(u) Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, the Company will take or cause to be taken all commercially
reasonable steps necessary or desirable and will proceed diligently and in
good faith to satisfy each condition to its obligations contained in this
Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and the Company will not, nor will it
permit any of its Subsidiaries to, take or fail to take any action that
would reasonably be expected to result in the nonfulfillment of any such
condition.
5.02 Covenants of Parent. At all times from and after the date hereof
until the Effective Time, Parent covenants and agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, or to the extent that the Company shall otherwise previously
consent in writing, which consent shall not be unreasonably withheld or
delayed):
(a) Ordinary Course. Parent and each of its Subsidiaries shall conduct
their businesses only in, and Parent and each of its Subsidiaries shall not
take any action except in, the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, Parent and its
Subsidiaries shall use all commercially reasonable efforts to preserve
intact in all material respects their present business organizations and
reputation, to maintain in effect all existing permits, to keep available
the services of their key officers and employees, to maintain their assets
and properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or
Regulatory Authorities applicable to them.
(b) Charter Documents. Parent shall not, nor shall it permit any of its
Subsidiaries to, amend or propose to amend its certificate or articles of
incorporation or bylaws or its memorandum and articles of association (or
other comparable corporate charter documents).
(c) Dividends. Other than as set forth in the Parent Budget (as defined
in Section 5.02(e)), Parent shall not, nor shall it permit any of its
Subsidiaries to,
(i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock or share capital,
except:
(A) that Parent may continue the declaration and payment of
regular cash dividends (including increases consistent with past
practice) on Parent Ordinary Shares, with usual record and payment
dates for such dividends in accordance with past dividend practice;
provided, that no
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such dividend shall exceed by more than 12% the dividend payable
during the prior fiscal year in respect of the comparable time
period, and
(B) for the declaration and payment of dividends by a wholly-owned
Subsidiary solely to its parent corporation, and
(ii) other than in connection with the restructuring of the
transactions contemplated hereby pursuant to Section 6.07, split,
combine, reclassify or take similar action with respect to any of its
capital stock or share capital or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or comprised in its share
capital, (iii) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization or (iv) other than as described in Section 5.02(c)
of the Parent Disclosure Letter, directly or indirectly redeem,
repurchase or otherwise acquire any shares of its capital stock or
comprised in its share capital or any Option with respect thereto
except:
(A) in connection with intercompany purchases of capital stock or
share capital,
(B) for the purpose of funding employee share ownership, dividend
reinvestment, stock purchase and other incentive plans disclosed in
Section 5.02 (c) of the Parent Disclosure Letter in accordance with
past practice or
(C) the redemption of the Special Share in accordance with its
terms.
(d) Share Issuances. Parent shall not, nor shall it permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or comprised
in its share capital or any Option with respect thereto (other than (i) up
to 125 million shares of Parent Ordinary Shares for general corporate
purposes, (ii) the issuance of Parent Ordinary Shares or stock
appreciation, share awards or similar rights, as the case may be, pursuant
to the Parent Share Schemes, in each case outstanding on the date of this
Agreement and in accordance with their present terms or pursuant to any
share scheme of Parent to be adopted in the ordinary course consistent with
past practice, (iii) the issuance of options or awards pursuant to Parent
Share Schemes in accordance with their present terms and, except as set
forth in Section 5.02(d) of the Parent Disclosure Letter, only in
connection with the hiring of new employees, and the issuance of shares of
Parent Ordinary Shares upon exercise of such options or awards, and (iv)
the issuance by a wholly-owned Subsidiary of its capital stock to its
parent corporation, or modify or amend any right of any holder of
outstanding shares of capital stock or Options with respect thereto.
(e) Acquisitions. Other than as provided in the 1999 operating budget of
Parent, a copy of which has been disclosed to and discussed with the
Company, or any subsequently-adopted budget of Parent disclosed to the
Company (collectively, the "Parent Budget"), Parent shall not, nor shall it
permit any of its Subsidiaries to, acquire (by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner) any business or any
corporation, partnership, association or other business organization or
division thereof (i) in excess of (Pounds)750 million or (ii) if such
acquisition would have a material adverse affect on Parent and its
Subsidiaries taken as a whole, without the prior written consent of the
Company.
(f) Dispositions. Other than as provided in the Parent Budget, Parent
shall not, nor shall it permit any of its Subsidiaries to, sell, lease,
grant any security interest in or otherwise dispose of or encumber any of
its assets or properties, other than dispositions in the ordinary course of
its business consistent with past practice and having an aggregate value of
less than (Pounds)750 million.
(g) Indebtedness. Parent shall not, nor shall it permit any of its
Subsidiaries to, incur or guarantee any indebtedness (including any debt
borrowed or guaranteed or otherwise assumed, including, without limitation,
the issuance of debt securities or warrants or rights to acquire debt) or
enter into any "keep well" or other agreement to maintain any financial
condition of another Person or enter into any arrangement
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having the economic effect of any of the foregoing, other than indebtedness
in an aggregate amount not exceeding 110% of the amount of indebtedness
provided for in the Parent Budget.
(h) Affiliate Contracts. Parent shall not, nor shall it permit any of its
Subsidiaries or, within the exercise of its reasonable commercial efforts,
its Joint Ventures to, enter into any Contract or amend or modify any
existing Contract, or engage in any new transaction outside the ordinary
course of business consistent with past practice or not on an arm's length
basis, with any affiliate of such party or any of its Subsidiaries.
(i) Capital Expenditures. Parent shall not, nor shall it permit any of
its Subsidiaries to, make any capital expenditures or commitments (except
as required by law or regulation) in excess of 110% of the aggregate amount
provided for such purposes in the Parent Budget.
(j) 1935 Act. Parent shall not, nor shall it permit any of its
Subsidiaries to, engage in any activities which would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act, including any
action or inaction that would cause the prior approval of the SEC under the
1935 Act to be required for the consummation of the transactions
contemplated hereby.
(k) UK Licensing Regime. Parent shall not, nor shall it permit any of
its Subsidiaries to, engage in any activities or omit to do anything which
would entitle any Governmental or Regulatory Authority to revoke in whole
or in material part any material license, authorization or appointment or
which would otherwise materially change the status of Parent or any of its
Subsidiaries (Parent and its Subsidiaries being referred to as the "Parent
Group") thereunder.
(l) Transmission, Generation. Except as set forth in Section 5.02(l) of
the Parent Disclosure Letter, Parent shall not, nor shall it permit its
Subsidiaries to:
(i) commence construction of any additional generating, transmission
or delivery capacity in excess of 500 megawatts, or
(ii) obligate itself to purchase or otherwise acquire, or to sell or
otherwise dispose of, or to share, any additional generating,
transmission or delivery plants or facilities, in an amount in excess
of $200 million in any one transaction.
(m) Accounting. Parent shall not, nor shall it permit any of its
Subsidiaries to, make any changes in their accounting methods, except as
required by law, rule, regulation or applicable generally accepted
accounting principles.
(n) Tax Matters. Parent shall not, nor shall it permit any of its
Subsidiaries to, take any action which (or fail to take any action if such
failure) would cause the Merger to fail to qualify as a reorganization
described in Section 368(a) of the Code.
(o) No Breach. Parent shall not, nor shall it permit any of its
Subsidiaries to, willfully take or fail to take any action that would or is
reasonably likely to result (i) in a material breach of any provision of
this Agreement, or (ii) in any of its representations and warranties set
forth in this Agreement being untrue on and as of the Closing Date.
(p) Advice of Changes. Parent shall confer with the Company on a regular
and frequent basis with respect to Parent's business and operations and
other matters relevant to the Merger, and shall promptly advise the
Company, orally and in writing, of any material change or event, including,
without limitation, any complaint, investigation or hearing by any
Governmental or Regulatory Authority (or communication indicating the same
may be contemplated) or the institution or threat of litigation, having, or
which, insofar as can be reasonably foreseen, could have, a material
adverse effect on Parent and its Subsidiaries taken as a whole or on the
ability of Parent to consummate the transactions contemplated hereby;
provided that Parent shall not be required to make any disclosure to the
extent such disclosure would constitute a violation of any applicable law
or regulation.
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(q) Notice and Cure. Parent will notify the Company in writing of, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance, as soon as practical after it
becomes known to Parent, that causes or will cause any covenant or
agreement of Parent under this Agreement to be breached or that renders or
will render untrue any representation or warranty of Parent contained in
this Agreement. Parent will also notify the Company in writing of, and will
use all commercially reasonable efforts to cure, before the Closing, any
violation or breach, as soon as practical after it becomes known to Parent,
of any representation, warranty, covenant or agreement made by Parent. No
notice given pursuant to this paragraph shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining the satisfaction of any condition
contained herein.
(r) Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, Parent will take or cause to be taken all commercially
reasonable steps necessary or desirable and proceed diligently and in good
faith to satisfy each condition to the Company's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and Parent will not, nor will it permit any
of its Subsidiaries to, take or fail to take any action that would
reasonably be expected to result in the nonfulfillment of any such
condition.
5.03 Joint Executive Committee. As soon as practicable after the date
hereof, Parent and the Company shall establish a joint executive committee
(the "Joint Executive Committee") which shall be comprised of three nominees
of Parent (one of whom, in the first instance, shall be Ian Robinson) and
three nominees of the Company (one of whom, in the first instance, shall be
Keith McKennon). The Joint Executive Committee shall be jointly chaired by Ian
Robinson and Keith McKennon and shall have the objective of facilitating and
achieving the Merger contemplated in this Agreement, integration planning,
strategic development, developing recommendations concerning the future
structure and the general operation of the Company after the Effective Time
subject to applicable law. The Joint Executive Committee shall meet monthly in
the United States or upon such other date or dates, and in such other places,
as Parent and the Company may agree from time to time and may be convened by
telephone, video conference or similar means.
5.04 Tax Matters. Except as set forth in their respective Disclosure
Letters, neither Parent nor the Company shall, nor shall any party permit its
Subsidiaries to, make or rescind any material express or deemed election
relating to taxes, or change any of its methods of reporting income or
deductions for tax purposes from those employed in the preparation of its tax
return(s) for the prior taxable year, except as may be required by applicable
law or as agreed to by the other party. The Company shall inform Parent
regarding the progress of any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to taxes
and shall consult with Parent before entering into any settlements or
compromises with regard to such matters.
5.05 Discharge of Liabilities. Neither Parent nor the Company shall, nor
shall any party permit its Subsidiaries to, pay, discharge or satisfy any
material claims, liabilities or obligations (absolute accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
(which includes the payment of final and unappealable judgments) or in
accordance with their terms, of liabilities reflected or reserved against in,
or contemplated by, the most recent consolidated financial statements (or the
notes thereto) of such party included in such party's reports filed with the
SEC or the Registrar of Corporations in Edinburgh, or incurred in the ordinary
course of business consistent with past practice.
5.06 Contracts. Neither Parent nor the Company shall, nor shall any party
permit its Subsidiaries or, within the exercise of its reasonable business
efforts, its Joint Ventures to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail to use
reasonable business efforts to renew any material contract or agreement to
which such party or any Subsidiary of such party is a party or waive, release
or assign any material rights or claims.
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5.07 No Solicitations. (a) Except as disclosed in Section 5.07 of the
Company Disclosure Letter, prior to the Effective Time, the Company agrees (i)
that neither it nor any of its Subsidiaries or other affiliates shall, and it
shall use its best efforts to cause their respective Representatives (as
defined in Section 9.12) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, consolidation or other business
combination including the Company or any of its Subsidiaries or any
acquisition or similar transaction (including, without limitation, a tender or
exchange offer) involving the purchase of (A) all or any significant portion
of the assets of the Company and its Subsidiaries taken as a whole, (B) 5% or
more of the outstanding shares of Company Common Stock or (C) 5% of the
outstanding shares of the capital stock of any Subsidiary of the Company (any
such proposal or offer being hereinafter referred to as an "Alternative
Proposal"), or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
or group relating to an Alternative Proposal (excluding the transactions
contemplated by this Agreement), or otherwise facilitate any effort or attempt
to make or implement an Alternative Proposal; (ii) that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties with respect to any of the foregoing, and it
will take the necessary steps to inform such parties of its obligations under
this Section; and (iii) that it will notify Parent promptly if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it or any of such persons; provided, however,
that nothing contained in this Section 5.07(a) shall prohibit the Board of
Directors of the Company from (i) furnishing information to (but only pursuant
to a confidentiality agreement in customary form and having terms and
conditions no less favorable to the Company than the Confidentiality Agreement
(as defined in Section 6.01)) or entering into discussions or negotiations
with any person or group that makes an unsolicited bona fide Alternative
Proposal, if, and only to the extent that, prior to receipt of the Company
Stockholders' Approval, (A) the Board of Directors of the Company, based upon
the advice of outside counsel, determines in good faith that a failure to
perform such action could reasonably be expected to result in a breach of its
fiduciary duties to stockholders imposed by law, (B) the Board of Directors
has reasonably concluded in good faith (after consultation with its financial
advisors) that the person or group making such Alternative Proposal will have
adequate sources of financing to consummate such Alternative Proposal, (C) the
Board of Directors has reasonably concluded in good faith that such
Alternative Proposal is more favorable to the Company's stockholders than the
Merger, (D) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or group, the Company provides
written notice to Parent to the effect that it is furnishing information to,
or entering into discussions or negotiations with, such person or group, which
notice shall identify such person or group in reasonable detail, and (E) the
Company keeps Parent appropriately informed of the status of any such
discussions or negotiations; and (ii) to the extent required, complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative
Proposal. Nothing in this Section 5.07 shall (x) permit the Company to
terminate this Agreement (except as specifically provided in Article VIII),
(y) permit the Company to enter into any agreement with respect to an
Alternative Proposal for so long as this Agreement remains in effect (it being
agreed that for so long as this Agreement remains in effect, the Company shall
not enter into any agreement with any person or group that provides for, or in
any way facilitates, an Alternative Proposal (other than a confidentiality
agreement under the circumstances described above)), or (z) affect any other
obligation of the Company under this Agreement.
(b) Parent agrees that (i) neither it nor any of its Subsidiaries or
other affiliates shall, and it shall use its best efforts to cause their
respective Representatives (as defined in Section 9.12) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making
of any proposal or offer (including, without limitation, any proposal or
offer to its shareholders) with respect to any transaction that would
constitute a Change of Control (as defined in Section 8.01(e)), (ii) it
will notify the Company promptly if any such inquiries, proposals or offers
are received by Parent and (iii) will keep the Company appropriately
informed of the status of any such inquiries, proposals or offers.
5.08 Conduct of Business of Merger Sub. (a) Merger Sub shall not be
formed until immediately prior to the Closing Date.
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(b) Prior to the Effective Time, Parent shall cause Merger Sub to (i)
perform its obligations under this Agreement in accordance with its terms,
(ii) not incur directly or indirectly any liabilities or obligations other
than those incurred in connection with the Merger, (iii) not engage
directly or indirectly in any business or activities of any type or kind
and not enter into any agreements or arrangements with any person, or be
subject to or bound by any obligation or undertaking, which is not
contemplated by this Agreement and (iv) not create, grant or suffer to
exist any Lien upon its properties or assets which would attach to any
properties or assets of the Surviving Corporation after the Effective Time.
5.09 Third Party Standstill Agreements. During the period from the date
of this Agreement through the Effective Time, neither the Company nor any of
its Subsidiaries shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. During such
period, the Company shall enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreement, including, but not
limited to, by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court having jurisdiction.
5.10 Control of Other Party's Business. Nothing contained in this
Agreement shall give the Company, directly or indirectly, the right to control
or direct Parent's operations prior to the Effective Time. Nothing contained
in this Agreement shall give Parent, directly or indirectly, the right to
control or direct the Company's operations prior to the Effective Time. Prior
to the Effective Time, each of the Company and the Parent shall exercise,
consistent with the terms and conditions of this Agreement, complete control
and supervision over its respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information. Each of the Company and Parent shall, and
shall cause each of its Subsidiaries and, so long as consistent with its
confidentiality obligations under its Joint Venture agreements, shall use
commercially reasonable efforts to cause its Joint Ventures to, throughout the
period from the date hereof to the Effective Time, (i) provide the other and
its Representatives with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of
the Company and Parent, as the case may be, and its Subsidiaries and Joint
Ventures and their respective assets, properties, books and records, but only
to the extent that such access does not unreasonably interfere with the
business and operations of the Company and Parent, as the case may be, and its
Subsidiaries and Joint Ventures, and (ii) furnish promptly to such persons (x)
a copy of each report, statement, schedule and other document filed or
received by the Company and Parent, as the case may be, or any of its
Subsidiaries and Joint Ventures pursuant to the requirements of federal or
state securities laws and each material report, statement, schedule and other
document filed with any other Governmental or Regulatory Authority, and (y)
all other information and data (including, without limitation, copies of
Contracts, Company Employee Benefit Plans, and other books and records)
concerning the business and operations of the Company and Parent, as the case
may be, and its Subsidiaries and Joint Ventures as such party or any of such
other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained
in this Agreement or any condition to the obligations of the parties hereto.
Any such information or material obtained pursuant to this Section 6.01 that
constitutes "Review Material" (as such term is defined in the letter agreement
dated as of October 12, 1998 between the Company and Parent (the
"Confidentiality Agreement")) shall be governed by the terms of the
Confidentiality Agreement.
6.02 Preparation of Registration Statement and Proxy Statement. As soon
as practicable after the date of this Agreement, the Company shall, in
cooperation with Parent, prepare the Proxy Statement and Parent shall, in
cooperation with the Company, prepare the Registration Statement, in which the
Proxy Statement will be included as the prospectus. The Company shall, in
cooperation with Parent, file the Proxy Statement with the SEC as its
preliminary Proxy Statement and Parent shall, in cooperation with the Company,
prepare and file with the SEC the Registration Statement in which the Proxy
Statement will be included as the prospectus. Parent and
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the Company shall use commercially reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable after such
filing. Parent and the Company shall also take any action (other than
qualifying as a foreign corporation or taking any action which would subject
it to service of process in any jurisdiction where Parent is not now so
qualified or subject) required to be taken under applicable state blue sky or
securities laws in connection with the issuance of Parent ADRs or Merger
Ordinary Shares in connection with the Merger. If at any time prior to the
Effective Time any event shall occur that should be set forth in an amendment
of or a supplement to the Registration Statement, Parent shall prepare and
file with the SEC such amendment or supplement as soon thereafter as is
reasonably practicable. Parent and the Company shall cooperate with each other
in the preparation of the Registration Statement and the Proxy Statement and
any amendment or supplement thereto, and each shall notify the other of the
receipt of any comments of the SEC with respect to the Registration Statement
or the Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information, and shall provide to the
other promptly copies of all correspondence between Parent or the Company, as
the case may be, or any of its Representatives with respect to the
Registration Statement or the Proxy Statement. Parent and the Company shall
give the other and its respective counsel the opportunity to review the
Registration Statement and the Proxy Statement and all responses to requests
for additional information by and replies to comments of the SEC before their
being filed with, or sent to, the SEC. Each of the Company and Parent agrees
to use commercially reasonable efforts, after consultation with each other, to
respond promptly to all such comments of and requests by the SEC and to cause
(x) the Registration Statement to be declared effective by the SEC at the
earliest practicable time and to be kept effective as long as is necessary to
consummate the Merger, and (y) the Proxy Statement to be mailed to the holders
of Company Common Stock and Company Preferred Stock entitled to vote at the
meeting of the stockholders of the Company at the earliest practicable time.
6.03 Approval of Shareholders. (a) Parent shall, through its Board of
Directors, duly call, give notice of, convene and hold a general meeting of
its shareholders (the "Parent Shareholders' Meeting"), for the purpose of
voting on the Merger and the creation of and the authorization of the Board of
Directors to allot, the Parent Ordinary Shares in the Merger and under the
Company Stock Plans after the Merger in accordance with this Agreement (the
"Parent Shareholders' Approval"). Unless the Board of Directors of Parent,
based upon the advice of outside counsel, determines in good faith that making
such recommendation, or failing to amend, modify or withdraw any previously
made recommendation, could reasonably be expected to result in a breach of its
fiduciary duties to shareholders imposed by law, Parent shall, through its
Board of Directors, include in the Circular the recommendation of the Board of
Directors of Parent that the shareholders of Parent approve such matters, and
shall use its reasonable best efforts to obtain such approval. In connection
with the Parent Shareholders' Meeting, subject to applicable law, (i) Parent
shall, as soon as practicable after the date of this Agreement and in
accordance with the listing rules of the LSE, prepare and submit to the LSE
for approval the Circular and the Listing Particulars, and shall use all
reasonable efforts to have such documents formally approved by the LSE and
shall thereafter publish the Circular and the Listing Particulars and dispatch
the Circular to its shareholders in compliance with all legal requirements
applicable to the Parent Stockholders Meeting and the listing rules of the LSE
and (ii) if necessary, after the Circular has been so dispatched, promptly
publish or circulate amended, supplemental or supplemented materials and, if
required in connection therewith, resolicit votes. In the event that the
Parent Shareholders' Approval is not obtained without the vote having been
taken on the date on which the Parent Shareholders' Meeting is initially
convened, the Board of Directors of Parent agrees to use its reasonable best
efforts to adjourn such Parent Shareholders' Meeting for the purpose of
obtaining the Parent Shareholders' Approval and to use commercially reasonable
efforts during any such adjournments to obtain the Parent Shareholders'
Approval.
(b) The Company shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Company
Stockholders' Meeting") for the purpose of voting on the approval of this
Agreement (the "Company Stockholders' Approval") as soon as reasonably
practicable after the date hereof. Unless the Board of Directors of the
Company, based on the advice of outside counsel, determines in good faith that
making such recommendation, or failing to amend, modify or withdraw any
previously made recommendation, could reasonably be expected to result in a
breach of its fiduciary duties to stockholders
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imposed by law, the Company shall, through its Board of Directors, include in
the Proxy Statement the recommendation of the Board of Directors of the
Company that the stockholders of the Company approve this Agreement, and shall
use its reasonable best efforts to obtain such approval. The Company shall
consult and discuss in good faith with Parent regarding the alternatives
available for obtaining the Company Stockholders' Approval. In the event that
the Company Stockholders' Approval is not obtained without the vote having
been taken on the date on which the Company Stockholders' Meeting is initially
convened, the Board of Directors of the Company will use its reasonable best
efforts to adjourn such Company Stockholders' Meeting for the purpose of
obtaining the Company Stockholders' Approval and to use commercially
reasonable efforts during any such adjournments to obtain the Company
Stockholders' Approval.
(c) Parent shall, through its Board of Directors, at the Annual General
Meeting of Parent next following the date of this Agreement, include for
consideration by its shareholders and, subject to its fiduciary duties,
recommend the approval of a resolution to approve amendments to the Articles
of Association of Parent in order to provide, to the extent reasonably
possible, for the holders of Parent ADRs substantially the same rights as
holders of Parent Ordinary Shares to receive notice of, attend, speak and vote
at general meetings of holders of Parent Ordinary Shares (the "ADR Holder
Proposal"). In the event the ADR Holder Proposal is not adopted by Parent's
shareholders at such Annual General Meeting, Parent shall, through its Board
of Directors, include for consideration by its shareholders and, subject to
its fiduciary duties, recommend approval of the ADR Holder Proposal at
Parent's Annual General Meeting next following the Effective Time.
6.04 Company Affiliates. At least thirty (30) days prior to the Closing
Date the Company shall deliver a letter to Parent identifying all persons who,
at the time of the Company Stockholders' Meeting, may, in the Company's
reasonable judgment, be deemed to be "affiliates" (as such term is used in
Rule 145 under the Securities Act) of the Company ("Company Affiliates"). The
Company shall use its best efforts to cause each Company Affiliate to deliver
to Parent on or prior to the Closing Date a written agreement substantially in
the form and to the effect of Exhibit B hereto (an "Affiliate Agreement").
Parent shall be entitled to place legends as specified in such Affiliate
Agreements on the certificates evidencing any Parent ADSs to be received by
such Company Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
ADSs, consistent with the terms of such Affiliate Agreements.
6.05 Auditors' Letters. Each of the Company and Parent shall use all
reasonable efforts to cause to be delivered to the other party and such other
party's Board of Directors a letter of its independent auditors, dated the
date on which the Registration Statement shall become effective, and addressed
to the other party and such other party's Board of Directors, in form and
substance customary for "comfort" letters delivered by independent public
accountants in connection with registration statements on Form F-4 and Form S-
4.
6.06 Stock Exchange Listing; Deposit Agreement. (a) Parent shall use its
commercially reasonable efforts, and the Company shall cooperate in respect
thereto, to cause (a) the Parent ADSs to be issued in the Merger and under the
Company Stock Plans after the Merger in accordance with this Agreement to be
approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date; and (b) each of (i) the Parent Ordinary Shares to
be represented by the Parent ADSs to be issued in the Merger to be admitted to
the Official List of the London Stock Exchange and (ii) the Merger Ordinary
Shares to be issued in the Merger to be admitted to the Official List of the
London Stock Exchange.
(b) Following the execution of this Agreement, Parent shall promptly
prepare and shall use its commercially reasonable efforts to have executed, an
amendment to the Deposit Agreement, dated as of December 18, 1991, as amended
and restated as of September 4, 1997, among Parent, The Bank of New York and
the holders of Parent ADRs thereunder and shall take such other action as may
reasonably be required, all on terms and conditions reasonably satisfactory to
the Company, that will provide holders of Parent ADRs with the right to (i)
participate in rights offerings, (ii) attend Parent shareholder meetings,
(iii) speak at Parent shareholder meetings, (iv) call for a poll at Parent
shareholder meetings, (v) examine documents made available at Parent
shareholder meetings, (vi) instruct the Depository to vote its Parent ADSs in
a particular fashion, (vii) generally be counted individually as present
and/or voting with respect to resolutions adopted at Parent
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shareholder meetings, and (viii) decide at Parent shareholder meetings how to
vote on particular resolutions, in each case on the same basis as the holders
of Parent Ordinary Shares.
6.07 Restructuring of Merger. The parties expressly acknowledge and agree
that, although it is their current intention to effect a business combination
among themselves in the form contemplated by this Agreement, it may be
preferable to effectuate such a business combination by means of an
alternative structure in light of the conditions set forth in Sections
7.01(i), 7.02(d) and 7.03(d). Accordingly, if the only conditions to the
parties' obligations to consummate the Merger which are not satisfied or
waived are receipt of any one or more of those set forth in Sections 7.01(i),
7.02(d) and 7.03(d), and the adoption of an alternative structure (that
otherwise substantially preserves for the parties the economic and other
material benefits of the Merger) would result in such conditions being
satisfied or waived, then the parties shall use their respective reasonable
best efforts to effect a business combination among themselves by means of a
mutually agreed upon structure other than the Merger that so preserves such
benefits; provided that, prior to closing any such restructured transaction,
all material third party and Governmental and Regulatory Authority
declarations, filings, registrations, notices, authorizations, consents or
approvals necessary to effect such alternative business combination shall have
been obtained and all other conditions to the parties' obligations to
consummate the Merger, as applied to such alternative business combination,
shall have been satisfied or waived. The parties further agree that, under the
circumstances described in Schedule II hereto the obligations of the parties
will be as set forth in Schedule II.
6.08 Regulatory and Other Approvals. Subject to the terms and conditions
of this Agreement and without limiting the provisions of Sections 6.02, 6.03
and 6.06, each of the Company and Parent shall jointly develop a regulatory
approval plan and proceed cooperatively and in good faith to, as promptly as
practicable, (i) obtain all consents, approvals or actions of, make all
filings with and give all notices to Governmental or Regulatory Authorities or
any other public or private third parties required of Parent, the Company or
any of their Subsidiaries or Joint Ventures to consummate the Merger and the
other matters contemplated hereby (including without limitation those set
forth on Section 3.04 of the Company Disclosure Letter and Section 4.04 of the
Parent Disclosure Letter), and (ii) provide such other information and
communications to such Governmental or Regulatory Authorities or other public
or private third parties as the other party or such Governmental or Regulatory
Authorities or other public or private third parties may reasonably request in
connection therewith. In addition to and not in limitation of the foregoing,
each of the parties will (w) take promptly all actions necessary to make the
filings required of Parent and the Company or their affiliates under the HSR
Act and to comply with filing and approval requirements of the FERC and each
state Governmental or Regulatory Authority, (x) comply at the earliest
practicable date with any request for additional information received by such
party or its affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust Division")
pursuant to the HSR Act, (y) cooperate with the other party in connection with
such party's filings under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the Merger or the other matters
contemplated by this Agreement commenced by either the FTC or the Antitrust
Division or state attorneys general or by the FERC or any State Governmental
or Regulatory Authority having jurisdiction with respect to the Merger or
another transaction contemplated by this Agreement, and (z) provide to the
other promptly copies of all correspondence between such party and the
applicable Governmental or Regulatory Authority with respect to any filings
referred to in this Section 6.08, and shall give the other party the
opportunity to review such filings and all responses to requests for
additional information by such Governmental or Regulatory Authority prior to
their being filed therewith.
6.09 Employee Benefit Plans. Parent shall use its reasonable best efforts
to cause the Company Employee Benefit Plans in effect at the date of this
Agreement that have been disclosed to Parent prior to such date to remain in
effect until the second anniversary of the Effective Time or, to the extent
such Company Employee Benefit Plans are not continued, Parent will maintain
until such date benefit plans which are no less favorable, in the aggregate,
to the employees covered by such Company Employee Benefit Plans provided,
however, that nothing contained herein shall be construed as requiring Parent
or the Surviving Corporation to
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continue any specific plan or as preventing Parent or the Surviving
Corporation from (a) establishing and, if necessary, seeking shareholder
approval to establish, any other benefit plans in respect of all or any of the
employees covered by such Company Employee Benefit Plans or any other
employees, or (b) amending such Company Employee Benefit Plans (or any
replacement benefit plans therefor) where required by applicable law or where
such amendment is with the consent of the affected employees. From and after
the Effective Time, Parent shall honor, and shall cause its Subsidiaries to
honor, in accordance with its express terms, each existing employment, change
of control, severance and termination agreement between the Company or any of
its Subsidiaries, and any officer, director or employee of such company,
including without limitation all legal and contractual obligations pursuant to
outstanding restoration plans, severance plans, bonus deferral plans, vested
and accrued benefits and similar employment and benefit arrangements, policies
and agreements that have been disclosed to Parent as of the date hereof and
other obligations entered into in accordance with Sections 5.01(d) and (h).
6.10 Company Stock Plan. (a) At the Effective Time, each outstanding
option to purchase shares of Company Common Stock (a "Company Stock Option")
under the Company Option Plan, whether vested or unvested, shall be converted
into an option to acquire, on the same terms and conditions as were applicable
under such Company Stock Option, except as amended by this Section 6.10, a
number of Parent ADSs equal to the product (rounded down to the nearest whole
number) of (i) the number of shares of Company Common Stock subject to the
option immediately prior to the Effective Time and (ii) the ADS Consideration
and the option exercise price per Parent ADS at which such option is
exercisable shall be the amount (rounded up to the nearest whole cent)
obtained by dividing (iii) the option exercise price per share of Company
Common Stock at which such option is exercisable immediately prior to the
Effective Time by (iv) the ADS Consideration; provided, however, that, in the
case of any Company Stock Option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422-424 of the Code
("qualified stock options"), the option exercise price, the number of shares
which may be acquired pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code; provided, further, that, under no circumstances shall the
option exercise price per Parent ADS be less than the aggregate par value of
the Parent Ordinary Shares represented by a Parent ADS.
(b) As soon as practicable after the Effective Time, Parent shall deliver
to the participants in the Company Option Plan appropriate notices setting
forth such participants' rights pursuant thereto and the grants pursuant to
the Company Option Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section after giving
effect to the Merger).
(c) Parent shall take all corporate action necessary to have a sufficient
number of shares of Parent ADSs available for delivery under the Company
Option Plan as adjusted in accordance with this Section. As soon as
practicable after the Effective Time, Parent shall file a registration
statement on Form F-8 promulgated by the SEC under the Securities Act (or any
successor or other appropriate form) with respect to the Parent ADSs subject
to such options and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
(d) For purposes of Section 2.01(c), Company Common Stock shall include
shares of restricted Company Common Stock issued under the Company's Non-
Employee Director's Stock Compensation Plan, Stock Incentive Plan and Long
Term Incentive Plan (collectively, the "Company Restricted Stock Plans"). The
Company shall take all corporate action necessary and obtain all relevant
consents to ensure that the consideration received under such Section 2.01(c)
upon the conversion of each outstanding share of restricted Company Common
Stock will continue to be subject to the same restrictions that such shares
were subject to under the Company Restricted Stock Plans and the applicable
award agreements thereunder, including, without limitation, any forfeiture
restrictions subject to amendment or modification of such plans or award
agreements to reflect action of the Board of Directors of the Company taken
prior to the date of this Agreement and previously disclosed to Parent.
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6.11 Directors' and Officers' Indemnification and Insurance. (a) Except
to the extent required by law, until the sixth anniversary of the Effective
Time, Parent will not take any action so as to amend, modify or repeal the
provisions for indemnification of directors or officers contained in the
certificate or articles of incorporation or bylaws (or other comparable
charter documents) of the Surviving Corporation and its Subsidiaries (which
after the Effective Time shall be substantially identical to those of the
Company in effect on the date hereof) in such a manner as would adversely
affect the rights of any individual who shall have served as a director or
officer of the Company or any of its Subsidiaries prior to the Effective Time
to be indemnified by such corporations in respect of their serving in such
capacities prior to the Effective Time.
(b) Parent and the Surviving Corporation shall, until the sixth
anniversary of the Effective Time, cause to be maintained in effect, to the
extent available, the policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries as of the date hereof (or
policies of at least the same coverage and amounts containing terms that are
no less advantageous to the insured parties) with respect to claims arising
from facts or events that occurred on or prior to the Effective Time; provided
that in no event shall Parent or the Surviving Corporation be obligated to
expend in order to maintain or procure insurance coverage pursuant to this
paragraph any amount per annum in excess of two hundred percent (200%) of the
aggregate premiums payable by the Company and its Subsidiaries in 1998 (on an
annualized basis) for such purpose.
6.12 Parent Governance; Additional Matters. (a) Subject to the exercise
of fiduciary duties and to the extent permitted by applicable law, Parent's
Board of Directors shall take action to cause the full Board of Directors of
Parent at the Effective Time to include Keith McKennon, as Deputy Chairman of
Parent, and two additional non-executive members of the Company's current
Board of Directors to be designated by the Company at least thirty (30) days
prior to the Effective Time.
(b) Parent shall, promptly following the Effective Time, cause certain of
the non-executive members of the Company's Board of Directors immediately
prior to the Effective Time who do not become directors of Parent pursuant to
Section 6.12(a) hereof, and who are willing to so serve, to be elected or
appointed as members of an advisory board (the "Advisory Board") established
by the Company, the function of which shall be to meet no less frequently than
semi-annually in order to advise the Company's Board of Directors with respect
to general business as well as opportunities and activities in the Company's
market area and to maintain and develop customer relationships. The Advisory
Board shall be chaired by Ian Robinson, and shall also include Duncan Whyte,
Richard O'Brien, and such other representatives from the communities served by
the Company (including but not limited to non-executive members of the
Company's Board of Directors immediately prior to the Effective Time) as shall
be mutually agreed by Ian Robinson and Keith McKennon. The members of the
Advisory Board who are willing to so serve initially shall be elected or
appointed for a term of two years. Parent agrees to cause the Company to re-
elect or re-appoint each of the initial members of the Advisory Board to one
successive one-year term following the initial term; provided, however, that
Parent shall have no obligation to cause the Company to elect or appoint, or
re-elect or re-appoint, and may cause the Company to remove, any member if
Parent reasonably determines that such member has a conflict of interest that
compromises such member's ability to serve effectively as a member of the
Advisory Board or any cause exists that otherwise would allow for removal of
such person as a director of the Company if such person were a member of the
Company's Board of Directors.
(c) Immediately following the Effective Time, the Company's United States
headquarters shall continue to be in Portland, Oregon. In recognition of
Parent's commitment to the community of Portland and the State of Oregon,
following the Effective Time Parent will contribute to The PacifiCorp
Foundation the sum of $5 million.
6.13 Expenses. Except as set forth in Section 8.02, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense. The Company shall not be obligated for any
fees or expenses relating to Parent's obligation to demonstrate the existence
of adequate working capital in connection with the filing of the Listing
Particulars. Notwithstanding any provision of this Agreement, in no event
shall Parent or
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any affiliate of Parent pay any expenses of the Company, any Company affiliate
or any Company stockholder in connection with the transactions contemplated by
this Agreement.
6.14 Brokers or Finders. Each of Parent and the Company represents, as to
itself and its affiliates, that, except as set forth on Section 6.14 of the
Company Disclosure Letter, no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except Salomon Smith Barney,
whose fees and expenses will be paid by the Company in accordance with the
Company's agreement with such firm (a true and complete copy of which has been
delivered by the Company to Parent prior to the execution of this Agreement),
and Morgan Stanley Dean Witter Discover Inc. whose fees and expenses will be
paid by Parent in accordance with Parent's agreement with such firm (a true
and complete copy of which has been delivered by Parent to the Company prior
to the execution of this Agreement), and each of Parent and the Company shall
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other such fee or commission or
expenses related thereto asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
6.15 Takeover Statutes. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the
members of the Board of Directors of the Company shall grant such approvals
and take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and thereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated hereby
and thereby.
6.16 Conveyance Taxes. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes and duties, any
transfer, recording, registration and other fees, and any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time. The Company shall pay, without deduction or withholding
(except where such deduction or withholding is required by applicable law)
from any amount payable to the holders of Company Common Stock, any such taxes
which become payable in connection with the transfer of Company Common Stock
in exchange for the Ordinary Share Consideration and the ADS Consideration.
The Company shall also pay any stamp duty or stamp duty reserve tax arising in
connection with the issue of the Parent ADSs and ADRs.
6.17 Rate Matters. During the period commencing on the date hereof and
ending on the Effective Date, the Company shall, and shall cause its
Subsidiaries to, obtain Parent's approval, not to be unreasonably withheld or
delayed, prior to initiating any general rate case and shall consult with
Parent prior to making any material changes in its or its Subsidiaries' rates
or charges, standards of service or accounting from those in effect on the
date hereof and shall further consult with Parent prior to making any filing
(or any amendment thereto), or effecting any agreement, commitment,
arrangement or consent, whether written or oral, formal or informal, with
respect thereto.
6.18 Tax Matters. Parent agrees that:
(a) Prior to the Closing Date, Parent will make an election pursuant to
Section 301.7701-3 of the U.S. Treasury regulations promulgated under the
Code to treat UKSub 1 and UKSub 2 as entities disregarded as separate from
the Parent and will not change such election during the period beginning on
the date such election is effective for U.S. federal income tax purposes
and ending on the date that is three years after the Closing Date.
(b) Throughout the period beginning on the date the election described in
Section 6.18(a) of this Agreement is effective for U.S. federal income tax
purposes and ending on the date that is three years after the Closing Date,
Parent: (i) will not make an election under Section 301.7701-3 of the U.S.
Treasury regulations to treat UKSub 1 or UKSub 2 as an association taxable
as a corporation; (ii) will directly own the whole of the share capital of
UKSub 1 and UKSub 2; and (iii) will cause UKSub 1 and UKSub 2 to directly
own all of the equity interests in the Partnership.
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(c) Throughout the period beginning at the Effective Time and ending on
the date that is three years after the Closing Date, the Partnership will
directly own all of the Common Stock of the Surviving Corporation, except
for contribution to a controlled subsidiary described in Code Section
368(a)(2)(C) and the regulations promulgated thereunder.
(d) Throughout the period beginning at the Effective Time and ending on
the date that is three years after the Closing Date, none of Parent, UKSub
1, UKSub 2, the Partnership, nor any other affiliate of Parent will redeem,
acquire, convert, exchange, or cause the Company or any affiliate of the
Company to acquire, convert or exchange or arrange for another person to
acquire, convert or exchange any of the ADS Consideration or the Ordinary
Share Consideration, unless Parent has received a written opinion of
counsel that such action will not cause those persons who were stockholders
of the Company at the time of the Merger to recognize gain or loss for US
federal income tax purposes either with respect to the Merger or with
respect to a subsequent exchange or conversion;
(e) Neither Parent nor any affiliate of Parent will, directly or
indirectly, pay any expense incurred by (i) the Company, (ii) any affiliate
of the Company or (iii) any Company stockholder, in each case, in
connection with the transactions contemplated by this Agreement.
(f) For a period of three years following the Closing Date, without the
receipt of a written opinion of counsel that such action will not affect
the tax-free status of the transactions contemplated by this Agreement,
neither Parent nor any affiliate of Parent, will, directly or indirectly,
(i) make contributions (whether or not in exchange for shares) or loan
additional funds to (x) the Company, (y) any affiliate of the Company or
(z) any escrow account, trust or other fund established to pay any expenses
incurred by the Company, any affiliate of the Company or any Company
stockholder in connection with the transactions contemplated by this
Agreement or (ii) permit the Company or any Company affiliate to incur
additional indebtedness guaranteed by Parent or any Parent affiliate;
(g) Neither Parent nor any affiliate of Parent will, directly or
indirectly reimburse (or otherwise pay) any amounts paid to the holders of
$1.28 Series, $1.18 Series or $1.16 Series no par serial preferred stock of
the Company in connection with the redemption of their preferred stock
prior to the Closing Date.
(h) Neither Parent nor any affiliate of Parent will, directly or
indirectly, acquire any Company stock except for the Company stock acquired
solely in exchange for the ADS Consideration or the Ordinary Share
Consideration unless acquired directly from the Company.
6.19 Dividends. Parent hereby acknowledges its intention, following the
Effective Time, to adopt a practice of paying, with respect to Parent's
Ordinary Shares and ADSs, quarterly dividends on regular quarterly dividend
dates in roughly equal amounts. After the date hereof, each of Parent and the
Company shall coordinate with the other with respect to the declaration of
dividends in respect of Parent Ordinary Shares and Company Common Stock and
the record dates and payment dates with respect thereto prior to the Effective
Time, with the intention that the holders of Company Common Stock receive
dividends in respect of the Company Common Stock for all periods prior to the
Effective Time but do not receive dividends on the ADS Consideration and the
Ordinary Share Consideration after the Effective Time in respect of periods
prior to the Effective Time.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved by the
requisite vote of the stockholders of the Company under the BCA. The
shareholders of Parent shall have approved the Merger
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and the creation of, and authorization of the Board of Directors to allot,
the Parent Ordinary Shares in connection with the Merger by the requisite
vote under applicable law or under the applicable regulations of any
national securities exchange, as the case may be.
(b) Registration Statement; State Securities Laws. The Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order suspending such effectiveness shall
have been issued and remain in effect and no proceeding seeking such an
order shall be pending or threatened. Parent shall have received all state
securities or "Blue Sky" permits and other authorizations necessary to
issue the Parent ADSs pursuant to this Agreement and under the Company
Stock Plans after the Merger.
(c) Exchange Listing. The LSE shall have agreed to admit to the Official
List (subject to allotment) the new Parent Ordinary Shares to be issued in
connection with the Merger and such agreement shall not have been withdrawn
and the Parent ADSs issuable to the Company stockholders in the Merger and
under the Company Stock Plans after the Merger in accordance with this
Agreement shall have been authorized for listing on the NYSE, upon official
notice of issuance.
(d) HSR Act. Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(e) Injunctions or Restraints. No court of competent jurisdiction or
other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making illegal or otherwise restricting, preventing or
prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement.
(f) Exon-Florio. The review and investigation under Exon-Florio shall
have been terminated and the President shall have taken no action
authorized thereunder.
(g) Power Act; Atomic Energy Act. The final approval of (i) the FERC and
(ii) the Nuclear Regulatory Commission under the Atomic Energy Act, with
respect to the Merger and the transactions contemplated by this Agreement
shall have been obtained.
(h) H.M. Treasury Consent. Parent shall have received consent from H.M.
Treasury pursuant to Section 765 of the U.K. Income and Corporation Taxes
Act 1988 in respect of the Merger and any other matter contemplated hereby,
or confirmation that no consent is required.
(i) Governmental and Regulatory Consents and Approvals. Other than the
filings provided for by Section 1.03 and any filing required in connection
with the registration or exemption of Parent under the 1935 Act, all
consents, approvals and actions of, filings with and notices to any
Governmental or Regulatory Authority (including under the HSR Act and Exon-
Florio Act and the approvals by FERC pursuant to the Power Act) required of
Parent, the Company or any of their Subsidiaries to consummate the Merger
and the other matters contemplated hereby shall have been made or obtained
(as the case may be) and become Final Orders (as defined in this Section
below), and such Final Orders shall not, individually or in the aggregate,
contain terms or conditions that would have, or would reasonably be
expected to have, a material adverse effect on the Surviving Corporation
and its Subsidiaries, taken as a whole. A "Final Order" means an action by
the relevant Governmental or Regulatory Authority that has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect
to which any waiting period prescribed by applicable law before the
transactions contemplated hereby may be consummated has expired, and as to
which all conditions to the consummation of such transactions prescribed by
applicable law, regulation or order have been satisfied.
(j) Other Consents and Approvals. The consent or approval of each person
(other than a Governmental or Regulatory Authority) whose consent or
approval is required of Parent, the Company or any of their Subsidiaries
under any Contract in order to consummate the Merger and the other
transactions contemplated hereby shall have been obtained, except for those
consents and approvals which, if not obtained, would not have, or would not
reasonably be expected to have, a material adverse effect on the
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Company and its Subsidiaries taken as a whole or on the ability of Parent
or the Company to consummate the transactions contemplated hereby.
(k) UK Fair Trading Act. Any of:
(i) the Office of Fair Trading (the "OFT") shall have indicated in
writing that the Secretary of State for Trade and Industry (the "SOS")
in the exercise of his powers under the Fair Trading Act 1973 (the
"FTA") does not intend to refer the Merger or any matter relating
thereto to the Monopolies and Mergers Commission ("MMC"); or
(ii) in the event of an MMC reference, the MMC shall have concluded
that the Merger does not or may not be expected to operate against the
public interest; or
(iii) if on a reference the MMC shall have concluded that the Merger
does or may be expected to operate against the public interest, the SOS
shall have indicated in writing that it is his intention to approve the
Merger,
provided that if any indication by the SOS referred to in (i) or (iii)
above is subject to undertakings, assurances or any other terms or
conditions, such undertakings, assurances, terms or conditions would not
have, or would reasonably be expected not to have, individually or in the
aggregate, a material adverse effect on the Parent Group taken as a whole.
(l) UK Regulators. Each of the Office of Electricity Regulation ("OFFER")
and the Office of Water Services ("OFWAT") shall have indicated:
(i) that it is not its intention to seek any modifications to any
conditions of the licenses or appointments held by any member of the
Parent Group under any applicable statute, law, regulation, order or
determination which would have, or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on
the Parent Group taken as a whole; and
(ii) that it will give such consents and/or directions (if any) as
are necessary or appropriate with respect to such licenses or
appointments in connection with the Merger on terms which would not
have, or would reasonably be expected not to have, individually or in
the aggregate, a material adverse effect on the Parent Group taken as a
whole.
(m) UK Undertakings/Assurances. Neither OFFER nor OFWAT shall have sought
undertakings or assurances from any member of the Parent Group which would
have, or would reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Parent Group taken as a whole.
7.02 Conditions to Obligation of Parent and the Merger Sub to Effect the
Merger. The obligation of Parent and Merger Sub to effect the Merger is
further subject to the fulfillment, at or prior to the Closing, of each of the
following additional conditions (all or any of which may be waived in whole or
in part by Parent and Merger Sub in their sole discretion):
(a) Representations and Warranties. The representations and warranties
made by the Company in this Agreement shall be true and correct, in all
material respects, taken as a whole, as of the Closing Date as though made
on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date, except as affected by the transactions
contemplated by this Agreement, and the Company shall have delivered to
Parent a certificate, dated the Closing Date and executed in the name and
on behalf of the Company by its Chairman of the Board, President or any
Executive or Senior Vice President, to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations, taken as a whole, which are required by this Agreement to be
so performed or complied with by the Company at or prior to the Closing,
and the
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Company shall have delivered to Parent a certificate, dated the Closing
Date and executed in the name and on behalf of the Company by its Chairman
of the Board, President or any Executive or Senior Vice President, to such
effect.
(c) Material Adverse Effect. Since the date of this Agreement, no
material adverse effect shall have occurred with respect to the Company and
its Subsidiaries taken as a whole and there shall exist no facts or
circumstances arising after the date hereof, which in the aggregate would,
or insofar as reasonably can be foreseen, could, when taken together with
any breaches or violations of any representations, warranties, covenants
and agreements of the Company contained herein, have a material adverse
effect on the Company and its Subsidiaries taken as a whole. For purposes
of this Section 7.02(c), (i) any tax benefits relating directly to the
structure of the transactions contemplated by this Agreement as of the date
hereof which are not realized by Parent, and (ii) any adverse effects on
the Company and its Subsidiaries resulting from general economic or
financial conditions, shall not be taken into account in determining
whether a material adverse effect has occurred under this Section 7.02(c).
(d) Tax Opinion. Parent and the Partnership shall have received the
opinion, based on appropriate representations of the Company and Parent, of
Milbank, Tweed, Hadley & McCloy, special counsel to Parent, dated on or
about the date on which the Registration Statement (or the last amendment
thereto) shall have become effective, which opinion shall have been
confirmed in writing on and as of the Closing Date, to the effect that the
Merger will constitute a "reorganization" within the meaning of Code
Section 368(a) and that no gain or loss will be recognized for US federal
income tax purposes by the stockholders of the Company who exchange Company
Common Stock for Parent ADSs or Merger Ordinary Shares pursuant to the
Merger (except with respect to cash received in lieu of fractional Parent
ADSs or Merger Ordinary Shares).
(e) Proceedings. All proceedings to be taken on the part of the Company
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Parent, and Parent shall have received copies of all such
documents and other evidences as Parent may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
7.03 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the
Company in its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Parent and Merger Sub in this Agreement shall be true and correct,
in all material respects, taken as a whole, as of the Closing Date as
though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, except as affected by the
transactions contemplated by this Agreement, and Parent and Merger Sub
shall each have delivered to the Company a certificate, dated the Closing
Date and executed in the name and on behalf of Parent by its Chairman of
the Board, President or any Executive or Senior Vice President and in the
name and on behalf of Merger Sub by its Chairman of the Board, President or
any Vice President, to such effect.
(b) Performance of Obligations. Parent and Merger Sub shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by Parent or Merger Sub at or prior to the Closing, and
Parent and Merger Sub shall each have delivered to the Company a
certificate, dated the Closing Date and executed in the name and on behalf
of Parent by its Chairman of the Board, President or any Executive or
Senior Vice President and in the name and on behalf of Merger Sub by its
Chairman of the Board, President or any Vice President, to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, no
material adverse effect shall have occurred with respect to Parent and its
Subsidiaries taken as a whole and there shall exist no facts or
circumstances arising after the date hereof which in the aggregate would,
or insofar as reasonably can be foreseen, could, when taken together with
any breaches or violations of any representations, warranties,
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<PAGE>
covenants and agreements of Parent contained herein, have a material
adverse effect on Parent and its Subsidiaries taken as a whole. For
purposes of this Section 7.03(c), any adverse effects on Parent and its
Subsidiaries resulting from general economic or financial conditions shall
not be taken into account in determining whether a material adverse effect
has occurred under this Section 7.03(c).
(d) Tax Opinion. The Company shall have received the opinion, based on
appropriate representations of the Company and Parent, of Stoel Rives LLP,
counsel to the Company, and LeBoeuf, Lamb, Greene & MacRae, LLP, special
counsel to the Company, dated on or about the date on which the
Registration Statement (or the last amendment thereto) shall have become
effective, which opinion shall have been confirmed in writing on and as of
the Closing Date to the effect that the Merger will constitute a
"reorganization" within the meaning of Code Section 368(a) and that no gain
or loss will be recognized for US federal income tax purposes by the
stockholders of the Company who exchange Company Common Stock for Parent
ADSs or Merger Ordinary Shares pursuant to the Merger (except with respect
to cash received in lieu of fractional Parent ADSs or Merger Ordinary
Shares).
(e) Proceedings. All proceedings to be taken on the part of Parent and
Merger Sub in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company, and the Company shall
have received copies of all such documents and other evidences as the
Company may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection
therewith.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after the Company Stockholders' Approval or the Parent
Shareholders' Approval:
(a) By mutual written agreement of the parties hereto duly authorized by
action taken by or on behalf of their respective Boards of Directors;
(b) By either the Company or Parent upon notification to the non-
terminating party by the terminating party:
(i) at any time after the date which is nine (9) months following the
date of this Agreement if the Merger shall not have been consummated on
or prior to such date and such failure to consummate the Merger is not
caused by a breach of this Agreement by the terminating party;
provided, however, that if on such date Parent and the Company have not
received all of the approvals required in order to satisfy the
conditions set forth in Section 7.01(i) but all other conditions to
effect the Merger shall be fulfilled or shall be capable of being
fulfilled, then, at the option of either Parent or the Company (which
shall be exercised by written notice), the term of this Agreement shall
be extended until the expiration of such date which is eighteen (18)
months after the date of this Agreement;
(ii) if the Company Stockholders' Approval or the Parent
Shareholders' Approval shall not be obtained by reason of the failure
to obtain the requisite vote upon a vote actually held at a meeting of
such stockholders or shareholders, or any adjournment thereof, called
therefor;
(iii) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the non-terminating
party set forth in this Agreement (determined in all cases as if the
terms "material" or "materially" were not included in any such
representation or warranty), which breach is not curable or, if
curable, has not been cured within thirty (30) days following receipt
by the non-terminating party of notice of such breach from the
terminating party which breach, when taken together with any other
breaches of representations, warranties, covenants and agreements of
the non-terminating party contained in this Agreement, has or would
reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole; or
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<PAGE>
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise preventing or prohibiting the Merger and such
order shall have become final and nonappealable;
(c) By the Company upon five (5) days' prior notice to Parent if (i) the
Board of Directors of the Company determines in good faith, that a failure
to terminate this Agreement could reasonably be expected to result in a
breach of its fiduciary duties to stockholders imposed by law by reason of
an unsolicited bona fide Alternative Proposal meeting the requirements of
clauses (B) and (C) of Section 5.07 having been made; provided that
(A) The Board of Directors of the Company shall have been advised by
outside counsel, that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into in
the proper exercise of its applicable fiduciary duties, and
notwithstanding all concessions which may be offered by Parent in
negotiations entered into pursuant to clause (B) below, a failure to
reconsider such commitment as a result of such Alternative Proposal
could reasonably be expected to result in a breach of its fiduciary
duties to stockholders imposed by law, and
(B) prior to any such termination, the Company shall, and shall cause
its respective financial and legal advisors to, negotiate with Parent
to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms;
and provided further that the Company's ability to terminate this Agreement
pursuant to this clause (i) is conditioned upon the prior payment by the
Company to Parent of any amounts owed by it pursuant to Section 8.02(b);
or (ii) the Board of Directors of Parent (or any committee thereof) shall
have withdrawn or modified in a manner materially adverse to the Company
its approval or recommendation of this Agreement or the Merger; or
(d) By Parent if the Board of Directors of the Company (or any committee
thereof) (i) shall have withdrawn or modified in a manner materially
adverse to Parent its approval or recommendation of this Agreement or the
Merger, (ii) shall fail to reaffirm such approval or recommendation upon
Parent's request, (iii) shall have approved, recommended or taken no
position with respect to an Alternative Proposal to the stockholders of the
Company or (iv) shall resolve to take any of the foregoing actions; or
(e) By the Company if there has been a Change of Control prior to the
Effective Time. A "Change of Control" shall occur if any of the following
applies: (A) Any "Person", as such term is used in Sections 13(d) and 14(d)
of the Exchange Act is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of Parent representing 30 percent or more of the combined voting power of
Parent's outstanding capital stock; (B) the shareholders of Parent approve
a merger or other consolidation of Parent with any other company, other
than a merger or consolidation effected to implement a recapitalization of
Parent (or similar transaction) in which no Person acquires more than 30
percent of the combined voting power of Parent's then outstanding
securities; (C) a tender or exchange offer is made for the ordinary shares
of Parent (or securities convertible into ordinary shares of Parent) and
such offer results in a portion of those securities being purchased and the
offeror after the consummation of the offer is the beneficial owner (as
determined pursuant to Section 13(d) of the Exchange Act), directly or
indirectly, of securities representing at least 30 percent of the voting
power of outstanding securities of Parent; or (D) Parent sells 30 percent
or more of its operating assets to a buyer that is not a member of Parent
controlled group of corporations.
8.02 Effect of Termination. (a) If this Agreement is validly terminated
by either the Company or Parent pursuant to Section 8.01, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of either the Company or Parent (or any of their respective
Representatives or affiliates), except (i) that the provisions of Sections
6.13, 6.14 and 6.16, this Section 8.02, and Sections 9.10 and 9.11 will
continue to apply following any such termination, (ii) that nothing contained
herein shall relieve any party hereto
50
<PAGE>
from liability for willful breach of its representations, warranties,
covenants or agreements contained in this Agreement and (iii) as provided in
paragraphs (b) and (c) below.
(b) In the event that any person or group shall have made an Alternative
Proposal and thereafter (i) this Agreement is terminated (x) by the Company
pursuant to Section 8.01(c)(i), (y) by Parent pursuant to Section
8.01(b)(iii) or Section 8.01(d) or (z) by either party pursuant to Section
8.01(b)(ii) as a result of the Company Stockholders' Approval not being
obtained or (ii) this Agreement is terminated for any other reason (other
than by reason of the breach of this Agreement by Parent or pursuant to
Section 8.01(b)(ii) as a result of the Parent Shareholders' Approval not
being obtained or Section 8.01(c)(ii)) or 8.01(e) and, in the case of this
clause (ii) only, a definitive agreement with respect to such Alternative
Proposal is executed within one year after such termination, then the
Company shall pay to Parent, by wire transfer of same day funds, either on
the date contemplated in Section 8.01(c) if applicable, or otherwise,
within two (2) business days after such amount becomes due, a termination
fee of $250,000,000.
(c) In the event that this Agreement is terminated by the Company
following a Change of Control, then Parent shall pay to the Company, by
wire transfer of same day funds, within two (2) business days following
such termination, a termination fee of $250,000,000.
(d) In the event that this Agreement is terminated by either party
pursuant to Section 8.01(b)(ii) in circumstances in which the termination
fee set forth in clause (b) above is not payable, (i) in the case of the
Company Stockholders' Approval not being obtained and the Parent
Shareholders' Approval having been obtained, the Company shall pay to
Parent or (ii) in the case of the Parent Shareholders' Approval not being
obtained and the Company Stockholders' Approval having been obtained,
Parent shall pay to the Company, in each case an amount equal to
$10,000,000.
(e) If the Company fails promptly to pay the amount due pursuant to the
preceding paragraphs, and in order to obtain such payment, Parent or Merger
Sub commences a suit which results in a judgment against the Company for
the fee set forth in such paragraph, the Company shall pay to Parent or
Merger Sub, as the case may be, its cost and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of The Chase Manhattan
Bank in effect on the date such payment was required to be made.
8.03 Amendment. This Agreement may be amended, supplemented or modified
by action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after the Company Stockholders' Approval or the Parent Shareholders' Approval
shall have been obtained, but after such adoption and approval only to the
extent permitted by applicable law. No such amendment, supplement or
modification shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto, by
action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable law (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on
behalf of the party extending the time of performance or waiving any such
inaccuracy or non-compliance. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
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<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article I and Article II, in
Sections 5.01(o), 5.02(k), 6.09, 6.10, 6.11, 6.12, 6.14, 6.16 and 6.18, this
Article IX and the agreements of the "affiliates" of the Company delivered
pursuant to Section 6.04, which shall survive the Effective Time.
9.02 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to Parent, the Partnership or Merger Sub, to:
Scottish Power plc
1 Atlantic Quay
Glasgow G2 8FP
Facsimile No.: 011-44-141-248-8300
Attn: Company Secretary
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, N.Y. 10005
Facsimile No.: (212) 530-5219
Attn: M. Douglas Dunn
and to:
Freshfields
65 Fleet Street
London EC4Y 1HS
Facsimile No.: 011-44-171-832-7001
Attn: Simon Marchant
If to the Company, to:
PacifiCorp
700 N.E. Multnomah
Portland, Oregon 97232-4116
Facsimile No.: (503) 813-7250
Attn: Executive Vice President and Chief Operating Officer
with a copy to:
Stoel Rives LLP
900 S.W. Fifth Avenue
Suite 2300
Portland, Oregon 97232
Facsimile No.: (503) 220-2480
Attn: Dexter E. Martin
and to:
LeBoeuf, Lamb, Greene & MacRae, LLP
125 West 55th Street
New York, NY 10019
Facsimile No.: (212) 424-8500
Attn: William S. Lamb
52
<PAGE>
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other person to
whom a copy of such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
9.03 Entire Agreement; Incorporation of Exhibits. (a) This Agreement
supersedes all prior discussions and agreements among the parties hereto with
respect to the subject matter hereof, other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement in
accordance with its terms, and contains, together with the Confidentiality
Agreement, the sole and entire agreement among the parties hereto with respect
to the subject matter hereof.
(b) The Company Disclosure Letter, the Parent Disclosure Letter and any
Exhibit or Schedule attached to this Agreement and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
9.04 Public Announcements. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system or any
other Regulatory Authority (including the U.K. Takeover Panel) , so long as
this Agreement is in effect, Parent and the Company will not, and will not
permit any of their respective Subsidiaries or Representatives to, issue or
cause the publication of any press release or make any other public
announcement with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be
unreasonably withheld. Parent and the Company will cooperate with each other
in the development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.
9.05 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Sections
6.09, 6.10, 6.11 and 6.12 (which are intended to be for the benefit of the
persons entitled to therein, and may be enforced by any of such persons), it
is not the intention of the parties to confer third-party beneficiary rights
upon any other person.
9.06 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without
the prior written consent of the other parties hereto and any attempt to do so
will be void, except that Parent may cause Merger Sub to assign any or all of
its rights, interests and obligations hereunder to another direct or indirect
wholly-owned Subsidiary of Parent, provided that any such Subsidiary agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.07 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define, modify or limit the
provisions hereof.
9.08 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law or order,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
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9.09 Governing Law. Except to the extent that the BCA is mandatorily
applicable to the Merger and the rights of the stockholders of the Constituent
Corporations, this Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and
performed in such State, without giving effect to the conflicts of laws
principles thereof.
9.10 Submission to Jurisdiction; Waivers. Each of Parent (on behalf of
itself and Merger Sub), the Partnership, UKSub 1, UKSub 2 and the Company
irrevocably agree that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by another party hereto or its successors or assigns may be brought
and determined in the Supreme Court of the State of New York in New York
County or in the United States District Court for the Southern District of New
York, and each of Parent (on behalf of itself and Merger Sub), the
Partnership, and the Company hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Any service of process to be made in such action or proceeding may be made by
delivery of process in accordance with the notice provisions contained in
Section 9.02. Each of Parent, the Partnership, Merger Sub, and the Company
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect
to this Agreement, (a) the defense of sovereign immunity, (b) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve process in accordance with this
Section 9.10, (c) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or
otherwise), and (d) to the fullest extent permitted by applicable law that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by
such courts.
9.11 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specified terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.12 Certain Definitions. As used in this Agreement:
(a) except as used in Sections 2.03(b), 3.02(c), 3.17 and 6.04, the term
"affiliate," as applied to any person, shall mean any other person directly
or indirectly controlling, controlled by, or under common control with,
that person; for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of that person, whether through the ownership
of voting securities, by contract or otherwise;
(b) a person will be deemed to " beneficially" own securities if such
person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time);
(c) the term "business day" means a day other than Saturday, Sunday or
any day on which banks located in the State of Oregon or London, England
are authorized or obligated to close;
(d) the term "knowledge" or any similar formulation of "knowledge" shall
mean, with respect to any party hereto, the actual knowledge after due
inquiry of the executive officers of Parent or the Company and its
Subsidiaries, respectively, set forth in Section 9.12(d) of the Parent
Disclosure Letter or Section 9.12(d) of the Company Disclosure Letter.
(e) any reference to any event, change or effect having a "material
adverse effect" on or with respect to an entity (or group of entities taken
as a whole) means such event, change or effect is materially adverse to the
business, properties, assets, liabilities, financial condition or results
of operations of such entity (or of such group of entities taken as a
whole);
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(f) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(g) the "Representatives" of any entity means such entity's directors,
officers, employees, legal, investment banking and financial advisors,
accountants and any other agents and representatives;
(h) except as used in Sections 3.02(d) and 3.17, the term "Subsidiary"
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which more than fifty percent
(50%) of either the equity interests in, or the voting control of, such
corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party.
9.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
55
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
Scottish Power PLC
By: /s/ Ian Robinson
------------------------------
Name: Ian Robinson
Title: Chief Executive
NA General Partnership
By: Scottish Power NA 2 Limited,
a General Partner
By: /s/ Ian Simon MacGregor Russell
----------------------------------
Name: Ian Simon MacGregor Russell
Title:
Pacificorp
By: /s/ Keith R. McKennon
----------------------------------
Name: Keith R. McKennon
Title: Chairman and Chief
Executive Officer
For purposes of Section 2.01 only:
Scottish Power NA 1 Limited
By: /s/ Ian Simon MacGregor Russell
----------------------------------
Name: Ian Simon MacGregor Russell
Title:
For purposes of Section 2.01 only:
Scottish Power NA 2 Limited
By: /s/ Ian Simon MacGregor Russell
----------------------------------
Name: Ian Simon MacGregor Russell
Title:
56
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Column A Column B
----------------- -----------------
<S> <C> <C>
Proportion of Parent Ordinary Shares
represented by Parent ADSs not more than 75% not less than 25%
Proportion of Merger Ordinary Shares not more than 75% not less than 25%
</TABLE>
A-1
<PAGE>
EXHIBIT B
[Form of Affiliate's Agreement]
[Date]
[name]
[address]
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of PacifiCorp, an Oregon corporation (the "Company"), as that term
is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Act"). Neither my entering into this agreement, nor anything contained
herein, shall be deemed an admission on my part that I am such an "affiliate".
Pursuant to the terms of the Agreement and Plan of Merger dated as of
December 6, 1998 (the "Merger Agreement"), among Scottish Power plc, a public
limited company incorporated under the laws of Scotland ("Parent"), NA General
Partnership, a Nevada general partnership (the "Partnership"), and the Company
providing for the merger of a wholly-owned subsidiary of the Partnership with
and into the Company (the "Merger"), and as a result of the Merger, I may
receive shares of Parent's American Depositary Shares, each representing four
Parent Ordinary Shares (the "Parent Securities"), in exchange for the shares
of common stock, without par value, of the Company owned by me at the
Effective Time (as defined in the Merger Agreement) of the Merger.
I represent and warrant to Parent that in such event:
A. I shall not make any sale, transfer or other disposition of the Parent
Securities in violation of the Act or the Rules and Regulations
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of Parent Securities, to the extent
I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form F-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company I may have been deemed to have been an
affiliate of the Company and a distribution by me of Parent Securities has
not been registered under the Act, the Parent Securities must be held by me
indefinitely unless (i) a distribution of Parent Securities by me has been
registered under the Act, (ii) a sale of Parent Securities by me is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act or (iii) in the opinion of counsel reasonably
acceptable to Parent, some other exemption from registration is available
with respect to a proposed sale, transfer or other disposition of the
Parent Securities by me.
<PAGE>
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of Parent Securities by me or on my behalf or
to take any other action necessary in order to make compliance with an
exemption from registration available.
E. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Securities and that
there will be placed on the certificates for the Parent Securities, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933, as amended, applies. The shares represented by this certificate
may only be transferred in accordance with the terms of an agreement
dated , , between the registered holder hereof and
(the "Corporation"), a copy of which agreement is on file
at the principal offices of the Corporation."
F. I also understand that unless the transfer by me of my Parent
Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the right to
put the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and were acquired from a
person who received such shares in a transaction to which Rule 145
promulgated under such Act applies. The shares have been acquired by
the holder not with a view to, or for resale in connection with, any
distribution thereof within the meaning of such Act and may not be
sold, pledged or otherwise transferred except in accordance with an
exemption from the registration requirements of such Act."
It is understood and agreed that the legends set forth in paragraph E and
F above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Parent a copy of a letter
from the staff of the Commission, or an opinion of counsel reasonably
acceptable to Parent to the effect that such legend is not required for
purposes of the Act.
Very truly yours,
-------------------------------------
Name:
Accepted this day of
, , by:
SCOTTISH POWER plc
By: _________________________________
Name:
Title:
2
<PAGE>
ANNEX B
Execution Copy
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
dated as of December 6, 1998,
as amended as of January 29, 1999 and February 9, 1999,
and amended and restated as of February 23, 1999,
by and among
NEW SCOTTISH POWER PLC,
SCOTTISH POWER PLC,
NA GENERAL PARTNERSHIP
and
PACIFICORP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience only.
<TABLE>
<CAPTION>
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No.
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<C> <S> <C>
ARTICLE I THE MERGER.................................................... 2
1.01 The Merger..................................................... 2
1.02 Closing........................................................ 2
1.03 Effective Time................................................. 2
1.04 Governing Instrument........................................... 2
1.05 Directors and Officers of the Surviving Corporation............ 3
1.06 Effects of the Merger.......................................... 3
1.07 Further Assurances............................................. 3
ARTICLE II CONVERSION OF SHARES......................................... 3
2.01 Conversion of Capital Stock.................................... 3
2.02 Procedure for Election......................................... 4
2.03 Exchange of Certificates....................................... 5
2.04 Withholding Rights............................................. 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 8
3.01 Organization and Qualification................................. 8
3.02 Capital Stock.................................................. 9
3.03 Authority Relative to this Agreement........................... 10
3.04 Non-Contravention; Approvals and Consents...................... 10
3.05 SEC Reports, Financial Statements and Utility Reports.......... 11
3.06 Absence of Certain Changes or Events........................... 12
3.07 Absence of Undisclosed Liabilities............................. 12
3.08 Legal Proceedings.............................................. 13
3.09 Information Supplied........................................... 13
3.10 Permits; Compliance with Laws and Orders....................... 13
3.11 Compliance with Agreements..................................... 14
3.12 Taxes.......................................................... 14
3.13 Employee Benefit Plans; ERISA.................................. 15
3.14 Labor Matters.................................................. 17
3.15 Environmental Matters.......................................... 17
3.16 Intellectual Property Rights................................... 19
3.17 Regulation as a Utility........................................ 19
3.18 Insurance...................................................... 19
3.19 Vote Required.................................................. 20
3.20 [Intentionally Omitted]........................................ 20
3.21 Ownership of HoldCo or ScottishPower Stock..................... 20
3.22 Article VII of the Company's Articles of Incorporation and
Sections 60.825-60.845 of the BCA Not Applicable............... 20
3.23 Certain Contracts.............................................. 20
3.24 Year 2000...................................................... 20
3.25 Joint Venture Representations.................................. 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDCO, SCOTTISHPOWER AND
THE PARTNERSHIP...................................................... 20
4.01 Organization and Qualification................................. 20
4.02 Capital Stock.................................................. 22
4.03 Authority Relative to this Agreement........................... 23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
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No.
----
<C> <S> <C>
4.04 Non-Contravention; Approvals and Consents........................ 23
4.05 SEC Reports and Financial Statements............................. 24
4.06 Absence of Certain Changes or Events............................. 25
4.07 Absence of Undisclosed Liabilities............................... 25
4.08 Legal Proceedings................................................ 25
4.09 Information Supplied............................................. 26
4.10 Permits; Compliance with Laws and Orders......................... 26
4.11 Compliance with Agreements....................................... 27
4.12 Taxes............................................................ 27
4.13 ScottishPower Employee Benefit Plans............................. 28
4.14 Labor Matters.................................................... 29
4.15 Environmental Matters............................................ 29
4.16 Intellectual Property Rights..................................... 31
4.17 Vote Required.................................................... 31
4.18 [Intentionally Omitted].......................................... 31
4.19 Ownership of Company Common Stock................................ 31
4.20 Insurance........................................................ 31
4.21 Year 2000........................................................ 32
4.22 Joint Venture Representations.................................... 32
ARTICLE V COVENANTS....................................................... 32
5.01 Covenants of the Company......................................... 32
5.02 Covenants of HoldCo and ScottishPower............................ 36
5.03 Joint Executive Committee........................................ 39
5.04 Tax Matters...................................................... 40
5.05 Discharge of Liabilities......................................... 40
5.06 Contracts........................................................ 40
5.07 No Solicitations................................................. 40
5.08 Conduct of Business of Merger Sub................................ 41
5.09 Third Party Standstill Agreements................................ 41
5.10 Control of Other Party's Business................................ 41
ARTICLE VI ADDITIONAL AGREEMENTS.......................................... 42
6.01 Access to Information............................................ 42
6.02 Preparation of Registration Statement and Proxy Statement........ 42
6.03 Approval of Shareholders......................................... 43
6.04 Company Affiliates............................................... 44
6.05 Auditors' Letters................................................ 44
6.06 Stock Exchange Listing; Deposit Agreement........................ 44
6.07 Restructuring of Merger.......................................... 44
6.08 Regulatory and Other Approvals................................... 45
6.09 Employee Benefit Plans........................................... 45
6.10 Company Stock Plan............................................... 45
6.11 Directors' and Officers' Indemnification and Insurance........... 46
6.12 HoldCo Governance; Additional Matters............................ 47
6.13 Expenses......................................................... 47
6.14 Brokers or Finders............................................... 47
6.15 Takeover Statutes................................................ 48
6.16 Conveyance Taxes................................................. 48
6.17 Rate Matters..................................................... 48
6.18 Tax Matters...................................................... 48
6.19 Dividends........................................................ 49
</TABLE>
ii
<PAGE>
<TABLE>
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No.
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<C> <S> <C>
ARTICLE VII CONDITIONS.................................................. 50
7.01 Conditions to Each Party's Obligation to Effect the Merger..... 50
Conditions to Obligation of HoldCo, ScottishPower and Merger
7.02 Sub to Effect the Merger....................................... 51
7.03 Conditions to Obligation of the Company to Effect the Merger... 52
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................... 53
8.01 Termination.................................................... 53
8.02 Effect of Termination.......................................... 55
8.03 Amendment...................................................... 56
8.04 Waiver......................................................... 56
ARTICLE IX GENERAL PROVISIONS........................................... 56
Non-Survival of Representations, Warranties, Covenants and
9.01 Agreements..................................................... 56
9.02 Notices........................................................ 56
9.03 Entire Agreement; Incorporation of Exhibits.................... 57
9.04 [Intentionally Omitted]........................................ 57
9.05 Public Announcements........................................... 57
9.06 No Third Party Beneficiary..................................... 58
9.07 No Assignment; Binding Effect.................................. 58
9.08 Headings....................................................... 58
9.09 Invalid Provisions............................................. 58
9.10 Governing Law.................................................. 58
9.11 Submission to Jurisdiction; Waivers............................ 58
9.12 Enforcement of Agreement....................................... 59
9.13 Certain Definitions............................................ 59
9.14 Counterparts................................................... 60
9.15 WAIVER OF JURY TRIAL........................................... 60
</TABLE>
<TABLE>
<C> <S>
SCHEDULES
SCHEDULE I Scheme Consents
SCHEDULE II Articles of Association of Holdco
EXHIBITS
EXHIBIT A Scheme of Arrangement
EXHIBIT B Allotment of Shares
EXHIBIT C Form of Affiliate Agreement
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
<TABLE>
<S> <C>
"1935 Act"............................................ Section 3.02(c)
"ADR Depositary"...................................... Section 2.01(e)
"ADR Holder Proposal.................................. Section 6.03(c)
"ADS Consideration"................................... Section 2.01(c)(i)
"Advisory Board"...................................... Section 6.12(b)
"affiliate"........................................... Section 9.12 (a)
"Affiliate Agreement"................................. Section 6.04
"Agreement"........................................... Preamble
"Alternative Proposal"................................ Section 5.08
"Antitrust Division".................................. Section 6.08
"Articles of Merger".................................. Section 1.03
"BCA"................................................. Section 1.01
"beneficially"........................................ Section 9.12(b)
"business day"........................................ Section 9.12(c)
"Certificates"........................................ Section 2.03(b)
"Circular"............................................ Section 3.09(b)
"Closing"............................................. Section 1.02
"Closing Date"........................................ Section 1.02
"Code"................................................ Preamble
"Companies Act"....................................... Section 4.02(a)
"Company"............................................. Preamble
"Company Affiliates".................................. Section 6.04
"Company Budget"...................................... Section 5.01(e)
"Company Common Stock"................................ Preamble
"Company Disclosure Letter"........................... Section 3.01(a)
"Company Employee Benefit Plan"....................... Section 3.13(b)(i)
"Company Financial Statements"........................ Section 3.05(a)
"Company Joint Venture"............................... Section 3.01(b)(ii)
"Company Option"...................................... Section 2.01(f)
"Company Option Plan"................................. Section 2.01(f)
"Company Permits"..................................... Section 3.10
"Company Preferred Stock"............................. Section 3.02(a)
"Company SEC Reports"................................. Section 3.05(a)
"Company Stock Option"................................ Section 6.10(a)
"Company Stockholders' Approval"...................... Section 6.03(b)
"Company Stockholders' Meeting"....................... Section 6.03(b)
"Confidentiality Agreement"........................... Section 6.01
"Constituent Corporations"............................ Section 1.01
"Contracts"........................................... Section 3.04(a)
"control," "controlling," "controlled by"
and "under common control with"...................... Section 9.12(a)
"Converted Shares".................................... Section 2.01(c)(i)
"DOE"................................................. Section 3.05(b)
"Effective Time"...................................... Section 1.03
"Election Date"....................................... Section 2.02(a)
"Environmental Claims"................................ Section 3.15(g)(i)
"Environmental Laws".................................. Section 3.15(g)(ii)
"Environmental Permits"............................... Section 3.15(b)
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
"ERISA"............................................. Section 3.13(b)(i)
"ERISA Affiliate"................................... Section 3.13(b)(iii)
"Exchange Act"...................................... Section 3.04(b)
"Exchange Agent".................................... Section 2.03(a)
"Exchange Fund"..................................... Section 2.03(a)
"FERC".............................................. Section 3.05(b)
"FSA"............................................... Section 3.09(b)
"FTA"............................................... Section 7.01(k)
"FTC"............................................... Section 6.08
"Governmental or Regulatory Authority".............. Section 3.04(a)
"group"............................................. Section 9.12(f)
"Hazardous Materials"............................... Section 3.15(g)(iii)
"HoldCo ADRs"....................................... Preamble
"HoldCo ADSs"....................................... Preamble
"HoldCo Employee Benefit Plans"..................... Section 4.13(b)
"HoldCo Group"...................................... Section 5.02(k)
"HoldCo Ordinary Shares"............................ Preamble
"HoldCo Share Schemes".............................. Section 4.02(a)
"HoldCo Special Share".............................. Schedule II
"HSR Act"........................................... Section 3.04(b)
"Intellectual Property"............................. Section 3.16
"Joint Executive Committee"......................... Section 5.03(a)
"Joint Venture"..................................... Section 301(b)(i)
"knowledge"......................................... Section 9.13(d)
"laws".............................................. Section 3.04(a)
"Lien".............................................. Section 3.02(b)
"Listing Particulars"............................... Section 3.09(b)
"LSE"............................................... Section 2.03(e)
"material adverse effect"........................... Section 9.12(e)
"Merger"............................................ Preamble
"Merger Consideration".............................. Section 2.01(c)(i)
"Merger Ordinary Shares"............................ Preamble
"Merger Sub"........................................ Preamble
"Merger Sub Common Stock"........................... Section 2.01
"MMC"............................................... Section 7.01(k)
"New Facilities".................................... Section 9.13(f)
"NYSE".............................................. Section 2.03(e)
"OFFER"............................................. Section 7.01(l)
"OFT"............................................... Section 7.01(k)
"OFWAT"............................................. Section 7.01(l)
"Options"........................................... Section 3.02(a)
"orders"............................................ Section 3.04(a)
"Ordinary Share Consideration"...................... Section 2.01(c)(i)
"Ordinary Share Election"........................... Section 2.02
"Ordinary Share Election Form"...................... Section 2.02
"Original Agreement"................................ Preamble
"Partnership"....................................... Preamble
"Partnership Agreement"............................. Section 4.01(a)
"Partnership Loan Note"............................. Section 2.01(e)
"person"............................................ Section 9.13(g)
"Plan".............................................. Section 3.12(b)(ii)
"Policies".......................................... Section 4.14(b)
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
"Power Act"......................................... Section 3.05(b)
"Proxy Statement"................................... Section 3.09(a)
"qualified stock options"........................... Section 6.10(a)
"RCF"............................................... Section 9.13(h)
"Registration Statement"............................ Section 4.09
"Release"........................................... Section 3.15(g)(iv)
"Representatives"................................... Section 9.13(i)
"Review Material"................................... Section 6.01
"Sales Price"....................................... Section 2.03(e)
"Scheme of Arrangement"............................. Preamble
"Scheme Consents"................................... Section 9.13(k)
"Scheme Date"....................................... Section 2.01(c)
"Scheme Document"................................... Section 9.13(l)
"ScottishPower"..................................... Preamble
"ScottishPower ADRs"................................ Preamble
"ScottishPower ADSs"................................ Preamble
"ScottishPower Budget".............................. Section 5.02(e)
"ScottishPower Disclosure Documents"................ Section 3.09(b)
"ScottishPower Disclosure Letter"................... Section 4.01(a)
"ScottishPower Employee Benefit Plans".............. Section 4.13
"ScottishPower Financial Statements"................ Section 4.05
"ScottishPower Joint Venture"....................... Section 3.01(b)(iii)
"ScottishPower Ordinary Shares"..................... Preamble
"ScottishPower Permits"............................. Section 4.10
"ScottishPower SEC Reports"......................... Section 4.05
"ScottishPower Share Schemes"....................... Section 4.02(a)
"ScottishPower Shareholders' Approval".............. Section 6.03(a)
"ScottishPower Shareholders' Meeting"............... Section 6.03(a)
"ScottishPower Special Share"....................... Section 4.02(a)
"SEC"............................................... Section 3.04(b)
"Secretary of State"................................ Section 1.03
"Securities Act".................................... Section 3.04(b)
"Share Transfer".................................... Preamble
"SOS"............................................... Section 7.01(k)
"Subsidiary"........................................ Section 9.13(j)
"Surviving Corporation"............................. Section 1.01
"Surviving Corporation Common Stock"................ Section 2.01
"taxes"............................................. Section 3.12(g)
"Trading Day"....................................... Section 2.03(e)
"UK Code"........................................... Section 6.03(a)
</TABLE>
vi
<PAGE>
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
December 6, 1998 and amended as of January 29, 1999 and February 9, 1999, and
amended and restated as of February 23, 1999 (this "Agreement"), is made and
entered into by and among NEW SCOTTISH POWER PLC, a public limited company
incorporated under the laws of Scotland ("HoldCo"), SCOTTISH POWER PLC, a
public limited company incorporated under the laws of Scotland
("ScottishPower"), NA GENERAL PARTNERSHIP, a Nevada general partnership
indirectly wholly owned by ScottishPower (the "Partnership"), and PACIFICORP,
an Oregon corporation (the "Company"), and, with respect to Section 2.01 hereof
only, Scottish Power NA 1 Limited, a limited liability company incorporated
under the laws of Scotland ("UKSub1") and Scottish Power NA 2 Limited, a
limited liability company incorporated under the laws of Scotland ("UKSub2").
WHEREAS, ScottishPower, the Partnership, UKSub1, UKSub2 and the Company
entered into an Agreement and Plan of Merger dated as of December 6, 1998 and
amended as of January 29, 1999 and February 9, 1999 (the "Original Agreement");
WHEREAS, HoldCo, ScottishPower, the Partnership, UKSub1, UKSub2 and the
Company wish to amend and restate the Original Agreement in its entirety,
effective as of the date set forth in Section 9.03(c);
WHEREAS, the Board of Directors of ScottishPower intends to recommend to
its shareholders a proposal to introduce HoldCo as a new holding company for
the ScottishPower group pursuant to a scheme of arrangement sanctioned by the
Court of Session, Edinburgh (the "Scheme of Arrangement"), substantially in the
form of the draft Scheme of Arrangement attached hereto as Exhibit A subject to
such amendments as ScottishPower may reasonably deem necessary or desirable;
provided, that if such amendments would have a material adverse effect on the
benefits of the Merger for the holders of Company Common Stock, such amendments
may only be effected with the prior written consent of the Company;
WHEREAS, pursuant to the Scheme of Arrangement, (A) all ordinary shares of
50 pence each of ScottishPower ("ScottishPower Ordinary Shares") will be
cancelled and the holders thereof will receive in place of the ScottishPower
Ordinary Shares then held by them an identical number of ordinary shares of 50
pence each of HoldCo ("HoldCo Ordinary Shares"), and (B) all ScottishPower
Ordinary Shares represented by American Depositary Shares of ScottishPower
("ScottishPower ADSs"), each representing four (4) ScottishPower Ordinary
Shares and evidenced by American Depositary Receipts ("ScottishPower ADRs"),
will be cancelled and the holders thereof will receive in place of the
ScottishPower ADSs then held by them an identical number of American Depositary
Shares of HoldCo ("HoldCo ADSs"), each representing four (4) HoldCo Ordinary
Shares and evidenced by American Depositary Receipts ("HoldCo ADRs");
WHEREAS, after the Scheme Date (as defined in Section 2.01) and prior to
the Closing Date (as defined in Section 1.02) ScottishPower shall transfer to
HoldCo all of the outstanding shares of UKSub 1 and UKSub 2 ("Share Transfer");
WHEREAS, the Boards of Directors of HoldCo, ScottishPower and the Company
and the partners of the Partnership, have each determined that it is advisable
and in the best interests of their respective stockholders and partners, as the
case may be, to consummate, and have approved, the business combination
transaction provided for herein in which Merger Sub (as defined below) would
merge with and into the Company and the Company would become an indirect,
wholly-owned subsidiary of HoldCo (the "Merger") pursuant to the terms of this
Agreement, whereby each issued and outstanding share of common stock of the
Company (the "Company Common Stock"), other than shares owned directly or
indirectly by HoldCo, ScottishPower, the Partnership, Merger Sub or the
Company, will be converted into the right to receive either (i) HoldCo ADSs
evidenced by HoldCo ADRs or (ii) HoldCo Ordinary Shares (the "Merger Ordinary
Shares");
WHEREAS, immediately prior to the Closing Date (as defined in Section
1.02), an Oregon corporation wholly-owned by the Partnership ("Merger Sub")
will be formed for the purpose of effectuating the Merger;
<PAGE>
WHEREAS, the respective Boards of Directors of HoldCo, ScottishPower and
the Company, and the partners of the Partnership, have determined that the
Merger is in furtherance of and consistent with their respective long-term
business strategies and is fair to and in the best interests of their
respective shareholders and stockholders, each of HoldCo and ScottishPower has
approved this Agreement and the Merger, UKSub 1 and UKSub 2 in their capacity
as general partners of the Partnership and as parties to Section 2.01 have
approved this Agreement and the Merger, and the Partnership has agreed that,
immediately following the formation of Merger Sub, it will approve this
Agreement and the Merger as the sole stockholder of Merger Sub;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, HoldCo, ScottishPower, the Partnership and the Company desire to
make certain representations, warranties and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.03), Merger Sub shall
be merged with and into the Company in accordance with the Business Corporation
Act of the State of Oregon (the "BCA"). At the Effective Time, the separate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). Merger Sub
and the Company are sometimes referred to herein as the "Constituent
Corporations". As a result of the Merger, the outstanding shares of capital
stock of the Constituent Corporations shall be converted and cancelled in the
manner provided in Article II.
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, and subject to the satisfaction or waiver (where applicable) of the
conditions set forth in Article VII, the consummation of the Merger (the
"Closing") will take place at the offices of Milbank, Tweed, Hadley & McCloy, 1
Chase Manhattan Plaza, New York, New York 10005, at 10:00 a.m., local time, on
the fifth business day following satisfaction or waiver (where applicable) of
the conditions set forth in Article VII, unless another date, time or place is
agreed to in writing by the parties hereto (the "Closing Date"). At the Closing
there shall be delivered to HoldCo, ScottishPower, the Partnership, Merger Sub
and the Company the certificates and other documents and instruments required
to be delivered under Article VII.
1.03 Effective Time. At the Closing, the parties shall cause to be duly
prepared and executed by the Company as the Surviving Corporation and Merger
Sub articles of merger (the "Articles of Merger") for filing on, or as soon as
practicable after, the Closing Date with the Secretary of State of the State of
Oregon (the "Secretary of State"), as provided in Section 60.494 of the BCA.
The Merger shall become effective at the time of the filing of the Articles of
Merger with the Secretary of State (such date and time being referred to herein
as the "Effective Time").
1.04 Governing Instrument. At the Effective Time, (i) the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation, and
(ii) the Bylaws of the Company as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided by law, the Articles of Incorporation of the Surviving Corporation
and such Bylaws.
2
<PAGE>
1.05 Directors and Officers of the Surviving Corporation. The individuals
listed on Schedule I shall, from and after the Effective Time, be the directors
and executive officers, respectively, of the Company as the Surviving
Corporation until their successors shall have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.
1.06 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the BCA.
1.07 Further Assurances. Each party hereto will, either prior to or after
the Effective Time, execute such further documents, instruments, deeds, bills
of sale, assignments and assurances and take such further actions as may
reasonably be requested by one or more of the other parties hereto to
consummate the Merger, to vest the Surviving Corporation with full title to all
assets, properties, privileges, rights, approvals, immunities and franchises of
either of the Constituent Corporations or to effect the other purposes of this
Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and, with respect to clauses (a)-(c), (f) and (g) hereof, without any
action on the part of the holder thereof:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of the
common stock of Merger Sub ("Merger Sub Common Stock") outstanding
immediately prior to the Effective Time shall be cancelled and the
Surviving Corporation shall issue to the Partnership at the Effective Time
such number of shares of common stock as is equal to the number of shares
of Merger Sub Common Stock, with the same rights, powers and privileges as
the Merger Sub Common Stock, and shall constitute the only outstanding
shares of common stock of the Surviving Corporation ("Surviving Corporation
Common Stock").
(b) Cancellation of Treasury Stock and Stock Owned by HoldCo,
ScottishPower and Subsidiaries. All shares of Company Common Stock that are
owned by the Company as treasury stock and any shares of Company Common
Stock owned by HoldCo, ScottishPower, the Partnership, Merger Sub or any
other wholly-owned Subsidiary (as defined in Section 9.12) of HoldCo or
ScottishPower, shall be canceled and retired and shall cease to exist and
no stock of HoldCo or other consideration shall be delivered in exchange
therefor.
(c) Conversion of Company Common Stock. (i) Each issued and outstanding
share of Company Common Stock (other than shares to be cancelled in
accordance with Section 2.01(b)), shall be converted into the right to
receive (A) .58 HoldCo ADSs (the "ADS Consideration"), or (B) if a properly
completed Ordinary Share Election Form (as defined in Section 2.02) shall
have been submitted to the Exchange Agent (as defined in Section 2.02) on a
timely basis with respect to such share of Company Common Stock, 2.32 fully
paid and nonassessable Merger Ordinary Shares (the "Ordinary Share
Consideration"; the Ordinary Share Consideration and the ADS Consideration
are each sometimes referred to herein as the "Merger Consideration"). All
shares of Company Common Stock to be converted into shares of HoldCo ADSs
or Merger Ordinary Shares pursuant to this Section 2.01(c) are hereinafter
referred to as "Converted Shares."
(ii) If, (A) prior to the time at which the Scheme of Arrangement becomes
effective (the "Scheme Date"), ScottishPower shall pay a dividend in,
subdivide, consolidate or, except pursuant to the Scheme of Arrangement,
issue by capitalization of its reserves, any ScottishPower Ordinary Shares
or (B) following the Scheme Date and prior to the Effective Time, HoldCo
shall pay a dividend in, subdivide, consolidate or issue by capitalization
of its reserves, any HoldCo Ordinary Shares, as applicable, the
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Merger Consideration shall be multiplied by a fraction, the numerator of
which shall be the number of ScottishPower Ordinary Shares or HoldCo
Ordinary Shares, as applicable, outstanding immediately after, and the
denominator of which shall be the number of such shares outstanding
immediately before, the occurrence of such event, and the resulting product
shall from and after the date of such event be the Merger Consideration
subject to further adjustment in accordance with this sentence.
(iii) All shares of Company Common Stock converted in accordance with
paragraph (i) of this Section 2.01(c) shall no longer be outstanding
and shall, as part of the consideration for the allotment and issue by
HoldCo referred to in Section 2.01(e) below, automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
and any cash in lieu of fractional HoldCo ADSs or Merger Ordinary
Shares (determined in accordance with Section 2.03(e)), upon the
surrender of such certificate in accordance with Section 2.03, without
interest.
(d) UKSub 1 shall continue to be the owner of a 90% general partnership
interest in the Partnership, and UKSub 2 shall continue to be the owner of
a 10% general partnership interest in the Partnership.
(e) As consideration for the acquisition by the Partnership of the
Surviving Corporation Common Stock in accordance with Section 2.01(a): (i)
the Partnership agrees to issue a loan note to HoldCo in the form and in an
amount to be mutually agreed upon by HoldCo and the Partnership (the
"Partnership Loan Note"), (ii) UKSub 1 agrees to allot and issue to HoldCo
fully paid ordinary shares of (Pounds)1 each and (iii) UKSub 2 agrees to
allot and issue to HoldCo fully paid ordinary shares of (Pounds)1 each. In
consideration of the other steps referred to in this Section 2.01
(including, to the extent set out in column A of Exhibit B attached hereto,
the issue of the Partnership Loan Note by the Partnership), HoldCo shall
allot and issue (i) the number of HoldCo Ordinary Shares represented by
HoldCo ADSs to be issued in the Merger to HoldCo's United States Depositary
(the "ADR Depositary") on behalf of the holders of Company Common Stock
entitled thereto for the purposes of giving effect to the conversion and
exchange referred to in this Article II, and (ii) the number of Merger
Ordinary Shares to be issued in the Merger. In consideration of the other
steps referred to in this Section 2.01 (including, to the extent set out in
column B of Exhibit B, the issues of ordinary shares by UKSub 1 and UKSub 2
referred to above), HoldCo shall allot and issue (i) the number of HoldCo
Ordinary Shares represented by HoldCo ADSs to be issued in the Merger to
the ADR Depositary on behalf of the holders of Company Common Stock
entitled thereto for the purposes of giving effect to the conversion and
exchange referred to in this Article II, and (ii) the number of Merger
Ordinary Shares to be issued in the Merger.
(f) Subject to the terms and conditions of the Company's Stock Incentive
Plan (the "Company Option Plan") and the stock option agreements executed
pursuant thereto, each option to purchase Company Common Stock granted
thereunder that is outstanding at the Effective Time (a "Company Option")
shall be converted into an option to acquire, on the same terms and
conditions as were applicable under the Company Option Plan at the
Effective Time, a number of (i) HoldCo ADSs equal to the ADS Consideration,
or (ii) Merger Ordinary Shares equal to the Ordinary Share Consideration,
in each case multiplied by the number of shares of Company Common Stock
subject to such option immediately prior to the Effective Time, on the
basis described in Section 6.10. The Company as the Surviving Corporation
and HoldCo shall take all action necessary to ensure that HoldCo has
control of the operation of the Company Option Plan and the Company
Restricted Stock Plans.
(g) Subject to Section 5.01 (c)(iv)(C), the Company Preferred Stock (as
defined below) shall not be affected by the Merger and shall continue to
have the same rights and preferences as were in effect prior to
consummation of the Merger.
2.02 Procedure for Election. At such time as shall be sufficient to permit
the holders of Company Common Stock to exercise their right to make an election
pursuant to this Section 2.02, HoldCo will make available to all holders of
Company Common Stock of record a letter of transmittal and election form and
other appropriate materials (collectively, the "Ordinary Share Election Form")
providing for such holder to elect to
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receive the Ordinary Share Consideration with respect to all or any portion of
such holder's shares of Company Common Stock ("Ordinary Share Election"). As of
the Election Date (as hereinafter defined), any share of Company Common Stock
with respect to which there shall not have been effected such election by
submission to the Exchange Agent (as defined in Section 2.03) of an effective,
properly completed Ordinary Share Election Form shall be converted in the
Merger into the right to receive the ADS Consideration.
(a) Any election to receive the Ordinary Share Consideration shall have
been validly made only if the Exchange Agent shall have received by 5:00
p.m., New York City time, on or prior to the Election Date, an Ordinary
Share Election Form properly completed and executed (with the signature or
signatures thereon guaranteed if required by the Ordinary Share Election
Form) by such holder of shares of Company Common Stock. As used herein,
"Election Date" means a date announced by HoldCo, in a news release
delivered to the Dow Jones News Service, as the last day on which an
Ordinary Share Election Form will be accepted; provided, however, that such
date shall be a business day no earlier than five (5) business days prior
to the date on which the Effective Time occurs and shall be at least five
(5), and not more than 20, business days following the date of such news
release; provided further, that, subsequent to such announcement, HoldCo
shall have the right to change such Election Date to a later date so long
as such later date is (i) at least five (5) business days following the
date of notice of such change and (ii) not later than the date on which the
Effective Time occurs. HoldCo shall have the right to make reasonable
determinations and to establish reasonable procedures (not inconsistent
with the terms of this Agreement) in guiding the Exchange Agent in its
determination as to the validity of Ordinary Share Election Forms and of
any revision, revocation or withdrawal thereof.
(b) Two or more holders of shares of Company Common Stock who are
determined to constructively own such shares owned by each other by virtue
of Section 318(a) of the Code and who so certify to HoldCo's reasonable
satisfaction, and any single holder of shares of Company Common Stock who
holds such shares in two or more different names and who so certifies to
HoldCo's reasonable satisfaction, may submit a joint Ordinary Share
Election Form covering the aggregate shares of Company Common Stock owned
by all such holders or by such single holder, as the case may be. For all
purposes of this Agreement, each such group of holders which, and each such
single holder who, submits a joint Ordinary Share Election Form shall be
treated as a single holder of shares of Company Common Stock.
(c) Record holders of shares of Company Common Stock who are nominees
only may submit a separate Ordinary Share Election Form for each beneficial
owner for whom such record holder is a nominee; provided, however, that, at
the request of HoldCo, such record holder shall certify to the reasonable
satisfaction of HoldCo that such record holder holds such shares as nominee
for the beneficial owner thereof. For purposes of this Agreement, each
beneficial owner for which an Ordinary Share Election Form is submitted
will be treated as a separate holder of shares of Company Common Stock
subject, however, to Section 2.02(b).
(d) Any holder of shares of Company Common Stock may at any time prior to
5:00 p.m. New York City time, on the Election Date revoke such holder's
election by written notice to the Exchange Agent received at any time prior
to 5:00 p.m., New York City time, on the Election Date.
2.03 Exchange of Certificates. (a) Exchange Agent. Promptly following the
Effective Time, (i) HoldCo shall issue to and deposit with the ADR Depositary,
for the benefit of the holders of shares of Company Common Stock converted into
the ADS Consideration in accordance with Section 2.01(c), HoldCo Ordinary
Shares in an amount sufficient to permit the ADR Depositary to issue HoldCo
ADRs representing the number of HoldCo ADSs issuable pursuant to Section
2.01(c) and (ii) HoldCo shall, for the benefit of the holders of the shares of
Company Common Stock converted into Merger Ordinary Shares in the Merger, make
available to the Surviving Corporation for deposit with a bank or trust company
designated before the Closing Date by HoldCo and reasonably acceptable to the
Company (the "Exchange Agent"), (A) certificates representing the number of
duly authorized whole Merger Ordinary Shares issuable in accordance with
Section 2.01(c), and (B) an amount of cash equal to the aggregate amount
payable in lieu of fractional HoldCo ADSs and Merger Ordinary Shares in
accordance with Section 2.03(e) (such cash, certificates representing Merger
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Ordinary Shares and HoldCo ADRs representing HoldCo ADSs, together with any
dividends or distributions with respect thereto being hereinafter referred to
as the "Exchange Fund"), to be held for the benefit of and distributed to the
holders of Converted Shares in accordance with this Section. The Exchange Agent
shall agree to hold such Merger Ordinary Shares and funds for delivery as
contemplated by this Section and upon such additional terms as may be agreed
upon by the Exchange Agent, the Company and HoldCo. HoldCo shall cause the ADR
Depositary to issue through and upon the instructions of the Exchange Agent,
for the benefit of the holders of shares of the Company Common Stock converted
into the ADS Consideration in accordance with Section 2.01(c), HoldCo ADRs
representing the number of HoldCo ADSs issuable pursuant to Section 2.01(c).
Neither HoldCo, ScottishPower, their respective affiliates nor holders of
Converted Shares shall be responsible for any stamp duty reserve tax payable in
connection with the ADS Consideration. The Exchange Agent shall invest any cash
included in the Exchange Fund as directed by the Surviving Corporation on a
daily basis. Any interest and other income resulting from such investments
shall promptly be paid to the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares are converted pursuant
to this Article II into the right to receive HoldCo ADSs or Merger Ordinary
Shares (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form
and have such other provisions as the Surviving Corporation or HoldCo may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing HoldCo ADRs which
represent HoldCo ADSs, and Merger Ordinary Shares and cash in lieu of
fractional HoldCo ADSs or Merger Ordinary Shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal duly executed and completed in accordance with its terms, the
holder of such Certificate shall be entitled to receive in exchange therefor
(i) one or more HoldCo ADRs representing, in the aggregate, that whole number
of HoldCo ADSs and/or a certificate or certificates representing that whole
number of Merger Ordinary Shares elected to be received in accordance with
Section 2.02, (ii) the amount of dividends or other distributions, if any, with
a record date on or after the Effective Time which theretofore became payable
with respect to such HoldCo ADSs and Merger Ordinary Shares, and (iii) the cash
amount payable in lieu of fractional HoldCo ADSs and Merger Ordinary Shares in
accordance with Section 2.03(e), in each case which such holder has the right
to receive pursuant to the provisions of this Article II, and the Certificate
so surrendered shall forthwith be canceled. In no event shall the holder of any
Certificate be entitled to receive interest on any funds to be received in the
Merger. In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, one or more HoldCo
ADRs representing, in the aggregate, that whole number of HoldCo ADSs and/or a
certificate or certificates representing that whole number of Merger Ordinary
Shares elected to be received in accordance with Section 2.02, plus the cash
amount payable in lieu of fractional HoldCo ADSs and Merger Ordinary Shares in
accordance with Section 2.03(e), may be issued to a transferee if the
Certificate representing such Company Common Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.03(b), each
Certificate shall be deemed at any time after the Effective Time for all
corporate purposes of HoldCo, except as limited by Section 2.03(c) below and
subject to applicable law, to represent ownership of the whole number of HoldCo
ADSs and/or Merger Ordinary Shares into which the number of shares of Company
Common Stock shown thereon have been converted as contemplated by this Article
II. Notwithstanding the foregoing, Certificates representing Company Common
Stock surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Section 6.04 shall not be exchanged until HoldCo has
received an Affiliate Agreement (as defined in Section 6.04) as provided in
Section 6.04.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared, made or paid after the Effective Time with
respect to HoldCo Ordinary Shares with a record date on or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the
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HoldCo ADSs and Merger Ordinary Shares represented thereby and no cash payment
in lieu of fractional HoldCo ADSs and Merger Ordinary Shares shall be paid to
any such holder pursuant to Section 2.03(e) until the holder of record of such
Certificate shall surrender such Certificate in accordance with this Section.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing the HoldCo ADRs which represent HoldCo ADSs and Merger Ordinary
Shares issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions, if any, with a
record date on or after the Effective Time which theretofore became payable,
but which were not paid by reason of the immediately preceding sentence, with
respect to such HoldCo ADSs and Merger Ordinary Shares and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date on or after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such HoldCo ADSs and
Merger Ordinary Shares.
(d) No Further Ownership Rights in Company Common Stock. All HoldCo ADSs
and Merger Ordinary Shares issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 2.03(e)) shall be deemed to have been issued at the
Effective Time in full satisfaction of all rights pertaining to the Converted
Shares represented thereby, subject, however, to the Surviving Corporation's
obligation to pay any dividends which may have been declared by the Company on
the shares of Company Common Stock in accordance with the terms of this
Agreement and which remained unpaid at the Effective Time. From and after the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers thereon of the shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section.
(e) No Fractional Shares. No certificate or scrip representing fractional
HoldCo ADSs or Merger Ordinary Shares will be issued in the Merger upon the
surrender for exchange of Certificates, and such fractional HoldCo ADS or
Merger Ordinary Share interests will not entitle the owner thereof to vote or
to any rights of a holder of HoldCo ADSs or Merger Ordinary Shares. In lieu of
any such fractional HoldCo ADS or Merger Ordinary Share, each holder of
Certificates who would otherwise have been entitled to a fraction of HoldCo ADS
or Merger Ordinary Share in exchange for such Certificates pursuant to this
Section shall receive from the Exchange Agent, as applicable, (i) a cash
payment in lieu of such fractional HoldCo ADS determined by multiplying (A) the
Sales Price (as defined below) of a HoldCo ADS on the last Trading Day (as
defined below) immediately preceding the Closing Date by (B) the fractional
HoldCo ADS interest to which such holder would otherwise be entitled, and/or
(ii) a cash payment in lieu of such fractional Merger Ordinary Share determined
by multiplying (A) the Sales Price of a HoldCo ADS Ordinary Share on the last
Trading Day immediately preceding the Closing Date by (B) the fractional Merger
Ordinary Share interest to which such holder would otherwise be entitled. The
term "Sales Price" shall mean, on any Trading Day, with respect to HoldCo ADSs,
the closing sales price of HoldCo ADSs reported on the New York Stock Exchange,
Inc. ("NYSE") Composite Tape on such day and, with respect to Merger Ordinary
Shares, the closing middle market quotation of a HoldCo Ordinary Share as
reported in the Daily Official List of the London Stock Exchange ("LSE") for
such date. The term "Trading Day" shall mean any day on which securities are
traded, with respect to HoldCo ADSs, on the NYSE, and with respect to HoldCo
Ordinary Shares, on the LSE.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of the Company for one (1) year after
the Effective Time shall be delivered to HoldCo, upon demand, and any holders
of Certificates who have not theretofore complied with this Article II shall
thereafter look only to HoldCo (subject to abandoned property, escheat and
other similar laws) as general creditors for payment of their claim for HoldCo
ADSs, Merger Ordinary Shares, any cash in lieu of fractional HoldCo ADSs and
Merger Ordinary Shares and any dividends or distributions with respect to
HoldCo ADSs and Merger Ordinary Shares. Neither HoldCo, ScottishPower nor the
Surviving Corporation shall be liable to any holder of any Certificate for
HoldCo ADSs or Merger Ordinary Shares (or dividends or distributions with
respect to either), or cash payable in respect of fractional HoldCo ADSs or
Merger Ordinary Shares, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by HoldCo,
the posting by such person of a bond in such reasonable amount as HoldCo may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby, any
cash in lieu of fractional HoldCo ADSs or Merger Ordinary Shares, and unpaid
dividends and distributions in respect of or on HoldCo ADSs or Merger Ordinary
Shares deliverable in respect thereof, pursuant to this Agreement.
2.04 Withholding Rights. Each of the Surviving Corporation and HoldCo
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law, including the tax laws of the United Kingdom. To the extent
that amounts are so withheld by the Surviving Corporation or HoldCo, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or HoldCo, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to HoldCo, ScottishPower, the
Partnership and Merger Sub, as of December 6, 1998 (except for the
representations and warranties contained in Sections 3.03 and 3.04, which are
made as of the date hereof), as follows:
3.01 Organization and Qualification. (a) Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize the concept of good standing) under
the laws of its jurisdiction of organization and has full corporate or
partnership, as the case may be, power and authority to conduct its business as
and to the extent now conducted and to own, use and lease its assets and
properties, except for such failures to be so organized, existing and in good
standing (with respect to jurisdictions which recognize the concept of good
standing) or to have such power and authority which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect (as defined in Section 9.12) on the Company and its
Subsidiaries taken as a whole. Each of the Company and its Subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing (with
respect to jurisdictions which recognize the concept of good standing) in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing (with respect to jurisdictions that
recognize the concept of good standing) which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
Section 3.01 of the letter dated December 6, 1998 and delivered to
ScottishPower, the Partnership and Merger Sub by the Company on such date (the
"Company Disclosure Letter") sets forth (i) the name and jurisdiction of
organization of each Subsidiary of the Company and (x) with respect to
Subsidiaries that are corporations, (a) such Subsidiary's authorized capital
stock, (b) the number of issued and outstanding shares of such Subsidiary's
capital stock and (c) the record owners of such Subsidiary's shares and, (y)
with respect to Subsidiaries that are partnerships, the names and ownership
interests of the partners thereof. The Company has previously delivered to
ScottishPower correct and complete copies of the certificate or articles of
incorporation and bylaws (or other comparable charter documents) of the Company
and its Subsidiaries.
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(b) Section 3.01 of the Company Disclosure Letter sets forth a description
as of December 6, 1998, of all Company Joint Ventures, including (i) the name
of each such entity and the Company's interest therein, and (ii) a brief
description of the principal line or lines of business conducted by each such
entity. For purposes of this Agreement:
(i) "Joint Venture" of a person or entity shall mean any corporation or
other entity (including partnerships and other business associations) that
is not a Subsidiary of such person or entity, in which such person or one
or more of its Subsidiaries owns directly or indirectly an equity interest,
other than equity interests which are less than 5% of each class of the
outstanding voting securities or equity interests of any such entity;
(ii) "Company Joint Venture" shall mean any Joint Venture of the Company
or any of its Subsidiaries; and
(iii) "Scottish Power Joint Venture" shall mean any Joint Venture of
ScottishPower, HoldCo or any of their respective Subsidiaries.
(c) Except for interests in the Subsidiaries of the Company, the Company
Joint Ventures and as disclosed in the Company SEC Reports (as defined in
Section 3.05) filed prior to December 6, 1998 or Section 3.01 of the Company
Disclosure Letter, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any material corporation,
partnership, limited liability company, joint venture or other business
association or entity (other than non-controlling investments in the ordinary
course of business and corporate partnering, development, cooperative marketing
and similar undertakings and arrangements entered into in the ordinary course
of business).
3.02 Capital Stock. (a) The authorized capital stock of the Company
consists of:
(i) 750 million shares of Company Common Stock, of which 297,335,056
shares were issued and outstanding as of November 30, 1998, and
(ii) 126,533 shares of 5% preferred stock, of which 126,533 were issued
and outstanding as of November 30, 1998, 3.5 million shares of serial preferred
stock, of which 288,499 were issued and outstanding as of November 30, 1998 and
of which 2,065 shares were designated the 4.52% Series, 18,060 shares were
designated the 7.00% Series, 5,932 shares were designated the 6.00% Series,
42,000 were designated the 5.00% Series, 65,960 were designated the 5.40%
Series, 69,890 were designated the 4.72% Series, and 84,592 were designated the
4.56% Series, respectively; and 16 million shares of no par serial preferred
stock, of which 2,744,438 were issued and outstanding as of November 30, 1998
and of which 381,220 shares were designated the $1.28 Series, 420,116 shares
were designated the $1.18 Series, 193,102 shares were designated the $1.16
Series, 1,000,000 shares were designated the $7.70 Series, and 750,000 shares
were designated the $7.48 Series, respectively (collectively, the "Company
Preferred Stock").
As of November 30, 1998, 28,817,971 shares of Company Common Stock were
reserved or held for issuance under the PacifiCorp Stock Incentive Plan, the
PacifiCorp Long Term Incentive Plan, the PacifiCorp K-Plus Employee Savings and
Stock Ownership Plan and the PacifiCorp Dividend Reinvestment and Stock
Purchase Plan. All of the issued and outstanding shares of Company Common Stock
are, and all shares reserved for issuance will be, upon issuance in accordance
with the terms specified in the instruments or agreements pursuant to which
they are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and except as described in
Section 3.02 of the Company Disclosure Letter, as of December 6, 1998 there
were no outstanding subscriptions, options, warrants, rights (including stock
appreciation rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion or exchange
under any outstanding security, instrument or agreement (together, "Options"),
obligating the Company or any of its Subsidiaries to issue or sell any shares
of capital stock of the Company or to grant, extend or enter into any Option
with respect thereto.
(b) Except as disclosed in the Company SEC Reports filed prior to December
6, 1998 or Section 3.02 of the Company Disclosure Letter, all of the
outstanding shares of capital stock of each Subsidiary of the
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Company are duly authorized, validly issued, fully paid and nonassessable and
are owned, beneficially and of record, by the Company or a Subsidiary wholly
owned, directly or indirectly, by the Company, free and clear of any liens,
claims, mortgages, encumbrances, pledges, security interests, equities and
charges of any kind (each a "Lien"), other than Liens or failures to so own
which are immaterial. Each outstanding share of Company Preferred Stock, other
than shares of the $1.28 Series, $1.18 Series and $1.16 Series of no par serial
preferred stock, is entitled to one vote per share, voting together with the
holders of Company Common Stock as a single class, on all matters generally
submitted to the stockholders of the Company for a vote. Except as disclosed in
the Company SEC Reports filed prior to December 6, 1998 or Section 3.02 of the
Company Disclosure Letter, there are no (i) outstanding Options obligating the
Company or any of its Subsidiaries to issue or sell any shares of capital stock
of any Subsidiary of the Company or to grant, extend or enter into any such
Option or (ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than the Company or a
Subsidiary wholly owned, directly or indirectly, by the Company with respect to
the voting of or the right to participate in dividends or other earnings on any
capital stock of any Subsidiary of the Company.
(c) None of the Subsidiaries of the Company or the Company Joint Ventures is
a "public utility company," a "holding company," a "subsidiary company" or an
"affiliate" of any public utility company within the meaning of Section
2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act
of 1935, as amended (the "1935 Act"), respectively.
(d) Except as disclosed in the Company SEC Reports filed prior to December
6, 1998 or Section 3.02 of the Company Disclosure Letter, there are no
outstanding contractual obligations of the Company or any Subsidiary of the
Company to repurchase, redeem or otherwise acquire any shares of Company Common
Stock or any material capital stock of any Subsidiary of the Company or to
provide any material amount of funds to, or make any material investment (in
the form of a loan, capital contribution or otherwise) in, any Subsidiary of
the Company or any other person.
3.03 Authority Relative to this Agreement. The Company has full corporate
power and authority to enter into this Agreement, and, subject to obtaining the
Company Stockholders' Approval (as defined in Section 6.03 (b)), to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of the Company, the
Board of Directors of the Company has recommended approval of this Agreement by
the stockholders of the Company and directed that this Agreement be submitted
to the stockholders of the Company for their consideration, and no other
corporate proceedings on the part of the Company or its stockholders are
necessary to authorize the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, other than obtaining the Company
Stockholders' Approval. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach
of, constitute (with or without notice or lapse of time or both) a default
under, result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of the
Company or any of its Subsidiaries or any of the Company Joint Ventures under,
any of the terms, conditions or provisions of (i) the certificates or articles
of incorporation or bylaws (or other comparable charter documents) of the
Company or any of its Subsidiaries, or (ii) subject to the obtaining of the
Company Stockholders' Approval and the taking
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of the actions described in Section 3.04(b), (x) any statute, law, rule,
regulation or ordinance (together, "laws"), or any judgment, decree, order,
writ, permit or license (together, "orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision (a "Governmental or Regulatory
Authority") applicable to the Company or any of its Subsidiaries or any of the
Company Joint Ventures or any of their respective assets or properties, or (y)
any note, bond, mortgage, security agreement, indenture, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind (together, "Contracts") to which the Company or any of
its Subsidiaries or any of the Company Joint Ventures is a party or by which
the Company or any of its Subsidiaries or any of the Company Joint Ventures or
any of their respective assets or properties is bound, excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches, defaults, rights
of payment and reimbursement, terminations, modifications, accelerations and
creations and impositions of Liens which, individually or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole or on the ability of the Company
to consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (ii) for the
filing of the Proxy Statement (as defined in Section 3.09) and the Registration
Statement (as defined in Section 4.09) with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), and the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), the declaration of the effectiveness of the
Registration Statement by the SEC and filings with various state securities
authorities that are required in connection with the transactions contemplated
by this Agreement, (iii) for the filing of an application under Section 203 and
any directly related Section of, or regulation under, the Power Act (as defined
in Section 3.05(b)) for the sale or disposition of jurisdictional facilities of
the Company; (iv) for the filing of the Articles of Merger and other
appropriate merger documents required by the BCA with the Secretary of State
and appropriate documents with the relevant authorities of other states in
which the Constituent Corporations are qualified to do business; and (v) as
disclosed in Section 3.04 of the Company Disclosure Letter, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority or other public or private third party is necessary or required under
any of the terms, conditions or provisions of any law or order of any
Governmental or Regulatory Authority or any Contract to which the Company or
any of its Subsidiaries or any of the Company Joint Ventures is a party or by
which the Company or any of its Subsidiaries or any of the Company Joint
Ventures or any of their respective assets or properties is bound for the
execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder or the consummation of the transactions
contemplated hereby, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be, individually
or in the aggregate, would not reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries taken as a whole or on the
ability of the Company to consummate the transactions contemplated by this
Agreement.
3.05 SEC Reports, Financial Statements and Utility Reports. (a) The Company
has delivered to ScottishPower a true and complete copy of each form, report,
schedule, registration statement, registration exemption, if applicable,
definitive proxy statement and other document (together with all amendments
thereof and supplements thereto) filed by the Company or any of its
Subsidiaries with the SEC since December 31, 1995 (as such documents have since
the time of their filing been amended or supplemented, the "Company SEC
Reports"), which are all the documents (other than preliminary materials) that
the Company and its Subsidiaries were required to file with the SEC since such
date. As of their respective dates, the Company SEC Reports (i) complied as to
form in all material respects with the requirements of the Securities Act or
the Exchange Act, if applicable, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes,
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if any, thereto) included in the Company SEC Reports (the "Company Financial
Statements") complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments (which are not expected to be, individually or in the
aggregate, materially adverse to the Company and its Subsidiaries taken as a
whole)) the consolidated financial position of the Company and its consolidated
subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows for the respective periods then ended. Except
as set forth in Section 3.05 of the Company Disclosure Letter, each Subsidiary
of the Company is treated as a consolidated subsidiary of the Company in the
Company Financial Statements for all periods covered thereby.
(b) All material filings required to be made by the Company or any of its
Subsidiaries since December 31, 1995, under the Federal Power Act (the "Power
Act") and applicable state laws and regulations, have been filed with the
Federal Energy Regulatory Commission (the "FERC"), the Department of Energy
(the "DOE") or any appropriate state public utilities commission (including,
without limitation, the state utility regulatory agencies of California, Idaho,
Montana, Oregon, Utah, Washington and Wyoming), as the case may be, including
all material written forms, statements, reports, agreements and all material
documents, exhibits, amendments and supplements appertaining thereto, including
but not limited to all material rates, tariffs, franchises, service agreements
and related documents, complied, as of their respective dates, in all material
respects with all applicable requirements of the appropriate statute and the
rules and regulations thereunder.
3.06 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to December 6, 1998 or Section 3.06 of the
Company Disclosure Letter, (a) between December 31, 1997 and December 6, 1998,
there has not been any change, event or development having, or that would
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries taken as a whole (other than
those changes, events or developments occurring as a result of general economic
or financial conditions or which are not unique to the Company and its
Subsidiaries but also affect other entities who participate or are engaged in
the lines of business in which the Company and its Subsidiaries are engaged),
and (b) between December 31, 1997 and December 6, 1998 (i) the Company, its
Subsidiaries and the Company Joint Ventures have conducted their respective
businesses only in the ordinary course substantially consistent with past
practice and (ii) neither the Company nor any of its Subsidiaries nor any of
the Company Joint Ventures has (x) acquired or agreed to acquire (by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner) any business or
any corporation, partnership, association or other business organization or
division thereof for a purchase price (including the amount of any indebtedness
assumed in connection therewith) of $25 million or more in any one transaction
or (y) sold, leased or otherwise disposed of any of its assets or properties
(or agreed to do so) other than dispositions in the ordinary course of business
consistent with past practice or having a net book value of $25 million or less
in any one transaction.
3.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period ended December 31, 1997
included in the Company Financial Statements or as disclosed in the Company SEC
Reports filed prior to December 6, 1998 or in Section 3.07 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries had at such
date, or has incurred since such date, any liabilities or obligations (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to become
due) of any nature that would be required by U.S. generally accepted accounting
principles to be reflected on a consolidated balance sheet of the Company and
its consolidated subsidiaries (including the notes thereto), except liabilities
or obligations (i) which were incurred in the ordinary course of business
consistent with past practice or (ii) which are not having, and would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries taken as a whole.
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3.08 Legal Proceedings. Except as disclosed in the Company SEC Reports
filed prior to December 6, 1998 or in Section 3.08 of the Company Disclosure
Letter and except for environmental matters which are governed by Section 3.15,
(i) there are no actions, suits, arbitrations or proceedings pending or, to the
knowledge of the Company, threatened against, nor to the knowledge of the
Company are there any Governmental or Regulatory Authority investigations or
audits pending or threatened against, the Company or any of its Subsidiaries or
any of the Company Joint Ventures or any of their respective assets and
properties which, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole or on the ability of the Company to consummate the
transactions contemplated by this Agreement, and (ii) neither the Company nor
any of its Subsidiaries is subject to any order of any Governmental or
Regulatory Authority which, individually or in the aggregate, is having or
would reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement.
3.09 Information Supplied. (a) The proxy statement relating to the Company
Stockholders' Meeting (as defined in Section 6.03(b)), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by the Company with the SEC
(including, without limitation, under the 1935 Act) in connection with the
Merger and the other transactions contemplated hereby will (in the case of the
Proxy Statement and any such other documents filed with the SEC under the
Exchange Act or the Securities Act), comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act, respectively,
and will not, on the date of its filing or, in the case of the Proxy Statement,
at the date it is mailed to stockholders of the Company and at the time of the
Company Stockholders' Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation is made by
the Company with respect to information supplied in writing by or on behalf of
HoldCo, ScottishPower, the Partnership or Merger Sub expressly for inclusion
therein and information incorporated by reference therein from documents filed
by HoldCo, ScottishPower or any of their respective Subsidiaries with the SEC.
(b) The information supplied or to be supplied by the Company for
inclusion in any filing by HoldCo or ScottishPower with the LSE in respect of
the Merger (including, without limitation, the Class 1 circular to be issued to
shareholders of ScottishPower (the "Circular"), and the listing particulars
under Part IV of the Financial Services Act 1986 of the United Kingdom (the
"FSA") relating to HoldCo Ordinary Shares (the "Listing Particulars") and the
Scheme Document (together with any amendments or supplements thereto, the
"ScottishPower Disclosure Documents") will, at all relevant times, include all
information relating to the Company, and information which is within the
knowledge of each of the directors of the Company (or which it would be
reasonable for them to obtain by making inquiries), which, in each case, is
required to enable the ScottishPower Disclosure Documents and the parties
hereto to comply in all material respects with all United Kingdom statutory and
other legal and regulatory provisions (including, without limitation, the
Companies Act (as defined in Section 4.02(a), the FSA and the rules and
regulations made thereunder, and the rules and requirements of the LSE) and all
such information contained in such documents will be substantially in
accordance with the facts and will not omit anything material likely to affect
the import of such information.
(c) Notwithstanding the foregoing provisions of this Section 3.09, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Registration Statement, the Proxy
Statement or the ScottishPower Disclosure Documents based on information
supplied by HoldCo, ScottishPower or the Partnership expressly for inclusion or
incorporation by reference therein or based on information which is not
incorporated by reference in such documents but should have been disclosed
pursuant to Section 4.09.
3.10 Permits; Compliance with Laws and Orders. The Company, its
Subsidiaries and the Company Joint Ventures hold all permits, licenses,
franchises, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities (other than environmental permits which are governed by
Section
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3.15) necessary for the lawful conduct of their respective businesses (the
"Company Permits"), except for failures to hold such Company Permits which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. The Company, its Subsidiaries and the Company Joint Ventures
are in compliance with the terms of the Company Permits, except failures so to
comply which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole. Except as disclosed in the Company SEC Reports
filed prior to December 6, 1998 or Section 3.10 of the Company Disclosure
Letter, the Company, its Subsidiaries and the Company Joint Ventures are not in
violation of or default under any law or order of any Governmental or
Regulatory Authority, except for such violations or defaults which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole.
3.11 Compliance with Agreements. Except as disclosed in the Company SEC
Reports filed prior to December 6, 1998 or Section 3.11 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries nor any of
the Company Joint Ventures nor, to the knowledge of the Company, any other
party thereto is in breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred which, with
notice or lapse of time or both, would reasonably be expected to result in a
default under, (i) the certificates or articles of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries
or (ii) any Contract to which the Company or any of its Subsidiaries or any of
the Company Joint Ventures is a party or by which the Company or any of its
Subsidiaries, or any of the Company Joint Ventures or any of their respective
assets or properties is bound, except in the case of clause (ii) for breaches,
violations and defaults which, individually or in the aggregate, are not having
and would not reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
3.12 Taxes. Except as disclosed in the Company SEC Reports filed prior to
December 6, 1998 or Section 3.12 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has filed all material tax
returns and reports required to be filed by it, or requests for extensions
to file such returns or reports have been timely filed or granted and have
not expired, and all tax returns and reports are complete and accurate in
all respects, except to the extent that such failures to either file, to
have extensions granted that remain in effect or to file returns complete
and accurate in all respects, as applicable, would not reasonably be
expected to have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries taken as a whole. The Company
and each of its Subsidiaries has paid (or the Company has paid on its
behalf) all taxes shown as due on such tax returns and reports. The most
recent financial statements contained in the Company SEC Reports reflect an
adequate reserve for all taxes payable by the Company and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of
such financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its
Subsidiaries that are not adequately reserved for, except for inadequately
reserved taxes and inadequately reserved deficiencies that would not
reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries taken as a
whole. No requests for waivers of the time to assess any taxes against the
Company or any of its Subsidiaries have been granted or are pending, except
for requests with respect to such taxes that have been adequately reserved
for in the most recent financial statements contained in the Company SEC
Reports, or, to the extent not adequately reserved, the assessment of which
would not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on the Company and its Subsidiaries taken as a
whole.
(b) Neither the Company nor any of its Subsidiaries has taken any action
or has any knowledge of any fact or circumstance that is reasonably likely
to prevent the Merger from qualifying as a tax-free reorganization within
the meaning of Code Section 368(a).
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(c) Neither the Company nor any of its Subsidiaries has filed a consent
under Code Section 341(f) concerning collapsible corporations, neither the
Company nor any of its Subsidiaries has made any payments, is obligated to
make any payment, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
(d) Each of the Company and its Subsidiaries has disclosed on its federal
income tax returns all positions taken therein that could give rise to a
substantial understatement of United States federal income tax within the
meaning of Code Section 6662.
(e) Neither the Company nor any of its Subsidiaries is a party to any tax
allocation or sharing agreement. Neither the Company nor any of its
Subsidiaries (i) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which was the Company) or (ii) has any material liability for the
taxes of any person (other than any of the Company and its Subsidiaries)
under United States Treasury Regulation Section 1.1502-6 (or any similar
provision or state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(f) As used in this Section 3.12 and in Section 4.12, "taxes" shall
include all federal, state, local and foreign income, franchise, gross
receipts, property, sales, use, excise, alternative-minimum, estimated and
other taxes and duties of any jurisdiction, including obligations for
withholding taxes from payments due or made to any other person and any
interest, penalties or additions to tax.
3.13 Employee Benefit Plans; ERISA. (a) Except as disclosed in the Company
SEC Reports filed prior to December 6, 1998 or Section 3.13 of the Company
Disclosure Letter or as would not reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries taken as a whole, (i) all
Company Employee Benefit Plans (as defined below) are in compliance with all
applicable requirements of law, including without limitation ERISA (as defined
below) and the Code, and (ii) neither the Company nor any of its Subsidiaries
has any liabilities or obligations with respect to any such Company Employee
Benefit Plans, whether accrued, contingent or otherwise, nor to the knowledge
of the Company are any such liabilities or obligations expected to be incurred.
Except as specifically set forth in Section 3.13 of the Company Disclosure
Letter, the execution of, and performance of the transactions contemplated in,
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Company Employee Benefit
Plan that will or would reasonably be expected to result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee. The only severance agreements or
severance policies applicable to the Company or any of its Subsidiaries are the
agreements and policies specifically referred to in Section 3.13 of the Company
Disclosure Letter.
(b) As used herein:
(i) "Company Employee Benefit Plan" means any Plan (other than any
"multiemployer plan," as that term is defined in Section 4001 of ERISA)
entered into, established, maintained, sponsored, contributed to or
required to be contributed to by the Company or any of its Subsidiaries for
the benefit of the current or former employees or directors of the Company
or any of its Subsidiaries and existing on December 6, 1998 or at any time
subsequent thereto and on or prior to the Effective Time and, in the case
of a Plan which is subject to Part 3 of Title I of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), Section 412 of the Code or Title IV of ERISA, at any
time during the five-year period immediately preceding December 6, 1998;
and
(ii) "Plan" means any employment, bonus, incentive compensation, deferred
compensation, long term incentive, pension, profit sharing, retirement,
stock purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, medical, accident, disability,
severance, separation, termination, change of control or other benefit
plan, agreement, practice, policy, program, scheme or arrangement, whether
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written or oral, and whether applicable to only one individual or a group
of individuals, including, but not limited to any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
(iii) "ERISA Affiliate" means any person, who on or before the Effective
Time, is under common control with the Company within the meaning of
Section 414 of the Code.
(c) Complete and correct copies of the following documents have been made
available to ScottishPower, as of December 6, 1998: (i) all material Company
Employee Benefit Plans and any related trust agreements or related insurance
contracts and pro forma option agreements, (ii) the most current summary plan
descriptions of each Company Employee Benefit Plan subject to the requirement
to give a summary plan description under ERISA, (iii) the most recent Form 5500
and Schedules thereto for each Company Employee Benefit Plan subject to such
reporting, (iv) the most recent determination of the Internal Revenue Service
with respect to the qualified status of each Company Employee Benefit Plan that
is intended to qualify under Section 401(a) of the Code, (v) the most recent
accountings with respect to each Company Employee Benefit Plan funded through a
trust, (vi) the most recent actuarial report of the qualified actuary of each
Company Employee Benefit Plan with respect to which actuarial valuations are
conducted.
(d) Except as disclosed in the Company SEC Reports filed prior to December
6, 1998 or Section 3.13 of the Company Disclosure Letter, neither the Company
nor any Subsidiary maintains or is obligated to provide benefits under any
life, medical or health Plan (other than as an incidental benefit under a Plan
qualified under Section 401(a) of the Code) which provides benefits to retirees
or other terminated employees other than benefit continuations rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(e) Except as set forth in Section 3.13 of the Company Disclosure Letter,
each Company Employee Benefit Plan covers only employees who are employed by
the Company or a Subsidiary (or former employees or beneficiaries with respect
to service with the Company or a Subsidiary), so that the transactions
contemplated by this Agreement will require no spin-off of assets and
liabilities or other division or transfer of rights with respect to any such
plan.
(f) Except as disclosed in the Company SEC Reports filed prior to December
6, 1998 or Section 3.13 of the Company Disclosure Letter, neither the Company,
any Subsidiary, any ERISA Affiliate nor any other corporation or organization
controlled by or under common control with any of the foregoing within the
meaning of Section 4001 of ERISA has at any time during the five (5) year
period preceding December 6, 1998 contributed to any "multiemployer plan", as
that term is defined in Section 4001 of ERISA. With respect to each
"multiemployer plan", as defined above, in which the Company, any Subsidiary or
any ERISA Affiliate participates or has participated, (i) neither the Company,
any Subsidiary nor any ERISA Affiliate has incurred, any material withdrawal
liability, (ii) neither the Company, any Subsidiary nor any ERISA Affiliate has
received any notice that (A) any such plan is being reorganized in a manner
that will result, or would reasonably be expected to result, in material
liability, (B) increased contributions of a material amount may be required to
avoid a reduction in plan benefits or the imposition of an excise tax, or (C)
any such plan is, or would reasonably be expected to become, insolvent, and
(iii) to the knowledge of the Company, there are no PBGC (as defined below)
proceedings against any such plan.
(g) Except as disclosed in the Company SEC Reports filed prior to December
6, 1998 or Section 3.13 of the Company Disclosure Letter, no event has
occurred, and there exists no condition or set of circumstances in connection
with any Company Employee Benefit Plan, under which the Company or any
Subsidiary, directly or indirectly (through any indemnification agreement or
otherwise), could reasonably be expected to be subject to any risk of material
liability under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of
ERISA or Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in liability
to the Pension Benefit Guaranty Corporation ("PBGC") under Section 302(c)(11),
4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to the Company,
any Subsidiary, HoldCo, ScottishPower or any corporation or organization
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controlled by or under common control with any of the foregoing within the
meaning of Section 4001 of ERISA, and, to the knowledge of the Company, no
event or condition exists or has existed which would reasonably be expected to
result in any material liability to the PBGC with respect to HoldCo,
ScottishPower, the Company, any Subsidiary or any such corporation or
organization. Except as set forth in Section 3.13 of the Company Disclosure
Schedule, no "reportable event" within the meaning of Section 4043 of ERISA has
occurred with respect to any Company Employee Benefit Plan that is a defined
benefit plan under Section 3(35) of ERISA other than "reportable events" as to
which the requirement of notice to the PBGC within thirty days has been waived.
(i) Except as set forth in Section 3.13 of the Company Disclosure
Schedule, no employer securities, employer real property or other employer
property is included in the assets of any Company Employee Benefit Plan.
(j) No stock appreciation rights are outstanding under the Company Stock
Incentive Plan or any other plan or arrangement maintained by the Company or
any affiliate of the Company.
3.14 Labor Matters. (a) Except as set forth in Section 3.14 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or other labor agreement with any union
or labor organization. Except as disclosed in the Company SEC Reports filed
prior to December 6, 1998 or in Section 3.14 of the Company Disclosure Letter,
there are no disputes pending or, to the knowledge of the Company, threatened
between the Company or any of its Subsidiaries or any of the Company Joint
Ventures and any trade union or other representatives of its employees, except
as would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the Company and its Subsidiaries taken as a whole,
and, to the knowledge of the Company, except as set forth in Section 3.14 of
the Company Disclosure Letter, there are no material organizational efforts
presently being made involving any of the now unorganized employees of the
Company or any of its Subsidiaries or any of the Company Joint Ventures. Since
December 31, 1995, there has been no work stoppage, or strike by employees of
the Company or any of its Subsidiaries or any of the Company Joint Ventures
except as would not, individually or in the aggregate, reasonably be expected
to have a material adverse effect on the Company and its Subsidiaries taken as
a whole.
(b) To the knowledge of the Company, neither the Company nor any of its
Subsidiaries nor any of the Company Joint Ventures is in material violation of
any labor laws in any country (or political subdivision thereof) in which they
transact business except for such violations as would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
3.15 Environmental Matters. Except as disclosed in the Company SEC Reports
filed prior to December 6, 1998 or in Section 3.15 of the Company Disclosure
Letter and except as would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole:
(a) (i) Each of the Company, its Subsidiaries and the Company Joint
Ventures is in compliance with all applicable Environmental Laws (as
hereinafter defined); and
(ii) Neither the Company nor any of its Subsidiaries nor any of the
Company Joint Ventures has received any written communication from any
person or Governmental or Regulatory Authority that alleges that the
Company or any of its Subsidiaries or any of the Company Joint Ventures is
not in such compliance with applicable Environmental Laws.
(b) Each of the Company, its Subsidiaries and the Company Joint Ventures
has obtained all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits") necessary for
the construction of its facilities and the conduct of its operations, as
applicable, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is
pending agency approval, and the Company, its Subsidiaries and
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the Company Joint Ventures are in compliance with all terms and conditions
of the Environmental Permits.
(c) There is no Environmental Claim (as hereinafter defined) pending
(i) against the Company or any of its Subsidiaries or any of the
Company Joint Ventures;
(ii) to the knowledge of the Company, against any person or entity
whose liability for any such Environmental Claim the Company or any of
its Subsidiaries or any of the Company Joint Ventures has or may have
retained or assumed either contractually or by operation of law; or
(iii) against any real or personal property or operations which the
Company or any of its Subsidiaries or any of the Company Joint Ventures
owns, leases or manages, in whole or in part.
(d) To the knowledge of the Company, there have not been any Releases (as
hereinafter defined) of any Hazardous Material (as hereinafter defined) that
would be reasonably likely to form the basis of any material Environmental
Claim against the Company or any of its Subsidiaries or any of the Company
Joint Ventures, or against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries or any of the
Company Joint Ventures has or may have been retained or assumed either
contractually or by operation of law.
(e) To the knowledge of the Company, with respect to any predecessor of
the Company or any of its Subsidiaries, there is no Environmental Claim pending
or threatened in writing, and there has been no Release of Hazardous Materials
that would be reasonably likely to form the basis of any Environmental Claim.
(f) There are no material facts specific to the Company that have not been
disclosed to ScottishPower which the Company reasonably believes are likely to
form the basis of a Environmental Claim against the Company or any of its
Subsidiaries or any of the Company Joint Ventures arising from (x) current
environmental remediation or mining reclamation costs of the Company, its
Subsidiaries and the Company Joint Ventures or such remediation or reclamation
costs known to be required in the future, or (y) any other environmental matter
affecting the Company or its Subsidiaries or any of the Company Joint Ventures.
(g) As used in this Section 3.15:
(i) "Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or written notices of noncompliance,
liability or violation by any person or entity (including any Governmental
or Regulatory Authority) alleging potential liability (including, without
limitation, potential responsibility or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its
Subsidiaries or any of the Company Joint Ventures; or
(B) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials;
(ii) "Environmental Laws" means all Federal, state and local laws, rules
and regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including,
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without limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials;
(iii) "Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls; and (b) any chemicals, materials or substances which are now
defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants", or
words of similar import, under any Environmental Law; and (c) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its Subsidiaries or any of the
Company Joint Ventures operates or any jurisdiction which has received such
chemical, material, substance or waste from the Company or its
Subsidiaries; and
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
3.16 Intellectual Property Rights. The Company and its Subsidiaries have
all right, title and interest in, or a valid and binding license to use, all
Intellectual Property (as defined below) individually or in the aggregate
material to the conduct of the businesses of the Company and its Subsidiaries
taken as a whole. Neither the Company nor any Subsidiary of the Company is in
default (or with the giving of notice or lapse of time or both, would be in
default) under any license to use such Intellectual Property and, to the
knowledge of the Company, such Intellectual Property is not being infringed by
any third party, and neither the Company nor any Subsidiary of the Company is
infringing any Intellectual Property of any third party, except for such
defaults and infringements which, individually or in the aggregate, are not
having and would not reasonably be expected to have a material adverse effect
on the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, "Intellectual Property" means patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names and service name rights, copyrights and
copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing.
3.17 Regulation as a Utility. (a) The Company is not regulated as a public
utility by any state other than the States of California, Idaho, Montana,
Oregon, Utah, Washington and Wyoming. Section 3.17 of the Company Disclosure
Letter lists each Subsidiary of the Company which is a public utility or is
otherwise engaged in the regulated supply (including generation, transmission
or distribution) of electricity, natural gas and/or telecommunications. Except
as set forth in Section 3.17 of the Company Disclosure Letter, neither the
Company nor any "subsidiary company" or "affiliate" of the Company is subject
to regulation as a public utility or public service company (or similar
designation) by any state in the United States or any foreign country. The
Company is not a public utility holding company under the 1935 Act.
(b) As used in this Section 3.17, the terms "subsidiary company" and
"affiliate" shall have the respective meanings ascribed to them in the 1935
Act.
3.18 Insurance. Except as set forth in Section 3.18 of the Company
Disclosure Letter, each of the Company and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary in
all material respects for companies conducting the business conducted by the
Company and its Subsidiaries during such time period. Except as set forth in
Section 3.18 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries has received any notice of cancellation or termination with
respect to any material insurance policy of the Company or any of its
Subsidiaries. The material insurance policies of the Company and each of its
Subsidiaries are valid and enforceable policies.
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3.19 Vote Required. Assuming the accuracy of the representation and
warranty contained in Section 4.19, the affirmative vote of the holders of
record of at least (i) a majority of voting power of the outstanding shares of
Company Common Stock and Company Preferred Stock voting together and (ii) a
majority of the voting power of the Company Preferred Stock voting separately
from the Company Common Stock as a single class with respect to the approval of
this Agreement are the only votes of the holders of any class or series of the
capital stock of the Company or its Subsidiaries required to approve this
Agreement and approve the Merger and the other transactions contemplated
hereby.
3.20 [Intentionally Omitted]
3.21 Ownership of HoldCo or ScottishPower Stock. Neither the Company nor
any of its Subsidiaries beneficially owns any ScottishPower Ordinary Shares,
ScottishPower ADSs, HoldCo Ordinary Shares or HoldCo ADSs.
3.22 Article VII of the Company's Articles of Incorporation and Sections
60.825-60.845 of the BCA Not Applicable. The Company has taken all necessary
actions so that neither the provisions of Article VII of the Company's Articles
of Incorporation nor the provisions of Sections 60.825-60.845 of the BCA (i.e.,
affiliated transactions and fair price provisions) will, before the termination
of this Agreement, apply to this Agreement or the Merger or the other
transactions contemplated hereby.
3.23 Certain Contracts. Except as set forth in Section 3.23 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries or Joint
Ventures is a party to, or bound by, any Contract containing any provision or
covenant prohibiting or materially limiting the ability of the Company or any
Company Subsidiary to engage in any business activity or compete with any
person.
3.24 Year 2000. The Company and its Subsidiaries have put into effect
practices and programs which the Company reasonably believes will enable all
material software, hardware and equipment (including microprocessors) that is
owned or utilized by the Company or any of its Subsidiaries in the operations
of its or their respective business to be capable, by December 31, 1999, of
accounting for all calculations using a century and date sensitive algorithm
for the year 2000 and the fact that the year 2000 is a leap year and to
otherwise continue to function without any material interruption caused by the
occurrence of the year 2000.
3.25 Joint Venture Representations. Each representation or warranty made
by the Company in this Article III relating to a Company Joint Venture that is
neither operated nor managed by the Company or a Subsidiary of the Company
shall be deemed to be made only to the Company's knowledge.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDCO, SCOTTISHPOWER AND
THE PARTNERSHIP
ScottishPower and HoldCo (each on behalf of itself and on behalf of Merger
Sub) and the Partnership represent and warrant to the Company as follows (which
representations and warranties (i) in respect of ScottishPower and its
Subsidiaries are made as of December 6, 1998 (except for the representations
and warranties contained in Sections 4.03 and 4.04, which are made as of the
date hereof), (ii) in respect of HoldCo and its Subsidiaries are made as of the
date of this Agreement and (iii) of ScottishPower and HoldCo on behalf of
Merger Sub shall only be true and correct as of the Closing Date), it being
agreed that HoldCo and ScottishPower shall not be in breach or deemed to be in
breach of any representation or warranty contained in this Article IV by virtue
of the fact that any Scheme Consent (as defined in Section 9.13(k)) has not
been obtained by the date of this Agreement:
4.01 Organization and Qualification. (a) Each of HoldCo, ScottishPower and
their respective Subsidiaries (other than the Partnership) is a corporation
duly incorporated, validly existing and in good standing (with respect to
jurisdictions which recognize the concept of good standing) under the laws of
its
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jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties, except for such failures to be so
incorporated, existing and in good standing (with respect to jurisdictions
which recognize the concept of good standing) or to have such power and
authority which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole. The
Partnership is a general partnership validly existing under the laws of the
State of Nevada. Each of the Partnership and Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement
(other than, with respect to the Partnership, in connection with the investment
of the initial partnership capital pursuant to or in accordance with the
Partnership Agreement, dated December 3, 1998, by and between UKSub 1 and UKSub
2 (the "Partnership Agreement")), has engaged in no other business activities
and has conducted its operations only as contemplated hereby (or, with respect
to the Partnership, as contemplated by the Partnership Agreement). HoldCo was
formed solely for the purpose contemplated by the Scheme of Arrangement and
this Agreement and has conducted its operations only as contemplated by the
Scheme of Arrangement and this Agreement. Except as disclosed in Section 4.01
of the ScottishPower Disclosure Letter (as defined below), each of UKSub 1 and
UKSub 2 was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated hereby. Each of
ScottishPower, HoldCo and their respective Subsidiaries is duly qualified,
licensed or admitted to do business and is in good standing (with respect to
jurisdictions which recognize the concept of good standing) in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing, admission or good standing necessary, except for such failures to be
so qualified, licensed or admitted and in good standing (with respect to
jurisdictions which recognize the concept of good standing) which, individually
or in the aggregate, are not having and would not reasonably be expected to
have a material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. Section 4.01 of the letter dated December 6,
1998 and delivered by ScottishPower and Merger Sub to the Company on such date
(the "ScottishPower Disclosure Letter") sets forth (i) the name and
jurisdiction of incorporation of each Subsidiary of ScottishPower, (ii) its
authorized capital stock, (iii) the number of issued and outstanding shares of
its capital stock and (iv) the record owners of such shares. ScottishPower has
previously delivered to the Company correct and complete copies of the
memorandum and articles of association and bylaws (or other comparable charter
documents) of ScottishPower and each of its Subsidiaries, and the Partnership
Agreement. As of the Scheme Date, the articles of association and bylaws (or
other comparable charter documents) of HoldCo shall substantially reflect the
principles set out in Schedule II, subject to amendments required to comply
with applicable law or the rules of the LSE and subject to such other
amendments as ScottishPower may reasonably deem necessary or desirable,
provided, that to the extent such other amendments deemed necessary or
desirable by ScottishPower would materially adversely affect the benefits of
the Merger for the holders of Company Common Stock, ScottishPower shall have
received the prior written consent of the Company.
(b) Section 4.01 of the ScottishPower Disclosure Letter sets forth a
description as of December 6, 1998, of all ScottishPower Joint Ventures,
including (i) the name of each such party and ScottishPower's interest therein,
and (ii) a brief description of the principal line or lines of business
conducted by each such entity.
(c) Except for interests in the Subsidiaries of ScottishPower and HoldCo
and as disclosed in Section 4.01 of the ScottishPower Disclosure Letter,
neither HoldCo nor ScottishPower directly or indirectly owns any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, (i) any material
corporation, partnership, joint venture or other business association or entity
(other than non-controlling investments in the ordinary course of business and
corporate partnering, development, cooperative marketing and similar
undertakings and arrangements entered into in the ordinary course of business)
or (ii) any other business association or entity the effect of which is having
or could reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole.
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4.02 Capital Stock. (a) The authorized share capital of ScottishPower
consists solely of (i) 1,700,000,000 ScottishPower Ordinary Shares, of which
1,198,629,102 shares were issued as of November 30, 1998, and (ii) one Special
Rights Non-Voting Redeemable Preference Share of (Pounds)1 (the "Special
Share") which was issued as of such date. The authorized share capital of
HoldCo consists solely of (i) 50,000 HoldCo ordinary shares of (Pounds)1 each
(to be subdivided into HoldCo Ordinary Shares of 50p each prior to the Scheme
Date), of which 2 were issued as of the date of this Agreement, and (ii) 49,998
non-voting redeemable ordinary shares of (Pounds)1 each, all of which were
issued as of the date of this Agreement, are held by ScottishPower and shall be
redeemed by HoldCo prior to the Effective Time. Since November 30, 1998, except
as disclosed in the ScottishPower SEC Reports filed prior to December 6, 1998,
Section 4.02 of the ScottishPower Disclosure Letter or pursuant to the Scheme
of Arrangement, there has been no change in the number of issued ScottishPower
Ordinary Shares other than the issuance of ScottishPower Ordinary Shares
pursuant to options or rights outstanding as of such date to subscribe or
purchase ScottishPower Ordinary Shares, which options or rights are described
in Section 4.02 of the ScottishPower Disclosure Letter. All of the issued
ScottishPower Ordinary Shares and HoldCo Ordinary Shares are, and all Merger
Ordinary Shares and all HoldCo Ordinary Shares to be issued to the ADR
Depositary pursuant to Section 2.01 will be, upon issuance, duly authorized,
validly issued and fully paid and voting, and no class of shares is entitled to
preemptive rights, except as provided in Section 89 of the Companies Act of
1985 of the United Kingdom (the "Companies Act"). Except pursuant to this
Agreement, the ScottishPower employee share schemes listed in Section 4.02 of
the ScottishPower Disclosure Letter (the "ScottishPower Share Schemes"), the
HoldCo employee share schemes established in connection with the Scheme of
Arrangement to replace the ScottishPower Share Schemes and which are in all
material respects similar to the ScottishPower Share Schemes (the "HoldCo Share
Schemes"), and except as disclosed in the ScottishPower SEC Reports filed prior
to December 6, 1998 or Section 4.02 of the ScottishPower Disclosure Letter, as
of December 6, 1998 there were no outstanding Options obligating HoldCo,
ScottishPower or any of their respective Subsidiaries to issue or sell any
capital or other shares of ScottishPower or HoldCo or to grant, extend or enter
into any Option with respect thereto.
(b) Except as disclosed in the ScottishPower SEC Reports filed prior to
December 6, 1998 or Section 4.02 of the ScottishPower Disclosure Letter, all of
the outstanding shares of each Subsidiary of HoldCo and ScottishPower are duly
authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by HoldCo or ScottishPower or a Subsidiary wholly
owned, directly or indirectly, by HoldCo or ScottishPower, free and clear of
any Liens. Immediately following the Scheme Date, all of the outstanding shares
of ScottishPower will be duly authorized, validly issued, fully paid and
nonassessable and owned, beneficially and of record, by HoldCo or its nominees.
Except as disclosed in the ScottishPower SEC Reports filed prior to December 6,
1998 or Section 4.02 of the ScottishPower Disclosure Letter, and except for the
Share Transfer, there are no (i) outstanding Options obligating HoldCo,
ScottishPower or any of their respective Subsidiaries to issue or sell any
shares of any Subsidiary of HoldCo or ScottishPower or to grant, extend or
enter into any such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
HoldCo or ScottishPower or a Subsidiary wholly owned, directly or indirectly,
by HoldCo or ScottishPower with respect to the voting of or the right to
participate in dividends or other earnings in respect of any shares of any
Subsidiary of HoldCo or ScottishPower.
(c) Other than (i) as disclosed in the ScottishPower SEC Reports filed
prior to December 6, 1998 or Section 4.02 of the ScottishPower Disclosure
Letter, (ii) the right of Holdco to redeem the 49,998 non-voting redeemable
shares held by ScottishPower and referred to in Section 4.02(a), (iii) the
right of the holder of the ScottishPower Special Share to require ScottishPower
to redeem the ScottishPower Special Share pursuant to the Articles of
Association of ScottishPower or, following the Scheme Date, the right of the
holder of the HoldCo Special Share (as defined in Schedule II) to require
HoldCo to redeem the HoldCo Special Share pursuant to the Articles of
Association of HoldCo, and (iv) pursuant to the Scheme of Arrangement or
pursuant to a proposed amendment to ScottishPower's Articles of Association
which will provide for shares in ScottishPower to be issued to an optionholder
under the ScottishPower Share Schemes to be transferred to HoldCo in
consideration for HoldCo issuing to the optionholder the same number of HoldCo
Ordinary Shares
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as the number of ScottishPower shares so issued under the ScottishPower
Schemes, there are no outstanding contractual obligations of HoldCo or
ScottishPower or any Subsidiary of HoldCo or ScottishPower to repurchase,
redeem or otherwise acquire any HoldCo Ordinary Shares or ScottishPower
Ordinary Shares or any shares of any Subsidiary of HoldCo or ScottishPower or
to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary of HoldCo or ScottishPower or any
other person.
(d) As of December 6, 1998, no bonds, debentures, notes or other
indebtedness of HoldCo or ScottishPower having the right to vote on any matters
on which shareholders may vote are issued or outstanding.
4.03 Authority Relative to this Agreement. Each of HoldCo, ScottishPower,
the Partnership and Merger Sub (and, with respect to Section 2.01 only, UKSub 1
and UKSub 2) has full power and authority to enter into this Agreement, and,
subject (in the case of this Agreement) to obtaining the ScottishPower
Shareholders' Approval (as defined in Section 6.03(a)) and the Scheme Consents,
to perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of HoldCo, ScottishPower, the Partnership and Merger Sub (and, with
respect to Section 2.01 only, UKSub 1 and UKSub 2) and the consummation by each
of HoldCo, ScottishPower, the Partnership and Merger Sub (and, with respect to
Section 2.01 only, UKSub 1 and UKSub 2) of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of HoldCo,
ScottishPower and Merger Sub (and, with respect to Section 2.01 only, UKSub 1
and UKSub 2) and the general partners of the Partnership, and by the
Partnership in its capacity as sole stockholder of Merger Sub. The Board of
Directors of ScottishPower has passed a resolution declaring the advisability
of the Merger and resolving that the Merger be submitted for consideration by
the shareholders of ScottishPower. The Board of Directors of HoldCo has passed
a resolution approving the Merger. No other corporate proceedings on the part
of HoldCo, ScottishPower or Merger Sub or their shareholders, or the
Partnership or its general partners are necessary to authorize the execution,
delivery and performance of this Agreement by HoldCo, ScottishPower, the
Partnership or Merger Sub (and, with respect to Section 2.01 only, UKSub 1 and
UKSub 2) and the consummation by HoldCo, ScottishPower, the Partnership and
Merger Sub (and, with respect to Section 2.01 only, UKSub 1 and UKSub 2) of the
transactions contemplated hereby, other than obtaining the ScottishPower
Shareholders' Approval and the Scheme Consents, and to the Scheme of
Arrangement becoming effective. This Agreement has been duly and validly
executed and delivered by each of HoldCo, ScottishPower, the Partnership and
Merger Sub (and, with respect to Section 2.01 only, UKSub 1 and UKSub 2) and
constitutes a legal, valid and binding obligation of each of HoldCo,
ScottishPower, the Partnership and Merger Sub (and, with respect to Section
2.01 only, UKSub 1 and UKSub 2) enforceable against each of HoldCo,
ScottishPower, the Partnership and Merger Sub (and, with respect to Section
2.01 only, UKSub 1 and UKSub 2) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents. (a) Subject to the
requirement to obtain the Scheme Consents, the execution and delivery of this
Agreement by each of HoldCo, ScottishPower, the Partnership and Merger Sub
(and, with respect to Section 2.01 only, UKSub 1 and UKSub 2) do not, and the
performance by each of HoldCo, ScottishPower, the Partnership and Merger Sub
(and, with respect to Section 2.01 only, UKSub 1 and UKSub 2) of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures under, any of the terms, conditions or provisions
of (i) the memorandum or articles of association or bylaws (or other comparable
charter documents) of HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures, (ii) the Partnership
Agreement, or (iii) subject to the obtaining of the ScottishPower Shareholders'
Approval and the
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taking of the actions described in paragraph (b) of this Section, (x) any laws
or orders of any Governmental or Regulatory Authority applicable to HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures or any of their respective assets or properties,
or (y) any Contracts to which HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures is a party or by which
HoldCo, ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures or any of their respective assets or properties is
bound, excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, rights of payment or reimbursement, terminations,
modifications, accelerations and creations and impositions of Liens which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole or on the ability of HoldCo, ScottishPower, the
Partnership and Merger Sub to consummate the transactions contemplated by this
Agreement.
(b) Except (i) for the filing of a premerger notification report by
ScottishPower under the HSR Act, (ii) for the filing of the Registration
Statement with the SEC pursuant to the Securities Act, the declaration of the
effectiveness of the Registration Statement by the SEC and filings with various
state securities authorities that are required in connection with the
transactions contemplated by this Agreement, (iii) for the filing of the
Articles of Merger and other appropriate merger documents required by the BCA
with the Secretary of State and appropriate documents with the relevant
authorities of other states in which the Constituent Corporations are qualified
to do business, (iv) for the filings with, notices to, and approvals of, the
LSE and NYSE, (v) the filing of a notice pursuant to Section 721 of the Defense
Production Act of 1950, or any successor thereto ("Exon-Florio"), (vi) the
approval of the FERC pursuant to the Power Act, (vii) the approval of any
jurisdictional state regulating agencies, (viii) the giving of indications by
the OFT, SOS, OFFER and OFWAT as described in Sections 7.01(k) and (l), (ix) as
disclosed in Section 4.04 of the ScottishPower Disclosure Letter and (x) for
the Scheme Consents, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or private third
party is necessary or required under any of the terms, conditions or provisions
of any law or order of any Governmental or Regulatory Authority or any Contract
to which HoldCo, ScottishPower or any of their respective Subsidiaries or any
of the ScottishPower Joint Ventures is a party or by which HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures or any of their respective assets or properties is
bound for the execution and delivery of this Agreement by each of HoldCo,
ScottishPower, the Partnership and Merger Sub, the performance by each of
HoldCo, ScottishPower, the Partnership and Merger Sub of its obligations
hereunder or the consummation of the transactions contemplated hereby other
than such consents, approvals, actions, filings and notices which the failure
to make or obtain, as the case may be, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole or on the
ability of HoldCo, ScottishPower, the Partnership and Merger Sub to consummate
the transactions contemplated by this Agreement.
4.05 SEC Reports and Financial Statements. (a) ScottishPower has delivered
to the Company a true and complete copy of each form, report, schedule,
registration statement, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) filed by HoldCo,
ScottishPower or any of their respective Subsidiaries with the SEC since
December 31, 1995 (as such documents have since the time of their filing been
amended or supplemented, the "ScottishPower SEC Reports"), which are all the
documents (other than preliminary materials) that HoldCo, ScottishPower and
their respective Subsidiaries were required to file with the SEC since such
date. As of their respective dates, the ScottishPower SEC Reports (i) complied
as to form in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in
the ScottishPower SEC Reports (the "ScottishPower Financial Statements")
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles in the United
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Kingdom applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements) and fairly present (subject, in the case of the unaudited
interim financial statements, to normal, recurring year-end audit adjustments
(which are not expected to be, individually or in the aggregate, materially
adverse to HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole)) the consolidated financial position of ScottishPower and, in respect of
periods ending after the Scheme Date, HoldCo and their respective consolidated
subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows for the respective periods then ended. Except
as set forth in Section 4.05 of the ScottishPower Disclosure Letter, each
Subsidiary of ScottishPower and, after the Scheme Date, of Holdco is treated as
a consolidated subsidiary of ScottishPower or HoldCo, as the case may be, in
the ScottishPower Financial Statements for all periods covered thereby.
(b) All material filings required to be made by ScottishPower or any of
its Subsidiaries since December 31, 1995 in the United Kingdom under the
Electricity Act 1989, the Water Industry Act 1991, the Water Resources Act 1991
and the Telecommunications Act 1984 have been filed with OFFER, OFWAT and the
Office of Telecommunications Services or any other appropriate Governmental or
Regulatory Authority, as the case may be, including all material forms,
statements, reports, agreements and all material documents, exhibits,
amendments and supplements appertaining thereto, including but not limited to
all material rates, tariffs, franchises, service agreements and related
documents, complied, as of their respective dates, in all material respects
with all applicable requirements of the statute and the rules and regulations
thereunder.
4.06 Absence of Certain Changes or Events. Except as disclosed in the
ScottishPower SEC Reports filed prior to December 6, 1998 or Section 4.06 of
the ScottishPower Disclosure Letter, (a) since March 31, 1998 there has not
been any change, event or development having, or that would reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on HoldCo, ScottishPower and their respective Subsidiaries taken as a whole
(other than those changes, events, or developments occurring as a result of
general economic or financial conditions or which are not unique to HoldCo,
ScottishPower and their respective Subsidiaries but also affect other entities
who participate or are engaged in the lines of business in which HoldCo,
ScottishPower and their respective Subsidiaries are engaged), and (b) between
March 31, 1998 and December 6, 1998 ScottishPower, its Subsidiaries and the
ScottishPower Joint Ventures have conducted their respective businesses only in
the ordinary course substantially consistent with past practice.
4.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period ended March 31, 1998
included in the ScottishPower Financial Statements or as disclosed in Section
4.07 of the ScottishPower Disclosure Letter, neither HoldCo, ScottishPower nor
any of their respective Subsidiaries had at such date, or has incurred since
that date, any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any nature
that would be required by generally accepted accounting principles in the
United Kingdom to be reflected on a consolidated balance sheet of ScottishPower
and, in respect of periods ending after the Scheme Date, HoldCo and their
respective consolidated subsidiaries (including the notes thereto), except
liabilities or obligations (i) which were incurred in the ordinary course of
business consistent with past practice or (ii) which have not been, and would
not reasonably be expected to be, individually or in the aggregate, materially
adverse to HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole.
4.08 Legal Proceedings. Except as disclosed in the ScottishPower SEC
Reports filed prior to December 6, 1998 or in Section 4.08 of the ScottishPower
Disclosure Letter and except for environmental matters which are governed by
Section 4.15, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of HoldCo or ScottishPower, threatened against,
nor to the knowledge of HoldCo or ScottishPower are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
HoldCo, ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures or any of their respective assets and properties
which, individually or in the aggregate, would reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole or on the ability of HoldCo, ScottishPower, the
Partnership and Merger Sub to consummate the transactions contemplated by this
Agreement, and (ii) neither HoldCo, ScottishPower nor any
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of their respective Subsidiaries nor any of the ScottishPower Joint Ventures is
subject to any order of any Governmental or Regulatory Authority which,
individually or in the aggregate, is having or would reasonably be expected to
have a material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole or on the ability of HoldCo, ScottishPower, the
Partnership and Merger Sub to consummate the transactions contemplated by this
Agreement.
4.09 Information Supplied. (a) The registration statement on Form F-4 to
be filed with the SEC by HoldCo in connection with the issuance of HoldCo ADSs
in the Merger, as amended or supplemented from time to time (as so amended and
supplemented, the "Registration Statement"), and any other documents to be
filed by HoldCo or ScottishPower with the SEC or any other Governmental or
Regulatory Authority in connection with the Merger and the other transactions
contemplated hereby will (in the case of the Registration Statement and any
such other documents filed with the SEC under the Securities Act or the
Exchange Act) comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act, respectively, and will not, on the
date of its filing or, in the case of the Registration Statement, at the time
it becomes effective under the Securities Act, or at the date the Proxy
Statement is mailed to stockholders of the Company and at the time of the
Company Stockholders' Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation is made by
HoldCo, ScottishPower, the Partnership or Merger Sub with respect to
information supplied in writing by or on behalf of the Company expressly for
inclusion therein and information incorporated by reference therein from
documents filed by the Company or any of its Subsidiaries with the SEC.
(b) The ScottishPower Disclosure Documents will, at all relevant times,
include all information relating to ScottishPower and HoldCo and their
respective Subsidiaries, and information which is within the knowledge of each
of the directors of ScottishPower and HoldCo (or which it would be reasonable
for them to obtain by making inquiries), which, in each case, is required to
enable the ScottishPower Disclosure Documents and the parties hereto to comply
in all material respects with all United Kingdom statutory and other legal and
regulatory provisions (including, without limitation, the Companies Act, the
FSA and the rules and regulations made thereunder, and the rules and
requirements of the LSE) and all such information contained in such documents
will be substantially in accordance with the facts and will not omit anything
material likely to affect the import of such information.
(c) Notwithstanding the foregoing provisions of this Section 4.09, no
representation or warranty is made by ScottishPower or HoldCo with respect to
statements made or incorporated by reference in the Registration Statement, the
Proxy Statement, the Listing Particulars, the Circular or the Scheme Document
based on information supplied by the Company expressly for inclusion or
incorporation by reference therein or based on information which is not made in
or incorporated by reference in such documents but which should have been
disclosed pursuant to Section 3.09.
4.10 Permits; Compliance with Laws and Orders. HoldCo, ScottishPower,
their respective Subsidiaries and the ScottishPower Joint Ventures hold all
permits, licenses, franchises variances, exemptions, orders and approvals of
all Governmental and Regulatory Authorities (other than environmental permits
which are governed by Section 4.15) necessary for the lawful conduct of their
respective businesses (the "ScottishPower Permits"), except for failures to
hold such ScottishPower Permits which, individually or in the aggregate, are
not having and would not reasonably be expected to have a material adverse
effect on HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole. HoldCo, ScottishPower, their respective Subsidiaries and the
ScottishPower Joint Ventures are in compliance with the terms of the
ScottishPower Permits, except failures so to comply which, individually or in
the aggregate, are not having and would not reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. Except as disclosed in the ScottishPower SEC
Reports filed prior to December 6, 1998, none of HoldCo, ScottishPower, their
respective Subsidiaries or the ScottishPower Joint Ventures are in violation of
or default under any law or order of any Governmental or Regulatory Authority,
except for such violations or defaults which, individually or in the aggregate,
are not having and would not reasonably be
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expected to have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole.
4.11 Compliance with Agreements. Except as disclosed in the ScottishPower
SEC Reports filed prior to December 6, 1998 or Section 4.11 of the
ScottishPower Disclosure Letter, none of HoldCo, ScottishPower or any of their
respective Subsidiaries or, to the knowledge of HoldCo or ScottishPower, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has
occurred which, with notice or lapse of time or both, would reasonably be
expected to result in a default under, (i) the memorandum or articles of
association (or other comparable charter documents) of HoldCo, ScottishPower or
any of their material Subsidiaries or (ii) any Contract to which HoldCo,
ScottishPower or any of their respective Subsidiaries is a party or by which
HoldCo, ScottishPower or any of their respective Subsidiaries or any of their
respective assets or properties is bound, except in the case of clause (ii) for
breaches, violations and defaults which, individually or in the aggregate, are
not having and would not reasonably be expected to have a material adverse
effect on HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole.
4.12 Taxes. (a) Each of HoldCo, ScottishPower and their respective
Subsidiaries has filed all material tax returns and reports required to be
filed by it, or requests for extensions to file such returns or reports have
been timely filed or granted and have not expired and all tax returns and
reports are complete and accurate in all material respects. HoldCo (if
applicable), ScottishPower and each of their respective Subsidiaries has paid
(or HoldCo or ScottishPower has paid on its behalf) all taxes shown as due on
such tax returns and reports. The most recent financial statements contained in
the ScottishPower SEC Reports reflect an adequate reserve for all taxes payable
by ScottishPower and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against
HoldCo, ScottishPower or any of their respective Subsidiaries that are not
adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole. No requests for waivers of the time
to assess any taxes against HoldCo, ScottishPower or any of their respective
Subsidiaries have been granted or are pending, except for requests with respect
to such taxes that have been adequately reserved for in the most recent
financial statements contained in the ScottishPower SEC Reports, or, to the
extent not adequately reserved, the assessment of which would not, individually
or in the aggregate, have a material adverse effect on HoldCo, ScottishPower
and their respective Subsidiaries taken as a whole.
(b) Neither HoldCo, ScottishPower nor any of their respective Subsidiaries
has taken any action or has any knowledge of any fact or circumstance that is
reasonably likely to prevent the Merger from qualifying as a tax-free
reorganization within the meaning of Code Section 368(a).
(c) UKSub 1 and UKSub 2 are not public limited companies.
(d) From the date hereof through the Share Transfer, ScottishPower will
directly own the whole of the issued share capital of UKSub 1 and UKSub 2.
Following the Share Transfer and through the Closing Date, HoldCo will directly
own the whole of the issued share capital of UKSub 1 and UKSub 2.
(e) UKSub 1 and UKSub 2 directly own all of the equity interests in the
Partnership.
(f) Prior to the Closing Date, ScottishPower or HoldCo will make (i) the
elections necessary pursuant to Section 301.7701-3 of the U.S. Treasury
regulations promulgated under the Code to treat UKSub 1 and UKSub 2 as entities
disregarded as separate from ScottishPower and HoldCo and (ii) an election
under Section 301.7701-3 of the U.S. Treasury regulations to treat the
Partnership as an association taxable as a corporation. Neither ScottishPower,
HoldCo, nor any of their respective Subsidiaries has taken any action that (or
has failed to take any action if such failure) would reasonably be likely to
cause UKSub 1 or UKSub 2 to be characterized as an association taxable as a
corporation for U.S. federal income tax purposes.
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(g) Following the Scheme Date, HoldCo will satisfy either directly or
indirectly, through the activities of one or more "qualified subsidiaries", the
active trade or business test specified in Section 1.367(a)-3(c)(3) of the U.S.
Treasury regulations for a minimum period of three years prior to the Closing
Date.
(h) None of HoldCo, ScottishPower, UKSub 1, UKSub 2, the Partnership, nor
any other affiliate of HoldCo or ScottishPower has any intention to redeem,
acquire, or to cause the Company or any affiliate of the Company to acquire, or
to arrange for another person to acquire, any of the ADS Consideration or the
Ordinary Share Consideration.
(i) Neither HoldCo, ScottishPower nor any affiliate thereof, directly or
indirectly, has paid any expense incurred by the Company, any Company affiliate
or any Company stockholder in connection with the transactions contemplated by
this Agreement.
(j) Neither HoldCo, ScottishPower nor any affiliate thereof, directly or
indirectly, has loaned any funds to any escrow account, trust or other fund
established to pay any expenses incurred by the Company, any Company affiliate
or any Company stockholder in connection with the transactions contemplated by
this Agreement.
(k) Neither HoldCo, ScottishPower nor any affiliate thereof, directly or
indirectly, owns any stock issued by the Company unless acquired directly from
the Company.
4.13 ScottishPower Employee Benefit Plans. (a) ScottishPower has made
available to the Company complete and correct copies, as of December 6, 1998,
of: (i) the current trust deeds and rules of each of the material employee
benefit plans to which ScottishPower and its Subsidiaries make or could become
liable to make payments for providing retirement, death, disability or life
assurance benefits (the "ScottishPower Employee Benefit Plans") (including any
draft amendments); (ii) the most recently prepared explanatory booklets and
announcements relating to each of the ScottishPower Employee Benefit Plans;
(iii) a copy of the actuary's report on the latest actuarial valuation of the
ScottishPower Employee Benefit Plans, if applicable; and (iv) the rules of the
ScottishPower Share Schemes.
(b) The ScottishPower Employee Benefit Plans are the only material schemes
to which HoldCo, ScottishPower and their respective Subsidiaries make or could
become liable to make payments for providing retirement, death, disability or
life insurance benefits except for any schemes for providing retirement, death
or disability or life insurance benefits ("HoldCo Employee Benefit Plans")
which HoldCo establishes in connection with the Scheme of Arrangement which are
in all material respects similar to the ScottishPower Employee Benefit Plans.
(c) To the extent such exemption is intended by ScottishPower, the
ScottishPower Employee Benefit Plans are exempt approved schemes within the
meaning of Chapter 1 Part XIV of the Income and Corporation Taxes Act 1988.
Except as specifically set forth in Section 4.13 of the ScottishPower
Disclosure Letter, members of the ScottishPower Employee Benefit Plans are
contracted-out of the State Earnings Related Pension Scheme.
(d) To the knowledge of HoldCo or ScottishPower, there is no amount which
is treated by Section 144 of the Pension Schemes Act 1993 or Section 75 of the
Pensions Act 1995 as a debt due to the trustees of the ScottishPower Employee
Benefit Plans or from ScottishPower or any of its Subsidiaries to the trustees
of any other benefit plan except for such debts which would not reasonably be
expected to have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole. The ScottishPower Employee Benefit
Plans have not ceased to admit new members.
(e) Except as set forth in Section 4.13 of the ScottishPower Disclosure
Letter and except for disputes which would not reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole, there is no dispute about the benefits payable
under the ScottishPower
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Employee Benefit Plans and, to the knowledge of HoldCo or ScottishPower, there
are no circumstances which might give rise to any such dispute.
(f) To the knowledge of HoldCo or ScottishPower, the actuary's report on
the latest actuarial valuation accurately describes the financial position of
each ScottishPower Employee Benefit Plan for which an actuarial valuation is
required by law at its effective date and in accordance with the assumptions
employed for that valuation. Except as set forth in Section 4.13 of the
ScottishPower Disclosure Letter, nothing has happened since that date which
would, to a material extent, affect the level of funding of any ScottishPower
Employee Benefit Plan and, since that date, contributions have been paid to
each ScottishPower Employee Benefit Plan at the rate recommended by the
actuary. Except as set forth in Section 4.13 of the ScottishPower Disclosure
Letter, no assets have been withdrawn by HoldCo, ScottishPower or any of their
respective Subsidiaries from any ScottishPower Employee Benefit Plan (except to
pay benefits or by way of reimbursement of expenses) since the effective date
of the latest actuarial valuation of that plan.
(g) Except as set forth in Section 4.13 of the ScottishPower Disclosure
Letter or as would not reasonably be expected to have a material adverse effect
on HoldCo, ScottishPower and their respective Subsidiaries taken as a whole,
the ScottishPower Employee Benefit Plans comply with and have been administered
in accordance with all applicable laws, regulations and requirements. All
amounts due to the ScottishPower Employee Benefit Plans at any time prior to
the month in which this Agreement is signed have been paid.
4.14 Labor Matters. (a) Except as set forth in Section 4.14 of the
ScottishPower Disclosure Letter, neither HoldCo, ScottishPower nor any of their
respective Subsidiaries is a party to any collective bargaining agreement,
recognition agreement, European Works Council or other labor agreement with any
union, labor organization or other responsible body. Except as disclosed in the
ScottishPower SEC Reports filed prior to December 6, 1998 or in Section 4.14 of
the ScottishPower Disclosure Letter, there are no disputes pending or, to the
knowledge of HoldCo or ScottishPower, threatened between HoldCo, ScottishPower
or any of their respective Subsidiaries or any of the ScottishPower Joint
Ventures and any trade union or other representatives of its employees, except
as would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole, and, to the knowledge of HoldCo or
ScottishPower, there are no material organization efforts presently being made
involving any of the now unorganized employees of HoldCo, ScottishPower or any
of their respective Subsidiaries or any of the ScottishPower Joint Ventures.
Since December 31, 1995, there has been no work stoppage, strike or other
concerted action by employees of HoldCo, ScottishPower or any of their
respective Subsidiaries except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole.
(b) To the knowledge of HoldCo or ScottishPower, neither HoldCo,
ScottishPower nor any of their respective Subsidiaries nor any of the
ScottishPower Joint Ventures is in violation of any labor laws in any country
(or political subdivision thereof) in which they transact business, except for
such violations as would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole.
4.15 Environmental Matters. Except as disclosed in the ScottishPower SEC
Reports filed prior to December 6, 1998 or in Section 4.15 of the ScottishPower
Disclosure Letter and except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole:
(a) (i) Each of HoldCo, ScottishPower and their respective Subsidiaries
and the ScottishPower Joint Ventures is in compliance with all applicable
Environmental Laws (as hereinafter defined); and
(ii) Neither HoldCo, ScottishPower nor any of their respective
Subsidiaries nor any of the ScottishPower Joint Ventures has received any
written communication from any person or Governmental
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or Regulatory Authority that alleges that HoldCo, ScottishPower or any of
their respective Subsidiaries or Joint Ventures is not in such compliance
with applicable Environmental Laws.
(b) Each of HoldCo, ScottishPower, their respective Subsidiaries and the
ScottishPower Joint Ventures has obtained all environmental, health and
safety permits and governmental authorizations (collectively, the
"Environmental Permits") necessary for the construction of its facilities
and the conduct of its operations, as applicable, and all such
Environmental Permits are in full force and effect or, where applicable, a
renewal application has been timely filed and is pending agency approval,
and HoldCo, ScottishPower, their respective Subsidiaries and the
ScottishPower Joint Venture are in compliance with all terms and conditions
of the Environmental Permits.
(c) There is no Environmental Claim (as hereinafter defined) pending
(i) against HoldCo., ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures;
(ii) against HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures;
(ii) to the knowledge of HoldCo or ScottishPower, against any person
or entity whose liability for any Environmental Claim HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures has or may have retained or assumed either
contractually or by operation of law; or
(iii) against any real or personal property or operations which
HoldCo, ScottishPower or any of their respective Subsidiaries or any of
the ScottishPower Joint Ventures owns, leases or manages in whole or in
part.
(d) To HoldCo's or ScottishPower's knowledge, there have not been any
Releases (as hereinafter defined) of any Hazardous Material (as hereinafter
defined) that would be reasonably likely to form the basis of any
Environmental Claim against HoldCo, ScottishPower or any of their
respective Subsidiaries or any of the ScottishPower Joint Ventures, or
against any person or entity whose liability for any Environmental Claim
HoldCo, ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures has or may have retained or assumed either
contractually or by operation of law.
(e) As used in this Section 4.15:
(i) "Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance, liability or violation (written or oral) by any person
or entity (including any Governmental or Regulatory Authority) alleging
potential liability (including, without limitation, potential
responsibility or liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial
costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from
(A)(A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or
not owned, operated, leased or managed by HoldCo, ScottishPower or
any of their respective Subsidiaries or any of the ScottishPower
Joint Ventures; or
(B) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials;
(ii) "Environmental Laws" means all European Union, national,
regional, or local laws, rules and regulations relating to pollution,
the environment (including, without limitation, ambient air,
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surface water, groundwater, land surface or subsurface strata) or
protection of human health as its relates to the environmental
including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials
including, without limitation, Part II and paragraphs 161 and 162 of
Schedule 22 of the Environment Act 1995 and the Department of the
Environment Transport and the Regions Consultation Draft Guidance on
Contaminated Land dated October 1998 but not to the extent that any
modification thereof introduced in the final form of this guidance
imposes materially more onerous or stringent requirements in respect of
contaminated land or pollution.
(iii) "Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing
polychlorinated biphenyls; and (b) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or
waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which HoldCo, ScottishPower or
any of their respective Subsidiaries or any of the ScottishPower Joint
Ventures operates or any jurisdiction which has received such chemical,
material, substance or waste from HoldCo, ScottishPower or their
respective Subsidiaries; and
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
4.16 Intellectual Property Rights. HoldCo, ScottishPower and their
respective Subsidiaries have all right, title and interest in, or a valid and
binding license to use, all Intellectual Property individually or in the
aggregate material to the conduct of the businesses of HoldCo, ScottishPower
and their respective Subsidiaries taken as a whole. Neither HoldCo,
ScottishPower nor any of their respective Subsidiaries is in default (or with
the giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property, to the knowledge of HoldCo or
ScottishPower, such Intellectual Property is not being infringed by any third
party, and neither HoldCo, ScottishPower nor any of their respective
Subsidiaries is infringing any Intellectual Property of any third party, except
for such defaults and infringements which, individually or in the aggregate,
are not having and would not reasonably be expected to have a material adverse
effect on HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole.
4.17 Vote Required. The only votes of the holders of any class of shares
of ScottishPower or, after the Scheme Date, Holdco required to approve the
Merger and the other transactions contemplated hereby (other than those set
forth in paragraphs 1 through 3 of Schedule II and any vote which may be
required in order to give effect to the conversion of the Company Stock Options
in accordance with Section 6.10 or to give effect to the amendments to HoldCo's
Articles of Association in accordance with Section 6.03(c)) are the affirmative
vote of a majority of such ordinary shareholders of ScottishPower as (being
entitled to do so) are present and vote (or, in the case of a vote taken on a
poll, the affirmative vote by shareholders or their proxies representing a
majority of the ScottishPower Ordinary Shares in respect of which votes were
validly exercised) at the ScottishPower Shareholders Meeting in relation to the
approval of the Merger and the Scheme of Arrangement.
4.18 [Intentionally Omitted]
4.19 Ownership of Company Common Stock. Neither HoldCo, ScottishPower nor
any of their respective Subsidiaries or other affiliates beneficially owns any
shares of Company Common Stock.
4.20 Insurance. Except as set forth in Section 4.20 of the ScottishPower
Disclosure Letter, each of ScottishPower and its Subsidiaries is, and has been
continuously since January 1, 1994 (and at all times
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following the Scheme Date, HoldCo and its Subsidiaries will be), insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary in all material respects for companies conducting the
business conducted by HoldCo, ScottishPower and their respective Subsidiaries
during such time period. Except as set forth in Section 4.20 of the
ScottishPower Disclosure Letter, neither HoldCo, ScottishPower nor any of their
respective Subsidiaries has received any notice of cancellation or termination
with respect to any material insurance policy of HoldCo, ScottishPower or any
of their respective Subsidiaries. The insurance policies of Holdco,
ScottishPower and each of their respective Subsidiaries are valid and
enforceable policies.
4.21 Year 2000. ScottishPower and its Subsidiaries have (and at all times
following the Scheme Date, to the extent (if at all) then necessary, HoldCo
will have) put into effect practices and programs which ScottishPower (or
HoldCo) reasonably believes will enable all material software, hardware and
equipment (including microprocessors) that are owned or utilized by
ScottishPower (or HoldCo) or any of their respective Subsidiaries in the
operations of its or their respective business to be capable, by December 31,
1999 of accounting for all calculations using a century and date sensitive
algorithm for the year 2000, and the fact that the year 2000 is a leap year and
to otherwise continue to function without material interruption caused by the
occurrence of the year 2000.
4.22 Joint Venture Representations. Each representation and warranty made
by HoldCo or ScottishPower in this Article IV relating to a ScottishPower Joint
Venture that is neither operated nor managed by HoldCo or ScottishPower or a
Subsidiary thereof shall be deemed to be made only to HoldCo's and
ScottishPower's knowledge.
ARTICLE V
COVENANTS
5.01 Covenants of the Company. At all times from and after December 6,
1998 until the Effective Time, the Company covenants and agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by
this Agreement, or to the extent that HoldCo or ScottishPower shall otherwise
previously consent in writing, which consent shall not be unreasonably withheld
or delayed):
(a) Ordinary Course. The Company and each of its Subsidiaries shall
conduct their businesses only in, and the Company and each of its
Subsidiaries shall not take any action except in, the ordinary course
substantially consistent with past business practice. Without limiting the
generality of the foregoing, the Company and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations, to maintain in effect all existing
material permits, to keep available the services of their key officers and
employees, to maintain their assets and properties in good working order
and condition, ordinary wear and tear excepted, to maintain insurance on
their tangible assets and businesses in substantially the same amounts and
against substantially the same risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or
Regulatory Authorities applicable to them.
(b) Charter Documents. The Company shall not, nor shall it permit any of
its Subsidiaries to, amend or propose to amend its certificate or articles
of incorporation or bylaws or its memorandum and articles of association
(or other comparable corporate charter documents).
(c) Dividends. The Company shall not, nor shall it permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock or share
capital, except:
(A) that the Company may continue the declaration and payment of
regular cash dividends (including increases consistent with past
practice) on Company Common Stock and the Company
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Preferred Stock, with usual record and payment dates for such dividends
in accordance with past dividend practice; provided, that no such
dividend on the Company Common Stock shall exceed the amount budgeted
therefor in the Company Budget (as hereinafter defined), and
(B) for the declaration and payment of dividends by (x) a wholly-
owned Subsidiary solely to its parent corporation, (y) Bridger Coal
Company in accordance with past practice and (z) Subsidiaries of
regular cash dividends with usual record and payment dates (including
increases consistent with past practice) in accordance with past
dividend practice, and
(ii) split, combine, reclassify or take similar action with respect to
any of its capital stock or share capital or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or comprised in its share
capital, (iii) except as disclosed in Section 5.01(c) of the Company
Disclosure Letter, adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization or (iv) except as disclosed in Section 5.01(c) of the
Company Disclosure Letter, directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock or comprised in its share
capital or any Option with respect thereto except:
(A) in connection with intercompany purchases of capital stock or
share capital,
(B) for the purpose of funding employee stock ownership or dividend
reinvestment, stock purchase plans and other incentive plans disclosed
in Section 5.01(d) of the Company Disclosure Letter in accordance with
past practice, and
(C) Prior to the Closing Date, the Company shall redeem all
outstanding shares of its $1.28 Series, $1.18 Series and $1.16 Series
of no par serial preferred stock.
(d) Share Issuances. The Company shall not, nor shall it permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or comprised
in its share capital or any Option with respect thereto (other than (i) the
issuance of Company Common Stock upon the exercise of Options issued
pursuant to the Company's Stock Incentive Plan outstanding on December 6,
1998 and in accordance with their present terms, (ii) except as
specifically set forth under the heading "Long-Term Incentive Awards" on
the Schedule of Ongoing Compensation Obligations attached to Section
5.01(d) of the Company Disclosure Letter, the issuance of options or awards
pursuant to the Company's Stock Incentive Plan in accordance with its
present terms and only in connection with the hiring of new employees, and
the issuance of shares of Company Common Stock upon exercise of such
options or awards, (iii) the issuance by a wholly-owned Subsidiary of its
capital stock to its parent corporation, or modify or amend any right of
any holder of outstanding shares of capital stock or Options with respect
thereto and (iv) shares of Company Preferred Stock with a stated value of
up to an aggregate of $250 million).
(e) Acquisitions. Except as set forth in Section 5.01(e) of the Company
Disclosure Letter and other than as provided in the 1999 operating budget
of the Company, a copy of which has been disclosed to and discussed with
ScottishPower, or any other budget of the Company thereafter approved by
HoldCo or ScottishPower, which approval shall not be unreasonably withheld
(collectively, the "Company Budget"), the Company shall not, nor shall it
permit any of its Subsidiaries to, acquire (by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner) any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets in
excess of $25 million in any one transaction; provided, that this Section
5.01(e) shall not prohibit any capital expenditures made in accordance with
Section 5.01(j).
(f) Dispositions. Other than as set forth in Section 5.01(f) of the
Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries to, sell, lease, grant any security interest in or
otherwise dispose of or encumber any of its assets or properties, other
than dispositions in the ordinary
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course of its business consistent with past practice or having an aggregate
net book value of $25 million or less in any one transaction.
(g) Indebtedness. Other than as expressly provided in the Company Budget,
the Company shall not, nor shall it permit any of its Subsidiaries to,
incur or guarantee any indebtedness (including any debt borrowed or
guaranteed or otherwise assumed, including, without limitation, the
issuance of debt securities or warrants or rights to acquire debt) or enter
into any "keep well" or other agreement to maintain any financial condition
of another person or enter into any arrangement having the economic effect
of any of the foregoing other than (i) short-term indebtedness in the
ordinary course of business consistent with past practice (such as the
issuance of commercial paper or the use of existing credit facilities) in
an aggregate amount not exceeding $500 million; (ii) long-term indebtedness
not aggregating more than $200 million and (iii) indebtedness entered into
in connection with the refinancing of indebtedness outstanding on December
6, 1998 or incurred in compliance with this Section 5.01(g).
(h) Employee Benefits. Except as set forth on Section 5.01(h) of the
Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries to, enter into, adopt, amend (except as may be required
by applicable law) or terminate any Company Employee Benefit Plan, or
increase in any manner the compensation or fringe benefits of any director
or executive officer, or, except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Company and its Subsidiaries taken as a whole, increase in any manner
the compensation or fringe benefits of any employee, or pay any benefit not
required by any plan or arrangement in effect as of December 6, 1998 and,
in no event shall the Company or its Subsidiaries be permitted to grant to
any employee any rights that are not in effect on December 6, 1998 to any
payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or increase in
obligations to fund benefits with respect to that employee resulting from a
change in control or change in ownership of the Company or any of its
Subsidiaries.
(i) Affiliate Contracts. Except as disclosed in Section 5.01(i) of the
Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries or, within the exercise of its reasonable commercial
efforts, its Joint Ventures to, except as otherwise expressly provided for
in this Agreement, enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's length basis,
with any affiliate of such party or any of its Subsidiaries.
(j) Capital Expenditures. The Company shall not, nor shall it permit any
of its Subsidiaries to, make any capital expenditures or commitments other
than (i) as required by applicable law, (ii) capital expenditures incurred
in connection with the repair or replacement of facilities destroyed or
damaged due to casualty or accident (whether or not covered by insurance),
and (iii) other capital expenditures in excess of 110% of the aggregate
amount provided for such purposes in the Company Budget.
(k) 1935 Act. The Company shall not, nor shall it permit any of its
Subsidiaries to, engage in any activities which would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act, including any
action or inaction that would cause the prior approval of the SEC under the
1935 Act to be required for the consummation of the transactions
contemplated hereby.
(l) Regulatory Status. The Company shall not, nor shall it permit any of
its Subsidiaries to, agree or consent to any material agreements or
modifications of material existing agreements with any Government or
Regulatory Authority in respect of the operations of their businesses
except where following discussion with the relevant authority such
agreements or modifications are imposed upon the Company.
(m) Transmission, Generation. Except as required pursuant to tariffs on
file with the FERC as of December 6, 1998, or as set forth in Section
5.02(m) of the Company Disclosure Letter, the Company shall not, nor shall
it permit its Subsidiaries to:
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(i) commence construction of any additional generating, transmission
or delivery capacity in excess of 500 megawatts, or
(ii) obligate itself to purchase or otherwise acquire, or to sell or
otherwise dispose of, or to share, any additional generating,
transmission or delivery plants or facilities, in an amount in excess
of $25 million in any one transaction, except as set forth in the
Company Budget. Any regulatory order potentially imposing any such
obligation shall be immediately forwarded to HoldCo or ScottishPower.
(n) Accounting. The Company shall not, nor shall it permit any of its
Subsidiaries to, make any material changes in their accounting methods,
except as required by law, rule, regulation or applicable generally
accepted accounting principles.
(o) Tax Matters. The Company shall not take any action which (or fail to
take any action if such failure) would cause the Merger to fail to qualify
as a reorganization described in Code Section 368(a).
(p) No Breach. The Company shall not, nor shall it permit any of its
Subsidiaries to willfully take or fail to take any action that would or is
reasonably likely to result (i) in a material breach of any provision of
this Agreement, or (ii) in any of its representations and warranties set
forth in this Agreement being untrue on and as of the Closing Date.
(q) No Litigation. The Company shall not, nor shall it permits any of its
Subsidiaries to, initiate any material actions, suits, arbitrations or
proceedings.
(r) Tax-Exempt Status. The Company shall not, nor shall it permit any of
its Subsidiaries to, except as otherwise expressly provided for in this
Agreement, take any action that would be reasonably likely to jeopardize
the qualification of any material amount of outstanding revenue bonds which
qualify on December 6, 1998 under Section 142(a) of the Code as "exempt
facility bonds" or as tax-exempt industrial development bonds under Section
103(b)(4) of the Internal Revenue Code of 1954, as amended, prior to the
enactment of the Tax Reform Act of 1986.
(s) Advice of Changes. The Company shall confer with HoldCo or
ScottishPower on a regular and frequent basis with respect to the Company's
business and operations and other matters relevant to the Merger, and shall
promptly advise HoldCo or ScottishPower, orally and in writing, of any
material change or event, including, without limitation, any complaint,
investigation or hearing by any Governmental or Regulatory Authority (or
communication indicating the same may be contemplated) or the institution
or threat of material litigation; provided that the Company shall not be
required to make any disclosure to the extent such disclosure would
constitute a violation of any applicable law or regulation.
(t) Notice and Cure. The Company will notify HoldCo or ScottishPower in
writing of, and will use all commercially reasonable efforts to cure before
the Closing, any event, transaction or circumstance, as soon as practical
after it becomes known to the Company, that causes or will cause any
covenant or agreement of the Company under this Agreement to be breached or
that renders or will render untrue in any material respect any
representation or warranty of the Company contained in this Agreement. The
Company also will notify HoldCo or ScottishPower in writing of, and will
use all commercially reasonable efforts to cure, before the Closing, any
violation or breach, as soon as practical after it becomes known to the
Company, of any representation, warranty, covenant or agreement made by the
Company. No notice given pursuant to this paragraph shall have any effect
on the representations, warranties, covenants or agreements contained in
this Agreement for purposes of determining satisfaction of any condition
contained herein.
(u) Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, the Company will take or cause to be taken all commercially
reasonable steps necessary or desirable and will proceed diligently and in
good faith to satisfy each condition to its obligations contained in this
Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and the Company will
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not, nor will it permit any of its Subsidiaries to, take or fail to take
any action that would reasonably be expected to result in the
nonfulfillment of any such condition.
5.02 Covenants of HoldCo and ScottishPower. Each of HoldCo, at all times
from and after the date hereof until the Effective Time, and ScottishPower, at
all times from December 6, 1998 until the Effective Time, covenants and agrees
as to itself and its Subsidiaries that (except for the transactions
contemplated or permitted by this Agreement or to the extent that the Company
shall otherwise previously consent in writing, which consent shall not be
unreasonably withheld or delayed):
(a) Ordinary Course. Except pursuant to the Scheme of Arrangement and the
establishment of HoldCo Share Schemes and HoldCo Employee Benefit Plans,
HoldCo, ScottishPower and each of their respective Subsidiaries shall
conduct their businesses only in, and HoldCo, ScottishPower and each of
their respective Subsidiaries shall not take any action except in, the
ordinary course consistent with past practice. Without limiting the
generality of the foregoing, HoldCo, ScottishPower and their respective
Subsidiaries shall use all commercially reasonable efforts to preserve
intact in all material respects their present business organizations and
reputation, to maintain in effect all existing permits, to keep available
the services of their key officers and employees, to maintain their assets
and properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or
Regulatory Authorities applicable to them.
(b) Charter Documents. Other than as contemplated by Section 6.03(c) and
except to the extent required to comply with applicable law or the rules of
the LSE, HoldCo (after the Scheme Date) and ScottishPower shall not, nor
shall they permit any of their respective Subsidiaries to, amend or propose
to amend their respective certificates or articles of incorporation or
bylaws or their respective memoranda and articles of association (or other
comparable corporate charter documents).
(c) Dividends. Other than as set forth in the ScottishPower Budget (as
defined in Section 5.02(e)), HoldCo and, prior to the Scheme Date,
ScottishPower shall not, nor shall they permit any of their respective
Subsidiaries to,
(i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock or share capital,
except:
(A) that, ScottishPower may, (I) as regards record dates for the
payment of dividends occurring prior to the Scheme Date, continue
the declaration and payment of regular cash dividends (including
increases consistent with past practice) on ScottishPower Ordinary
Shares, with usual record and payment dates for such dividends in
accordance with past dividend practice; provided, that no such
dividend shall exceed by more than 12% the dividend payable during
the prior fiscal year in respect of the comparable time period and
(II) before, on or after the Scheme Date, effect the Share Transfer,
and
(B) that, as regards record dates for the payment of dividends
occurring after the Scheme Date, HoldCo may declare and pay regular
cash dividends (including increases consistent with ScottishPower's
past practice) on HoldCo Ordinary Shares, with usual record and
payment dates for such dividends in accordance with ScottishPower's
past dividend practice; provided, that no such dividend shall, when
taken together with any dividend paid pursuant to clause (A)(I) of
this paragraph (c), exceed more than 12% of the dividend payable by
ScottishPower during the prior fiscal year in respect of the
comparable time period, and
(C) for the declaration and payment of dividends by a wholly-owned
Subsidiary solely to its parent corporation (including for the
avoidance of doubt dividends by ScottishPower to HoldCo following
the Scheme Date), and
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(ii) other than pursuant to the Scheme of Arrangement or in
connection with the restructuring of the transactions contemplated
hereby pursuant to Section 6.07, split, combine, reclassify or take
similar action with respect to any of its capital stock or share
capital or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or comprised in its share capital (except that HoldCo
may subdivide its ordinary shares as referred to in Section 4.02(a)),
(iii) other than pursuant to the Scheme of Arrangement, adopt a plan of
complete or partial liquidation or resolutions providing for or
authorizing such liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or (iv) other
than pursuant to the Scheme of Arrangement or as described in Section
5.02(c) of the ScottishPower Disclosure Letter, directly or indirectly
redeem, repurchase or otherwise acquire any shares of its capital stock
or comprised in its share capital or any Option with respect thereto
except:
(A) in connection with intercompany purchases of capital stock or
share capital,
(B) for the purpose of funding employee share ownership, dividend
reinvestment, stock purchase and other incentive plans disclosed in
Section 5.02 (c) of the ScottishPower Disclosure Letter in
accordance with past practice,
(C) the redemption of the ScottishPower Special Share or the
HoldCo Special Share in accordance with its terms or
(D) the redemption of the 49,998 HoldCo non-voting redeemable
shares referred to in Section 4.02.
(d) Share Issuances. Other than pursuant to the Scheme of Arrangement,
(i) ScottishPower shall not, nor shall it permit any of its Subsidiaries
to, issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or comprised in its share
capital or any Option with respect thereto (other than (A) up to 125
million shares of ScottishPower Ordinary Shares for general corporate
purposes, (B) the issuance of ScottishPower Ordinary Shares or stock
appreciation, share awards or similar rights, as the case may be, pursuant
to the ScottishPower Share Schemes, in each case outstanding on December 6,
1998 and in accordance with their present terms, subject to any amendments
made in the ordinary course consistent with past practice or pursuant to
any share scheme of ScottishPower to be adopted in the ordinary course
consistent with past practice, (C) the issuance of options or awards
pursuant to ScottishPower Share Schemes in accordance with their present
terms, subject to any amendments made in the ordinary course of business
consistent with past practice or as reasonably necessary to reflect the
Scheme of Arrangement and, except as set forth in Section 5.02(d) of the
ScottishPower Disclosure Letter, only in connection with the hiring of new
employees and the issuance of shares of ScottishPower Ordinary Shares upon
exercise of such options or awards, and (D) the issuance by a wholly-owned
Subsidiary of its capital stock to its parent corporation, or modify or
amend any right of any holder of outstanding shares of capital stock or
Options with respect thereto).
(ii) HoldCo shall not, nor shall it permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock other than in the amounts and for
the purposes set forth in clause (i) of this paragraph (d) and other than
pursuant to the HoldCo Share Schemes or pursuant to the arrangement
referred to in Section 4.02(c)(iv) or pursuant to the ScottishPower Share
Schemes as amended as reasonably necessary to reflect the Scheme of
Arrangement.
(e) Acquisitions. Other than as provided in the 1999 operating budget of
ScottishPower, a copy of which has been disclosed to and discussed with the
Company, or any subsequently-adopted budget of ScottishPower disclosed to
the Company (collectively, the "ScottishPower Budget") or pursuant to the
Scheme of Arrangement, neither HoldCo nor ScottishPower shall, nor shall
they permit any of their respective Subsidiaries to, acquire (by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner) any business
or any corporation, partnership, association or other business organization
or division thereof (i) in excess of (Pounds)750 million or (ii) if such
acquisition would have a material adverse affect on HoldCo, ScottishPower
and their respective Subsidiaries taken as a whole, without the prior
written consent of the Company.
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(f) Dispositions. Other than as provided in the ScottishPower Budget, and
other than the transfer of all of the outstanding shares of UKSub 1 and
UKSub 2 from ScottishPower to HoldCo, neither HoldCo nor ScottishPower
shall, nor shall they permit any of their respective Subsidiaries to, sell,
lease, grant any security interest in or otherwise dispose of or encumber
any of its assets or properties, other than dispositions in the ordinary
course of its business consistent with past practice and having an
aggregate value of less than (Pounds)750 million.
(g) Indebtedness. Neither HoldCo nor ScottishPower shall, nor shall they
permit any of their respective Subsidiaries to, incur or guarantee any
indebtedness (including any debt borrowed or guaranteed or otherwise
assumed, including, without limitation, the issuance of debt securities or
warrants or rights to acquire debt) or enter into any "keep well" or other
agreement to maintain any financial condition of another Person or enter
into any arrangement having the economic effect of any of the foregoing,
other than indebtedness in an aggregate amount not exceeding 110% of the
amount of indebtedness provided for in the ScottishPower Budget. For
purposes of this paragraph (g), any indebtedness up to (Pounds)500 million
incurred in connection with the planned buyback of ScottishPower Ordinary
Shares and/or HoldCo Ordinary Shares shall be disregarded.
(h) Affiliate Contracts. Neither HoldCo nor ScottishPower shall, nor
shall they permit any of their respective Subsidiaries or, within the
exercise of its reasonable commercial efforts, the ScottishPower Joint
Ventures to, enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction (other than pursuant to the
Scheme of Arrangement) outside the ordinary course of business consistent
with past practice or not on an arm's length basis, with any affiliate of
such party or any of its Subsidiaries.
(i) Capital Expenditures. Except for any payments by HoldCo to
ScottishPower in connection with the acquisition by HoldCo of UKSub 1 and
UKSub 2 or any investment by HoldCo in UKSub 1 and UKSub 2, neither HoldCo
nor ScottishPower shall, nor shall they permit any of their respective
Subsidiaries to, make any capital expenditures or commitments (except as
required by law or regulation) in excess of 110% of the aggregate amount
provided for such purposes in the ScottishPower Budget.
(j) 1935 Act. Except for the acquisition of ScottishPower by HoldCo and
the filing of Forms U-57 by ScottishPower and HoldCo's other utility
subsidiaries after the acquisition of ScottishPower by HoldCo, neither
HoldCo nor ScottishPower shall, nor shall they permit any of their
respective Subsidiaries to, engage in any activities which would cause a
change in its status, or that of its Subsidiaries, under the 1935 Act,
including any action or inaction that would cause the prior approval of the
SEC under the 1935 Act to be required for the consummation of the
transactions contemplated hereby.
(k) UK Licensing Regime. Except pursuant to the Scheme of Arrangement,
neither HoldCo nor ScottishPower shall, nor shall they permit any of their
respective Subsidiaries to, engage in any activities or omit to do anything
which would entitle any Governmental or Regulatory Authority to revoke in
whole or in material part any material license, authorization or
appointment or which would otherwise materially change the status of
HoldCo, ScottishPower or any of their respective Subsidiaries (HoldCo,
ScottishPower and their respective Subsidiaries being referred to as the
"HoldCo Group") thereunder.
(l) Transmission, Generation. Except as set forth in Section 5.02(l) of
the ScottishPower Disclosure Letter, neither HoldCo nor ScottishPower
shall, nor shall they permit any of their respective Subsidiaries to:
(i) commence construction of any additional generating, transmission
or delivery capacity in excess of 500 megawatts, or
(ii) obligate itself to purchase or otherwise acquire, or to sell or
otherwise dispose of, or to share, any additional generating,
transmission or delivery plants or facilities, in an amount in excess
of $200 million in any one transaction.
(m) Accounting. Neither HoldCo nor ScottishPower shall nor shall they
permit any of their respective Subsidiaries to, make any changes in their
accounting methods, except as required by law, rule,
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regulation or applicable generally accepted accounting principles or, in
the case of HoldCo, adopting accounting methods substantially the same as
those of ScottishPower.
(n) Tax Matters. Neither HoldCo nor ScottishPower shall, nor shall they
permit any of their respective Subsidiaries to, take any action which (or
fail to take any action if such failure) would cause the Merger to fail to
qualify as a reorganization described in Section 368(a) of the Code.
(o) No Breach. Neither HoldCo nor ScottishPower shall, nor shall they
permit any of their respective Subsidiaries to, willfully take or fail to
take any action that would or is reasonably likely to result (i) in a
material breach of any provision of this Agreement, or (ii) in any of its
representations and warranties set forth in this Agreement being untrue on
and as of the Closing Date.
(p) Advice of Changes. HoldCo and ScottishPower shall confer with the
Company on a regular and frequent basis with respect to HoldCo's and
ScottishPower's business and operations and other matters relevant to the
Merger, and shall promptly advise the Company, orally and in writing, of
any material change or event, including, without limitation, any complaint,
investigation or hearing by any Governmental or Regulatory Authority (or
communication indicating the same may be contemplated) or the institution
or threat of litigation, having, or which, insofar as can be reasonably
foreseen, could have, a material adverse effect on HoldCo, ScottishPower
and their respective Subsidiaries taken as a whole or on the ability of
HoldCo and ScottishPower to consummate the transactions contemplated
hereby; provided that HoldCo and ScottishPower shall not be required to
make any disclosure to the extent such disclosure would constitute a
violation of any applicable law or regulation.
(q) Notice and Cure. HoldCo or ScottishPower will notify the Company in
writing of, and will use all commercially reasonable efforts to cure before
the Closing, any event, transaction or circumstance, as soon as practical
after it becomes known to HoldCo or ScottishPower, that causes or will
cause any covenant or agreement of HoldCo or ScottishPower under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of HoldCo or ScottishPower contained in this
Agreement. HoldCo or ScottishPower will also notify the Company in writing
of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach, as soon as practical after it becomes
known to HoldCo or ScottishPower, of any representation, warranty, covenant
or agreement made by HoldCo or ScottishPower. No notice given pursuant to
this paragraph shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of
determining the satisfaction of any condition contained herein.
(r) Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, HoldCo and ScottishPower will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each condition to the Company's obligations
contained in this Agreement and to consummate and make effective the
transactions contemplated by this Agreement, and neither HoldCo nor
ScottishPower will, nor will they permit any of their respective
Subsidiaries to, take or fail to take any action that would reasonably be
expected to result in the nonfulfillment of any such condition.
5.03 Joint Executive Committee. As soon as practicable after the date
hereof, ScottishPower and the Company shall establish a joint executive
committee (the "Joint Executive Committee") which shall be comprised of three
nominees of ScottishPower (one of whom, in the first instance, shall be Ian
Robinson) and three nominees of the Company (one of whom, in the first
instance, shall be Keith McKennon). The Joint Executive Committee shall be
jointly chaired by Ian Robinson and Keith McKennon and shall have the objective
of facilitating and achieving the Merger contemplated in this Agreement,
integration planning, strategic development, developing recommendations
concerning the future structure and the general operation of the Company after
the Effective Time subject to applicable law. The Joint Executive Committee
shall meet monthly in the United States or upon such other date or dates, and
in such other places, as ScottishPower and the Company may agree from time to
time and may be convened by telephone, video conference or similar means.
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5.04 Tax Matters. Except as set forth in their respective Disclosure
Letters, neither HoldCo, ScottishPower nor the Company shall, nor shall any
party permit its Subsidiaries to, make or rescind any material express or
deemed election relating to taxes, or change any of its methods of reporting
income or deductions for tax purposes from those employed in the preparation of
its tax return(s) for the prior taxable year, except as may be required by
applicable law, as agreed to by the other party or, subject to Section 6.18, to
the extent reasonably necessary to comply with or implement the Scheme of
Arrangement. The Company shall inform ScottishPower regarding the progress of
any material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes and shall consult with
ScottishPower before entering into any settlements or compromises with regard
to such matters.
5.05 Discharge of Liabilities. Neither HoldCo, ScottishPower nor the
Company shall, nor shall any party permit its Subsidiaries to, pay, discharge
or satisfy any material claims, liabilities or obligations (absolute accrued,
asserted or unasserted, contingent or otherwise), other than the entry into of
the New Facilities in place of, and/or amending, the RCF, or other than as
contemplated by paragraph 11 of Schedule I or other than the payment, discharge
or satisfaction, in the ordinary course of business consistent with past
practice (which includes the payment of final and unappealable judgments) or in
accordance with their terms, of liabilities reflected or reserved against in,
or contemplated by, the most recent consolidated financial statements (or the
notes thereto) of such party included in such party's reports filed with the
SEC or the Registrar of Companies in Edinburgh, or incurred in the ordinary
course of business consistent with past practice.
5.06 Contracts. Neither HoldCo, ScottishPower nor the Company shall, nor
shall any party permit its Subsidiaries or, within the exercise of its
reasonable business efforts, its Joint Ventures to, except the entry into of
the New Facilities in place of, and/or amending, the RCF, or other than as
contemplated by paragraph 11 of Schedule I or as contemplated by this Agreement
or in the ordinary course of business consistent with past practice, modify,
amend, terminate, renew or fail to use reasonable business efforts to renew any
material contract or agreement to which such party or any Subsidiary of such
party is a party or waive, release or assign any material rights or claims.
5.07 No Solicitations. (a) Except as disclosed in Section 5.07 of the
Company Disclosure Letter, prior to the Effective Time, the Company agrees (i)
that neither it nor any of its Subsidiaries or other affiliates shall, and it
shall use its best efforts to cause their respective Representatives (as
defined in Section 9.12) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, consolidation or other business
combination including the Company or any of its Subsidiaries or any acquisition
or similar transaction (including, without limitation, a tender or exchange
offer) involving the purchase of (A) all or any significant portion of the
assets of the Company and its Subsidiaries taken as a whole, (B) 5% or more of
the outstanding shares of Company Common Stock or (C) 5% of the outstanding
shares of the capital stock of any Subsidiary of the Company (any such proposal
or offer being hereinafter referred to as an "Alternative Proposal"), or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person or group relating to an
Alternative Proposal (excluding the transactions contemplated by this
Agreement), or otherwise facilitate any effort or attempt to make or implement
an Alternative Proposal; (ii) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties with respect to any of the foregoing, and it will take the necessary
steps to inform such parties of its obligations under this Section; and (iii)
that it will notify ScottishPower or HoldCo promptly if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with, it or any of such persons; provided, however, that nothing contained in
this Section 5.07(a) shall prohibit the Board of Directors of the Company from
(i) furnishing information to (but only pursuant to a confidentiality agreement
in customary form and having terms and conditions no less favorable to the
Company than the Confidentiality Agreement (as defined in Section 6.01)) or
entering into discussions or negotiations with any person or group that makes
an unsolicited bona fide Alternative Proposal, if, and only to the extent that,
prior to receipt of the Company Stockholders' Approval, (A) the Board of
Directors of the Company,
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based upon the advice of outside counsel, determines in good faith that a
failure to perform such action could reasonably be expected to result in a
breach of its fiduciary duties to stockholders imposed by law, (B) the Board of
Directors has reasonably concluded in good faith (after consultation with its
financial advisors) that the person or group making such Alternative Proposal
will have adequate sources of financing to consummate such Alternative
Proposal, (C) the Board of Directors has reasonably concluded in good faith
that such Alternative Proposal is more favorable to the Company's stockholders
than the Merger, (D) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or group, the Company provides
written notice to ScottishPower or HoldCo to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person
or group, which notice shall identify such person or group in reasonable
detail, and (E) the Company keeps ScottishPower or HoldCo appropriately
informed of the status of any such discussions or negotiations; and (ii) to the
extent required, complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Alternative Proposal. Nothing in this Section 5.07 shall (x)
permit the Company to terminate this Agreement (except as specifically provided
in Article VIII), (y) permit the Company to enter into any agreement with
respect to an Alternative Proposal for so long as this Agreement remains in
effect (it being agreed that for so long as this Agreement remains in effect,
the Company shall not enter into any agreement with any person or group that
provides for, or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement under the circumstances described above)), or (z)
affect any other obligation of the Company under this Agreement.
(b) Each of HoldCo and ScottishPower agrees that (i) neither it nor any of
its Subsidiaries or other affiliates shall, and it shall use its best efforts
to cause their respective Representatives (as defined in Section 9.12) not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to its shareholders) with respect to any transaction that would
constitute a Change of Control (as defined in Section 8.01(e)), (ii) it will
notify the Company promptly if any such inquiries, proposals or offers are
received by HoldCo or ScottishPower and (iii) will keep the Company
appropriately informed of the status of any such inquiries, proposals or
offers.
5.08 Conduct of Business of Merger Sub. (a) Merger Sub shall not be formed
until immediately prior to the Closing Date.
(b) Prior to the Effective Time, HoldCo shall cause Merger Sub to (i)
perform its obligations under this Agreement in accordance with its terms, (ii)
not incur directly or indirectly any liabilities or obligations other than
those incurred in connection with the Merger, (iii) not engage directly or
indirectly in any business or activities of any type or kind and not enter into
any agreements or arrangements with any person, or be subject to or bound by
any obligation or undertaking, which is not contemplated by this Agreement and
(iv) not create, grant or suffer to exist any Lien upon its properties or
assets which would attach to any properties or assets of the Surviving
Corporation after the Effective Time.
5.09 Third Party Standstill Agreements. During the period from December 6,
1998 through the Effective Time, neither the Company nor any of its
Subsidiaries shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. During such
period, the Company shall enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreement, including, but not
limited to, by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court
having jurisdiction.
5.10 Control of Other Party's Business. Nothing contained in this
Agreement shall give the Company, directly or indirectly, the right to control
or direct HoldCo's or ScottishPower's operations prior to the Effective Time.
Nothing contained in this Agreement shall give HoldCo or ScottishPower,
directly or indirectly, the right to control or direct the Company's operations
prior to the Effective Time. Prior to the Effective Time, each of the Company,
HoldCo and ScottishPower shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information. Each of the Company, HoldCo and ScottishPower
shall, and shall cause each of its Subsidiaries and, so long as consistent with
its confidentiality obligations under its Joint Venture agreements, shall use
commercially reasonable efforts to cause its Joint Ventures to, throughout the
period from the date hereof to the Effective Time, (i) provide the other
parties and their respective Representatives with full access, upon reasonable
prior notice and during normal business hours, to all officers, employees,
agents and accountants of the Company, HoldCo and ScottishPower, as the case
may be, and their respective Subsidiaries and Joint Ventures and their
respective assets, properties, books and records, but only to the extent that
such access does not unreasonably interfere with the business and operations of
the Company, HoldCo and ScottishPower, as the case may be, and its Subsidiaries
and Joint Ventures, and (ii) furnish promptly to such persons (x) a copy of
each report, statement, schedule and other document filed or received by the
Company, HoldCo and ScottishPower, as the case may be, or any of their
respective Subsidiaries and Joint Ventures pursuant to the requirements of
federal or state securities laws and each material report, statement, schedule
and other document filed with any other Governmental or Regulatory Authority,
and (y) all other information and data (including, without limitation, copies
of Contracts, Company Employee Benefit Plans, and other books and records)
concerning the business and operations of the Company, HoldCo and
ScottishPower, as the case may be, and its Subsidiaries and Joint Ventures as
any such party or any of such other persons reasonably may request. No
investigation pursuant to this paragraph or otherwise shall affect any
representation or warranty contained in this Agreement or any condition to the
obligations of the parties hereto. Any such information or material obtained
pursuant to this Section 6.01 that constitutes "Review Material" (as such term
is defined in the letter agreement dated as of October 12, 1998 between the
Company and ScottishPower (the "Confidentiality Agreement")) shall be governed
by the terms of the Confidentiality Agreement.
6.02 Preparation of Registration Statement and Proxy Statement. As soon as
practicable after the date of this Agreement, the Company shall, in cooperation
with HoldCo and ScottishPower, prepare the Proxy Statement and HoldCo and
ScottishPower shall, in cooperation with the Company, prepare the Registration
Statement, in which the Proxy Statement will be included as the prospectus. The
Company shall, in cooperation with ScottishPower, file the Proxy Statement with
the SEC as its preliminary Proxy Statement and HoldCo shall, in cooperation
with the Company, prepare and file with the SEC the Registration Statement in
which the Proxy Statement will be included as the prospectus. HoldCo and the
Company shall use commercially reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable after such
filing. HoldCo and the Company shall also take any action (other than
qualifying as a foreign corporation or taking any action which would subject it
to service of process in any jurisdiction where ScottishPower is not now so
qualified or subject) required to be taken under applicable state blue sky or
securities laws in connection with the issuance of HoldCo ADRs or Merger
Ordinary Shares in connection with the Merger. If at any time prior to the
Effective Time any event shall occur that should be set forth in an amendment
of or a supplement to the Registration Statement, HoldCo shall prepare and file
with the SEC such amendment or supplement as soon thereafter as is reasonably
practicable. HoldCo, ScottishPower and the Company shall cooperate with the
other parties in the preparation of the Registration Statement and the Proxy
Statement and any amendment or supplement thereto, and each shall notify the
other parties of the receipt of any comments of the SEC with respect to the
Registration Statement or the Proxy Statement and of any requests by the SEC
for any amendment or supplement thereto or for additional information, and
shall provide to the other parties promptly copies of all correspondence
between HoldCo, ScottishPower or the Company, as the case may be, or any of
their respective Representatives with respect to the Registration Statement or
the Proxy Statement. HoldCo, ScottishPower and the Company shall give the other
parties and their respective counsel the opportunity to review the Registration
Statement and the Proxy Statement and all responses to requests for additional
information by and replies to comments of the SEC before their being filed
with, or sent to, the SEC. Each of the Company and HoldCo agrees to use
commercially reasonable efforts, after consultation with each other, to respond
promptly to all such comments of and requests by the SEC and to cause (x) the
Registration Statement to be declared effective by the SEC at the earliest
practicable time and to
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be kept effective as long as is necessary to consummate the Merger, and (y) the
Proxy Statement to be mailed to the holders of Company Common Stock and Company
Preferred Stock entitled to vote at the meeting of the stockholders of the
Company at the earliest practicable time.
6.03 Approval of Shareholders. (a) ScottishPower shall, through its Board
of Directors, duly call, give notice of, convene and hold a general meeting of
its shareholders (the "ScottishPower Shareholders' Meeting"), for the purpose
of voting on the Merger in accordance with this Agreement (the "ScottishPower
Shareholders' Approval"). Unless the Board of Directors of ScottishPower, based
upon the advice of outside counsel, determines in good faith that making such
recommendation, or failing to amend, modify or withdraw any previously made
recommendation, could reasonably be expected to result in a breach of its
fiduciary duties to shareholders imposed by law, ScottishPower shall, through
its Board of Directors, include in the Circular the recommendation of the Board
of Directors of ScottishPower that the shareholders of ScottishPower approve
such matters, and shall use its reasonable best efforts to obtain such
approval. In connection with the ScottishPower Shareholders' Meeting, subject
to applicable law, (i) ScottishPower shall, as soon as practicable after the
date of this Agreement and in accordance with the listing rules of the LSE,
prepare and submit to the LSE for approval the Circular and the Listing
Particulars, and shall use all reasonable efforts to have such documents
formally approved by the LSE and shall thereafter publish the Circular and the
Listing Particulars and dispatch the Circular to its shareholders in compliance
with all legal requirements applicable to the ScottishPower Shareholders'
Meeting and the listing rules of the LSE and (ii) if necessary, after the
Circular has been so dispatched, promptly publish or circulate amended,
supplemental or supplemented materials and, if required in connection
therewith, resolicit votes. In the event that the ScottishPower Shareholders'
Approval is not obtained without the vote having been taken on the date on
which the ScottishPower Shareholders' Meeting is initially convened, the Board
of Directors of ScottishPower agrees to use its reasonable best efforts to
adjourn such ScottishPower Shareholders' Meeting for the purpose of obtaining
the ScottishPower Shareholders' Approval and to use commercially reasonable
efforts during any such adjournments to obtain the ScottishPower Shareholders'
Approval.
(b) The Company shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Company
Stockholders' Meeting") for the purpose of voting on the approval of this
Agreement (the "Company Stockholders' Approval") as soon as reasonably
practicable after the date hereof. Unless the Board of Directors of the
Company, based on the advice of outside counsel, determines in good faith that
making such recommendation, or failing to amend, modify or withdraw any
previously made recommendation, could reasonably be expected to result in a
breach of its fiduciary duties to stockholders imposed by law, the Company
shall, through its Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of the Company that the stockholders
of the Company approve this Agreement, and shall use its reasonable best
efforts to obtain such approval. The Company shall consult and discuss in good
faith with ScottishPower regarding the alternatives available for obtaining the
Company Stockholders' Approval. In the event that the Company Stockholders'
Approval is not obtained without the vote having been taken on the date on
which the Company Stockholders' Meeting is initially convened, the Board of
Directors of the Company will use its reasonable best efforts to adjourn such
Company Stockholders' Meeting for the purpose of obtaining the Company
Stockholders' Approval and to use commercially reasonable efforts during any
such adjournments to obtain the Company Stockholders' Approval.
(c) HoldCo shall, through its Board of Directors, at the Annual General
Meeting of HoldCo next following the Scheme Date (or earlier, if agreed),
include for consideration by its shareholders and, subject to its fiduciary
duties, recommend the approval of a resolution to approve amendments to the
HoldCo Articles of Association in order to provide, to the extent reasonably
possible, for the holders of HoldCo ADRs substantially the same rights as
holders of HoldCo Ordinary Shares to receive notice of, attend, speak and vote
at general meetings of holders of HoldCo Ordinary Shares (the "ADR Holder
Proposal"). In the event the ADR Holder Proposal is not adopted by HoldCo's
shareholders at such Annual General Meeting, HoldCo shall, through its Board of
Directors, include for consideration by its shareholders and, subject to its
fiduciary duties, recommend approval of the ADR Holder Proposal at HoldCo's
next Annual General Meeting. With effect from
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and/or following the Scheme Date, ScottishPower's Articles of Association shall
be amended to reflect its status as a subsidiary, provided, however, that if
the effect of such amendments would have a material adverse effect on the
benefits of the Merger for the holders of Company Common Stock, such amendments
may only be effected with the prior written consent of the Company.
6.04 Company Affiliates. At least thirty (30) days prior to the Closing
Date the Company shall deliver a letter to HoldCo identifying all persons who,
at the time of the Company Stockholders' Meeting, may, in the Company's
reasonable judgment, be deemed to be "affiliates" (as such term is used in Rule
145 under the Securities Act) of the Company ("Company Affiliates"). The
Company shall use its best efforts to cause each Company Affiliate to deliver
to HoldCo on or prior to the Closing Date a written agreement substantially in
the form and to the effect of Exhibit C hereto (an "Affiliate Agreement").
HoldCo shall be entitled to place legends as specified in such Affiliate
Agreements on the certificates evidencing any HoldCo ADSs to be received by
such Company Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the HoldCo
ADSs, consistent with the terms of such Affiliate Agreements.
6.05 Auditors' Letters. Each of the Company, HoldCo and ScottishPower
shall use all reasonable efforts to cause to be delivered to the other parties
and such other parties' Boards of Directors a letter of its independent
auditors, dated the date on which the Registration Statement shall become
effective, and addressed to the other parties and such other parties' Boards of
Directors, in form and substance customary for "comfort" letters delivered by
independent public accountants in connection with registration statements on
Form F-4 and Form S-4.
6.06 Stock Exchange Listing; Deposit Agreement. (a) HoldCo shall use its
commercially reasonable efforts, and the Company shall cooperate in respect
thereto, to cause (a) the HoldCo ADSs to be issued in the Merger and under the
Company Stock Plans after the Merger in accordance with this Agreement to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date; and (b) each of (i) the HoldCo Ordinary Shares to be
represented by the HoldCo ADSs to be issued in the Merger to be admitted to the
Official List of the London Stock Exchange and (ii) the Merger Ordinary Shares
to be issued in the Merger to be admitted to the Official List of the London
Stock Exchange.
(b) Following the execution of this Agreement, HoldCo shall promptly
prepare and shall use its commercially reasonable efforts to have executed a
deposit agreement, all on terms and conditions reasonably satisfactory to the
Company, that will provide holders of HoldCo ADRs with the right to (i)
participate in rights offerings, (ii) attend HoldCo shareholder meetings, (iii)
speak at HoldCo shareholder meetings, (iv) call for a poll at HoldCo
shareholder meetings, (v) examine documents made available at HoldCo
shareholder meetings, (vi) instruct the Depository to vote its HoldCo ADSs in a
particular fashion, (vii) generally be counted individually as present and/or
voting with respect to resolutions adopted at HoldCo shareholder meetings, and
(viii) decide at HoldCo shareholder meetings how to vote on particular
resolutions, in each case on the same basis as the holders of HoldCo Ordinary
Shares.
6.07 Restructuring of Merger. The parties expressly acknowledge and agree
that, although it is their current intention to effect a business combination
among themselves in the form contemplated by this Agreement, it may be
preferable to effectuate such a business combination by means of an alternative
structure in light of the conditions set forth in Sections 7.01(i), 7.02(d) and
7.03(d). Accordingly, if the only conditions to the parties' obligations to
consummate the Merger which are not satisfied or waived are receipt of any one
or more of those set forth in Sections 7.01(i), 7.02(d) and 7.03(d), and the
adoption of an alternative structure (that otherwise substantially preserves
for the parties the economic and other material benefits of the Merger) would
result in such conditions being satisfied or waived, then the parties shall use
their respective reasonable best efforts to effect a business combination among
themselves by means of a mutually agreed upon structure other than the Merger
that so preserves such benefits; provided that, prior to closing any such
restructured transaction, all material third party and Governmental and
Regulatory Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary to effect such alternative
business
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combination shall have been obtained and all other conditions to the parties'
obligations to consummate the Merger, as applied to such alternative business
combination, shall have been satisfied or waived.
6.08 Regulatory and Other Approvals. Subject to the terms and conditions
of this Agreement and without limiting the provisions of Sections 6.02, 6.03
and 6.06, each of the Company, HoldCo and ScottishPower shall jointly develop a
regulatory approval plan and proceed cooperatively and in good faith to, as
promptly as practicable, (i) obtain all consents, approvals or actions of, make
all filings with and give all notices to Governmental or Regulatory Authorities
or any other public or private third parties required of HoldCo, ScottishPower,
the Company or any of their Subsidiaries or Joint Ventures to consummate the
Merger and the other matters contemplated hereby (including without limitation
those set forth on Section 3.04 of the Company Disclosure Letter and Section
4.04 of the ScottishPower Disclosure Letter), and (ii) provide such other
information and communications to such Governmental or Regulatory Authorities
or other public or private third parties as the other parties or such
Governmental or Regulatory Authorities or other public or private third parties
may reasonably request in connection therewith. In addition to and not in
limitation of the foregoing, each of the parties will (w) take promptly all
actions necessary to make the filings required of HoldCo, ScottishPower and the
Company or their affiliates under the HSR Act and to comply with filing and
approval requirements of the FERC and each state Governmental or Regulatory
Authority, (x) comply at the earliest practicable date with any request for
additional information received by any such party or its affiliates from the
Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") pursuant to the HSR Act, (y)
cooperate with the other parties in connection with any such party's filings
under the HSR Act and in connection with resolving any investigation or other
inquiry concerning the Merger or the other matters contemplated by this
Agreement commenced by either the FTC or the Antitrust Division or state
attorneys general or by the FERC or any State Governmental or Regulatory
Authority having jurisdiction with respect to the Merger or another transaction
contemplated by this Agreement, and (z) provide to the other parties promptly
copies of all correspondence between any such party and the applicable
Governmental or Regulatory Authority with respect to any filings referred to in
this Section 6.08, and shall give the other parties the opportunity to review
such filings and all responses to requests for additional information by such
Governmental or Regulatory Authority prior to their being filed therewith.
6.09 Employee Benefit Plans. HoldCo shall use its reasonable best efforts
to cause the Company Employee Benefit Plans in effect at December 6, 1998 that
had been disclosed to ScottishPower prior to such date to remain in effect
until the second anniversary of the Effective Time or, to the extent such
Company Employee Benefit Plans are not continued, HoldCo will maintain until
such date benefit plans which are no less favorable, in the aggregate, to the
employees covered by such Company Employee Benefit Plans provided, however,
that nothing contained herein shall be construed as requiring HoldCo or the
Surviving Corporation to continue any specific plan or as preventing HoldCo or
the Surviving Corporation from (a) establishing and, if necessary, seeking
shareholder approval to establish, any other benefit plans in respect of all or
any of the employees covered by such Company Employee Benefit Plans or any
other employees, or (b) amending such Company Employee Benefit Plans (or any
replacement benefit plans therefor) where required by applicable law or where
such amendment is with the consent of the affected employees. From and after
the Effective Time, HoldCo shall honor, and shall cause its Subsidiaries to
honor, in accordance with its express terms, each existing employment, change
of control, severance and termination agreement between the Company or any of
its Subsidiaries, and any officer, director or employee of such company,
including without limitation all legal and contractual obligations pursuant to
outstanding restoration plans, severance plans, bonus deferral plans, vested
and accrued benefits and similar employment and benefit arrangements, policies
and agreements that had been disclosed to ScottishPower prior to December 6,
1998 and other obligations entered into in accordance with Sections 5.01(d) and
(h).
6.10 Company Stock Plan. (a) At the Effective Time, each outstanding
option to purchase shares of Company Common Stock (a "Company Stock Option")
under the Company Option Plan, whether vested or unvested, shall be converted
into an option to acquire, on the same terms and conditions as were applicable
under such Company Stock Option, except as amended by this Section 6.10, a
number of HoldCo ADSs equal
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to the product (rounded down to the nearest whole number) of (i) the number of
shares of Company Common Stock subject to the option immediately prior to the
Effective Time and (ii) the ADS Consideration and the option exercise price per
HoldCo ADS at which such option is exercisable shall be the amount (rounded up
to the nearest whole cent) obtained by dividing (iii) the option exercise price
per share of Company Common Stock at which such option is exercisable
immediately prior to the Effective Time by (iv) the ADS Consideration;
provided, however, that, in the case of any Company Stock Option to which
Section 421 of the Code applies by reason of its qualification under any of
Sections 422-424 of the Code ("qualified stock options"), the option exercise
price, the number of shares which may be acquired pursuant to such option and
the terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code; provided, further, that, under
no circumstances shall the option exercise price per HoldCo ADS be less than
the aggregate par value of the HoldCo Ordinary Shares represented by a HoldCo
ADS.
(b) As soon as practicable after the Effective Time, HoldCo shall deliver
to the participants in the Company Option Plan appropriate notices setting
forth such participants' rights pursuant thereto and the grants pursuant to the
Company Option Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section after giving effect to the
Merger).
(c) HoldCo shall take all corporate action necessary to have a sufficient
number of shares of HoldCo ADSs available for delivery under the Company Option
Plan as adjusted in accordance with this Section. As soon as practicable after
the Effective Time, HoldCo shall file a registration statement on Form F-8
promulgated by the SEC under the Securities Act (or any successor or other
appropriate form) with respect to the HoldCo ADSs subject to such options and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
(d) For purposes of Section 2.01(c), Company Common Stock shall include
shares of restricted Company Common Stock issued under the Company's Non-
Employee Director's Stock Compensation Plan, Stock Incentive Plan and Long Term
Incentive Plan (collectively, the "Company Restricted Stock Plans"). The
Company shall take all corporate action necessary and obtain all relevant
consents to ensure that the consideration received under such Section 2.01(c)
upon the conversion of each outstanding share of restricted Company Common
Stock will continue to be subject to the same restrictions that such shares
were subject to under the Company Restricted Stock Plans and the applicable
award agreements thereunder, including, without limitation, any forfeiture
restrictions, subject to amendment or modification of such plans or award
agreements to reflect action of the Board of Directors of the Company taken
prior to December 6, 1998 and disclosed to ScottishPower prior to such date.
6.11 Directors' and Officers' Indemnification and Insurance. (a) Except to
the extent required by law, until the sixth anniversary of the Effective Time,
HoldCo will not take any action so as to amend, modify or repeal the provisions
for indemnification of directors or officers contained in the certificate or
articles of incorporation or bylaws (or other comparable charter documents) of
the Surviving Corporation and its Subsidiaries (which after the Effective Time
shall be substantially identical to those of the Company in effect on December
6, 1998) in such a manner as would adversely affect the rights of any
individual who shall have served as a director or officer of the Company or any
of its Subsidiaries prior to the Effective Time to be indemnified by such
corporations in respect of their serving in such capacities prior to the
Effective Time.
(b) HoldCo and the Surviving Corporation shall, until the sixth
anniversary of the Effective Time, cause to be maintained in effect, to the
extent available, the policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries as of December 6, 1998 (or
policies of at least the same coverage and amounts containing terms that are no
less advantageous to the insured parties) with respect
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to claims arising from facts or events that occurred on or prior to the
Effective Time; provided that in no event shall HoldCo or the Surviving
Corporation be obligated to expend in order to maintain or procure insurance
coverage pursuant to this paragraph any amount per annum in excess of two
hundred percent (200%) of the aggregate premiums payable by the Company and its
Subsidiaries in 1998 (on an annualized basis) for such purpose.
6.12 HoldCo Governance; Additional Matters. (a) Subject to the exercise of
fiduciary duties and to the extent permitted by applicable law, HoldCo's Board
of Directors shall take action to cause the full Board of Directors of HoldCo
at the Effective Time to include Keith McKennon, as Deputy Chairman of HoldCo,
and two additional non-executive members of the Company's current Board of
Directors to be designated by the Company at least thirty (30) days prior to
the Effective Time.
(b) HoldCo shall, promptly following the Effective Time, cause certain of
the non-executive members of the Company's Board of Directors immediately prior
to the Effective Time who do not become directors of HoldCo pursuant to Section
6.12(a) hereof, and who are willing to so serve, to be elected or appointed as
members of an advisory board (the "Advisory Board") established by the Company,
the function of which shall be to meet no less frequently than semi-annually in
order to advise the Company's Board of Directors with respect to general
business as well as opportunities and activities in the Company's market area
and to maintain and develop customer relationships. The Advisory Board shall be
chaired by Ian Robinson, and shall also include Duncan Whyte, Richard O'Brien,
and such other representatives from the communities served by the Company
(including but not limited to non-executive members of the Company's Board of
Directors immediately prior to the Effective Time) as shall be mutually agreed
by Ian Robinson and Keith McKennon. The members of the Advisory Board who are
willing to so serve initially shall be elected or appointed for a term of two
years. HoldCo agrees to cause the Company to re-elect or re-appoint each of the
initial members of the Advisory Board to one successive one-year term following
the initial term; provided, however, that HoldCo shall have no obligation to
cause the Company to elect or appoint, or re-elect or re-appoint, and may cause
the Company to remove, any member if HoldCo reasonably determines that such
member has a conflict of interest that compromises such member's ability to
serve effectively as a member of the Advisory Board or any cause exists that
otherwise would allow for removal of such person as a director of the Company
if such person were a member of the Company's Board of Directors.
(c) Immediately following the Effective Time, the Company's United States
headquarters shall continue to be in Portland, Oregon. In recognition of
HoldCo's and ScottishPower's commitment to the communities served by the
Company, following the Effective Time HoldCo or ScottishPower will contribute
to The PacifiCorp Foundation the sum of $5 million.
6.13 Expenses. Except as set forth in Section 8.02, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense. The Company shall not be obligated for any fees
or expenses relating to HoldCo's obligation to demonstrate the existence of
adequate working capital in connection with the filing of the Listing
Particulars. Notwithstanding any provision of this Agreement, in no event shall
HoldCo, ScottishPower or any affiliate of HoldCo or ScottishPower pay any
expenses of the Company, any Company affiliate or any Company stockholder in
connection with the transactions contemplated by this Agreement.
6.14 Brokers or Finders. Each of HoldCo, ScottishPower and the Company
represents, as to itself and its affiliates, that, except as set forth on
Section 6.14 of the Company Disclosure Letter and except for any reasonable
fees and expenses that may be paid by HoldCo or ScottishPower to Morgan Stanley
Dean Witter Discover, Inc. in connection with the Scheme of Arrangement, no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement except Salomon Smith Barney, whose fees and expenses will be paid by
the Company in accordance with the Company's agreement with such firm (a true
and complete copy of which has been delivered by the Company to ScottishPower
prior
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to December 6, 1998), and Morgan Stanley Dean Witter Discover Inc. whose fees
and expenses will be paid by ScottishPower in accordance with ScottishPower's
agreement with such firm (a true and complete copy of which has been delivered
by ScottishPower to the Company prior to December 6, 1998), and each of HoldCo
and ScottishPower, on the one hand, and the Company, on the other, shall
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other such fee or commission or
expenses related thereto asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
6.15 Takeover Statutes. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the members
of the Board of Directors of the Company shall grant such approvals and take
such actions as are reasonably necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby and thereby.
6.16 Conveyance Taxes. The Company, HoldCo and ScottishPower shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes and duties, any transfer, recording, registration and other fees, and any
similar taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to be filed on or
before the Effective Time. The Company shall pay, without deduction or
withholding (except where such deduction or withholding is required by
applicable law) from any amount payable to the holders of Company Common Stock,
any such taxes which become payable in connection with the transfer of Company
Common Stock in exchange for the Ordinary Share Consideration and the ADS
Consideration. The Company shall also pay any stamp duty or stamp duty reserve
tax arising in connection with the issue of the HoldCo ADSs and HoldCo ADRs.
6.17 Rate Matters. During the period commencing on December 6, 1998 and
ending on the Effective Date, the Company shall, and shall cause its
Subsidiaries to, obtain HoldCo's and ScottishPower's approval, not to be
unreasonably withheld or delayed, prior to initiating any general rate case and
shall consult with HoldCo and ScottishPower prior to making any material
changes in its or its Subsidiaries' rates or charges, standards of service or
accounting from those in effect on December 6, 1998 and shall further consult
with HoldCo and ScottishPower prior to making any filing (or any amendment
thereto), or effecting any agreement, commitment, arrangement or consent,
whether written or oral, formal or informal, with respect thereto.
6.18 Tax Matters. Each of HoldCo and ScottishPower agrees that:
(a) Prior to the Closing Date, ScottishPower and HoldCo (i) will make the
elections necessary pursuant to Section 301.7701-3 of the U.S. Treasury
regulations promulgated under the Code to treat UKSub 1 and UKSub 2 as
entities disregarded as separate from ScottishPower and HoldCo and (ii)
will not change such election during the period beginning on the date such
election is effective for U.S. federal income tax purposes and ending on
the date that is three years after the Closing Date.
(b) Throughout the period beginning on the date the election described in
Section 6.18(a) of this Agreement is effective for U.S. federal income tax
purposes and ending on the date that is three years after the Closing Date:
(i) ScottishPower and HoldCo will not make an election under Section
301.7701-3 of the U.S. Treasury regulations to treat UKSub 1 or UKSub 2 as
an association taxable as a corporation; (ii) ScottishPower, before the
Share Transfer, will directly own the whole of the share capital of UKSub 1
and UKSub 2, and HoldCo, after the Share Transfer, will directly own the
whole of the share capital of UKSub 1 and UKSub 2; and (iii) ScottishPower
and HoldCo will cause UKSub 1 and UKSub 2 to directly own all of the equity
interests in the Partnership. Prior to the Closing Date, ScottishPower and
HoldCo shall cause the Share Transfer to occur.
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(c) Throughout the period beginning at the Effective Time and ending on
the date that is three years after the Closing Date, the Partnership will
directly own all of the Common Stock of the Surviving Corporation, except
for contribution to a controlled subsidiary described in Code Section
368(a)(2)(C) and the regulations promulgated thereunder.
(d) Throughout the period beginning at the Effective Time and ending on
the date that is three years after the Closing Date, none of HoldCo,
ScottishPower, UKSub 1, UKSub 2, the Partnership, nor any other affiliate
of HoldCo or ScottishPower will redeem, acquire, convert, exchange, or
cause the Company or any affiliate of the Company to acquire, convert or
exchange or arrange for another person to acquire, convert or exchange any
of the ADS Consideration or the Ordinary Share Consideration, unless HoldCo
has received a written opinion of counsel that such action will not cause
those persons who were stockholders of the Company at the time of the
Merger to recognize gain or loss for US federal income tax purposes either
with respect to the Merger or with respect to a subsequent exchange or
conversion;
(e) Neither HoldCo, ScottishPower nor any affiliate of HoldCo or
ScottishPower will, directly or indirectly, pay any expense incurred by (i)
the Company, (ii) any affiliate of the Company or (iii) any Company
stockholder, in each case, in connection with the transactions contemplated
by this Agreement.
(f) For a period of three years following the Closing Date, without the
receipt of a written opinion of counsel that such action will not affect
the tax-free status of the transactions contemplated by this Agreement,
neither HoldCo nor any affiliate of HoldCo, will, directly or indirectly,
(i) make contributions (whether or not in exchange for shares) or loan
additional funds to (x) the Company, (y) any affiliate of the Company or
(z) any escrow account, trust or other fund established to pay any expenses
incurred by the Company, any affiliate of the Company or any Company
stockholder in connection with the transactions contemplated by this
Agreement or (ii) permit the Company or any Company affiliate to incur
additional indebtedness guaranteed by HoldCo or any HoldCo affiliate;
(g) Neither HoldCo nor any affiliate of HoldCo will, directly or
indirectly reimburse (or otherwise pay) any amounts paid to the holders of
$1.28 Series, $1.18 Series or $1.16 Series no par serial preferred stock of
the Company in connection with the redemption of their preferred stock
prior to the Closing Date.
(h) Neither HoldCo, ScottishPower nor any affiliate of HoldCo or
ScottishPower will, directly or indirectly, acquire any Company stock
except for the Company stock acquired solely in exchange for the ADS
Consideration or the Ordinary Share Consideration unless acquired directly
from the Company.
6.19 Dividends. HoldCo hereby acknowledges its intention, following the
Effective Time, to adopt a practice of paying, with respect to HoldCo Ordinary
Shares and HoldCo ADSs, quarterly dividends on regular quarterly dividend dates
in roughly equal amounts. After the date hereof, each of HoldCo, ScottishPower
and the Company shall coordinate with the other with respect to the declaration
of dividends in respect of HoldCo Ordinary Shares and Company Common Stock and
the record dates and payment dates with respect thereto prior to the Effective
Time, with the intention that the holders of Company Common Stock receive
dividends in respect of the Company Common Stock for all periods prior to the
Effective Time but do not receive dividends on the ADS Consideration and the
Ordinary Share Consideration after the Effective Time in respect of periods
prior to the Effective Time.
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ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved by the
requisite vote of the stockholders of the Company under the BCA and the
shareholders of ScottishPower shall have approved the Merger.
(b) Registration Statement; State Securities Laws. The Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order suspending such effectiveness shall
have been issued and remain in effect and no proceeding seeking such an
order shall be pending or threatened. HoldCo shall have received all state
securities or "Blue Sky" permits and other authorizations necessary to
issue the HoldCo ADSs pursuant to this Agreement and under the Company
Stock Plans after the Merger.
(c) Exchange Listing. The LSE shall have agreed to admit to the Official
List (subject to allotment) the new HoldCo Ordinary Shares to be issued in
connection with the Merger and such agreement shall not have been withdrawn
and the HoldCo ADSs issuable to the Company stockholders in the Merger and
under the Company Stock Plans after the Merger in accordance with this
Agreement shall have been authorized for listing on the NYSE, upon official
notice of issuance.
(d) HSR Act. Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(e) Injunctions or Restraints. No court of competent jurisdiction or
other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making illegal or otherwise restricting, preventing or
prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement.
(f) Exon-Florio. The review and investigation under Exon-Florio shall
have been terminated and the President shall have taken no action
authorized thereunder.
(g) Power Act; Atomic Energy Act. The final approval of (i) the FERC and
(ii) the Nuclear Regulatory Commission under the Atomic Energy Act, with
respect to the Merger and the transactions contemplated by this Agreement
shall have been obtained.
(h) H.M. Treasury Consent. HoldCo or ScottishPower (as required) shall
have received consent from H.M. Treasury pursuant to Section 765 of the
U.K. Income and Corporation Taxes Act 1988 in respect of the Merger and any
other matter contemplated hereby, or confirmation that no consent is
required.
(i) Governmental and Regulatory Consents and Approvals. Other than the
filings provided for by Section 1.03 and any filing required in connection
with the registration or exemption of HoldCo under the 1935 Act, all
consents, approvals and actions of, filings with and notices to any
Governmental or Regulatory Authority (including under the HSR Act and Exon-
Florio Act and the approvals by FERC pursuant to the Power Act) required of
HoldCo, ScottishPower, the Company or any of their Subsidiaries to
consummate the Merger and the other matters contemplated hereby shall have
been made or obtained (as the case may be) and become Final Orders (as
defined in this Section below), and such Final Orders shall not,
individually or in the aggregate, contain terms or conditions that would
have, or would reasonably be expected to have, a material adverse effect on
the Surviving Corporation and its Subsidiaries, taken as a whole. A "Final
Order" means an action by the relevant Governmental or Regulatory Authority
that has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with
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respect to which any waiting period prescribed by applicable law before the
transactions contemplated hereby may be consummated has expired, and as to
which all conditions to the consummation of such transactions prescribed by
applicable law, regulation or order have been satisfied.
(j) Other Consents and Approvals. The consent or approval of each person
(other than a Governmental or Regulatory Authority) whose consent or
approval is required of HoldCo, ScottishPower, the Company or any of their
Subsidiaries under any Contract in order to consummate the Merger and the
other transactions contemplated hereby shall have been obtained, except for
those consents and approvals which, if not obtained, would not have, or
would not reasonably be expected to have, a material adverse effect on the
Company and its Subsidiaries taken as a whole or on the ability of HoldCo,
ScottishPower or the Company to consummate the transactions contemplated
hereby.
(k) UK Fair Trading Act. Any of:
(i) the Office of Fair Trading (the "OFT") shall have indicated in
writing that the Secretary of State for Trade and Industry (the "SOS")
in the exercise of his powers under the Fair Trading Act 1973 (the
"FTA") does not intend to refer the Merger or any matter relating
thereto to the Monopolies and Mergers Commission ("MMC"); or
(ii) in the event of an MMC reference, the MMC shall have concluded
that the Merger does not or may not be expected to operate against the
public interest; or
(iii) if on a reference the MMC shall have concluded that the Merger
does or may be expected to operate against the public interest, the SOS
shall have indicated in writing that it is his intention to approve the
Merger,
provided that if any indication by the SOS referred to in (i) or (iii)
above is subject to undertakings, assurances or any other terms or
conditions, such undertakings, assurances, terms or conditions would
not have, or would reasonably be expected not to have, individually or
in the aggregate, a material adverse effect on the HoldCo Group taken
as a whole.
(l) K Regulators. Each of the Office of Electricity Regulation ("OFFER")
and the Office of Water Services ("OFWAT") shall have indicated:
(i) that it is not its intention to seek any modifications to any
conditions of the licenses or appointments held by any member of the
HoldCo Group under any applicable statute, law, regulation, order or
determination which would have, or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on
the HoldCo Group taken as a whole; and
(ii) that it will give such consents and/or directions (if any) as
are necessary or appropriate with respect to such licenses or
appointments in connection with the Merger on terms which would not
have, or would reasonably be expected not to have, individually or in
the aggregate, a material adverse effect on the HoldCo Group taken as a
whole.
(m) UK Undertakings/Assurances. Neither OFFER nor OFWAT shall have sought
undertakings or assurances from any member of the HoldCo Group which would
have, or would reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the HoldCo Group taken as a whole.
7.02 Conditions to Obligation of HoldCo, ScottishPower and Merger Sub to
Effect the Merger. The obligation of HoldCo, ScottishPower and Merger Sub to
effect the Merger is further subject to the fulfillment, at or prior to the
Closing, of each of the following additional conditions (all or any of which
may be waived in whole or in part by HoldCo, ScottishPower and Merger Sub in
their sole discretion):
(a) Representations and Warranties. The representations and warranties
made by the Company in this Agreement shall be true and correct, in all
material respects, taken as a whole, as of the Closing Date as though made
on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date on and
as of such earlier date (provided, however, that for purposes of this
paragraph (a), no effect shall be given to the reference to the date
December 6, 1998 in
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the first paragraph of Article III), except as affected by the transactions
contemplated by this Agreement, and the Company shall have delivered to
HoldCo a certificate, dated the Closing Date and executed in the name and
on behalf of the Company by its Chairman of the Board, President or any
Executive or Senior Vice President, to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations, taken as a whole, which are required by this Agreement to be
so performed or complied with by the Company at or prior to the Closing,
and the Company shall have delivered to HoldCo a certificate, dated the
Closing Date and executed in the name and on behalf of the Company by its
Chairman of the Board, President or any Executive or Senior Vice President,
to such effect.
(c) Material Adverse Effect. Since December 6, 1998, no material adverse
effect shall have occurred with respect to the Company and its Subsidiaries
taken as a whole and there shall exist no facts or circumstances arising
after December 6, 1998, which in the aggregate would, or insofar as
reasonably can be foreseen, could, when taken together with any breaches or
violations of any representations, warranties, covenants and agreements of
the Company contained herein, have a material adverse effect on the Company
and its Subsidiaries taken as a whole. For purposes of this Section
7.02(c), (i) any tax benefits relating directly to the structure of the
transactions contemplated by this Agreement as of the date hereof which are
not realized by HoldCo or ScottishPower, and (ii) any adverse effects on
the Company and its Subsidiaries resulting from general economic or
financial conditions, shall not be taken into account in determining
whether a material adverse effect has occurred under this Section 7.02(c).
(d) Tax Opinion. HoldCo, ScottishPower and the Partnership shall have
received the opinion, based on appropriate representations of the Company,
HoldCo and ScottishPower, of Milbank, Tweed, Hadley & McCloy LLP, special
counsel to HoldCo and ScottishPower, dated on or about the date on which
the Registration Statement (or the last amendment thereto) shall have
become effective, which opinion shall have been confirmed in writing on and
as of the Closing Date, to the effect that the Merger will constitute a
"reorganization" within the meaning of Code Section 368(a) and that no gain
or loss will be recognized for US federal income tax purposes by the
stockholders of the Company who exchange Company Common Stock for HoldCo
ADSs or Merger Ordinary Shares pursuant to the Merger (except with respect
to cash received in lieu of fractional HoldCo ADSs or Merger Ordinary
Shares).
(e) Proceedings. All proceedings to be taken on the part of the Company
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to HoldCo, and HoldCo shall have received copies of all such
documents and other evidences as HoldCo may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
7.03 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the
Company in its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by HoldCo, ScottishPower and the Partnership in this Agreement shall
be true and correct, in all material respects, taken as a whole, as of the
Closing Date as though made on and as of the Closing Date or, in the case
of representations and warranties made as of a specified date earlier than
the Closing Date, on and as of such earlier date (provided, however, that
for purposes of this paragraph (a), no effect shall be given to the
reference to the date December 6, 1998 and the date of this Agreement in
the first paragraph of Article IV hereof), except as affected by the
transactions contemplated by this Agreement, and HoldCo, ScottishPower and
Merger Sub shall each have delivered to the Company a certificate, dated
the Closing Date and executed in the name and on behalf of HoldCo by its
Chairman of the Board, President or any Executive or Senior Vice President
or any Executive Director, in the name and on behalf of ScottishPower
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by its Chairman of the Board, President or any Executive or Senior Vice
President and in the name and on behalf of Merger Sub by its Chairman of
the Board, President or any Vice President, to such effect.
(b) Performance of Obligations. HoldCo, ScottishPower and Merger Sub
shall have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to be so
performed or complied with by HoldCo, ScottishPower or Merger Sub at or
prior to the Closing, and HoldCo, ScottishPower and Merger Sub shall each
have delivered to the Company a certificate, dated the Closing Date and
executed in the name and on behalf of HoldCo by its Chairman of the Board,
President or any Executive or Senior Vice President or any Executive
Director, in the name and on behalf of ScottishPower by its Chairman of the
Board, President or any Executive or Senior Vice President and in the name
and on behalf of Merger Sub by its Chairman of the Board, President or any
Vice President, to such effect.
(c) Material Adverse Effect. Since December 6, 1998, no material adverse
effect shall have occurred with respect to HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole and there shall exist no facts or
circumstances arising after December 6, 1998 which in the aggregate would,
or insofar as reasonably can be foreseen, could, when taken together with
any breaches or violations of any representations, warranties, covenants
and agreements of HoldCo and ScottishPower contained herein, have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. For purposes of this Section 7.03(c), any
adverse effects on HoldCo, ScottishPower and their respective Subsidiaries
resulting from general economic or financial conditions shall not be taken
into account in determining whether a material adverse effect has occurred
under this Section 7.03(c).
(d) Tax Opinion. The Company shall have received the opinion, based on
appropriate representations of the Company, HoldCo and ScottishPower, of
Stoel Rives LLP, counsel to the Company, and LeBoeuf, Lamb, Greene &
MacRae, LLP, special counsel to the Company, dated on or about the date on
which the Registration Statement (or the last amendment thereto) shall have
become effective, which opinion shall have been confirmed in writing on and
as of the Closing Date to the effect that the Merger will constitute a
"reorganization" within the meaning of Code Section 368(a) and that no gain
or loss will be recognized for US federal income tax purposes by the
stockholders of the Company who exchange Company Common Stock for HoldCo
ADSs or Merger Ordinary Shares pursuant to the Merger (except with respect
to cash received in lieu of fractional HoldCo ADSs or Merger Ordinary
Shares).
(e) Proceedings. All proceedings to be taken on the part of HoldCo,
ScottishPower and Merger Sub in connection with the transactions
contemplated by this Agreement and all documents incident thereto (other
than documentation relating to the Scheme of Arrangement) shall be
reasonably satisfactory in form and substance to the Company, and the
Company shall have received copies of all such documents and the
documentation relating to the Scheme of Arrangement and other evidences as
the Company may reasonably request in order to establish the consummation
of such transactions and the taking of all proceedings in connection
therewith.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after the Company Stockholders' Approval or the
ScottishPower Shareholders' Approval:
(a) By mutual written agreement of the parties hereto duly authorized by
action taken by or on behalf of their respective Boards of Directors;
(b) By either the Company or HoldCo upon notification to the non-
terminating party by the terminating party:
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(i) at any time after the date which is nine (9) months following
December 6, 1998 if the Merger shall not have been consummated on or
prior to such date and such failure to consummate the Merger is not
caused by a breach of this Agreement by the terminating party;
provided, however, that if on such date HoldCo, ScottishPower and the
Company and their respective Subsidiaries have not received all of the
approvals required in order to satisfy the conditions set forth in
Section 7.01(i) but all other conditions to effect the Merger shall be
fulfilled or shall be capable of being fulfilled, then, at the option
of either HoldCo or the Company (which shall be exercised by written
notice), the term of this Agreement shall be extended until the
expiration of such date which is eighteen (18) months after December 6,
1998;
(ii) if the Company Stockholders' Approval or the ScottishPower
Shareholders' Approval shall not be obtained by reason of the failure
to obtain the requisite vote upon a vote actually held at a meeting of
such stockholders or shareholders, or any adjournment thereof, called
therefor;
(iii) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the non-terminating
party set forth in this Agreement (determined in all cases as if the
terms "material" or "materially" were not included in any such
representation or warranty), which breach is not curable or, if
curable, has not been cured within thirty (30) days following receipt
by the non-terminating party of notice of such breach from the
terminating party which breach, when taken together with any other
breaches of representations, warranties, covenants and agreements of
the non-terminating party contained in this Agreement, has or would
reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole; or
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise preventing or prohibiting the Merger and such
order shall have become final and nonappealable;
(c) By the Company upon five (5) days' prior notice to HoldCo if (i) the
Board of Directors of the Company determines in good faith, that a failure
to terminate this Agreement could reasonably be expected to result in a
breach of its fiduciary duties to stockholders imposed by law by reason of
an unsolicited bona fide Alternative Proposal meeting the requirements of
clauses (B) and (C) of Section 5.07 having been made; provided that
(A) The Board of Directors of the Company shall have been advised by
outside counsel, that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into in
the proper exercise of its applicable fiduciary duties, and
notwithstanding all concessions which may be offered by HoldCo in
negotiations entered into pursuant to clause (B) below, a failure to
reconsider such commitment as a result of such Alternative Proposal
could reasonably be expected to result in a breach of its fiduciary
duties to stockholders imposed by law, and
(B) prior to any such termination, the Company shall, and shall cause
its respective financial and legal advisors to, negotiate with HoldCo
to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms;
and provided further that the Company's ability to terminate this Agreement
pursuant to this clause (i) is conditioned upon the prior payment by the
Company to HoldCo of any amounts owed by it pursuant to Section 8.02(b);
or (ii) the Board of Directors of HoldCo (or any committee thereof) shall have
withdrawn or modified in a manner materially adverse to the Company its
approval or recommendation of this Agreement or the Merger; or
(d) By HoldCo if the Board of Directors of the Company (or any committee
thereof) (i) shall have withdrawn or modified in a manner materially
adverse to HoldCo its approval or recommendation of this
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Agreement or the Merger, (ii) shall fail to reaffirm such approval or
recommendation upon HoldCo's request, (iii) shall have approved,
recommended or taken no position with respect to an Alternative Proposal to
the stockholders of the Company or (iv) shall resolve to take any of the
foregoing actions; or
(e) By the Company if there has been a Change of Control after the Scheme
Date and prior to the Effective Time. A "Change of Control" shall occur if
any of the following applies: (A) Any "Person", as such term is used in
Sections 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of HoldCo representing 30 percent or more of the
combined voting power of HoldCo's outstanding capital stock; (B) the
shareholders of HoldCo approve a merger or other consolidation of HoldCo
with any other company, other than a merger or consolidation effected to
implement a recapitalization of HoldCo (or similar transaction) in which no
Person acquires more than 30 percent of the combined voting power of
HoldCo's then outstanding securities; (C) a tender or exchange offer is
made for the ordinary shares of HoldCo (or securities convertible into
ordinary shares of HoldCo) and such offer results in a portion of those
securities being purchased and the offeror after the consummation of the
offer is the beneficial owner (as determined pursuant to Section 13(d) of
the Exchange Act), directly or indirectly, of securities representing at
least 30 percent of the voting power of outstanding securities of HoldCo;
or (D) HoldCo sells 30 percent or more of its shares of ScottishPower to a
buyer that is not a member of HoldCo controlled group of corporations.
8.02 Effect of Termination. (a) If this Agreement is validly terminated by
either the Company or HoldCo pursuant to Section 8.01, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of either the Company, HoldCo or ScottishPower (or any of their
respective Representatives or affiliates), except (i) that the provisions of
Sections 6.13, 6.14 and 6.16, this Section 8.02, and Sections 9.10 and 9.11
will continue to apply following any such termination, (ii) that nothing
contained herein shall relieve any party hereto from liability for willful
breach of its representations, warranties, covenants or agreements contained in
this Agreement and (iii) as provided in paragraphs (b) and (c) below.
(b) In the event that any person or group shall have made an Alternative
Proposal and thereafter (i) this Agreement is terminated (x) by the Company
pursuant to Section 8.01(c)(i), (y) by HoldCo pursuant to Section 8.01(b)(iii)
or Section 8.01(d) or (z) by either party pursuant to Section 8.01(b)(ii) as a
result of the Company Stockholders' Approval not being obtained or (ii) this
Agreement is terminated for any other reason (other than by reason of the
breach of this Agreement by HoldCo or pursuant to Section 8.01(b)(ii) as a
result of the ScottishPower Shareholders' Approval not being obtained or
Section 8.01(c)(ii)) or 8.01(e) and, in the case of this clause (ii) only, a
definitive agreement with respect to such Alternative Proposal is executed
within one year after such termination, then the Company shall pay to HoldCo by
wire transfer of same day funds, either on the date contemplated in Section
8.01(c) if applicable, or otherwise, within two (2) business days after such
amount becomes due, a termination fee of $250,000,000.
(c) In the event that this Agreement is terminated by the Company
following a Change of Control, then HoldCo shall pay to the Company, by wire
transfer of same day funds, within two (2) business days following such
termination, a termination fee of $250,000,000.
(d) In the event that this Agreement is terminated by either party
pursuant to Section 8.01(b)(ii) in circumstances in which the termination fee
set forth in clause (b) above is not payable, (i) in the case of the Company
Stockholders' Approval not being obtained and the ScottishPower Shareholders'
Approval having been obtained, the Company shall pay to HoldCo (ii) in the case
of the ScottishPower Shareholders' Approval not being obtained and the Company
Stockholders' Approval having been obtained, HoldCo shall pay to the Company,
in each case an amount equal to $10,000,000.
(e) If the Company fails promptly to pay the amount due pursuant to the
preceding paragraphs, and in order to obtain such payment, HoldCo or Merger Sub
commences a suit which results in a judgment against the Company for the fee
set forth in such paragraph, the Company shall pay to HoldCo or Merger Sub, as
the case may be, its cost and expenses (including reasonable attorneys' fees
and expenses) in connection with such suit,
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together with interest on the amount of the fee at the prime rate of The Chase
Manhattan Bank in effect on the date such payment was required to be made.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after the Company Stockholders' Approval or the ScottishPower Shareholders'
Approval shall have been obtained, but after such adoption and approval only to
the extent permitted by applicable law. No such amendment, supplement or
modification shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto, by
action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable law (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party extending the time of performance or waiving any such inaccuracy or non-
compliance. No waiver by any party of any term or condition of this Agreement,
in any one or more instances, shall be deemed to be or construed as a waiver of
the same or any other term or condition of this Agreement on any future
occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the Merger but shall terminate at the Effective Time, except
for the agreements contained in Article I and Article II, in Sections 5.01(o),
5.02(k), 6.09, 6.10, 6.11, 6.12, 6.14, 6.16 and 6.18, this Article IX and the
agreements of the "affiliates" of the Company delivered pursuant to Section
6.04, which shall survive the Effective Time.
9.02 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to HoldCo, ScottishPower, the Partnership or Merger Sub, to:
Scottish Power plc
1 Atlantic Quay
Glasgow G2 8FP
Facsimile No.: 011-44-141-248-8300
Attn: Company Secretary
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, N.Y. 10005
Facsimile No.: (212) 530-5219
Attn: M. Douglas Dunn
and to:
Freshfields
65 Fleet Street
London EC4Y 1HS
Facsimile No.: 0011-44-171-832-7001
Attn: Simon Marchant
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If to the Company, to:
PacifiCorp
700 N.E. Multnomah
Portland, Oregon 97232-4116
Facsimile No.: (503) 813-7250
Attn: Executive Vice President and Chief Operating Officer
with a copy to:
Stoel Rives LLP
900 S.W. Fifth Avenue
Suite 2300
Portland, Oregon 97232
Facsimile No.: (503) 220-2480
Attn: Dexter E. Martin
and to:
LeBoeuf, Lamb, Greene & MacRae, LLP
125 West 55th Street
New York, NY 10019
Facsimile No.: (212) 424-8500
Attn: William S. Lamb
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other person to
whom a copy of such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
9.03 Entire Agreement; Incorporation of Exhibits. (a) Subject to paragraph
(c) below, this Agreement supersedes all prior discussions and agreements among
the parties hereto with respect to the subject matter hereof, other than the
Confidentiality Agreement, which shall survive the execution and delivery of
this Agreement in accordance with its terms, and contains, together with the
Confidentiality Agreement, the sole and entire agreement among the parties
hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter, the ScottishPower Disclosure Letter and
any Exhibit or Schedule attached to this Agreement and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
(c) Notwithstanding the execution of this Agreement by the parties hereto
on the date hereof, this Agreement (other than this Section 9.03(c) which shall
have immediate effect) shall not take effect until the Scheme Date; provided,
however, that upon the Scheme of Arrangement becoming effective, this Agreement
shall be deemed to have been in full force and effect since the date hereof.
Prior to the Scheme Date, the Original Agreement shall continue in full force
and effect. If ScottishPower gives written notice to PacifiCorp that the Scheme
of Arrangement will not become effective, the transactions contemplated by the
Original Agreement will proceed as if no notice under Schedule II of the
Original Agreement had been received and this Agreement had not been entered
into.
9.04 [Intentionally Omitted.]
9.05 Public Announcements. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system or any
other Regulatory Authority (including the U.K. Takeover
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Panel) , so long as this Agreement is in effect, HoldCo, ScottishPower and the
Company will not, and will not permit any of their respective Subsidiaries or
Representatives to, issue or cause the publication of any press release or make
any other public announcement with respect to the transactions contemplated by
this Agreement without the consent of the other party, which consent shall not
be unreasonably withheld. HoldCo, ScottishPower and the Company will cooperate
with each other in the development and distribution of all press releases and
other public announcements with respect to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such
releases and announcements as far in advance as practicable.
9.06 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Sections
6.09, 6.10, 6.11 and 6.12 (which are intended to be for the benefit of the
persons entitled to therein, and may be enforced by any of such persons), it is
not the intention of the parties to confer third-party beneficiary rights upon
any other person.
9.07 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without
the prior written consent of the other parties hereto and any attempt to do so
will be void, except that HoldCo may cause Merger Sub to assign any or all of
its rights, interests and obligations hereunder to another direct or indirect
wholly-owned Subsidiary of HoldCo, provided that any such Subsidiary agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
9.08 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define, modify or limit the provisions
hereof.
9.09 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law or order, and
if the rights or obligations of any party hereto under this Agreement will not
be materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
9.10 Governing Law. Except to the extent that the BCA is mandatorily
applicable to the Merger and the rights of the stockholders of the Constituent
Corporations, this Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and
performed in such State, without giving effect to the conflicts of laws
principles thereof.
9.11 Submission to Jurisdiction; Waivers. Each of ScottishPower, HoldCo
(on behalf of itself and Merger Sub), the Partnership, UKSub 1, UKSub 2 and the
Company irrevocably agree that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by another party hereto or its successors or assigns may be
brought and determined in the Supreme Court of the State of New York in New
York County or in the United States District Court for the Southern District of
New York, and each of ScottishPower, HoldCo (on behalf of itself and Merger
Sub), the Partnership, and the Company hereby irrevocably submits with regard
to any such action or proceeding for itself and in respect to its property,
generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Any service of process to be made in such action or
proceeding may be made by delivery of process in accordance with the notice
provisions contained in Section 9.02. Each of ScottishPower, HoldCo, the
Partnership, Merger Sub, and the Company hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in
any action or proceeding with respect to this Agreement, (a) the defense of
sovereign immunity, (b) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
serve process in accordance with this Section 9.10,
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(c) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (d) to the fullest extent
permitted by applicable law that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
9.12 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specified terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.13 Certain Definitions. As used in this Agreement:
(a) except as used in Sections 2.03(b), 3.02(c), 3.17 and 6.04, the term
"affiliate," as applied to any person, shall mean any other person directly
or indirectly controlling, controlled by, or under common control with,
that person; for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of that person, whether through the ownership
of voting securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own securities if such
person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time);
(c) the term "business day" means a day other than Saturday, Sunday or
any day on which banks located in the State of Oregon or London, England
are authorized or obligated to close;
(d) the term "knowledge" or any similar formulation of "knowledge" shall
mean, with respect to ScottishPower or the Company, the actual knowledge
after due inquiry of the executive officers of ScottishPower or the Company
and their Subsidiaries, set forth in Section 9.12(d) of the ScottishPower
Disclosure Letter or Section 9.12(d) of the Company Disclosure Letter and,
with respect to HoldCo, the actual knowledge after due inquiry of the
Executive Directors of HoldCo immediately prior to the Effective Date;
(e) any reference to any event, change or effect having a "material
adverse effect" on or with respect to an entity (or group of entities taken
as a whole) means such event, change or effect is materially adverse to the
business, properties, assets, liabilities, financial condition or results
of operations of such entity (or of such group of entities taken as a
whole);
(f) the term "New Facilities" means new revolving credit facilities
and/or amendments to existing revolving credit facilities of not more than
(Pounds)2.6 billion in the aggregate on terms which are not significantly
less favorable taken as a whole than the RCF;
(g) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(h) the term "RCF" means the Revolving Credit Facility dated June 24,
1996 between, inter alia, ScottishPower, the Royal Bank of Scotland plc and
Union Bank of Switzerland (the "RCF");
(i) the "Representatives" of any entity means such entity's directors,
officers, employees, legal, investment banking and financial advisors,
accountants and any other agents and representatives;
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(j) except as used in Sections 3.02(d) and 3.17, the term "Subsidiary"
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which more than fifty percent
(50%) of either the equity interests in, or the voting control of, such
corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party.
(k) "Scheme Consents" means the consents, clearances and approvals
referred to in Schedule I;
(l) "Scheme Document" means the document, including an explanatory
statement, to be sent to the shareholders of ScottishPower in connection
with the Scheme of Arrangement.
(m) any reference to "transactions contemplated hereby," "transactions
contemplated hereunder," "transactions contemplated by this Agreement,"
"transactions contemplated under this Agreement" or any similar formulation
shall include the transaction contemplated by the Scheme of Arrangement;
provided, however, that the reference to such phrase appearing in the
parenthetical clause in the introductory paragraph of Section 5.02 shall
not include the transaction contemplated by the Scheme of Arrangement.
9.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
New Scottish Power PLC
By: /s/ Ian Simon MacGregor Russell
-----------------------------------
Name: Ian Simon MacGregor Russell
Title: Director
Scottish Power PLC
By: /s/ Ian Simon MacGregor Russell
-----------------------------------
Name: Ian Simon MacGregor Russell
Title: Director
NA General Partnership
By: Scottish Power NA 2 Limited,
a General Partner
By: /s/ Ian Simon MacGregor Russell
-----------------------------------
Name: Ian Simon MacGregor Russell
Title: Director
Pacificorp
By: /s/ Richard T. O'Brien
-----------------------------------
Name: Richard T. O'Brien
Title: Executive Vice President &
Chief Executive Officer
For purposes of Section 2.01 only:
Scottish Power NA 1 Limited
By: /s/ Ian Simon MacGregor Russell
-----------------------------------
Name: Ian Simon MacGregor Russell
Title: Director
For purposes of Section 2.01 only:
Scottish Power NA 2 Limited
By: /s/ Ian Simon MacGregor Russell
-----------------------------------
Name: Ian Simon MacGregor Russell
Title: Director
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EXHIBIT A
Scheme of Arrangement
(under section 425 of the Companies Act 1985)
between Scottish Power plc and the Scheme Shareholders (as hereinafter defined)
and the Special Shareholder (as hereinafter defined)
l. Preliminary
(A) In this Scheme of Arrangement, unless inconsistent with the subject or
context, the following expressions shall bear the following meanings:
business day means any day other than a Saturday or Sunday on which banks are
generally open for business in England and Wales;
Court means the Court of Session in Edinburgh;
Court Meeting means the meeting of holders of Scottish Power Shares convened by
interlocutor of the Court pursuant to section 425 of the Companies Act 1985 for
__________, 1999 to consider and, if thought fit, approve this Scheme;
CREST means a relevant system (as defined in the CREST Regulations) in respect
of which CRESTCo is the operator (as defined in the CREST Regulations);
CRESTCo means CRESTCo Limited;
CREST Regulations means the Uncertificated Securities Regulations 1995 (SI 1995
No. 3272) as from time to time amended;
holder includes any person entitled by transmission;
new Scottish Power Shares means new ordinary shares of 50 pence each in the
capital of ScottishPower;
New ScottishPower means New Scottish Power plc;
New ScottishPower Special Share means the special rights non-voting redeemable
preference share of (Pounds)1 in the capital of New ScottishPower;
New Shares means ordinary shares of [50 pence] each in the capital of New
ScottishPower;
Record Date means the business day immediately preceding the Scheme Date;
Scheme Date means the date on which this Scheme becomes effective in accordance
with clause 6 of this Scheme;
<PAGE>
Scheme Record Date means the business day immediately preceding the date of the
hearing of the Court at which the Scheme is sanctioned;
Scheme Shareholder means a holder of Scheme Shares as at 5:30 p.m. on the Record
Date;
Scheme Shares means:
(a) all ScottishPower Shares in issue at the date of this Scheme;
(b) all (if any) other ScottishPower Shares in issue immediately prior
to the Court Meeting; and
(c) all (if any) further ScottishPower Shares which may be in issue at
5:30 p.m. on the Scheme Record Date;
ScottishPower means Scottish Power plc;
ScottishPower Shares means ordinary shares of 50 pence each in the capital of
ScottishPower;
ScottishPower Special Share means the special rights non-voting redeemable
preference share of (Pound)1 in the capital of ScottishPower;
Special Shareholder means the Secretary of State for Scotland, the holder of the
ScottishPower Special Share;
this Scheme means this Scheme of Arrangement in its present form or with any
modification thereof or addition thereto or condition approved or imposed by the
Court; and
uncertificated or in uncertificated form means recorded on the relevant register
as in uncertificated form, being held in uncertificated form in CREST and title
to the object of which by virtue of the CREST Regulations may be transferred by
means of CREST.
(B) The authorised share capital of ScottishPower as at the date of this
Scheme is (Pounds) __________ divided into __________ ScottishPower Shares, of
which __________ have been issued and are fully paid up (and the remainder are
unissued), and one ScottishPower Special Share which has been issued and is
fully paid up.
(C) New ScottishPower was incorporated as a public limited company on
__________, 1999 under the name New ScottishPower. The authorised share capital
of New ScottishPower at the date of this Scheme is (Pounds) __________ divided
into _________ New Shares, of which __________ have been issued and are fully
paid up (and the remainder are unissued) and the New ScottishPower Special Share
which has not been issued.
(D) The purpose of this Scheme is to provide for the cancellation of the
Scheme Shares and the ScottishPower Special Share and the issue of new
ScottishPower Shares with an aggregate nominal value equal to that of the shares
so cancelled to New ScottishPower in consideration of the allotment by New
ScottishPower of New Shares to the Scheme Shareholders and the
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allotment by New ScottishPower of the New ScottishPower Power Special Share to
the Special Shareholder.
(E) New ScottishPower has agreed, and it is proposed that the Special
Shareholder will agree, to appear by Counsel on the hearing of the Petition for
the sanction by the Court of this Scheme, to consent thereto and to undertake to
be bound thereby and to execute or procure to be executed all such documents,
and to do or procure to be done all such acts and things, as may be necessary or
desirable to be executed or done by them respectively for the purpose of giving
effect to this Scheme.
2. The Scheme
ScottishPower Cancellation
1. (a) The share capital of ScottishPower shall be reduced by cancelling
the Scheme Shares and the ScottishPower Special Share.
(b) Forthwith and contingently upon the said reduction of capital taking
effect:
(i) the share capital of ScottishPower shall be increased to its
former amount by the creation of such number of new
ScottishPower Shares as shall be of an aggregate nominal
amount equal to the aggregate nominal amount of the shares
cancelled pursuant to sub-clause (a) of this clause 1;
(ii) ScottishPower shall apply the credit arising in its books of
account on the reduction of capital pursuant to sub-clause
(a) of this clause 1 in paying up, in full at par, the new
ScottishPower Shares created pursuant to sub-clause (b)(i)
of this clause 1 and shall allot and issue the same,
credited as fully paid, to New ScottishPower and/or its
nominee(s); and
(iii) ScottishPower will become a wholly owned subsidiary of New
ScottishPower.
New Shares
2. (a) In consideration of the cancellation of the Scheme Shares and the
ScottishPower Special Share and the issue of the new ScottishPower
Shares to New ScottishPower and/or its nominee(s) pursuant to clause
1 of this Scheme, New ScottishPower shall (subject to the provisions
of subclause (c) of this clause 2):
(i) allot and issue (credited as fully paid) New Shares to the
Scheme Shareholders on the following basis:
For each Scheme Share held at 5:30 p.m. on the Record Date,
one New Share
save that for any person holding New Shares as at 5:30 p.m.
on the Record Date his entitlement to receive New Shares
pursuant to this clause 2 shall be reduced by the number of
New Shares he holds at that time; and
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(ii) allot and issue (credited as fully paid) the New
ScottishPower Special Share to the Special Shareholder.
(b) The New Shares to be issued pursuant to sub-clause (a)(i) of this
clause 2 shall rank pari passu as a single class of shares inter se
and shall rank in full for all dividends or distributions made, paid
or declared after the Scheme Date on the ordinary share capital of
New ScottishPower.
(c) The provisions of sub-clause (a) of this clause 2 shall be subject
to any prohibition or condition imposed by law. Without prejudice to
the generality of the foregoing, if, in respect of any Scheme
Shareholder who is a citizen, resident or national of any
jurisdiction outside the United Kingdom ("overseas shareholder"),
New ScottishPower is advised that the allotment and issue of New
Shares pursuant to this clause 2 would infringe the laws of any
jurisdiction outside the United Kingdom [(other than the US)] or
would require New ScottishPower to observe any governmental or other
consent or any registration, filing or other formality [(other than
the US)], then New ScottishPower may determine that no New Shares
shall be allotted or issued to such overseas shareholder under this
clause 2, but shall instead be allotted to a nominee appointed by
New ScottishPower, as a trustee for such overseas shareholder, on
terms that the nominee shall, as soon as practicable following the
Scheme Date, sell the New Shares so allotted at the best price which
can reasonably be obtained and shall account for the net proceeds of
such sale (after the deduction of all expenses and commissions,
including value added tax payable thereon) by sending a cheque or
warrant to such overseas shareholder in accordance with the
provisions of clause 3 below. None of ScottishPower, New
ScottishPower, any nominee referred to in this subclause (c) or any
broker or agent of any of them shall have any liability for any loss
arising as a result of the timing or terms of any such sale.
Certificates and payment
3. (a) Not later than five (5) business days after the Scheme Date, New
ScottishPower shall send by post to the allottees of the New Shares
and to the allottee of the New ScottishPower Special Share allotted
and issued pursuant to clause 2 of this Scheme certificates in
respect of such shares, save that where Scheme Shares are held in
uncertificated form, New ScottishPower will procure that CRESTCo is
instructed to credit to the appropriate stock account in CREST of
the Scheme Shareholder concerned such shareholder's entitlement to
New Shares.
(b) Not later than five (5) business days following the sale of any
relevant New Shares pursuant to clause 2(c), New ScottishPower
and/or the nominee shall satisfy the cash consideration payable by
it by despatching to the persons respectively entitled thereto
cheques and/or warrants by post.
(c) All certificates required to be sent by ScottishPower pursuant to
sub-clause (a) of this clause 3 and all cheques or warrants required
to be sent by New ScottishPower and/or any nominee referred to in
clause 2(c) of this Scheme shall
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be sent through the post in pre-paid envelopes addressed to the
persons respectively entitled thereto at their respective addresses
appearing in the register of members of ScottishPower at the close of
business on the Record Date (or, in the case of joint holders, to the
address of that one of the joint holders whose name stands first in
the register in respect of the joint holding) or in accordance with
any special instructions regarding communications received at the
registered office of ScottishPower prior to the Record Date.
(d) None of ScottishPower, New ScottishPower, any nominee referred to in
clause 2(c) or any agent of any of them shall be responsible for any
loss or delay in transmission of certificates, cheques or warrants
sent in accordance with this clause 3.
(e) The preceding sub-clauses of this clause 3 shall take effect subject
to any prohibition or condition imposed by law.
Certificates representing Scheme Shares and the ScottishPower Special Share
4. With effect from and including the Scheme Date, all certificates
representing holdings of Scheme Shares and the ScottishPower Special Share shall
cease to be valid in respect of such holdings and the holders of such shares
shall be bound at the request of ScottishPower to deliver such certificates for
cancellation to ScottishPower or to any person appointed by ScottishPower to
receive the same.
Mandates
5. Each mandate in force at 5:30 p.m. on the Record Date relating to the
payment of dividends on Scheme Shares and each instruction then in force as to
notices and other communications from ScottishPower shall, unless and until
varied or revoked, be deemed as from the Scheme Date to be a valid and effective
mandate or instruction to New ScottishPower in relation to the corresponding New
Shares to be allotted and issued pursuant to this Scheme.
Scheme Date
6. This Scheme shall become effective as soon as an office copy of the
interlocutor of the Court sanctioning this Scheme under section 425 of the Act
and confirming under section 137 of the Act the reduction of capital proposed
under this Scheme shall have been duly delivered to the Registrar of Companies
for registration and the interlocutor and relative minute have been registered
by him.
7. Unless this Scheme shall have become effective on or before, 1999 or
such later date, if any, as the Court may allow, it shall lapse.
Modification
8. ScottishPower and New ScottishPower may jointly consent on behalf of all
persons concerned to any modification of or addition to this Scheme or to any
condition which the Court may think fit to approve or impose.
5
<PAGE>
Dated the day of , 1999
6
<PAGE>
EXHIBIT B
Column A Column B
-------- --------
Proportion of HoldCo Ordinary Shares
represented by HoldCo ADSs not more than 75% not less than 25%
Proportion of Merger Ordinary Shares not more than 75% not less than 25%
<PAGE>
EXHIBIT C
[Form of Affiliate's Agreement]
[Date]
[name]
[address]
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of PacifiCorp, an Oregon corporation (the "Company"), as that term
--------- -------
is defined for purposes of paragraphs (c) and (d) of Rule 145 ofthe rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
---------------------
Commission (the "Commission") under the Securities Act of 1933, as amended (the
----------
"Act"). Neither my entering into this agreement, nor anything contained herein,
---
shall be deemed an admission on my part that I am such an "affiliate".
---------
Pursuant to the terms of the Amended and Restated Agreement and Plan of
Merger dated as of December 6, 1998, as amended as of January 29, 1999 and
February 9, 1999 and amended and restated as of January 23, 1999 (the "Merger
------
Agreement"), by and among New Scottish Power plc, a public limited company
- ---------
incorporated under the laws of Scotland ("HoldCo"), Scottish Power plc, a public
------
limited company incorporated under the laws of Scotland, NA General Partnership,
a Nevada general partnership (the "Partnership"), and the Company providing for
-----------
the merger of a wholly-owned subsidiary of the Partnership with and into the
Company (the "Merger"), and as a result of the Merger, I may receive shares of
------
HoldCo's American Depositary Shares, each representing four HoldCo Ordinary
Shares (the "HoldCo Securities"), in exchange for the shares of common stock,
-----------------
without par value, of the Company owned by me at the Effective Time (as defined
in the Merger Agreement) of the Merger.
I represent and warrant to HoldCo that in such event:
A. I shall not make any sale, transfer or other disposition of the
HoldCo Securities in violation of the Act or the Rules and Regulations
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of HoldCo Securities, to the extent I felt
necessary, with my counsel or counsel for the Company.
<PAGE>
2
C. I have been advised that the issuance of HoldCo Securities to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form F-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders of the
Company I may have been deemed to have been an affiliate of the Company and a
distribution by me of HoldCo Securities has not been registered under the Act,
the HoldCo Securities must be held by me indefinitely unless (i) a distribution
of HoldCo Securities by me has been registered under the Act, (ii) a sale of
HoldCo Securities by me is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act or (iii) in
the opinion of counsel reasonably acceptable to HoldCo, some other exemption
from registration is available with respect to a proposed sale, transfer or
other disposition of the HoldCo Securities by me.
D. I understand that HoldCo is under no obligation to register the sale,
transfer or other disposition of HoldCo Securities by me or on my behalf or to
take any other action necessary in order to make compliance with an exemption
from registration available.
E. I also understand that stop transfer instructions will be given to
HoldCo's transfer agents with respect to the HoldCo Securities and that there
will be placed on the certificates for the HoldCo Securities, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 promulgated under the Securities Act of 1933, as amended,
applies. The shares represented by this certificate may only be transferred in
accordance with the terms of an agreement dated __________, _____, between the
registered holder hereof and _________(the "Corporation"), a copy of which
agreement is on file at the principal offices of the Corporation."
F. I also understand that unless the transfer by me of my HoldCo
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, HoldCo reserves the right to put the following
legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and were acquired from a person
who received such shares in a transaction to which Rule 145 promulgated under
such Act applies. The shares have been acquired by the holder not with a view
to, or for resale in connection with, any distribution thereof within the
meaning of such Act and may not be sold, pledged or otherwise transferred except
in accordance with an exemption from the registration requirements of such Act."
<PAGE>
3
It is understood and agreed that the legends set forth in paragraph E
and F above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to HoldCo a copy of a letter from
the staff of the Commission, or an opinion of counsel reasonably acceptable to
HoldCo to the effect that such legend is not required for purposes of the Act.
Very truly yours,
----------------------------
Name:
Accepted this ____ day of
___________, ________, by:
NEW SCOTTISH POWER plc
By:
---------------------------
Name:
Title:
<PAGE>
SCHEDULE I
SCHEME CONSENTS
1. The approval of the Scheme of Arrangement by a majority in number
representing three fourths in value of the ScottishPower Shareholders
present and voting (either in person or by proxy) at the meeting convened by
the Court.
2. The approval of the Scheme of Arrangement and the reduction in the capital
of ScottishPower, the increase in share capital, the capitalisation of new
ScottishPower Shares and the granting of authority to the directors of
ScottishPower to allot such Shares, in each case for the purposes of the
Scheme of Arrangement by a special resolution of ScottishPower.
3. The consent in writing of the ScottishPower Special Shareholder to the
Scheme of Arrangement and the proposed amendments to ScottishPower's
Articles of Association, and the approval of such amendments by a special
resolution of ScottishPower.
4. The sanction by the Court of the Scheme of Arrangement (with or without
modification) and the confirmation by the Court of the reduction in capital
by the cancellation of ScottishPower shares required as part of the Scheme
of Arrangement.
5. The approval in writing of the transaction to be effected by the Scheme of
Arrangement by the Secretary of State for Scotland and by each UK Regulator
whose consent is required, or considered by ScottishPower to be necessary,
under the terms of each licence, appointment or other authorisation held by
any member of the ScottishPower Group.
6. An indication on satisfactory terms by the Secretary of State for Trade and
Industry and by each UK Regulator, as appropriate, that it is not his
intention to seek, as a result of the transaction to be effected by the
Scheme of Arrangement, any revocation of or modification to any licence,
appointment or other authorisation held by any member of the ScottishPower
Group, except on satisfactory terms.
7. Neither the Secretary of State for Scotland nor any UK Regulator having
sought, as a result of the Scheme of Arrangement, undertakings or assurances
from any member of the ScottishPower Group, except on satisfactory terms.
8. The agreement of the LSE to admit the ordinary shares of HoldCo issued and
to be issued pursuant to the Scheme of Arrangement to the Of ficial List of
the LSE (subject only to allotment) and such agreement not being withdrawn
prior to the Scheme Date.
9. The receipt, in each case on satisfactory terms, by HoldCo of:
<PAGE>
2
(i) clearances from the Inland Revenue under section 138 of the
Taxation of Chargeable Gains Act 1992 and under section 707 of
the Income and Corporation Taxes Act 1988 in respect of the
Scheme of Arrangement; and
(ii) confirmation as to the application of section 136 of the
Taxation of Chargeable Gains Act 1992 in respect of the Scheme
of Arrangement,
10. The consent under the RCF of the Majority Banks (as defined therein) to
the Scheme of Arrangement, and/or the replacement of the RCF (in whole
or in part) with the New Facilities under which no such consent is
required (or consent has been given).
11. Confirmation from the European Investment Bank that it will not require
prepayment of any loan to ScottishPower or its subsidiaries as a result
of the change of control of ScottishPower which the Scheme of
Arrangement will result in. In the absence of such confirmation,
ScottishPower may decide to prepay such loan.
12. The HoldCo ADRs to be issued pursuant to the Scheme of Arrangement shall
have been authorised for listing on the NYSE, upon official notice of
issuance.
13. The execution of the replacement deposit agreement in respect of the
HoldCo ADRs pursuant to Section 6.06(b).
14. A registration statement to be filed under the Securities Exchange Act
of 1934 shall have been filed by HoldCo and declared effective by the
SEC.
15. The approval of HoldCo's ordinary shareholders (where required, by a
special resolution) (i) to the adoption or amendment of HoldCo's
Articles of Association in accordance with Section 4.01(a) (and to the
proposed changes to HoldCo's Articles of Association referred to in
Section 6.03(c) if the same are to be effective on or prior to the
Scheme Date), (ii) to increase the authorised share capital of HoldCo,
and to give the directors of HoldCo authority to allot shares under
Section 80 of the Companies Act 1985, in respect of the ordinary shares
of HoldCo to be issued pursuant to the Scheme of Arrangement and the
Merger and otherwise for general purposes, (iii) to disapply statutory
pre-emption rights, (iv) to authorise HoldCo to repurchase its own
shares, (v) to change HoldCo's name conditional upon the Scheme of
Arrangement becoming effective and (vi) to appoint directors.
16. Such other approvals, prior to the Scheme Date, of the Shareholders of
HoldCo, the board of HoldCo and the board of ScottishPower as may be
required to implement and give effect to the Scheme of Arrangement and
the terms of this Agreement.
17. The filing of orders, returns and other documents with the Registrar of
Companies in Scotland or with the Court in order to obtain the sanction
of the Court for, and to give effect to, the Scheme of Arrangement.
18. Such filings and consents as ScottishPower may reasonably consider
necessary or desirable in connection with the Scheme of Arrangement
and/or the Merger with stock
2
<PAGE>
3
exchanges or other Governmental or Regulatory Authorities in Australia,
Canada, Ireland, Japan and any other applicable jurisdiction (other than
the US and the UK).
Definitions
In this Schedule I, the following definitions apply:
Court means the Court of session, Edinburgh;
ScottishPower Shares means ordinary shares of (Pounds)0.50p in the capital of
ScottishPower; and
UK Regulator means each of the Director General of Electricity Supply, the
Director General of Water Services, the Director General of Gas Supply, and the
Director General of Telecommunications; and
on satisfactory terms means on terms which are satisfactory to HoldCo and which
would not, or would not reasonably be expected to, have, individually or in the
aggregate, a material adverse effect on the HoldCo Group taken as a whole.
3
<PAGE>
SCHEDULE II
THE ARTICLES OF ASSOCIATION OF HOLDCO
HoldCo's Articles of Association will have the principal differences from the
current Articles of Association of ScottishPower referred to below. There will
also be some differences of a minor or technical nature which have not been
included below. Holdco's Articles of Association will also include any changes
requested by the ScottishPower Special Shareholder or by the LSE and agreed to
by ScottishPower.
The number identifying each provision of HoldCo's proposed Articles of
Association corresponds (except where otherwise stated) to the numbering of the
current ScottishPower Articles of Association.
(a) Article 6(E) (The Redeemable Shares)
There is no equivalent of this proposed article in ScottishPower's current
Articles of Association. It will set out the rights attaching to non-voting
redeemable shares which it is intended that HoldCo will issue in order to have
the minimum issued capital required to obtain a trading certificate under
section 117 of the Companies Act 1985.
(b) Article 7 (The HoldCo Special Share)
This article, which will set out the rights attaching to the one share of
(Pounds)1 in the capital of HoldCo to be issued to the ScottishPower Special
Shareholder pursuant to the Scheme of Arrangement (the "HoldCo Special Share"),
will be amended from the comparable ScottishPower article so that each of the
following matters will also be deemed to be a variation requiring prior consent
in writing of the holder of the HoldCo Special Share:
(i) the giving by HoldCo of any consent or agreement to any amendment to,
deletion of or alteration to the effect of, article 7 of the Articles of
Association of ScottishPower (save as referred to below):
(ii) the giving by HoldCo of any consent or agreement to the creation or
issue of any shares in the capital of ScottishPower other than an issue
of shares upon the issue of which HoldCo will own the full legal and
beneficial interest in, and control, shares in the capital of
ScottishPower carrying at least 85 per cent. of the voting rights
exercisable on a poll at general meetings of ScottishPower;
(iii) the disposal by HoldCo of any of the shares in ScottishPower or of any
rights or interest therein, or the entering into by HoldCo of any
agreement or arrangement with respect to such shares, or the exercise of
any voting or other rights attaching to such shares, such that HoldCo
would cease to own the full legal and beneficial interest in, and
control, shares in the capital of ScottishPower carrying at least 85 per
cent. of the voting rights exercisable on a poll at general meetings
of ScottishPower;
<PAGE>
2
(iv) the giving by HoldCo of any consent or agreement to any abrogation,
variation, waiver or modification of any of the rights or privileges
attaching to any shares in ScottishPower such that HoldCo would cease to
own the full legal and beneficial interest in, and control, shares in
the capital of ScottishPower carrying at least 85 per cent. of the
voting rights exercisable on a poll at general meetings of Scottish
Power; and
(v) any other act or omission to act by HoldCo or the Directors of New
ScottishPower which results in HoldCo ceasing to own the full legal and
beneficial interest in, and control, shares in the capital of
ScottishPower carrying at least 85 per cent. of the voting rights
exercisable on a poll at general meetings of ScottishPower.
The existing article 7 of ScottishPower's Articles is to be deleted and replaced
by an article which ensures that the events set out in paragraphs (i), (ii) and
(iv) above do not occur without the prior written consent of HoldCo.
ScottishPower's Articles of Association will also include any changes requested
by the ScottishPower Special Shareholder and agreed to by ScottishPower.
(c) Article 50 (Disclosure of Interests in Shares)
This article, which will relate to the disclosure of interests in shares, will
be amended from the comparable ScottishPower article to remove references to
certain interim arrangements included in ScottishPower's Articles in connection
with the initial flotation of ScottishPower.
(d) Article 51 (Limitations on Shareholdings)
This article, which will set out restrictions on persons holding or controlling
the right to cast 15 per cent. or more of the votes at general meetings, will be
amended from the comparable ScottishPower article to remove references to
certain interim arrangements included in ScottishPower's Articles of Association
in connection with the initial flotation of ScottishPower.
(e) Article 98 (Number of Directors to Retire)
This article, which will relate to the number of directors to retire from office
by rotation, will be amended from the comparable ScottishPower article in
accordance with the new London Stock Exchange requirement that all directors
shall retire by rotation at least every three years.
(f) Article 123 (Borrowing Powers)
This article will, if considered necessary by ScottishPower, be amended from the
comparable ScottishPower article to reflect the new UEC Financial Reporting
Standard FRS 10. Any such amendment may include provisions to the effect that,
in calculating the borrowing limit, no goodwill or intangible assets will be
deducted except the amount that has been amortised in accordance with FRS 10.
(g) Article 130 (Interim Dividends)
The article, which will relate to the ability of the Directors to pay interim
dividends, may, if considered necessary or desirable by ScottishPower, be
amended from the comparable
<PAGE>
3
ScottishPower article to clarify that the Directors may declare and pay any
dividends, including final dividends, and not just interim dividends. This
relates to the proposed move to quarterly dividend payments.
(h) Article 160 (ADR Depositories)
Amendments will be made in accordance with Section 6.03(c) of this Agreement,
although these amendments may not be made prior to the Scheme Date.
<PAGE>
ANNEX C
SALOMONSMITHBARNEY
- ---------------------------
A member of citigroup[LOGO]
December 6, 1998
Board of Directors
PacifiCorp
700 NE Multnomah
Portland, Oregon 97232
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock ("Company Common Stock") of PacificCorp
(the "Company"), of the consideration to be received by such holders in
connection with the proposed merger (the "Merger") of the Company with a wholly-
owned subsidiary ("Merger Sub") of NA General Partnership (the "Partnership"), a
general partnership indirectly wholly-owned by Scottish Power PLC (the
"Parent"), pursuant to an Agreement and Plan of Merger (the "Agreement") dated
as of December 6, 1998, by and among the Company, Parent, Partnership, and
Merger Sub. As more specifically set forth in the Agreement and subject to the
terms and conditions thereof, upon the effectiveness of the Merger, each issued
and outstanding share of Company Common Stock (other than shares owned directly
or indirectly by Parent, the Partnership, Merger Sub, or the Company), will be
converted into and represent the right to receive either (the "Merger
Consideration") (i) .58 American Depositary Shares of Parent, each representing
four ordinary shares of 50 pence each of Parent ("Parent Ordinary Shares") and
evidenced by American Depositary Receipts, or (ii) upon proper election, 2.32
Parent Ordinary Shares (the "Merger Ordinary Shares"), and the surviving
corporation will be an indirect wholly-owned subsidiary of Parent.
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning the Company and Parent and certain other
financial information concerning the Company and Parent, including financial
forecasts, that were provided to us by the Company or Parent. We have discussed
the past and current business operations, financial condition and prospects of
the Company and Parent with certain officers and employees of the Company or
Parent. We have also considered such other information, financial studies,
analyses, investigations and financial, economic and market criteria that we
deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of the information reviewed by us for
the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts, we have been advised by the managements of the Company and Parent
that such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of the Company or
Parent, as the case may be, and we express no opinion with respect to such
forecasts or the assumptions on which they are based. We have not assumed any
responsibility for any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of the Company.
<PAGE>
SALOMONSMITHBARNEY
- ---------------------------
A member of citigroup[LOGO]
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof and we assume no responsibility to update or revise
our opinion based upon circumstances or events occurring after the date hereof.
Our opinion is, in any event, directed only to the fairness, from a financial
point of view, of the Merger Consideration to be received by the holders of
Company Common Stock in connection with the Merger and does not address the
Company's underlying business decision to effect the Merger or constitute a
recommendation concerning how holders of Company Common Stock should vote with
respect to the Agreement or the Merger.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Merger and will receive a fee for our services, a portion of
which is payable upon initial delivery of this fairness opinion and the
remainder of which is contingent upon shareholder approval of, and consummation
of the Merger. In the ordinary course of business, we and our affiliates may
hold or actively trade the securities of the Company and Parent for our own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities. In addition, we and our affiliates
have previously rendered certain investment banking and financial advisory
services to the Company and Parent for which we have received customary
compensation. We and our affiliates (including Citigroup Inc.) may have other
business relationships with the Company or Parent in the ordinary course of
their businesses.
This opinion is intended solely for the benefit and use of the Board of
Directors of the Company in considering the transaction to which it relates and
may not be used for any other purpose or reproduced, disseminated, quoted or
referred to (other than in the Agreement) at any time, in any manner or for any
purpose, nor shall any reference to Salomon Smith Barney be made, in each case
without the prior written consent of Salomon Smith Barney.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Merger Consideration is fair, from a financial point of view, to the
holders of Company Common Stock.
Very truly yours,
/s/ SALOMON SMITH BARNEY, INC.
SALOMON SMITH BARNEY INC.
<PAGE>
ANNEX D
MORGAN STANLEY
MORGAN STANLEY & CO.
LIMITED
25 CABOT SQUARE
CANARY WHARF
LONDON E14 4QA
Board of Directors
Scottish Power plc
1 Atlantic Quay
Glasgow G2 9FP
6th December, 1998
Members of the Board:
We understand that Scottish Power plc ("ScottishPower") and PacifiCorp
("PacifiCorp") have resolved to enter into a Merger Agreement dated 6th
December, 1998 (the "Merger Agreement"), which provides for the merger (the
"Merger") of PacifiCorp with and into a wholly-owned subsidiary of
ScottishPower. The Merger is to be implemented through an exchange of shares as
a result of which PacifiCorp shareholders will receive for each PacifiCorp
share of common stock 2.32 ScottishPower ordinary shares (or 0.58 ScottishPower
ADRs) (the "Exchange Ratio"). The terms of the proposed Merger are more fully
set out in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio is fair from
a financial point of view to ScottishPower.
For the purpose of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of ScottishPower and PacifiCorp, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating information concerning ScottishPower and PacifiCorp prepared
by the managements of the respective companies;
(iii) reviewed certain financial projections for ScottishPower and
PacifiCorp prepared by the managements of the respective companies;
(iv) reviewed and discussed with the senior management of ScottishPower
the strategic rationale for the Merger and the perceived benefits of the
Merger to the shareholders of ScottishPower;
(v) reviewed the estimates by senior management of ScottishPower of the
potential cost savings anticipated to be achieved if the Merger is
consummated;
(vi) discussed with senior executives of ScottishPower and PacifiCorp the
past and current operations and the financial conditions and prospects for
each of their respective companies;
(vii) discussed with the management of ScottishPower the results of the
due diligence exercise in relation to PacifiCorp conducted by
ScottishPower;
(viii) reviewed certain adjustments to the financial statements and
projections of PacifiCorp proposed by the management of ScottishPower, in
relation to the reconciliation from US to UK GAAP;
(ix) compared the financial performance of ScottishPower and recent
reported prices for ScottishPower ordinary shares and PacifiCorp common
stock with that of certain other comparable publicly traded companies and
their securities;
<PAGE>
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(xi) reviewed the likely impact of the Merger on the future earnings per
share for ScottishPower shareholders based on the summary financial
projections for ScottishPower and PacifiCorp;
(xii) participated in certain discussions and negotiations among
representatives of ScottishPower and PacifiCorp and their advisers;
(xiii) reviewed the draft Merger Agreement and certain related documents;
and
(xiv) performed such other analyses and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections and other estimates
supplied to us, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of ScottishPower and PacifiCorp.
In reaching our opinion, we have relied upon, without independent
verification, the assessment by the management of the future competitive and
regulatory environment, the cost synergies opportunities management have
estimated to be achievable and the ScottishPower Board of Directors' commercial
assessment of the Merger. We have not made any independent valuation or
appraisal of assets or liabilities, nor have we been furnished with any such
appraisals. With respect to tax matters and tax structures associated with the
transaction, we have relied upon the evaluation of ScottishPower and its legal
and accounting advisors. We have assumed (i) that the Merger will be completed
on the bases contemplated by the Merger Agreement; and (ii) that the Merger
will be accounted for under the acquisition accounting rules under UK GAAP. Our
opinion is based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial adviser to the Board of Directors of
ScottishPower in connection with this transaction and will receive a fee for
our services. In the past, Morgan Stanley & Co. Limited and its affiliates have
provided financial advisory and financing services to ScottishPower and to
PacifiCorp and/or their respective affiliates and have received fees for the
rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of ScottishPower only and, except for the inclusion of this letter in
its entirety in any circular sent by ScottishPower to its shareholders in
connection with the Merger, shall not be referred to or disclosed to any third
party or used for any other purpose without our prior written consent. In
addition, we express no opinion or recommendation to any shareholder of
ScottishPower as to how such shareholder should vote at any shareholder meeting
held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio is fair from a financial point of view to ScottishPower.
Very truly yours,
Morgan Stanley & Co. Limited
/s/ John J. Studzinski /s/ Daniel B. More
By: _________________________________ By: _________________________________
John J. Studzinski Daniel B. More
Managing Director Managing Director
<PAGE>
ANNEX E
DISSENTERS' RIGHTS
(Right to Dissent and Obtain Payment for Shares)
60.551 Definitions for 60.551 to 60.594. As used in OBCA 60.551 to 60.594:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under ORS 60.554 and who exercises that right when and in
the manner required by ORS 60.561 to 60.587.
(4) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
60.554 Right to dissent. (1) Subject to subsection (2) of this section, a
shareholder is entitled to dissent from, and obtain payment of the fair value
of the shareholder's shares in the event of, any of the following corporate
acts:
(a) Consummation of a plan of merger to which the corporation is a party
if shareholder approval is required for the merger by ORS 60.487 or the
articles of incorporation and the shareholder is entitled to vote on the
merger or if the corporation is a subsidiary that is merged with its parent
under OBCA 60.491;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all or substantially all of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
(d) An amendment of the articles of incorporation that materially and
adversely affect rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities; or
(B) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under OBCA 60.141; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
<PAGE>
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under OBCA 60.551 to 60.594 may not challenge the
corporate action creating the shareholder's entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the corporation.
(3) Dissenters' rights shall not apply to the holders of shares of any class
or series if the shares of the class or series were registered on a national
securities exchange or prices were quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System as a National Market System
issue on the date fixed to determine the shareholders entitled to vote at the
meeting of shareholders at which the amendment to the articles of
incorporation, plan of merger, exchange or proposed sale or exchange of
property and assets is to be acted upon unless the articles of incorporation of
the corporation shall otherwise provide.
60.557 Dissent by nominees and beneficial owners. (1) A record shareholder
may assert dissenters' rights as to fewer than all the shares registered in the
shareholder's name only if the shareholder dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf the shareholder asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares regarding which the shareholder dissents and the
shareholder's other shares were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held
on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote.
(Procedure for Exercise of Rights)
60.561 Notice of dissenters' rights. (1) If proposed corporate action
creating dissenters' rights under OBCA 60.554 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under OBCA 60.551 to 60.594 and be
accompanied by a copy of OBCA 60.551 to 60.594.
(2) If corporate action creating dissenters' rights under OBCA 60.554 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was
taken and send the shareholders entitled to assert dissenters' rights the
dissenters' notice described in OBCA 60.567.
60.564 Notice of intent to demand payment. (1) If proposed corporate action
creating dissenters' rights under OBCA 60.554 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert dissenters' rights
shall deliver to the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated and shall not vote such shares in favor of the
proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1) of
this section is not entitled to payment for the shareholder's shares under this
chapter.
60.567 Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under OBCA 60.554 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of OBCA 60.564.
2
<PAGE>
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action was taken, and shall:
(a) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement of the terms of the proposed corporate action to news
media or to shareholders and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of
the shares before that date;
(d) Set a date by which the corporation must receive the payment demand.
This date may not be fewer than 30 nor more than 60 days after the date the
subsection (1) of this section notice is delivered; and
(e) Be accompanied by a copy of OBCA 60.551 to 60.594.
60.571 Duty to demand payment. (1) A shareholder sent a dissenters' notice
described in OBCA 60.567 must demand payment, certify whether the shareholder
acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to OBCA 60.567(2)(c), and deposit the
shareholder's certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's shares
under subsection (1) of this section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
60.574 Share restrictions. (1) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment is received
until the proposed corporate action is taken or the restrictions released under
OBCA 60.581.
(2) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
60.577 Payment. (1) Except as provided in OBCA 60.584, as soon as the
proposed corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with OBCA 60.571, the amount
the corporation estimates to be the fair value of the shareholder's shares,
plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year and the latest available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under OBCA
60.587; and
(e) A copy of OBCA 60.551 to 60.594.
3
<PAGE>
60.581 Failure to take action. (1) If the corporation does not take the
proposed action within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under OBCA 60.567 and repeat the payment demand procedure.
60.584 After-acquired shares. (1) A corporation may elect to withhold payment
required by OBCA 60.577 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under subsection
(1) of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares plus accrued interest and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of such
demand. The corporation shall send with its offer a statement of its estimate
of the fair value of the shares an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
OBCA 60.587.
60.587 Procedure if shareholder dissatisfied with payment or offer. (1) A
dissenter may notify the corporation in writing of the dissenter's own estimate
of the fair value of the dissenter's shares and amount of interest due, and
demand payment of the dissenter's estimate, less any payment under OBCA 60.577
or reject the corporation's offer under OBCA 60.584 and demand payment of the
dissenter's estimate of the fair value of the dissenter's shares and interest
due, if:
(a) The dissenter believes that the amount paid under OBCA 60.577 or
offered under OBCA 60.584 is less than the fair value of the dissenter's
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under OBCA 60.577 within 60
days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section unless
the dissenter notifies the corporation of the dissenter's demand in writing
under subsection (1) of this section within 30 days after the corporation made
or offered payment for the dissenter's shares.
(Judicial Appraisal of Shares)
60.591 Court action. (1) If a demand for payment under OBCA 60.587 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand under OBCA 60.587 and petition the court under
subsection (2) of this section to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within
the 60-day period it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of the
county where a corporation's principal office is located, or if the principal
office is not in this state, where the corporation's registered office is
located. If the corporation is a foreign corporation without a registered
office in this state, it shall commence the proceeding in the county in this
state where the registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
4
<PAGE>
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the circuit court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
powers described in the court order appointing them, or in any amendment to the
order. The dissenters are entitled to the same discovery rights as parties in
other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment
for:
(a) The amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the
corporation; or
(b) The fair value, plus accrued interest, of the dissenter's after-
acquired shares for which the corporation elected to withhold payment under
OBCA 60.584.
60.594 Court costs and counsel fees. (1) The court in an appraisal proceeding
commenced under OBCA 60.591 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except
that the court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in demanding payment under
OBCA 60.587.
(2) The court may also assess the fees and expenses of counsel and experts of
the respective parties in amounts the court finds equitable:
(a) Against the corporation and in favor or any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of OBCA 60.561 to 60.587; or
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by this chapter.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may award to counsel reasonable fees to be paid out of the amount awarded the
dissenters who were benefited.
5
<PAGE>
ANNEX F
This document comprises summary listing particulars. These summary listing
particulars have been extracted from the full listing particulars relating to
New ScottishPower which have been prepared in accordance with the Listing
Rules made under section 142 of the Financial Services Act 1986.
A copy of the full listing particulars dated and published on 6 May 1999, from
which these summary listing particulars have been extracted, has been
delivered for registration to the Registrar of Companies in Scotland in
accordance with section 149 of that Act. The full listing particulars alone
contain full details relating to New ScottishPower and the New Shares to be
issued in connection with the Merger and the Scheme. Copies of the full
listing particulars are available for collection during business hours from
the Company Secretary, New Scottish Power plc, 1 Atlantic Quay, Glasgow G2
8SP, Scotland during normal business hours on any weekday (Saturdays, Sundays
and public holidays excepted) from 6 May 1999 to the Merger Date free of
charge. The full listing particulars may be inspected at the offices of
Freshfields at 65 Fleet Street, London EC4Y 1HS, England and at the Company
Announcement Office.
The Directors are satisfied that these Summary Listing Particulars contain a
fair summary of the key information set out in the full listing particulars.
Application has been made to the London Stock Exchange for the New Shares to
be admitted to the Official List. It is expected that admission will become
effective and dealings will commence in respect of the New Shares to be issued
pursuant to the Scheme at 9.00 a.m. on the Scheme Date and that admission will
become effective and dealings will commence in the New Shares to be issued
pursuant to the Merger at 9.00 a.m. on the Merger Date. Application has been
made to list the New ADSs to be issued pursuant to the Scheme and the Merger
on the NYSE under the symbol "SPI", the symbol currently used for the
ScottishPower ADSs.
All statements relating to the business, financial position and prospects of
New ScottishPower, ScottishPower and PacifiCorp should be viewed in light of
the Year 2000 compliance issues which are set out in Parts II and III of this
document.
- -------------------------------------------------------------------------------
[LOGO] New Scottish Power plc
to be renamed Scottish Power plc
(incorporated and registered in Scotland with registered no.
SC193794)
Summary Listing Particulars
relating to the admission to the Official List
of up to 2,156,000,000 New Shares in New Scottish Power plc
and the proposed Merger with PacifiCorp
Sponsored by Morgan Stanley & Co. Limited
- -------------------------------------------------------------------------------
New Scottish Power plc and Scottish Power plc have been advised that the New
Shares to be issued under the Scheme are exempt from the registration
requirements of the US Securities Act of 1933, as amended, by virtue of
section 3(a)(10) thereof and, as a consequence, the New Shares to be issued
pursuant to the Scheme have not been registered under that Act.
The issue of these summary listing particulars has been authorised by the
London Stock Exchange without approval of their contents.
Morgan Stanley & Co. Limited, which is regulated by The Securities and Futures
Authority Limited, is acting for New Scottish Power plc and Scottish Power plc
and no one else in connection with the Scheme and the Merger and the proposed
listing of the New Shares on the London Stock Exchange and will not be
responsible to anyone other than New Scottish Power plc and Scottish Power plc
for providing the protections afforded to customers of Morgan Stanley & Co.
Limited or for giving advice in relation to the Scheme, the Merger or the
proposed listing.
<PAGE>
New ScottishPower Summary Listing Particulars
Contents
Clause Page
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Part I Scheme of arrangement and recommended Merger of ScottishPower and
PacifiCorp 4
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1.Introduction 4
2.Principal features of the Scheme 4
3.Reasons for the Scheme 5
4.Principal features of the Merger 5
5.Reasons for and benefits of the Merger 7
6.PacifiCorp's business and revised strategy 8
7.The Combined Group board and headquarters 8
8.Forthcoming dividends and future policy 8
9.Share buy-back 9
10.Current trading 9
11.UK regulatory reviews 9
12.Accounting treatment and reporting 9
13.Stamp duty reserve tax 9
14.Merger EGM, Court Meeting, Scheme EGM and Class Meeting 9
15.Forward looking statements and general 10
Part II Information relating to ScottishPower 11
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A.ScottishPower and its activities 11
1.Energy businesses 11
2.Energy supply 13
3.Southern Water 14
4.Telecommunications 15
5.Specialist businesses 16
6.Customer services 16
7.Certain statements relating to ScottishPower's earnings 17
8.Year 2000 compliance 17
9.EMU preparation 18
B.Summary financial information for New ScottishPower 19
C.Summary financial information for the ScottishPower Group 19
1.Nature of financial information 19
2.Summary financial information for ScottishPower 20
Part III Information relating to PacifiCorp 24
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A.PacifiCorp and its activities 24
1.Background 24
2.Revised strategy 24
3.US electricity operations 26
4.Powercor 28
5.Other operations 29
6.Certain statements made by PacifiCorp 29
7.Year 2000 compliance 29
B.Summary financial information for PacifiCorp 31
1.Nature of financial information 31
2.Summary financial information for PacifiCorp 31
3.Summary of differences between US GAAP and UK GAAP and unaudited summary
statement of PacifiCorp's financial information under UK GAAP 36
Part IV Pro forma statement of net assets, indebtedness and working capital 38
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A.Pro forma statement of net assets 38
B.Indebtedness of the Combined Group 39
C.Working capital of the Combined Group 39
</TABLE>
2
<PAGE>
New ScottishPower Summary Listing Particulars
<TABLE>
<CAPTION>
Clause Page
- --------------------------------------------------------------------------------
<S> <C>
Part VFurther details of the Merger 40
- --------------------------------------------------------------------------------
A.Summary terms of the Merger 40
1.Introduction 40
2.Terms 40
3.Shareholder approval and other conditions 40
4.Certain representations, warranties and covenants 41
5.Directors and management of the Combined Group 42
6.Termination of the Merger Agreement 42
7.Termination payments 43
B.Factors considered by ScottishPower in assessing the Merger 44
Part VIRegulatory aspects of the Merger, certain regulatory reviews 46
and environmental matters
- --------------------------------------------------------------------------------
A.Regulatory aspects of the Merger 46
1.UK approvals 46
2.US and Australian approvals 46
3.General 48
B.Certain regulatory reviews 49
1. ScottishPower 49
2. PacifiCorp 51
C.Environmental matters 52
1. ScottishPower 52
2. PacifiCorp 52
Part VIIAdditional information 53
- --------------------------------------------------------------------------------
1.Responsibility 53
2.Incorporation and activity 53
3.Share capital of New ScottishPower 53
4. Limitations on shareholdings, summary of principal differences between 55
the New ScottishPower Articles and the ScottishPower Articles and future proposals
5.PacifiCorp share capital 57
6.Directors of New ScottishPower 60
7.Directors' and other interests in ScottishPower and New ScottishPower 60
8.ScottishPower employee share schemes 64
9.Effect of the Scheme on the ScottishPower Share Schemes 65
10.New ScottishPower Employee Share Schemes 65
11.Certain interests of directors and Executives of PacifiCorp relating to the Merger 65
12.Principal investments 69
13.Material contracts 70
14.Litigation 72
15.Significant change 73
16.General 73
17.Documents available for inspection 74
Definitions 75
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
New ScottishPower Summary Listing Particulars
Part I
Scheme of arrangement and recommended Merger of ScottishPower and PacifiCorp
1. Introduction
On 7 December 1998, the boards of ScottishPower and PacifiCorp announced that
they had reached agreement on the proposed merger of their two companies.
The Merger is subject to a number of conditions, including its approval by
both the ScottishPower Shareholders and the PacifiCorp Shareholders. The
Merger is also conditional on a number of regulatory, tax and other consents
and confirmations in the US and the UK. The boards of ScottishPower and
PacifiCorp have each recommended their respective shareholders to vote in
favour of the Merger. The Merger is expected to be completed later this year.
ScottishPower also announced on 25 February 1999 its intention to recommend to
ScottishPower Shareholders a proposal to introduce a new holding company for
the ScottishPower Group, New ScottishPower (to be renamed Scottish Power plc
upon the Scheme becoming effective), by way of a court sanctioned scheme of
arrangement. The Scheme will result in holders of ScottishPower Shares holding
the same number of shares having the same economic and voting rights in New
ScottishPower as they hold in ScottishPower. These proposals are contained in
the Scheme Circular. The Merger is not conditional upon the Scheme becoming
effective nor is the Scheme conditional upon the Merger becoming effective.
2. Principal features of the Scheme
Structure
Under the Scheme, all the ScottishPower Shares in issue as at 5:30 p.m. on the
Scheme Record Date (the "Scheme Shares") and the ScottishPower Special Share
will be cancelled on the Scheme Date (which is expected to be on 30 July
1999). In consideration of the cancellation, Scheme Shareholders will receive
in respect of any Scheme Shares held as at 5.30 p.m. on the Record Date:
For each Scheme Share cancelled One New Share
The rights attaching to the New Shares are substantially the same as those
attaching to the existing ScottishPower Shares. A summary of the principal
differences from the rights of the existing ScottishPower Shares are set out
in paragraph 4 of Part VII of this document.
Following the Scheme becoming effective, holders of ScottishPower ADSs will,
in respect of any ScottishPower ADSs held as at 5.30 p.m. (New York time) on
the Record Date, instead hold:
For each ScottishPower ADS One New ADS (representing
cancelled (representing the right to receive four
the right to receive four New Shares)
ScottishPower Shares)
The Special Shareholder will have issued to him the New ScottishPower Special
Share which will confer the same rights in relation to New ScottishPower as
the existing ScottishPower Special Share confers in relation to ScottishPower
together with additional consent rights.
Following the cancellation of the Scheme Shares and the ScottishPower Special
Share, new ScottishPower Shares will be issued to New ScottishPower which
will, as a result, become the holding company of ScottishPower and the Group.
Effect of the Scheme
The effect of the Scheme will be that Scheme Shareholders will have their
respective interests in ScottishPower replaced by equivalent proportionate
interests in New ScottishPower (of which ScottishPower will be a direct
subsidiary) and, subject to the effect of the exercise of options to subscribe
ScottishPower Shares granted under the ScottishPower Share Option Schemes and
the Southern Water Sharesave Scheme, their proportionate interests in the
profits, net assets and dividends of the Group will not be affected.
Conditions to the Scheme becoming effective
A Scheme Circular has been sent to ScottishPower Shareholders which gives full
details of the Scheme and the action to be taken by them. The Scheme Circular
also contains Notices of the Court Meeting, the Scheme EGM and the Class
Meeting which are being held to obtain the necessary shareholder approvals to
implement the Scheme.
4
<PAGE>
New ScottishPower Summary Listing Particulars
The Scheme will not become effective and binding unless:
. it is approved by a simple majority in number of those ScottishPower
Shareholders present and voting (either in person or by proxy) at the
Court Meeting representing not less than 75% of the number of the
ScottishPower Shares held by such ScottishPower Shareholders;
. the resolution numbered 1 set out in the Notice of Scheme EGM to approve
the Scheme, the cancellation of the ScottishPower Shares and issue of
new ScottishPower Shares and certain amendments to the ScottishPower
Articles is passed as a special resolution;
. the resolution set out in the Notice of Class Meeting to approve the
reduction of capital of ScottishPower pursuant to the Scheme and any
variation to the rights of the ScottishPower Shareholders which may
occur (or be deemed to occur) as a result of such reduction of capital
or otherwise as a result of the Scheme is passed as an extraordinary
resolution;
. the consent in writing of the Special Shareholder is obtained;
. it is sanctioned by the Court and the Court confirms the reduction of
capital which occurs as a result of the cancellation of ScottishPower
Shares and the ScottishPower Special Share as part of the Scheme; and
. a copy of the order of the Court sanctioning the Scheme and confirming
the reduction of ScottishPower's capital has been delivered to the
registrar of companies in Scotland.
In addition, the Directors will not take the necessary steps to enable the
Scheme to become effective unless, at the relevant time, they consider that it
continues to be in ScottishPower's best interests and the following conditions
have been satisfied or waived:
. various regulatory approvals or confirmations being given;
. various tax clearances and confirmations being obtained from the Inland
Revenue;
. the London Stock Exchange agreeing to admit the New Shares issued and to
be issued in connection with the Scheme to the Official List (subject
only to allotment) and its agreement not being withdrawn prior to the
Scheme Date; and
. the NYSE indicating on satisfactory terms that it intends to authorise
the listing of the New ADSs.
If the Scheme is sanctioned by the Court and the conditions to the Scheme are
satisfied or waived, it is expected to become effective and dealings in the
New Shares to be issued pursuant to the Scheme are expected to commence on 30
July 1999. If the Scheme has not become effective by 30 June 2000 (or such
later date as the Court may allow), it will lapse, in which event the Special
Shareholder will remain the holder of the ScottishPower Special Share,
ScottishPower Shareholders will remain holders of ScottishPower Shares,
ScottishPower Shares will continue to be listed on the London Stock Exchange
and the ScottishPower ADSs will continue to be listed on the NYSE.
3. Reasons for the Scheme
The Directors have decided that the Group would be more effective if it were
structured with a holding company which does not have any operating
activities. In particular, this will facilitate:
. a clearer demarcation between certain of the Group's activities; and
. the financial independence of different operating areas of the Group.
It is also anticipated that the creation of a new holding company for the
Group will assist the regulatory review process of the Merger in the UK and in
the US.
4. Principal features of the Merger
Structure
The Merger is to be effected by a statutory merger under Oregon law whereby
MergerSub, which will be a new wholly owned indirect US subsidiary of New
ScottishPower, will be merged with and into PacifiCorp and PacifiCorp will
become a wholly owned indirect subsidiary of New ScottishPower in accordance
with the terms of the Merger Agreement.
5
<PAGE>
New ScottishPower Summary Listing Particulars
Merger terms
Under the terms of the Merger, PacifiCorp Common Shareholders (other than New
ScottishPower or any subsidiary of New ScottishPower or PacifiCorp) will be
entitled to receive New ADSs or New Shares on the following basis.
For each share of 0.58 New ADSs (each New ADS
PacifiCorp Common Stock represents four New Shares) or
2.32 New Shares
The New ADSs will be listed on the NYSE and the New Shares will be listed on
the London Stock Exchange.
PacifiCorp Common Shareholders who would otherwise have been entitled to
receive a fraction of a New ADS or a New Share will receive a cash payment
instead, determined by reference to the price of a ScottishPower ADS or a
ScottishPower Share (as the case may be) on the last day of trading
immediately preceding the Merger Date.
Upon the Merger becoming effective, all options to acquire PacifiCorp Common
Stock (other than options granted on 9 February 1999) under the PacifiCorp
Stock Incentive Plan which are not yet exercisable will become exercisable and
all unexercised options (including those granted on 9 February 1999) will
convert into options to acquire New ADSs or New Shares (as the case may be)
after adjustment to take account of the Exchange Ratio. Based on PacifiCorp
options granted as at 27 April 1999 (being the latest practicable date prior
to the publication of this document), this will result in a maximum of
approximately 14 million New Shares being placed under option. All unvested
awards of restricted PacifiCorp Common Stock granted under the PacifiCorp
Stock Plans will be converted into awards of New ADSs or New Shares, as the
case may be, and all such unvested awards (other than awards granted on 9
February 1999 and all awards granted under the PacifiCorp Non-Employee
Directors Stock Compensation Plan) will become fully vested and free of
restrictions. As at 27 April 1999 (being the latest practicable date prior to
the publication of this document) not more than 6,080,085 unissued shares of
PacifiCorp Common Stock are the subject of such vested and unvested options
and there were not more than 233,918 existing shares of restricted PacifiCorp
Common Stock. PacifiCorp may grant further options to acquire shares of
PacifiCorp Common Stock or restricted shares of PacifiCorp Common Stock in the
ordinary course in the period prior to the Merger Date. Further details of
these arrangements are set out in paragraph 11 of Part VII.
The PacifiCorp Preferred Stock will remain outstanding following the Merger
Date and will not be acquired or cancelled as part of the Merger. However, the
Merger Agreement requires PacifiCorp to redeem three series of its No Par
Serial Preferred Stock prior to the Merger Date. Further details of the
PacifiCorp Preferred Stock are set out in paragraph 5 of Part VII.
The Merger values the PacifiCorp Common Stock at approximately (Pounds)3.64
billion and each PacifiCorp Share at $19.37 ((Pounds)12.01) based on the
middle market quotation for a ScottishPower Share as quoted in the Daily
Official List, and on the fully diluted issued share capital of PacifiCorp, on
27 April 1999 (being the latest practicable date prior to the publication of
this document).
A description of the principal terms of the Merger is set out in Section A of
Part V.
Shareholder approval and other conditions
The Merger is subject to shareholder approvals and a number of regulatory and
other conditions. Subject to obtaining these consents and clearances and
shareholder approvals, the Merger is expected to be completed later this year.
The Merger is not conditional on the Scheme becoming effective. If
ScottishPower gives notice to PacifiCorp that the Scheme will not proceed, the
Merger will proceed on the basis described above but with ScottishPower
substituted for New ScottishPower.
Termination rights
Either ScottishPower (or, following the Scheme Date, New ScottishPower) or
PacifiCorp can terminate the Merger Agreement in the circumstances set out in
paragraph 6 of Section A of Part V.
The Merger Agreement requires that PacifiCorp pay a termination fee of US$250
million to ScottishPower (or, following the Scheme Date, to New ScottishPower)
if the Merger Agreement is terminated under certain circumstances following a
bona fide proposal or attempt by a third party to acquire PacifiCorp. The
Merger Agreement requires ScottishPower (or, following the Scheme Date, New
ScottishPower) to pay a termination fee of US$250 million to PacifiCorp if
PacifiCorp terminates the
6
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New ScottishPower Summary Listing Particulars
Merger Agreement following a change in control (other than pursuant to the
Scheme) of ScottishPower (or, following the Scheme Date, of New
ScottishPower). In addition, the Merger Agreement requires a party to pay a
termination fee of US$10 million if, under certain circumstances, its
shareholder approval is not obtained and the other party's shareholder
approval is obtained. Further details of these termination payments are set
out in paragraph 7 of Section A of Part V.
5. Reasons for and benefits of the Merger
The Merger will create an international utility company with significant
energy businesses in the UK and the US and approximately seven million
customers. The Directors believe that significant benefits will be derived
from the Merger and that the Combined Group will be more operationally
efficient and stronger financially than either ScottishPower or PacifiCorp
would be on its own. The Merger is expected to enhance New ScottishPower's
earnings per share, before goodwill amortisation, from the first full year
after completion of the Merger compared to the Directors' present expectations
for the existing ScottishPower Group. The Merger represents a major step in
ScottishPower's stated strategy of achieving growth and creating value for
shareholders by utilising its core skills in the US.
ScottishPower has carried out detailed analyses of the US market and possible
combination partners. The Directors believe that PacifiCorp is an excellent
partner, in that it combines:
. a sound business, good quality assets and an extensive customer base in
a region of the US benefiting from good economic growth;
. substantial scope for improved performance and efficiency;
. experienced operational management; and
. low cost coal resources and generation plant.
ScottishPower has a proven track record of delivering value to shareholders
through improving operating efficiencies and integrating acquisitions. Since
privatisation in 1991, ScottishPower has demonstrated its ability to reduce
operating costs within its core operations whilst improving standards of
customer service. ScottishPower has successfully completed and integrated two
substantial acquisitions in the UK, Manweb and Southern Water. ScottishPower
achieved benefits for shareholders beyond its initial expectations, by
implementing cost savings and disposing of non-core operations, while
simultaneously improving customer service.
The Combined Group will focus on accelerating PacifiCorp's strategy to improve
the performance of its western US electricity business. ScottishPower and
PacifiCorp believe that the application of best practices of the two companies
will reduce costs and increase operating efficiencies with the goal of
enhancing shareholder value. Although it is difficult to predict the source of
cost savings, the Directors expect most, if not all, of the anticipated cost
savings to come from the application of best practices in operational and
overhead areas rather than through elimination of costs duplicated between
ScottishPower and PacifiCorp. The Board believes that this will enable
PacifiCorp, which has recently suffered from a period of financial under-
performance, to achieve more quickly its stated aim of earning the authorised
regulatory rate of return in each US state in which it conducts business and
will bring PacifiCorp's non-generation costs per customer in the US in line
with some of the most efficient comparable utilities, based on comparisons
drawn from information filed with FERC.
To assist the delivery of these improvements, the Directors intend to transfer
a number of senior managers with integration experience into PacifiCorp. Some
PacifiCorp managers will also be transferred into ScottishPower's UK
operations to gain experience of ScottishPower's working practices.
The Merger should enable ScottishPower to apply its proven utility management
skills to PacifiCorp. The Directors believe that these skills, developed in
the competitive UK market, will assist PacifiCorp as competition is introduced
into the US generation and supply businesses.
The Directors also intend to enhance significantly the performance and service
standards of PacifiCorp, and to increase the range of energy services offered
to PacifiCorp customers, by investing in PacifiCorp's existing US businesses
and by applying the best practices drawn from both ScottishPower and
PacifiCorp. ScottishPower and PacifiCorp share a common commitment to high
standards of customer service, to the environment and to the communities they
serve.
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New ScottishPower Summary Listing Particulars
Further information on the Merger is set out in Parts V and VI. A description
of the principal terms of the Merger Agreement and of the conditions of the
Merger is set out in Section A of Part V. Details of the regulatory approvals
required for the Merger are set out in Section A of Part VI.
6. PacifiCorp's business and revised strategy
PacifiCorp is one of the largest publicly held electricity utilities in the
United States. PacifiCorp's principal activities are electricity generation
and sales to domestic, industrial, agricultural and commercial end-users (the
"retail" business) and to distribution companies, other generators and power
marketers for on-sale (the "wholesale" business) in the United States.
PacifiCorp also has significant electricity operations in Victoria, Australia.
Further information on PacifiCorp is set out in Part III and also in Parts IV,
VI and VII. PacifiCorp adopted a revised strategy in 1998, which the Board
supports.
7. The Combined Group board and headquarters
ScottishPower's senior management will remain in place in the Combined Group
following the Merger. The ScottishPower Group will continue to be
headquartered in Glasgow, with its principal US office in Portland, Oregon.
The boards of ScottishPower and New ScottishPower are the same and will not be
changed as a result of the Scheme becoming effective.
It was announced on 27 January 1999 that Murray Stuart has postponed his
retirement and will continue as Chairman of ScottishPower while the Merger
with PacifiCorp is being completed. Ian Robinson will continue as Chief
Executive and Ian Russell as Deputy Chief Executive and Finance Director. The
appointment of Alan Richardson as Executive Director with responsibility for
managing all US aspects of the Merger was also announced with effect from 1
April 1999. He will take up the role of Chief Executive Officer of PacifiCorp
on completion of the Merger. Also with effect from 1 April 1999, Charles Berry
was appointed as Executive Director with responsibility for the Group's energy
supply and retail businesses. On 27 January 1999 Ken Vowles was given
additional executive responsibility and was appointed Executive Director UK
Power Operations. Sir Ronald Garrick's resignation as a non-executive Director
was announced on 26 April 1999 and took effect on 30 April 1999. Duncan Whyte
will leave the ScottishPower Group on 31 May 1999 to become the Chief
Executive of The Weir Group plc.
It is proposed that Keith McKennon, currently Chairman, Chief Executive
Officer and President of PacifiCorp, will join the New ScottishPower board as
Deputy Chairman, together with Nolan Karras and Robert Miller, two non-
executive directors from PacifiCorp, in each case with effect from the Merger
Date.
In his role as the new Chief Executive Officer of PacifiCorp, Alan Richardson
will work closely with Richard O'Brien, the Chief Operating Officer of
PacifiCorp, who will continue in that role and also become President of
PacifiCorp. The PacifiCorp board of directors will be reconstituted as an
executive-only board, chaired by Ian Robinson, with executives from New
ScottishPower having the majority of seats. A PacifiCorp advisory board will
be established, the function of which will be to advise the PacifiCorp board
with respect to general business strategy, opportunities and activities in
PacifiCorp's market area and customer relationships.
An Interim Joint Executive Committee, jointly chaired by Ian Robinson and
Keith McKennon, has been established to coordinate the transition in the
period up to the Merger Date.
8. Forthcoming dividends and future policy
Following completion of the Merger, New ScottishPower intends to move to
quarterly reporting and payment of quarterly dividends. It is expected that a
dividend will be paid in February, May, August and November of each year,
which is consistent with the current timing of PacifiCorp's dividend payments.
To facilitate this change, the New ScottishPower Articles permit the Board to
declare interim dividends and final dividends (see paragraph 4 of Part VII).
New ScottishPower is committed to ScottishPower's stated aim of achieving 7%
to 8% real dividend growth per annum until at least the UK regulatory reviews
which take effect in the year 2000, whilst maintaining a prudent level of
dividend cover. It is New ScottishPower's current aim to deliver real dividend
growth thereafter and this will be re-examined once the outcome of these
regulatory reviews is known.
PacifiCorp Common Shareholders will receive PacifiCorp dividends in respect of
the period of time up to the Merger Date, and will not receive dividends from
New ScottishPower in respect of such period of time even if such dividends are
payable after the Merger Date.
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New ScottishPower Summary Listing Particulars
9. Share buy-back
The Directors intend to implement a share buy-back programme of up to
(Pounds)500 million following approval of the Merger by both ScottishPower
Shareholders and PacifiCorp Shareholders but prior to the Merger Date. This is
intended to achieve further financial efficiency, with an expected net
interest cover of approximately three times, whilst targeting an "A" credit
rating. It is anticipated that the buy-back will be undertaken through on-
market purchases.
10. Current trading
On 6 May 1999, ScottishPower announced its preliminary results for the year
ended 31 March 1999. These results represented a satisfactory financial
performance from the Group and reflected ScottishPower's focus on investing to
grow the business. On 30 March 1999, PacifiCorp announced its results for the
year to 31 December 1998, which were in line with ScottishPower's
expectations.
Trading for the first month of ScottishPower's 1999/2000 financial year has
also been satisfactory. The Directors intend to continue to invest to develop
the UK business, through winning further gas and electricity customers,
investing in new generation and infrastructure assets and building
ScottishTelecom, thereby delivering long term value to shareholders.
Looking ahead into the new millennium, regulation will continue to have a
significant bearing on the profitability and investment capability of the
ScottishPower Group. Notwithstanding the Group's success to date in reducing
costs and improving efficiency, regulatory factors may have a greater
influence than previously.
The Merger should, when completed, create one of the largest international
utility companies and open up more growth opportunities for the Combined
Group. The Merger is expected to be earnings enhancing from the first full
year, before goodwill amortisation, compared to the Director's present
expectations for the existing ScottishPower Group.
11. UK regulatory reviews
Looking ahead it is expected that regulation will continue to have a material
bearing on the profitability and investment capability of the Group. The
Group's regulated monopoly businesses comprise electricity transmission and
distribution in ScottishPower and electricity distribution in Manweb (together
representing 44% of the Group's 1999 operating profits) and the water supply
and wastewater business in Southern Water (representing 33% of the Group's
1999 operating profits). The regulatory price controls relating to these areas
of the Group's business for the five year period commencing 1 April 2000 are
currently being reviewed, and reviews are also taking place in relation to
supply and generation. The Board believes that the Group has high standards of
operation and customer service. Nevertheless, the Board is unable to judge
accurately the outcome of these reviews and there can be no assurance that
they will not materially affect Group profits. It is expected that final
proposals resulting from these reviews will be known by November 1999. Further
discussion of regulatory matters is set out in Part VI.
12. Accounting treatment and reporting
The Scheme will be accounted for using the merger method of accounting in the
UK. The Merger will be accounted for using the acquisition method of
accounting in the UK and the purchase method of accounting in the US.
13. Stamp duty reserve tax
Stamp duty reserve tax of an amount equal to 1.5% of the issue price of New
Shares issued in the Merger in the form of New ADSs will be payable. Based on
the market price for the ScottishPower Shares on 27 April 1999 (being the
latest practicable date prior to the publication of this document), and on the
assumption that all New Shares issued in the Merger are issued in the form of
New ADSs, stamp duty reserve tax of approximately (Pounds)54.64 million would
be payable. Any such tax will be paid by PacifiCorp. No stamp duty or stamp
duty reserve tax is expected to be payable in connection with the
implementation of the Scheme.
14. Merger EGM, Court Meeting, Scheme EGM and Class Meeting
The Merger EGM, Court Meeting, Scheme EGM and Class Meeting have been convened
for 15 June 1999, starting at 10.00 a.m.
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New ScottishPower Summary Listing Particulars
15. Forward looking statements and general
Certain statements contained in this document, particularly those regarding
the possible or assumed future performance, costs, dividends, results of
operations, reserves and growth of ScottishPower, New ScottishPower and
PacifiCorp, as well as statements preceded by, followed by or that include the
words "believes", "expects", "estimates", "anticipates" or similar
expressions, are or may be considered to be forward-looking statements that
involve risks and uncertainties. It should be understood that a variety of
factors, including the specific factors identified in the discussions
accompanying such forward-looking statements, future levels of industry
generation and supply, demand and pricing, political stability and economic
growth in the relevant areas in which the Group has operations, the ability of
ScottishPower and PacifiCorp to integrate their businesses successfully
following the Merger, development and use of technology, the actions of
competitors, natural disasters and other changes to business conditions and
other factors discussed elsewhere in this document, could affect the future
results of ScottishPower, New ScottishPower and PacifiCorp and could cause
those results to differ materially from those expressed in any forward-looking
statements.
ScottishPower Shareholders should read the whole document and not just rely on
key or summarised information.
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New ScottishPower Summary Listing Particulars
Part II
Information relating to ScottishPower
A. ScottishPower and its activities
The ScottishPower Group is a leading multi-utility business in the UK serving
approximately five and a half million homes across Scotland, England and
Wales. The Group's activities span the generation, transmission, distribution
and supply of electricity, gas supply, water supply and wastewater services,
telecommunications, retailing of electrical appliances, technology and
contracting services. The ScottishPower Group, which has its headquarters in
Glasgow, is one of the largest industrial groups in the UK.
In the audited financial statements for the year ended 31 March 1999,
ScottishPower reported a consolidated profit before tax of (Pounds)644 million
(1998: (Pounds)640 million; 1997: (Pounds)558 million) on turnover of
(Pounds)3,242 million (1998: (Pounds)3,128 million; 1997: (Pounds)2,941
million). Earnings per share were 42.52p (1998: 41.28p; 1997: 38.11p) before
windfall tax and goodwill amortisation, and 42.42p (1998: 14.41p; 1997:
38.11p) after windfall tax and goodwill amortisation. The net dividends per
share amounted to 22.50p (1998: 20.40p; 1997: 18.50p) for the year.
ScottishPower employed an average of 15,196 personnel (stated on a full-time
equivalent basis) in the year ended 31 March 1999 compared with an average of
14,657 in the year ended 31 March 1997 and an average of 14,356 in the year
ended 31 March 1998. As at 31 March 1999, 3,588 were employed in the energy
businesses, 1,388 in energy supply, 2,201 in Manweb, 2,383 in
telecommunications, 2,262 in Southern Water and 4,210 in the specialist
businesses (including corporate functions).
Tighter regulation and increased competition has driven change across each of
the sectors in which ScottishPower operates. ScottishPower has responded by
continuing to improve the cost performance and efficiency of its businesses.
ScottishPower's major businesses are described in paragraphs 1 to 4 below:
1. Energy businesses
Generation
The generation business involves the generation of electricity in
ScottishPower's own plants and the purchase of external supplies of energy for
sale to the electricity supply businesses of ScottishPower, other supply
businesses in Scotland and to the wholesale market in England and Wales via
the Anglo-Scottish Interconnector described below. ScottishPower's owned
generation capacity comprises coal, gas, hydro and wind power. ScottishPower
owns and operates power stations with a net output capacity of more than 4,000
MW. Further capacity of over 2,800 MW is available to ScottishPower under
contract from nuclear, gas and hydro-electric stations operated by other
companies. As ScottishPower produces electricity at a cost that is below the
price at which the wholesale electricity trading market in England and Wales
(the "Pool") purchases electricity, ScottishPower is currently able to take
advantage of the prices at which electricity is purchased and sold through the
Pool.
ScottishPower's three largest power stations are Longannet (2,304 MW coal-
fired), Cockenzie (1,152 MW coal-fired) and Cruachan (400 MW pumped storage).
Construction of a 400 MW Combined Cycle Gas Turbine station near Brighton has
commenced, and commercial operation is planned for winter 2000. The project is
a joint venture, in which ScottishPower has a 50% economic and voting
interest, with CSW International Inc., the US parent company of SEEBOARD.
ScottishPower is contracted to take 74.9% of the output from two power
stations, Hunterston "B" and Torness, which are owned by British Energy (UK)
Limited, a subsidiary of British Energy plc. This contract terminates in 2005.
There are also agreements in place with Scottish and Southern Energy plc
("Scottish and Southern") whereby ScottishPower has a right to 50% of the
capacity of Scottish of Southern's Peterhead power station and up to 200MW of
Scottish and Southern's conventional hydro generating capacity. Scottish and
Southern has access to up to 576 MW of ScottishPower's coal-fired generating
capacity. These contracts account for half of ScottishPower's overall
generation requirements.
In light of the new competitive environment, the generation business has been
restructured in order to focus effectively on its key activities in fossil-
fuel fired, gas and renewable energy sources.
The focus of the generation business continues to be to reduce costs, improve
efficiency and enhance environmental performance. Investment is being made in
ScottishPower's Longannet and Cockenzie
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New ScottishPower Summary Listing Particulars
power stations and a major new cost savings initiative has been launched.
Acquisition of additional generation capacity is kept under consideration.
Progress on developing Hatfield Moors as a gas storage site continues with all
necessary planning and consents for construction obtained. The (Pounds)17.6
million project remains on target to meet the winter 1999 peak demands of some
450,000 customers.
ScottishPower's fuel purchasing strategy aims to achieve competitive fuel
prices while balancing the need for security and flexibility of supply. The
major components of the Group's fuel portfolio are coal, gas and oil. The
majority of the Group's coal requirements are sourced in Scotland under long-
term contracts. Under a 6 year contract with Scottish Coal (Deep Mine)
Limited, which commenced on 1 April 1998, ScottishPower will take 1.67 million
tonnes per annum of low sulphur coal. Up to a further 1.7 million tonnes of
coal will be supplied yearly by other Scottish suppliers under long-term
contracts of between three and five years, also commencing on 1 April 1998.
The balance of the Group's coal requirements will be sourced through the
exercise of options under these long-term contracts and/or short-term
competitive tenders. The Group's gas purchasing strategy is based on a
combination of long, medium and short-term contracts. In accordance with this
strategy, the Group has agreed contracts direct with gas producers on a non-
interruptible supply basis. The Group has two long-term contracts (with terms
of, respectively, 10 and 15 years, from 1994) for supply from major gas
fields. From time to time, ScottishPower purchases heavy fuel oil in the
international spot market when favourable prices are available.
Generation sales in the year ended 31 March 1999 were 29,679 GWh.
Approximately 22,246 GWh were attributable to ScottishPower's energy supply
business, with the remaining 7,433 GWh either being sold to other suppliers or
exported through the Anglo-Scottish Interconnector to the Pool in England and
Wales.
Power systems
ScottishPower owns and manages a substantial electricity network comprising
both the distribution system to customers in its two authorised areas and, in
Scotland, the high voltage transmission system (132 kilovolts and above). The
latter includes all the assets of the Anglo-Scottish Interconnector which are
in its Scottish authorised area. The main function of the power systems
business is to develop and maintain an efficient, co-ordinated and economical
network, including high voltage connections to England, and to operate and
develop the distribution system to approved standards of safety and
reliability. Within the power systems business the focus continues to be on
reducing costs and improving service. Its principal business activities
involve the provision of new connections, construction and refurbishment of
the system, maintenance and fault repair, setting tariffs and collecting
revenues for the use of its authorised networks, and all metering activities,
from provision and repair to meter reading. The power systems business
continues to focus strongly on the efficient delivery of electricity to
customers in its franchise areas via its overhead and underground network.
Investment in the business has included significant upgrades and
refurbishments to the transmission and distribution system.
ScottishPower's power systems business is divided into three regions in
Scotland, three regions in the Manweb authorised area and a metering business
which covers both areas. It has a distribution/transmission network which
extends to approximately 113,000 kilometres, with 63,000 kilometres of
underground cables and some 50,000 kilometres of overhead lines.
The power systems network is connected to the transmission system of the
National Grid Company plc by the Anglo-Scottish Interconnector, which has an
upper limit of transfer capability agreed currently as 1,850 MW. The
ScottishPower network is also connected at several points to the transmission
network of Scottish and Southern. An agreement has been made with the National
Grid Company plc and Scottish and Southern to upgrade the maximum capacity of
the Anglo-Scottish Interconnector to 2,200 MW. Planning approval has now been
granted by HM Government for the reinforcement necessary in England and Wales
to give full effect to the upgrade. The current completion date for this
project is September 2001. ScottishPower's generation business will provide
75% of the capital cost of the upgrade. Pursuant to an agreement with Scottish
and Southern, ScottishPower has the contractual right to 54% of the pre-
upgrade capacity and up to 75% of the additional upgrade capacity of the
Anglo-Scottish Interconnector. ScottishPower's Composite Licence only entitles
it to reserve capacity to itself
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New ScottishPower Summary Listing Particulars
with the consent of the DGES, and obliges it to offer to enter into an
agreement with a third party applicant for use of the Anglo-Scottish
Interconnector, except when the DGES determines that the capacity of the
Anglo-Scottish Interconnector is insufficient to accommodate the requirements
of the applicant having regard to such amount of capacity as has already been
reserved to ScottishPower (with the DGES's consent) or a third party. The DGES
determined, in December 1998, that ScottishPower may not reserve all of its
allocated capacity on the Anglo-Scottish Interconnector to its own generation
business. The DGES also determined that capacity was not insufficient to
accommodate the requirements of British Nuclear Fuels Limited ("BNFL"), and
specified that ScottishPower should make available to BNFL 196 MW of capacity
for the period 1 January 1999 to 31 March 2002. In the case of National Power
plc, the DGES declined to make a determination on the grounds that National
Power plc had not provided sufficient information in support of its
application. Following these determinations, ScottishPower has made
applications to the DGES to reserve capacity of 75% of the additional upgrade
capacity to itself and, with respect to the existing capacity is in
negotiation with the DGES with respect to amendments to the rules governing
the allocation of capacity.
The determinations referred to above resulted from requests to ScottishPower
from BNFL and National Power plc for access to the Anglo-Scottish
Interconnector, and a request by ScottishPower that the whole of the capacity
on the Anglo-Scottish Interconnector to which ScottishPower is contractually
entitled be reserved to ScottishPower's generation business. On 31 March 1999,
ScottishPower extended on an interim basis its existing Use of Interconnector
Agreement with BNFL, and negotiations are ongoing to enter into a new
agreement to provide BNFL with access up to 196 MW per year until 31 March
2002 and potentially beyond to accommodate the remaining life of the
Chapelcross power station. ScottishPower is currently disputing with Scottish
and Southern the implications of ScottishPower being obliged to permit BNFL
continued access to the Anglo-Scottish Interconnector. ScottishPower contends
that under the existing contractual arrangements between ScottishPower and
Scottish and Southern only 54% of BNFL's required access of 196 MW should be
deducted from ScottishPower's share of access. Scottish and Southern contends
that all of BNFL's required access should be deducted from ScottishPower's
share of access. The Directors believe it is likely that a compromise will be
reached with Scottish and Southern although, at the latest practicable date
before publication of this document, negotiations were still ongoing.
ScottishPower has entered into an agreement with Northern Ireland Electricity,
a subsidiary of Viridian Group PLC, for the construction of a Scottish-
Northern Irish Interconnector with a transfer capability of 250 MW and an
agreement for the supply by ScottishPower of around 1,095 GWh of electricity
per year over a period of 70 months from the date of commissioning. These
agreements amend and restate agreements originally entered into in 1994. Once
completed, the Northern Irish and marine sections of the Scottish-Northern-
Irish Interconnector will be owned by Northern Ireland Electricity, and the
Scottish section from the converter station will be owned by ScottishPower.
Northern Ireland Electricity will provide the full capital cost of this
Interconnector. Approval has been obtained from the Northern Ireland Office
for the Regulation of Electricity and Gas for this agreement although European
Commission approval and UK competition clearance are still being sought. It is
anticipated that the Scottish-Northern Irish Interconnector will commence
commercial operation in December 2001.
In late December 1998 and early January 1999, the Group's network in Scotland
sustained damage due to very severe weather conditions, causing interruptions
to supply. ScottishPower is implementing measures to further improve its
ability to deal with such incidents and is contributing to a review by OFFER
of electricity companies' responses to the bad weather.
2. Energy supply
Electricity
The energy supply business is responsible for the sales and marketing of
electricity, gas and related products to customers within ScottishPower's and
Manweb's respective home areas and to the competitive market throughout the
rest of Great Britain. The energy supply business supplies electricity to 3.2
million customers in Great Britain and has an overall market share of 12%.
ScottishPower's home area covers approximately 23,000 square kilometres and
comprises southern Scotland, most of central Scotland and a small part of
Northumberland. ScottishPower supplies electricity to 1.8 million customers
within its home area, which includes Glasgow and Edinburgh.
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Manweb is one of twelve Regional Electricity Companies ("RECs") which came
into existence as a result of the restructuring and subsequent privatisation
of the electricity industry in England and Wales in 1990. It was acquired by
ScottishPower in 1995. Manweb supplies electricity to some 1.3 million
customers in its home area in Merseyside and North Wales, including parts of
Cheshire, greater Manchester, Lancashire, Shropshire and Staffordshire. The
area covers approximately 12,200 square kilometres.
The energy supply business purchases electricity from a range of sources,
including the Group's generation business, for sale to customers both within
its home areas and outside them. Until September 1998, only public electricity
suppliers were entitled to supply customers in their franchise areas (now home
areas) with demand less than 100 KW (or "franchise" customers). From September
1998 to May 1999, the franchise areas of all public electricity suppliers are
being opened to competition on a phased basis, with the result that
electricity suppliers holding second tier licences, including ScottishPower
and Manweb, are able to supply electricity to all customers in the franchise
area of a public electricity supplier. Large industrial or commercial
customers with demand above that threshold have been and continue to be able
to seek supply from other electricity suppliers holding a "second tier"
licence. ScottishPower's and Manweb's respective franchises were opened to
competion in three phases, commencing in September 1998 and running through to
February 1999. Since September 1998, the strategic focus of the energy supply
business has been defence of its existing markets, particularly domestic and
small business customers in the ScottishPower and Manweb areas, while
exploiting the opportunity to expand its customer base outside these regional
boundaries. As at 31 March 1999, the energy supply business had retained 96%
of domestic customers in the ScottishPower area and 94% in Manweb. The
business had also signed-up 190,000 electricity contracts outside those home
areas.
In the highly competitive industrial and commercial energy market the Group
has sought to defend market share and has retained 76% of these volumes in the
ScottishPower area. In Manweb, which comprises some of the largest industrial
electricity users in the country, the Group has retained a 27% share of these
volumes. Outside the Group's home areas, the Group currently supplies around
1,750 GWh of electricity. The Group has also been developing a new range of
added value energy services for the market beyond the energy supply commodity.
Details of the principal terms and conditions of the licences held by the
energy businesses of ScottishPower under the Electricity Act 1989 are set out
in Section B of Part VI.
Gas markets
The domestic gas supply market has been open to full competition (i.e.
extended to premises with consumption under 2,500 therms per annum) since late
May 1998. The ScottishPower Group has now established itself as one of the
leading challengers to Centrica plc in this market, having already acquired a
total of 760,000 domestic contracts by the end of March 1999. In the business
market, the Group has continued to grow, supplying gas representing
approximately 220 million therms per annum to 23,215 sites across the UK.
The gas business of ScottishPower holds appropriate licences under the Gas
Acts 1986 and 1995.
Domestic energy accounts
The year ended 31 March 1999 was a very challenging one for the Group's energy
businesses as the residential electricity supply market has opened to
competition. At 31 March 1999, new domestic energy accounts secured since, in
the case of gas, the second phase of competition in April 1997 and, in the
case of electricity, the introduction of competition in September 1998,
totalled 950,000 (760,000 gas accounts and 190,000 new electricity contracts).
The Group's focus is on securing "dual fuel" electricity and gas customers and
to date the Group has more than 317,000 dual fuel energy contracts signed. The
Group's progress has been achieved in spite of intense competition.
Electricity customers registered to leave the Group at 31 March 1999 were
147,000, representing 5% of customers in ScottishPower's and Manweb's home
areas. The Group will continue to seek to win further new customers.
Attracting new customers leads to initial costs in sales and marketing,
information systems and new procedures. However, ScottishPower believes that
this investment should contribute to growing earnings in the medium to longer
term.
3. Southern Water
Southern Water is one of the ten water and sewerage companies which came into
existence as a result of the privatisation of the water industry in England
and Wales in 1989. Acquired by ScottishPower in
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New ScottishPower Summary Listing Particulars
August 1996, its principal business is the provision of water supply for a
population of approximately 2.2 million and wastewater services for a
population of approximately 4.0 million. Southern Water operates in a region
of approximately 10,450 square kilometres in the counties of Kent, East and
West Sussex, Hampshire and the Isle of Wight and small parts of Wiltshire,
Berkshire and Surrey. The region's coastline stretches from the Thames Estuary
north of Rochester to beyond the Solent, including the Isle of Wight.
Southern Water has an ongoing (Pounds)1 billion capital investment programme
over the five years to the year 2000. A major sludge treatment centre was
commissioned at Millbrook, in the Southampton Docks area. Approval was
received for the construction of a new (Pounds)115 million wastewater works at
Portsmouth and work is proceeding on the (Pounds)111 million Isle of Wight
wastewater treatment scheme and the (Pounds)53 million Hastings bathing water
project.
Southern Water Services is subject to the licensing regime contained in the
Water Industry Act. Details of the principal terms and conditions of the
appointment of Southern Water Services under the Water Industry Act are set
out in Section B of Part VI.
Water supply business
Southern Water supplies on average 600 million litres of water per day which
is distributed through 13,200 kilometres of water main. Southern Water's 104
water treatment works treat water from 132 water sources in the region with
approximately 70% of water supplied coming from underground sources. Water is
pumped through the water mains by 413 pumping stations. Southern Water is also
responsible for the operation and maintenance of four impounding reservoirs,
which have a total storage capacity of 42,390 million litres.
Southern Water has 13,200 kilometres of water main. In order to minimise the
loss of water through leakage, a leakage control initiative was enhanced
following privatisation in 1989 and has reduced water loss by 140 million
litres per day to date. Since privatisation, Southern Water has one of the
best records with respect to water supply leakage among the water and sewerage
companies. Losses through leaks in its distribution system stood at 11.5% in
1997/98 compared to 26% just before the time of privatisation, with a target
to achieve 10.8% by the year 2000.
Southern Water monitors water quality through a programme in which samples are
analysed regularly for both microbiological and chemical parameters. 99.8% of
water sampled passed the EU performance criteria in 1997 (the most recent
published figures) and the Group believes that this level was maintained in
1998.
Wastewater business
Southern Water has 392 wastewater treatment works which treat effluent pumped
through 20,600 kilometres of sewer by over 1,850 pumping stations. These works
provide various treatment types as follows: primary, enhanced primary,
secondary activated sludge, secondary biological, tertiary activated and
tertiary biological. In addition, as part of the treatment process to meet
current bathing water standards, Southern Water has 21 long sea outfalls
around the coastline of its region.
Under the Water Resources Act 1991, these works are granted consent by the
Environment Agency to discharge sewage effluent to controlled waters. The
conditions attached to each consent can cover quality, quantity and
operational parameters as laid down in the "Standard Clauses" of the Discharge
Consents Manual issued by the Environment Agency. The basis of the policy is
to maintain and improve water quality and the aquatic environment.
4. Telecommunications
ScottishTelecom's strategy has been to achieve growth through a combination of
organic growth and selective acquisitions. This has provided ScottishTelecom
with operations in key markets across the communications sector since its
launch in 1994.
ScottishTelecom now provides, under innovative tariff packages, a wide
portfolio of communication services ranging from voice, data and mobile
telephony services to call centre, on-line information and Internet access
services.
In September 1997, ScottishPower entered into a joint venture arrangement with
Martin Dawes Telecommunications Limited by contributing the net assets of its
mobile telephony business, Woodend Group Limited, and (Pounds)2.6 million of
additional capital, to form ScottishPower Telecommunications
15
<PAGE>
New ScottishPower Summary Listing Particulars
(Services) Limited, in which ScottishPower has a 50% economic and voting
interest. The joint venture has subsequently promoted mobile telephony
services.
In February 1998 ScottishTelecom acquired Pinnacle Cellular and it acquired
Demon Internet for (Pounds)66 million on 1 May 1998. ScottishPower's "Scotland
On-Line" and "Prestel" operations combined with Demon Internet now have in
excess of 275,000 customers.
The business moved into operating profit during the year ended 31 March 1998
and contributed (Pounds)10.3 million to the Group's audited consolidated
operating profits for the year ended 31 March 1999. ScottishTelecom's current
share of the overall Scottish telecommunications market in which it operates
is still relatively small, but is increasing. The ScottishPower Board believes
that revenue growth will come from carrying Demon Internet telecoms traffic
following the installation of a network switch and supporting infrastructure
which was completed at the beginning of February 1999.
On 16 February 1999, ScottishTelecom announced that Bill Allan had been
appointed to succeed Rod Matthews as Managing Director of ScottishTelecom.
The development of the ScottishPower Group has caused the Directors to review
the future of ScottishTelecom. ScottishPower is currently evaluating the
strategy of ScottishTelecom and the options available to maximise shareholder
value from its investment in this business, in what is a rapidly changing and
developing sector. This assessment includes a review of the services provided
by ScottishTelecom, its funding needs and any consequential restructuring. The
Directors expect to reach a decision during the year.
ScottishTelecom holds appropriate licences under the Telecommunications Act
1984.
5. Specialist businesses
Electrical retailing
ScottishPower's electrical retailing business sells electrical products
through a chain of 183 outlets throughout the UK. In addition to retail sales,
the Group's electrical retailing business provides servicing and repair
facilities and delivery and connection facilities.
Contracting services
The Group's contracting services business specialises in niche markets,
including the installation and maintenance of high voltage equipment,
residential heating (electrical and gas installations), street lighting,
security and fire alarms, residential telephone connections, appliance
installation inspection and pre-planned maintenance, as well as
instrumentation, mechanical and project management along with property and
facilities management.
Technology
The Group's technology business combines a number of groups which specialise
in different areas of engineering consultancy and science, including
mechanical, electrical, civil engineering and environmental sciences. These
services are provided to both internal and external customers.
6. Customer services
Electricity
ScottishPower has taken steps to improve all aspects of its customer service
within the energy businesses in preparation for full competition in the
domestic electricity supply market, and intends to continue to treat improving
customer service as a priority over the next year. The businesses' customer
service guaranteed standards were maintained in the year ended 31 March 1999
at the high level set in the previous year, with over 99.99% of all
electricity services provided currently matching or exceeding regulatory
standards.
All service requirements in Scotland are met by a customer service call
centre, employing modern communications and information technology, offering a
single telephone contact point and 24 hour support. In Manweb's home area the
Group has focused its activities on improving customer service through the
provision of two regional call centres, a business call centre and a single
telephone contact point.
16
<PAGE>
New ScottishPower Summary Listing Particulars
Water
Southern Water continues to improve customer service standards. Regular
reviews by the regulator, OFWAT, have recorded continuing improvements.
Southern Water emerged as the top overall performer of the large water
companies for water supply and customer service and was also top for
efficiency in water supply in the latest published OFWAT report which covers
the period from April 1997 to March 1998.
Gas
Domestic gas suppliers faced increases in complaints during the period of
market liberalisation. The most common complaints to the Gas Consumers'
Council have concerned the change of supplier process and sales and marketing
activity. ScottishPower received 2,285 Ofgas and Gas Consumer Council
complaints during the year ended 31 March 1999, which equates to less than 1%
of the customer accounts won during the year. ScottishPower's performance in
terms of user complaints was considerably better than that experienced by some
other market entrants. The Group has established a gas call centre in
Warrington servicing domestic and small business customers.
Telecommunications
ScottishTelecom has continued to develop systems and processes to further
improve customer service delivery. These efforts have resulted in a number of
successful BABT external audits on behalf of OFTEL and ISO9002 approval,
specifically for the handling of residential services. ScottishTelecom is
continuing to invest and develop this area by implementing a new customer care
system.
7. Certain statements relating to ScottishPower's earnings
The US Prospectus includes a description of certain work performed by Morgan
Stanley and Salomon Smith Barney in relation to their respective fairness
opinions delivered to ScottishPower and PacifiCorp in December 1998 including
certain valuation exercises performed in relation to ScottishPower and
PacifiCorp based upon information publicly available, information provided by
the management of the two companies and a variety of assumptions. In
particular, pro forma analyses were performed of the effect of the Merger on
ScottishPower's earnings for the financial years ending 31 March 2001, 2002
and 2003.
At the time these analyses were made, none of ScottishPower, PacifiCorp,
Salomon Smith Barney or Morgan Stanley sought, nor were they under any
obligation to seek, any independent verification of the analyses performed or
of the information and assumptions upon which they were based. In addition
such analyses, information and assumptions were not expected or intended to be
made public and have not been updated. Accordingly, and given the uncertainty
inherent in relation to any estimates of future financial performance,
especially in the context of a merger and in relation to financial periods
which have not yet commenced, there can be no assurance that the effect of the
Merger on ScottishPower's earnings per share or otherwise will be in
accordance with, or in line with the trend indicated by, these analyses.
Therefore, no reliance whatsoever should be placed on these analyses. Your
attention is also drawn to the section in relation to forward looking
statements in paragraph 15 of Part I of this document.
8. Year 2000 compliance
Potential computer problems associated with the Year 2000 date change are an
issue for users of computer systems throughout the world including systems
with embedded chips. ScottishPower is dependent on its own systems and on
those of its key suppliers and customers. The Directors do not believe that
ScottishPower faces greater risks from Year 2000 issues than other comparable
utility companies in the UK.
ScottishPower established its group-wide Year 2000 programme in 1997 to seek
to manage the effects that Year 2000 issues may have on the Group's
operations. The methodology used builds on practices developed in conjunction
with several user groups, including the Electricity Association (the trade
association for electricity), UK Y2K Interest Group (the largest Year 2000
self-help group in the UK) and IMPACT (a confederation of many of the Top 100
companies in the UK). The scope of ScottishPower's programme covers all
aspects of the Group's business.
17
<PAGE>
New ScottishPower Summary Listing Particulars
ScottishPower's approach concentrates on three main areas which are as
follows:
. working on and testing its own internal systems through gathering
inventory, assessing criticality, prioritisation and planning, testing
and remediation;
. understanding the Year 2000 readiness of its suppliers and major
customers; and
. modifying and developing contingency processes to reduce residual risk.
The programme focuses on IT systems, both corporate and desktop, non-IT
systems (embedded chip systems) including process monitoring and control,
business processes and business partners. ScottishPower is currently reviewing
contingency plans, operational procedures, staffing issues and "worst case"
scenarios. A Millenium Operating Regime is being implemented, and is
particularly aimed at enhancing the Group's state of readiness for the
rollover period.
Within each of ScottishPower's businesses, the Directors believe that
scheduled remediation projects on the Group's systems are well advanced with
89% of all critical projects substantially complete. The Group is finalising
compliance work on its systems, and this work is planned to be completed well
in advance of the end of 1999.
ScottishPower's systems and operations are also dependent on products and
services provided by others. Since autumn 1997, all orders and contracts
placed by ScottishPower have included a Year 2000 clause requiring compliance
to the BSI standard PD2000-1. As part of the supply chain management work
undertaken, ScottishPower is assessing critical suppliers and customers for
their Year 2000 compliance. The Group has made an initial assessment of all
its critical suppliers and will continue to monitor all of them during 1999.
Interdependencies with other utilities are being reviewed through the UK y2K
Utilities Forum and other forums and one-to-one meetings. All other suppliers
are being treated in accordance to the Group's reliance on them. Where
appropriate, alternative suppliers may be appointed.
ScottishPower's Year 2000 programme has been carried out using internal
resources where possible, supplier resources where appropriate and specialist
contractors where considered necessary. As at 31 March 1999, the Group has
already spent approximately (Pounds)22 million on its Year 2000 programme. The
Directors estimate, based on the Group's best estimates and, where
appropriate, advice from specialist contractors, that the total cost to
ScottishPower of the Year 2000 programme will be approximately (Pounds)30
million. This does not include the cost of certain capital investment
programmes which are being accelerated in order to seek to resolve the Year
2000 issues.
The Directors believe that the Group's work on its own systems and equipment
and review of critical suppliers means that the Group is taking all reasonable
steps to minimise the risks associated with Year 2000 issues. Based on the
current state of knowledge on managing Year 2000 issues and the management's
best estimates, the Directors believe that, because of the anticipated short-
term nature of any potential interruptions, it is unlikely that Year 2000
issues will have a material impact on the Group's financial condition or
operations. However, there can be no assurance that the steps taken by the
Group will successfully minimise vulnerabilities of its software and systems,
or those of its suppliers, to the problems associated with the transition to
the Year 2000, that disruptions to the Group's business will not occur or that
the costs associated with the advent of the Year 2000 will not be greater than
anticipated.
The Directors do not believe that any integration problems relating to Year
2000 issues will arise as a result of the Merger.
9. EMU preparation
European Economic and Monetary Union ("EMU") commenced on 1 January 1999 with
the introduction of a new currency, the euro.
The Group's businesses are almost totally domestic in nature with very few
sales and relatively few purchases denominated in currencies other than
sterling. As a result, while the UK remains outside EMU, the Directors believe
that the Group will not be significantly affected by the introduction of the
euro. A project team has been established to review the impact of the first
wave of EMU on customers and suppliers and to formulate the Group's response.
The project group is also considering the implications of potential UK
membership of EMU.
The Group has already issued commercial paper denominated in euros and will
consider issuing bonds in euros in due course.
18
<PAGE>
New ScottishPower Summary Listing Particulars
B. Summary financial information for New ScottishPower
Extract from New ScottishPower accountants' report
This financial information has been prepared for inclusion in the listing
particulars dated 6 May 1999 ("the listing particulars") of New ScottishPower.
New ScottishPower was incorporated and registered in Scotland on 19 February
1999. Save for entering into the Amended and Restated Merger Agreement
referred to in Part V of the listing particulars, New ScottishPower has not
yet commenced to trade, has not presented to its members or filed any
financial statements and has not declared or paid a dividend.
Financial information
The balance sheet of New ScottishPower at 31 March 1999 was as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Notes (Pounds)
- ---------------------------------------
<S> <C> <C>
Current assets
Debtors 37,500
Cash 12,500
- ---------------------------- ------
Net assets 50,000
- ---------------------------- ------
Called up share capital 2 50,000
- ---------------------------- ------
Capital employed 50,000
- ---------------------------- ------
</TABLE>
Notes to the financial information
1. Accounting policies
The balance sheet has been prepared in accordance with the historical cost
convention.
2. Share capital
As at 31 March 1999, New ScottishPower's authorised share capital was
(Pounds)99,998 comprising 50,000 ordinary shares of (Pounds)1 each and 49,998
Redeemable Shares of (Pounds)1 each. As at 31 March 1999, the issued share
capital comprised 2 ordinary shares of (Pounds)1 each and 49,998 Redeemable
Shares of (Pounds)1 each.
3. Costs
No costs were incurred by New ScottishPower in respect of the issue of
subscriber and Redeemable Shares. The costs to be incurred by New
ScottishPower in respect of the issue of the ordinary shares of 50p each in
New ScottishPower to which the listing particulars relate and their admission
to the Official List of the London Stock Exchange will be charged to the share
premium account arising on the proposed issue of those shares. Accordingly,
such costs have been treated as a prepayment. If the proposed issue is not
completed, the costs will be charged to the profit and loss account.
C. Summary financial information on the ScottishPower Group
For the three years ended 31 March 1999
1. Nature of financial information
The financial information set out in this Section C has been extracted without
material adjustment from the audited consolidated accounts of ScottishPower
for the three years ended 31 March 1999.
19
<PAGE>
New ScottishPower Summary Listing Particulars
2. Summary financial information for ScottishPower
Group Profit and Loss Account
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Year ended 31 March
1997 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Turnover: group and share of joint
ventures and associates 2,947.4 3,134.1 3,251.5
Less: share of turnover in joint ventures (4.6) (3.8) (7.3)
Less: share of turnover in associates (2.1) (2.1) (1.9)
- ----------------------------------------- -------- -------- --------
Group turnover from continuing operations 2,940.7 3,128.2 3,242.3
Cost of sales (1,743.5) (1,850.7) (1,860.5)
- ----------------------------------------- -------- -------- --------
Gross profit from continuing operations 1,197.2 1,277.5 1,381.8
Transmission and distribution costs (222.8) (219.1) (258.1)
Administrative expenses (331.1) (303.0) (348.8)
Other operating income 20.6 29.7 27.9
- ----------------------------------------- -------- -------- --------
Operating profit from continuing
operations 663.9 785.1 802.8
Share of operating profit in joint
ventures 1.8 1.6 2.1
Share of operating profit in associates 0.9 0.3 0.2
- ----------------------------------------- -------- -------- --------
Profit on ordinary activities before
interest 666.6 787.0 805.1
Net interest charge
- Group (107.5) (147.1) (160.8)
- Joint ventures (0.5) (0.2) (0.5)
- Associates (0.2) (0.1) -
(108.2) (147.4) (161.3)
- ----------------------------------------- -------- -------- --------
Profit on ordinary activities before
taxation 558.4 639.6 643.8
Ordinary taxation
- Group (135.7) (151.5) (141.0)
- Joint ventures (0.7) (0.4) (0.5)
- Associates (0.4) 0.3 (0.1)
(136.8) (151.6) (141.6)
- ----------------------------------------- -------- -------- --------
Profit after ordinary taxation 421.6 488.0 502.2
Exceptional taxation - windfall tax - (317.0) -
- ----------------------------------------- -------- -------- --------
Profit after taxation 421.6 171.0 502.2
Minority interests (0.5) (0.9) 0.6
- ----------------------------------------- -------- -------- --------
Profit for the financial year 421.1 170.1 502.8
Dividends (218.1) (243.3) (267.9)
- ----------------------------------------- -------- -------- --------
Profit/(loss) retained 203.0 (73.2) 234.9
- ----------------------------------------- -------- -------- --------
Earnings per ordinary share 38.11p 14.41p 42.42p
Adjusting items - goodwill amortisation - - 0.10p
- windfall tax - 26.87p -
- ----------------------------------------- -------- -------- --------
Earnings per ordinary share before
goodwill amortisation and windfall tax 38.11p 41.28p 42.52p
- ----------------------------------------- -------- -------- --------
Diluted earnings per ordinary share 37.73p 14.27p 42.00p
Adjusting items - goodwill amortisation - - 0.10p
- windfall tax - 26.60p -
- ----------------------------------------- -------- -------- --------
Diluted earnings per ordinary share
before goodwill amortisation and
windfall tax 37.73p 40.87p 42.10p
- ----------------------------------------- -------- -------- --------
Dividend per ordinary share 18.50p 20.40p 22.50p
- ----------------------------------------- -------- -------- --------
</TABLE>
20
<PAGE>
New ScottishPower Summary Listing Particulars
Statement of Total Recognised Gains and Losses
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Year ended 31 March
1997- 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Profit for the financial year 421.1 170.1 502.8
Surplus on revaluation of assets - 229.0 -
- -------------------------------------------- ------- ------- -------
Total recognised gains and losses for the
financial year 421.1 399.1 502.8
- -------------------------------------------- ------- ------- -------
Note of Historical Cost Profits and Losses
- -------------------------------------------------------------------------------
<CAPTION>
Year ended 31 March
1997- 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Profit on ordinary activities before
taxation 558.4 639.6 643.8
Difference between historical cost
depreciation charge and actual depreciation
charge for the year calculated on the
revalued amount of fixed assets - 1.7 3.4
- -------------------------------------------- ------- ------- -------
Historical cost profit on ordinary
activities before taxation 558.4 641.3 647.2
- -------------------------------------------- ------- ------- -------
Historical cost profit/(loss) retained for
the financial year after taxation, minority
interests and dividends 203.0 (71.5) 238.3
- -------------------------------------------- ------- ------- -------
</TABLE>
Reconciliation of Movements in Shareholders' Funds
<TABLE>
- ------------------------------------------------------------------
<CAPTION>
Year ended 31 March
1997 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- ------------------------------------------------------------------
<S> <C> <C> <C>
Profit for the financial year 421.1 170.1 502.8
Dividends (218.1) (243.3) (267.9)
- ----------------------------------- ------- ------- -------
Profit/(loss) retained 203.0 (73.2) 234.9
Share capital issued (net of costs) 633.2 45.5 3.2
Shares to be issued 13.4 - -
Revaluation of fixed assets - 229.0 -
Goodwill written off (534.6) (16.2) -
- ----------------------------------- ------- ------- -------
Net movement in shareholders' funds 315.0 185.1 238.1
Opening shareholders' funds 1,207.7 1,522.7 1,707.8
- ----------------------------------- ------- ------- -------
Closing shareholders' funds 1,522.7 1,707.8 1,945.9
- ----------------------------------- ------- ------- -------
</TABLE>
21
<PAGE>
New ScottishPower Summary Listing Particulars
Group Cash Flow Statement
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Year ended 31 March
1997 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash inflow from continuing operating
activities 801.9 1,014.1 944.9
Dividends received from associates and joint
ventures - 0.9 0.9
Returns on investments and servicing of finance (101.1) (146.7) (149.9)
Ordinary taxation (117.4) (134.5) (93.7)
- ----------------------------------------------- -------- ------- -------
Free cash flow before windfall tax 583.4 733.8 702.2
Exceptional taxation - windfall tax - (157.8) (157.8)
- ----------------------------------------------- -------- ------- -------
Free cash flow 583.4 576.0 544.4
Capital expenditure and financial investment (392.1) (592.7) (683.0)
- ----------------------------------------------- -------- ------- -------
Cash flow before acquisitions and disposals 191.3 (16.7) (138.6)
Acquisitions and disposals (1,234.6) 67.9 (77.4)
Equity dividends paid (170.0) (226.0) (252.8)
- ----------------------------------------------- -------- ------- -------
Cash outflow before use of liquid resources and
financing (1,213.3) (174.8) (468.8)
Management of liquid resources (21.0) (17.5) (12.1)
Financing
Issue of ordinary share capital (net of
expenses) 238.0 8.9 3.2
Increase in debt 1,048.6 252.6 451.0
</TABLE>
<TABLE>
<S> <C> <C> <C>
1,286.6 261.5 454.2
- ----------------------------------- ------- ------- -------
Increase/(Decrease) in cash in year 52.3 69.2 (26.7)
- ----------------------------------- ------- ------- -------
</TABLE>
Free cash flow represents cash flow from continuing operating activities after
adjusting for dividends received from associates and joint ventures, returns
on investments and servicing of finance and taxation.
Reconciliation of Net Cash Flow to Movement in Net Debt
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
1997 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase/(Decrease) in cash in year 52.3 69.2 (26.7)
Cash inflow from increase in debt (1,048.6) (252.6) (451.0)
Cash outflow from movement in liquid resources 21.0 17.5 12.1
- ---------------------------------------------- -------- -------- --------
Change in net debt resulting from cash flows (975.3) (165.9) (465.6)
Net debt acquired (168.6) (0.1) (2.7)
Net debt disposed - 6.7 -
Loan notes issued (14.3) (3.0) -
Other non-cash movements - - (0.3)
- ---------------------------------------------- -------- -------- --------
Movement in net debt in year (1,158.2) (162.3) (468.6)
Net debt at end of previous year (632.1) (1,790.3) (1,952.6)
- ---------------------------------------------- -------- -------- --------
Net debt at end of year (1,790.3) (1,952.6) (2,421.2)
- ---------------------------------------------- -------- -------- --------
</TABLE>
22
<PAGE>
New ScottishPower Summary Listing Particulars
Group Balance Sheet
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
As at 31 March
-------------------------------
1997 1998 1999
(Pounds)m (Pounds)m (Pounds)m
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed assets
Intangible assets - - 71.3
Tangible assets 4,049.7 4,723.9 5,295.1
Investments
- Investments in joint ventures:
Share of gross assets 13.4 23.8 54.2
Share of gross liabilities (7.4) (8.0) (29.8)
-------- -------- --------
6.0 15.8 24.4
- Investments in associates 7.9 7.4 5.9
- Other investments 3.8 44.1 43.4
17.7 67.3 73.7
- ---------------------------------------------- -------- -------- --------
4,067.4 4,791.2 5,440.1
- ---------------------------------------------- -------- -------- --------
Current assets
Stocks 113.7 144.2 125.8
Debtors 622.8 525.9 559.3
Short term bank and other deposits 41.7 115.5 106.9
- ---------------------------------------------- -------- -------- --------
778.2 785.6 792.0
- ---------------------------------------------- -------- -------- --------
Creditors: amounts falling due within
one year
Loans and other borrowings (1,137.1) (1,035.7) (843.6)
Other creditors (1,112.0) (1,396.3) (1,332.8)
- ---------------------------------------------- -------- -------- --------
(2,249.1) (2,432.0) (2,176.4)
- ---------------------------------------------- -------- -------- --------
Net current liabilities (1,470.9) (1,646.4) (1,384.4)
- ---------------------------------------------- -------- -------- --------
Total assets less current liabilities 2,596.5 3,144.8 4,055.7
Creditors: amounts falling due after
more than one year
Loans and other borrowings (694.9) (1,032.4) (1,684.5)
Provisions for liabilities and
charges (43.2) (38.1) (30.8)
Deferred income (335.3) (364.6) (393.2)
- ---------------------------------------------- -------- -------- --------
Net assets 1,523.1 1,709.7 1,947.2
- ---------------------------------------------- -------- -------- --------
Called up share capital 588.7 598.4 599.4
Share premium 305.7 388.7 394.0
Revaluation reserve - 227.3 223.9
Profit and loss account 628.3 493.4 728.6
- ---------------------------------------------- -------- -------- --------
Equity shareholders' funds 1,522.7 1,707.8 1,945.9
Minority interests 0.4 1.9 1.3
- ---------------------------------------------- -------- -------- --------
Capital employed 1,523.1 1,709.7 1,947.2
- ---------------------------------------------- -------- -------- --------
</TABLE>
23
<PAGE>
New ScottishPower Summary Listing Particulars
Part III
Information relating to PacifiCorp
A. PacifiCorp and its activities
1. Background
PacifiCorp is one of the largest publicly held electricity utilities in the
United States. PacifiCorp's principal activities are electricity generation,
and retail and wholesale sales of electricity in the United States. PacifiCorp
has 1.5 million retail customers in service territories aggregating about
135,800 square miles in portions of six western states of the United States.
PacifiCorp owns or has joint ownership interests in generating plants in the
United States with an aggregate plant net generating capability of 8,445 MW.
Powercor, PacifiCorp's Australian electricity distribution and marketing
subsidiary, distributes electricity to approximately 560,000 customers within
its distribution service area in Victoria. In addition, Powercor sells
electricity to customers in its distribution service area and other parts of
Victoria, New South Wales and the Australian Capital Territory.
As reported in the financial statements for the year ended 31 December 1998,
PacifiCorp reported a net loss of $36.1 million. 86.8% of PacifiCorp's
revenues from operations were derived from US electric operations. Powercor
contributed 11.0%, and other operations contributed 2.2%.
2. Revised strategy
On 23 October 1998, following a review of its future strategy, PacifiCorp
announced that it intended to focus on its core electricity business in the
western US and sell its other US businesses. This announcement followed a
period of financial under-performance and the statement made earlier in the
year that PacifiCorp intended to seek buyers for its California and Montana
electricity distribution assets. PacifiCorp also stated that it would
terminate its business development activities outside the US and Australia,
and seek to continue to cut overhead costs. Further, PacifiCorp announced a
plan to repurchase up to $750 million of shares of PacifiCorp Common Stock,
but this has been postponed.
PacifiCorp has decided to discontinue the eastern US electricity trading
business of PacifiCorp Power Marketing, Inc. ("PPM") and has disposed of the
natural gas marketing and storage operations of TPC Corporation ("TPC"). These
businesses have been treated as discontinued operations of PacifiCorp since 30
September 1998 and, accordingly, as required by US Accounting Standards
financial statements for previous years have been restated to reflect them as
discontinued operations. PacifiCorp has also decided to exit the majority of
its other wholesale energy development businesses. The most significant of
these businesses were EnergyWorks, PacifiCorp's joint venture with Bechtel
Enterprises, and PacifiCorp's development activities in Turkey and the
Philippines. PacifiCorp also intends to sell its interest in the Hazelwood
power station and coal mine in Victoria, Australia.
PacifiCorp recorded a total loss from discontinued operations of $146.7
million (after tax) in the year ended 31 December 1998, which included the
cost of exiting its eastern US energy trading business. A further $49 million
(after tax) was charged in the year ended 31 December 1998 in respect of the
write down of other energy businesses not classified as discontinued
operations including a write down of $17 million (after tax) in the carrying
value of Hazelwood Power Station.
In the year ended 31 December 1998, PacifiCorp recorded a $76 million (after
tax) special charge associated with workforce reductions in the US, a $13
million (after tax) cost attributable to the Merger, and a $38 million charge
($23.4 million after tax) in relation to the Utah Rate Case. The Utah Rate
Case is discussed further in paragraph 2 of Section B of Part VI.
PacifiCorp recorded a charge of $54.0 million (after tax) associated with
PacifiCorp's terminated bid for The Energy Group plc ("TEG"), the TEG bid
having been launched in June 1997 as part of PacifiCorp's previously stated
aim to become a premier global energy company. Additionally, in connection
with the attempt to acquire TEG, a subsidiary of PacifiCorp purchased
approximately 46 million shares of TEG at a price of 820 pence per share, or
$625 million. PacifiCorp recorded a pre tax gain on the TEG shares of $16
million ($10 million after tax, or $0.03 per share) when they were sold on 2
June 1998. Costs of $2 million (after tax) relating to foreign currency
exchange contracts associated with the TEG bid were incurred.
In December 1997, PacifiCorp completed the sale of Pacific Telecom Inc.
("PTI"). This gave rise to a gain of $365.1 million (after tax). This gain
plus the net income from PTI and the businesses discontinued during 1998 are
reported as discontinued operations, giving total net income from discontinued
operations of $446.8 million in 11 months ended 30 November 1997.
24
<PAGE>
New ScottishPower Summary Listing Particulars
A gain of $30 million (after tax) was included in income from continuing
operations for the year ended 31 December 1997 arising from the sale of
PacifiCorp's independent power subsidiary, Pacific Generation Company ("PGC").
Special and exceptional charges totalling $106 million (after tax) were also
incurred in the year ended 31 December 1997 relating to:
.an accrual for the closure of the Glenrock coal mine;
.the write off of deferred regulatory pension assets; and
. the write off of certain information systems capital costs associated
with PacifiCorp's decision to proceed with an installation of SAP
enterprise wide software.
Shown below are earnings on common stock and earnings per common share of
PacifiCorp for each of the three years ended 31 December 1998, adjusted to
exclude the effect of discontinued operations and the significant, non-
recurring charges discussed above. The figures in the following table are
directly extracted from or derived from Section B of Part III.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended 31 December
-------------------------
1996 1997 1998
$m $m $m
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings/(loss) on common stock for the year under
US GAAP 475.1 640.9 (55.4)
Discontinued operations
- - Provision for losses of discontinued operations - - 105.0
- - Gain on sale of PTI - (365.1) -
- - Net loss/(income) from discontinued operations (74.6) (81.7) 41.7
Extraordinary item - 16.0 -
Special and exceptional charges - 106.0 76.0
Other items
- - Utah Rate Case adjustment - - 23.4
- - Write down of other energy businesses - - 32.0
- - Write down of Hazelwood - - 17.0
- - Merger costs - - 13.0
- - Gain on sale of PGC - (30.0) -
- - Gain on sale of TEG shares - - (10.0)
- - TEG bid costs - 65.0 56.0
- -------------------------------------------------- ------- ------- -------
Earnings on common stock for the year as adjusted 400.5 351.1 298.7
- -------------------------------------------------- ------- ------- -------
Earnings/(loss) per common share $ 1.62 $ 2.16 $ (0.19)
- -------------------------------------------------- ------- ------- -------
Average number of common shares outstanding
- - basic and diluted (thousand) 292,424 296,094 297,229
- -------------------------------------------------- ------- ------- -------
Earnings per common share as adjusted $ 1.37 $ 1.19 $ 1.01
- -------------------------------------------------- ------- ------- -------
</TABLE>
Shown below are cash dividends declared on common stock and resulting
dividends per shares for each of the three years ended 31 December 1998.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended 31 December
-----------------------
1996 1997 1998
$m $m $m
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Cash dividends declared on common stock ($m) 317.9 320.0 321.0
Year end number of common stock shares outstanding
(thousand) 295,140 296,908 297,343
Cash dividends declared per share ($) $ 1.08 $ 1.08 $ 1.08
</TABLE>
A summary of the differences between US GAAP and UK GAAP is set out in
paragraph 3 of section B of this Part III.
PacifiCorp's major businesses are described in paragraphs 3 and 4 below.
25
<PAGE>
New ScottishPower Summary Listing Particulars
3. US electricity operations
Generation
PacifiCorp owns or has joint ownership interests in generating plants with an
aggregate plant net generating capability of 8,445 MW. These include 15
thermal electric generating plants with an aggregate plant net generating
capability of 7,039 MW, ownership of, or joint ownership interests in, 53
hydro-electric generating plants with an aggregate plant net generating
capability of 1,125 MW, and three other plants, including ownership of one gas
turbine generating plant, 50% ownership in a combined cycle turbine generating
plant and a 78.79% ownership interest in one wind power generating plant, with
an aggregate plant net generating capability of 281 MW. PacifiCorp, together
with the other co-owners, is pursuing a possible sale of the Centralia Power
Project, a 1,340 MW coal-fired electric generating plant, in which PacifiCorp
owns a 47.5% share. PacifiCorp is also pursuing a possible sale of the 4.15 MW
Big Fork hydro-electric project which is PacifiCorp's only hydro-electric
project in Montana. With its present generating facilities, under average
water conditions, PacifiCorp expects that approximately 5% of its energy
requirements for 1999 will be supplied by its hydro-electric plants and 59% by
its thermal plants. The balance of 36% is expected to be obtained under long-
term purchase contracts, interchange and other purchase arrangements. During
1998, approximately 6% and 53% of PacifiCorp's energy requirements were
supplied by its hydro-electric and thermal generating plants, respectively,
and the remaining 41% by purchased power.
PacifiCorp owns and mines much of the coal it uses for power generation. It
has ownership interests in five coal mines that produced approximately 23.5
million tons of coal in 1998. Of this amount, approximately 18.3 million tons
were used directly by PacifiCorp, and the balance of the coal production was
used by the other owners of coal-fired generating plants in which PacifiCorp
has an interest. Most of the coal reserves associated with these mines are
held pursuant to leases from the federal government and all such reserves are
dedicated to nearby generating plants which PacifiCorp owns or in which it has
a joint ownership interest. Three of these mines are owned and operated by
PacifiCorp. Substantially all mining operations at one of the three mines
owned by PacifiCorp will cease in 1999. Replacement coal is expected to be
readily available from third party suppliers. Of the remaining two mines, one
is a co-operative in which PacifiCorp has a 20% membership interest and the
other is a joint venture in which PacifiCorp has a 66 2/3% interest.
PacifiCorp is pursuing a possible sale of the wholly owned mining company
associated with the Centralia Power Project.
Retail
PacifiCorp distributes electricity to 1.5 million supply customers in service
areas aggregating about 135,800 square miles in portions of six western
states: Utah, Oregon, Wyoming, Washington, Idaho and California. Prior to the
sale of its Montana distribution assets in November 1998, PacifiCorp served
35,000 retail electric customers in Montana. The retail sales business of
PacifiCorp consists of the sale of electricity to domestic, industrial,
agricultural and commercial end-users. It is regulated at the state level
rather than the federal level, based on cost of service pricing and authorised
rates of return. PacifiCorp service areas contain diversified industrial and
agricultural economies. Principal industrial customers are active in oil and
gas extraction, lumber and wood products, paper and allied products,
chemicals, primary metals, mining, technology and agribusiness.
The geographical distribution of PacifiCorp's US retail electric operating
revenues for the year ended 31 December 1998 was Utah 38%, Oregon 33%, Wyoming
12%, Washington 8%, Idaho 6%, California 2% and Montana 1%.
PacifiCorp's service areas have complementary seasonal load patterns. In the
western states (Washington, Oregon and California), customer demand generally
peaks in the winter months due to space heating requirements. In the eastern
states (Utah, Wyoming and Idaho), customer demand generally peaks in the
summer when irrigation and cooling systems are heavily used.
During 1998, no single retail customer accounted for more than 2% of
PacifiCorp's retail electricity revenues and the 20 largest retail customers
accounted for 13.9% of total retail electricity revenues. PacifiCorp continues
to operate its electricity distribution and retail sales business as a
regulated monopoly throughout most of its franchise service areas. However,
PacifiCorp's electricity distribution and retail sales business is facing
increasing competition, principally as a result of industry restructuring,
deregulation and increased marketing by alternative energy suppliers. In
addition, many large industrial
26
<PAGE>
New ScottishPower Summary Listing Particulars
customers have the option to build their own generation or cogeneration
facilities or to use alternative energy sources, such as natural gas. These
competitive pressures enable these customers to negotiate lower prices through
special tariffs or contracts.
Since April 1998, retail electric energy sales in California have been subject
to open market competition. The provision by PacifiCorp of tariffed services
in California will continue to be regulated. In addition to California, the
other states in PacifiCorp's service areas have enacted legislation or
initiated studies of retail competition or are considering retail competition
as part of industry restructuring.
PacifiCorp has formulated strategies to meet these new challenges. PacifiCorp
is marketing power supply services to other utilities in the western United
States, including dispatch assistance, daily system load monitoring, backup
power, power storage and power marketing, and services to retail customers
that encourage efficient use of energy. From 1 January 1998, the California
Public Utilities Commission adopted rules regulating the non-tariffed sale of
energy and energy products and services by utilities and
their affiliates. PacifiCorp has decided to refrain from marketing products
and services to retail customers in California but intends to remain active in
the wholesale business selling to utilities in California and power marketers
elsewhere in the western United States.
In July 1998, PacifiCorp announced its intention to seek buyers for its
electric distribution assets in California and Montana. In November 1998,
PacifiCorp sold its Montana electric distribution assets and received proceeds
of $89 million, net of taxes and customer refunds. PacifiCorp returned $4
million of the $8 million gain on the sale to its Montana customers. On 9
April 1999, PacifiCorp announced that it had executed a non-binding letter of
intent to sell PacifiCorp's electric service area in California to Nor-Cal
Electric Authority for approximately $178 million, pre-tax, subject to
adjustment. PacifiCorp expects to enter into a binding sale agreement by late
July 1999. Subject to regulatory approvals, PacifiCorp anticipates completion
of the sale early in the year 2000.
Wholesale marketing and purchased power
PacifiCorp's wholesale sales of power contribute significantly to total
revenues. PacifiCorp's wholesale sales complement its retail business and
enhance the efficient use of its generating capacity. The wholesale sales
business consists of the sale of electricity to distribution companies for
resale to their retail customers, or to other generators or power marketers
for resale in the wholesale market. The wholesale business is regulated at the
federal rather than the state level, allowing companies under some
circumstances to operate at competitive rates and prices. In 1998,
PacifiCorp's wholesale trading revenues increased and its energy volume sold
increased over the prior year, accounting for a substantial portion of its
total energy sales and energy revenues. This business is expected to decline
in 1999 due to a reduced focus on short term wholesale sales.
In addition to its base of thermal and hydro-electric generation resources,
PacifiCorp utilises a mix of long-term and short-term firm power purchases
(being purchases that are contractually binding and cannot be interrupted or
curtailed by the supplier for any reason other than defined events of force
majeure), and non-firm power purchases (which provide for delivery of power as
and when it is available and which can be interrupted or curtailed by the
supplier), to meet its load obligations and to make sales to other utilities,
governmental bodies and power marketers. These purchases are made in the
wholesale market from other generators in the western United States and
Canada. Long-term firm power purchases supplied 9% of PacifiCorp's total
energy requirements in 1998. Short-term firm and non-firm purchases supplied
32% of PacifiCorp's total energy requirements in 1998.
PacifiCorp currently purchases 1,100 MW of firm capacity annually from the
Bonneville Power Administration ("BPA"), a power marketing agency of the
United States government, pursuant to a long-term agreement. The purchase
amount declines to 925 MW annually from 1 July 2000 and to 750 MW annually
from 1 July 2003 to August 2011. Amounts required to be purchased and sold may
be reduced by BPA under certain specified conditions on five years' notice and
by PacifiCorp under specified conditions on either one year's notice or five
years' notice depending on such conditions. PacifiCorp's current annual
payment under this agreement (based on the 1,100 MW purchase amount) is
approximately $74 million. The agreement provides for the amount of the
payment to decline proportionately as the amount purchased declines and also
to change at the rate of change of BPA's average system cost. The next change
to BPA's average system cost is expected to occur as of 1 October 2001. The
new average system cost for 2001 will be determined by BPA in future rate
proceedings.
27
<PAGE>
New ScottishPower Summary Listing Particulars
Competition has transformed the electric utility industry at the wholesale
level. The US Energy Policy Act 1992 opened wholesale competition to energy
brokers, independent power producers and power marketers. In 1996, the FERC
ordered all investor-owned utilities, which includes PacifiCorp, to allow
others access to their transmission systems for wholesale power sales. This
access must be provided at the same price and terms that the utilities would
use for their own wholesale customers. Competition is also influenced by
availability and price of alternate energy sources and the general demand for
electrical power.
On 1 April 1999, PacifiCorp Holdings sold all the outstanding stock of TPC to
NI Energy Services Inc. for approximately $150 million (including $17 million
working capital).
Nuclear
PacifiCorp has a 2.5% ownership interest in the Trojan nuclear plant in
Oregon. The plant is in the process of being decommissioned. Removal of
equipment (such as pumps, valves, piping, steam generators and other large
components) has begun. The radioactive components of the plant are to be
2removed and the site decontaminated by 2002-2003. Spent fuel is expected to
remain on site in a dry storage facility until 2018-2023. PacifiCorp's
estimated share of remaining decommissioning costs as at 31 December 1998 is
approximately $9.5 million. About half of these costs will be incurred before
2002.
Projected demand
Retail kilowatt-hour sales for PacifiCorp have experienced compound annual
growth of 2% since 1993. However, the downturn in international economic
conditions, particularly in the Far East and Japan, have had a negative impact
on PacifiCorp's service territories in the Pacific Northwest and many of the
industries PacifiCorp serves. For the period 1999 to 2002, PacifiCorp
estimates that the average annual growth in retail kilowatt-hour sales in its
franchise service territories will be about 2.1%. During this period,
PacifiCorp may lose energy sales to other suppliers in connection with
deregulation of the US electricity industry. However, as the US electricity
industry becomes deregulated, PacifiCorp expects to have opportunities to gain
market share in areas outside its franchise service territories. PacifiCorp's
actual results will be determined by a variety of factors, including the
outcome of deregulation in the electricity industry, economic and demographic
growth, profitability, competition and the effectiveness of energy efficiency
programmes.
PacifiCorp's base of existing resources, in combination with actions outlined
in its integrated resources plan, and its anticipated purchases for
residential and small farm load from BPA is expected to be sufficient to meet
its load growth expectations through 2012. Actions outlined in PacifiCorp's
integrated resource plan include promoting efficiency improvements by
customers, improved efficiency for existing generation, transmission and
distribution systems and other cost effective resource acquisition
opportunities that meet the future needs of PacifiCorp, including renewable
resources.
4. Powercor
Powercor, an indirect, wholly owned Australian subsidiary of PacifiCorp,
acquired in December 1995 for approximately US$1.6 billion, is the largest
electricity distribution company in Victoria based on sales volume, revenues,
geographic scope and number of customers. Powercor's principal businesses are
its distribution and supply businesses.
Distribution business
Powercor's distribution business consists of the ownership, management and
operation of the electricity distribution and subtransmission network in its
distribution service area, covering the western suburbs of Melbourne to
central and western Victoria. Substantially all of the distribution business
is a regulated monopoly. In 1998, the distribution business generated all of
Powercor's operating income.
Supply business
Powercor's supply business consists of the purchase of electricity from
generators and the resale of such electricity to customers in Powercor's
distribution service area and the other parts of Victoria, New South Wales and
the Australian Capital Territory. Powercor has an exclusive licence to sell
electricity to customers with a demand of 160 MWh per year or less ("franchise
customers") in its distribution service area, and non-exclusive licences to
sell electricity to customers with usage in excess of 160 MWh per year
("contestable customers") in its distribution service area and elsewhere in
Victoria and New South Wales and to customers in Queensland with annual usage
in excess of 4 GWh per year. Customers with usage of 160 MWh per year or less
will incrementally become contestable over the period ending
28
<PAGE>
New ScottishPower Summary Listing Particulars
31 December 2000 in Victoria and over the period ending 30 June 1999 in New
South Wales depending on their energy usage.
Powercor purchases substantially all of its power for sale to customers
through the Australian competitive wholesale market for electricity. The
principal function of the Australian wholesale market is to allow market
forces, rather than monopolised central planning, to determine the amount, mix
and cost characteristics of generating plants and the level and shape of
demand of suppliers.
5. Other operations
PacifiCorp financial services
PacifiCorp Financial Services, Inc. ("PFS"), which previously operated as a
financial services holding company, made its last investment in aircraft or
loans relating to aircraft in 1992. It has liquidated most of its loan,
leasing, real estate and affordable housing investment portfolio and is
principally engaged in managing its existing investments in leveraged lease
(primarily aircraft) and tax-advantaged assets.
As at 31 December 1998, PFS had net finance assets of $313.7 million. The
majority of this related to an aviation finance portfolio of leveraged lease
and other financial assets.
International operations
Through its subsidiaries, PacifiCorp Holdings has been engaged in the
acquisition or development of electrical power projects or systems
internationally. The most significant of these projects was the acquisition of
a 33% interest in the 75 MW Bakun hydro-electric project in the Philippines.
The process of exiting the international businesses, other than Powercor, is
underway.
In September 1996, the Hazelwood Power Partnership purchased a 1,600 MW, brown
coal-fired thermal power station and the adjacent brown coal mine in Victoria,
Australia. PacifiCorp Holdings has an indirect 19.9% interest in the Hazelwood
Power Partnership. PacifiCorp has also announced its intention to sell its
interest in the Hazelwood Power Partnership.
Details of the US utility regulatory regime applicable to PacifiCorp are set
out in Part VI.
6. Certain statements made by PacifiCorp
On 23 October 1998, PacifiCorp made certain statements regarding its prospects
for the year ending 31 December 1999. These statements were made in the US
within the "safe harbor" provisions of the US Private Litigation Reform Act
1995. At the time they were made, PacifiCorp had not sought, nor was it under
any obligation to seek, any independent verification of these statements by
its advisers. Given the uncertainty inherent in seeking to make a statement
regarding its prospects for an unexpired period as long as the year ending 31
December 1999, it is not possible for independent accountants and PacifiCorp's
financial advisers to obtain sufficient comfort on the assumptions underlying
the statement to enable them to report thereon in accordance with the
requirements of the London Stock Exchange. Accordingly, there can be no
assurance that the financial position set forth in the statement regarding
PacifiCorp's prospects for the year ending 31 December 1999 will be realised.
Therefore, ScottishPower Shareholders and potential investors should place no
reliance whatsoever on the statement in determining the action that they
should take.
7. Year 2000 compliance
PacifiCorp's Year 2000 project has been underway since mid-1996. A methodology
of inventory, assessment, remediation and testing of hardware, software and
equipment based on industry standards has been implemented. PacifiCorp plans
to have successfully identified, corrected and tested its existing critical
systems by 1 July 1999. The main areas of risk are in power supply (generating
plant and system controls), information technology (computer hardware and
software), business disruption and supply chain disruption. From 1 January
1998, all new hardware or software acquired or developed by PacifiCorp has had
to be certified Year 2000 compliant before it is installed. The directors of
PacifiCorp believe that PacifiCorp's Year 2000 project is well advanced. As at
31 December 1998, all PacifiCorp electric systems were inventoried, were 89%
assessed and were 49% tested. Of PacifiCorp's computer systems, all central
applications and desktop computers have been inventoried and assessed. The
extent (in percentage terms) of completion of remediation and testing was as
follows: central applications to correct (100%), central applications to
replace (75%), and desktops (30%).
29
<PAGE>
New ScottishPower Summary Listing Particulars
PacifiCorp is working closely with the North American Electric Reliability
Council ("NERC") and the Western Systems Coordinating Council ("WSCC") with
the aim of ensuring the integrity of the interconnected electrical
distribution and transmission system in PacifiCorp's service area and the
western US. NERC coordinates the efforts of the ten regional electric
reliability councils throughout the US while WSCC is focused on reliable
electric service in the western US. These agencies require Year 2000 readiness
for all interconnected electric utilities by 1 July 1999. PacifiCorp has
submitted its draft contingency plans to the WSCC as required by NERC.
PacifiCorp participated in the successful NERC sponsored industry preparedness
drill in respect of interruptions to necessary voice and data communications
on 9 April 1999. PacifiCorp has drawn up worst case scenarios and plans to
establish a precautionary posture for its systems at the end of 1999.
PacifiCorp has drawn up various contingency plans including a mining
operations contingency plan with a view to ensuring that increased stockpiles
of fuel are ready to supply the generating plants.
PacifiCorp's ability to maintain normal operations into the year 2000 will
also be affected by the extent of Year 2000 compliance of third parties from
whom PacifiCorp purchases products and services or with whom PacifiCorp
exchanges information. PacifiCorp believes it has identified all of its
critical third-party relationships and has assessed the extent of Year 2000
compliance of 98% of these parties. As at 27 April 1999, 98% of the critical
third parties had reported they would be Year 2000 ready by 31 December 1999.
PacifiCorp is in frequent contact with these third parties and the Year 2000
compliance information is updated as required.
PacifiCorp is also in the process of identifying third parties that are "super
critical". An elevated Year 2000 readiness assessment, which includes a site
visit, will be performed for each of them. To date, two super critical vendors
have been identified. The first vendor supplies chemical reagents used in air
emission control equipment at some generating plants. One week's supply can be
maintained. The plants would be able to generate power, but after a week may
not be able to meet air quality regulations. This vendor has advised
PacifiCorp that it will be Year 2000 ready by 30 September 1999. An on-site
assessment has been completed. PacifiCorp recently identified the second super
critical vendor, which provides investor services to the company. A review of
this vendor's Year 2000 project is scheduled for May 1999.
As at 31 December 1998, PacifiCorp has incurred $12.7 million of costs in
connection with the Year 2000 project. Year 2000 remediation costs amount to
approximately 5% of PacifiCorp's annual information technology budget.
Estimates of the total cost to PacifiCorp of the Year 2000 project are
approximately $30 million, which will be principally funded from operating
cash flows. This estimate does not include the cost of system replacements
that will be Year 2000 compliant but are not being installed primarily to
resolve Year 2000 problems. PacifiCorp has not delayed any information
technology projects that are critical to its operations as a result of Year
2000 remediation work. No independent verification of risk and cost estimates
has been undertaken.
PacifiCorp believes that its critical systems will be Year 2000 ready by 1
July 1999. This belief, and the expected costs and other impacts of the Year
2000 issues, are based on management's best estimates, which are based on
numerous assumptions concerning future events, including the availability of
certain resources, the completion of third-party modification plans and other
factors. There can be no assurance that these estimates will be achieved or
that there will not be a delay in PacifiCorp's implementation of its Year 2000
project or that it will not incur increased costs associated with Year 2000
issues.
30
<PAGE>
New ScottishPower Summary Listing Particulars
B. Summary financial information for PacifiCorp
for the three years ended 31 December 1998
1. Nature of financial information
The financial information set out below has been extracted without material
adjustment from the audited consolidated financial statements of PacifiCorp
for the three years ended 31 December 1998 contained in its annual reports
filed on Form 10-K with the SEC. Deloitte & Touche LLP have issued independent
accountants' reports on PacifiCorp's consolidated financial statements for the
three years ended 31 December 1996, 1997 and 1998 that are required to be
included in the annual report on Form 10-K pursuant to Section 13 or 15(d) of
the US Securities Exchange Act of 1934. Each report was unqualified.
The financial information has been prepared in accordance with US GAAP and
under PacifiCorp's accounting policies. US GAAP differs from UK GAAP in
certain material respects. A summary of the main differences between the
accounting policies adopted by PacifiCorp under US GAAP to those adopted by
ScottishPower under UK GAAP at 31 December 1998 and for the three years then
ended is set out at the end of this Part III.
2. Summary financial information for PacifiCorp
Statements of Consolidated Income and Retained Earnings
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended 31 December
----------------------------
1996 1997 1998
$m $m $m
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 3,792.0 4,548.9 5,580.4
- ------------------------------------------------ -------- -------- --------
Expenses
Purchased power 923.9 1,605.0 2,821.5
Other operations and maintenance 1,017.4 1,078.8 1,081.9
Administrative and general 241.3 319.0 322.9
Depreciation and amortisation 423.8 466.1 451.2
Taxes, other than income taxes 99.3 98.9 98.7
Special charges - 170.4 123.4
- ------------------------------------------------ -------- -------- --------
Total 2,705.7 3,738.2 4,899.6
- ------------------------------------------------ -------- -------- --------
Income from Operations 1,086.3 810.7 680.8
- ------------------------------------------------ -------- -------- --------
Interest Expense and Other
Interest expense 415.0 437.8 371.6
Interest capitalised (11.4) (12.2) (14.5)
Losses from equity investments 4.1 12.8 13.9
TEG costs and option losses - 105.6 73.0
Write down of investments in energy development
companies - - 79.5
Gain on sale of PGC - (56.5) -
Minority interest and other 11.8 (21.5) (12.4)
- ------------------------------------------------ -------- -------- --------
Total 419.5 466.0 511.1
- ------------------------------------------------ -------- -------- --------
Income from continuing operations before income
taxes 666.8 344.7 169.7
Income tax expense 236.5 111.8 59.1
- ------------------------------------------------ -------- -------- --------
Income from continuing operations before
extraordinary items 430.3 232.9 110.6
Discontinued operations (less applicable income
tax expense/(benefit): 1998: $(74.3m); 1997:
$361.1m and 1996: $47.4m) 74.6 446.8 (146.7)
Extraordinary loss from regulatory asset
impairment (less applicable income tax benefit
of $9.6m) - (16.0) -
- ------------------------------------------------ -------- -------- --------
Net Income/(Loss) 504.9 663.7 (36.1)
- ------------------------------------------------ -------- -------- --------
Earnings/(Loss) on Common Stock 475.1 640.9 (55.4)
- ------------------------------------------------ -------- -------- --------
Average number of common shares outstanding--
basic and diluted (Thousands) 292,424 296,094 297,229
Earnings/(Loss) per Common Share--Basic and
Diluted
Continuing operations $ 1.37 $ 0.71 $ 0.30
Discontinued operation $ 0.25 $ 1.50 $ (0.49)
Extraordinary item $ - $ (0.05) $ -
- ------------------------------------------------ -------- -------- --------
Total $ 1.62 $ 2.16 $ (0.19)
- ------------------------------------------------ -------- -------- --------
</TABLE>
31
<PAGE>
New ScottishPower Summary Listing Particulars
32
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
Assets
<TABLE>
<CAPTION>
31 December
----------------------------
1996 1997 1998
$m $m $m
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents 8.4 740.8 583.1
Accounts receivable less allowance for doubtful
accounts: 1998: $18.0m;
1997: $17.7m and 1996: $8.5m 620.9 723.9 703.2
Materials, supplies and fuel stock at average
cost 181.3 181.9 175.8
Net assets of discontinued operations and assets
held for sale 779.5 223.4 192.4
Real estate investments held for sale - 272.2 -
Other 71.8 55.1 87.9
- ------------------------------------------------- -------- -------- --------
Total Current Assets 1,661.9 2,197.3 1,742.4
- ------------------------------------------------- -------- -------- --------
Property, Plant and Equipment
Domestic Electric Operations
Production 4,659.2 4,720.6 4,844.2
Transmission 2,069.2 2,087.8 2,102.3
Distribution 3,029.7 3,244.0 3,319.7
Other 1,687.9 1,784.8 1,947.0
Construction work in progress 252.8 257.4 246.8
- ------------------------------------------------- -------- -------- --------
Total Domestic Electric Operations 11,698.8 12,094.6 12,460.0
Australian Electric Operations 1,361.9 1,161.2 1,140.4
Other Operations 68.8 31.0 22.2
Accumulated depreciation and amortisation (3,862.4) (4,240.0) (4,553.2)
- ------------------------------------------------- -------- -------- --------
Total Property, Plant and Equipment - Net 9,267.1 9,046.8 9,069.4
Other Assets
Investments in and advances to affiliated compa-
nies 253.9 166.1 114.9
Intangible assets - net 480.7 399.0 369.4
Regulatory assets - net 1,022.8 871.1 795.5
Finance note receivable 214.6 211.2 204.9
Finance assets - net 425.6 349.8 313.7
Real estate investment 217.0 - -
Deferred charges and other 268.7 385.7 378.3
- ------------------------------------------------- -------- -------- --------
Total Other Assets 2,883.3 2,382.9 2,176.7
- ------------------------------------------------- -------- -------- --------
Total Assets 13,812.3 13,627.0 12,988.5
- ------------------------------------------------- -------- -------- --------
</TABLE>
<PAGE>
New ScottishPower Summary Listing Particulars
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
31 December
---------------------------
1996 1997 1998
$m $m $m
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current Liabilities
Long-term debt currently maturing 219.8 365.4 299.5
Notes payable and commercial paper 683.5 189.2 260.6
Accounts payable 477.5 546.7 566.2
Taxes, interest and dividends payable 290.8 677.4 282.7
Customer deposits and other 83.7 84.9 168.0
- ------------------------------------------ -------- -------- --------
Total Current Liabilities 1,755.3 1,863.6 1,577.0
Deferred Credits
Income taxes 1,801.0 1,666.2 1,542.6
Investment tax credits 143.2 135.2 125.3
Other 727.9 646.3 646.1
- ------------------------------------------ -------- -------- --------
Total Deferred Credits 2,672.1 2,447.7 2,314.0
Long-Term Debt 4,892.4 4,413.0 4,559.3
Commitments and Contingencies - - -
Guaranteed Preferred Beneficial Interests
in Company's Junior Subordinated
Debentures 209.7 340.4 340.5
Preferred Stock Subject to Mandatory
Redemption 178.0 175.0 175.0
Preferred Stock 135.5 66.4 66.4
Common Equity
Common shareholders' capital: shares
authorised 750,000,000; shares outstand-
ing: 1998: 297,343,422; 1997:
296,908,110 and 1996: 295,139,753 3,236.8 3,274.2 3,285.0
Retained earnings 782.8 1,106.3 732.0
Accumulated other comprehensive income 12.7 (59.6) (60.7)
- ------------------------------------------ -------- -------- --------
Total Common Equity 4,032.3 4,320.9 3,956.3
- ------------------------------------------ -------- -------- --------
Total Liabilities and Shareholders' Equity 13,812.3 13,627.0 12,988.5
- ------------------------------------------ -------- -------- --------
</TABLE>
33
<PAGE>
New ScottishPower Summary Listing Particulars
Statements of Consolidated Changes in Common Shareholders' Equity
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Common Accumulated
Shareholders' Other Total
Capital Retained Comprehensive Comprehensive
Shares Amount Earnings Income Income/(Loss)
'000 $m $m $m $m
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at 1 January
1996 284,277 3,012.9 632.4 - -
Comprehensive income
Net income - - 504.9 - 504.9
Other comprehensive
income
Foreign currency
translation
adjustment, net of
tax of $8.0m - - - 12.7 12.7
Cash dividends declared
Preferred stock - - (29.1) - -
Common stock - - (317.9) - -
Preferred stock retired - - (7.5) - -
Sales to public 8,790 177.8 - - -
Sales through Dividend
Reinvestment and Stock
Purchase Plan 2,073 43.2 - - -
Redemptions and
repurchases - 2.9 - - -
- ------------------------ ------- ------- ------- ------- -------
Balance at 31 December
1996 295,140 3,236.8 782.8 12.7 517.6
- ------------------------ -------
Comprehensive income
Net income - - 663.7 - 663.7
Other comprehensive
income
Foreign currency
translation
adjustment, net of
tax of $46.9m - - - (72.3) (72.3)
Cash dividends declared
Preferred stock - - (20.0) - -
Common stock - - (320.0) - -
Preferred stock retired - - (0.2) - -
Sales through Dividend
Reinvestment and Stock
Purchase Plan 1,768 37.4 - - -
- ------------------------ ------- ------- ------- ------- -------
Balance at 31 December
1997 296,908 3,274.2 1,106.3 (59.6) 591.4
- ------------------------ -------
Comprehensive
income/(loss)
Net loss - - (36.1) - (36.1)
Other comprehensive
income/(loss)
Unrealised gain on
available-for-sale
securities, net of
tax of $3.8m - - - 6.2 6.2
Foreign currency
translation
adjustment, net of
tax of $4.0m - - - (7.3) (7.3)
Cash dividends declared
Preferred stock - - (17.2) - -
Common stock - - (321.0) - -
Sales through Dividend
Reinvestment and Stock
Purchase Plan 346 9.1 - - -
Stock options exercised 89 1.7 - - -
- ------------------------ ------- ------- ------- ------- -------
Balance at 31 December
1998 297,343 3,285.0 732.0 (60.7) (37.2)
- ------------------------ ------- ------- ------- ------- -------
</TABLE>
34
<PAGE>
New ScottishPower Summary Listing Particulars
Statements Of Consolidated Cash Flows
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Year ended 31
December
1996 1997 1998
$m $m $m
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income/(Loss) 504.9 663.7 (36.1)
Adjustments to reconcile net income/(loss) to net
cash provided by continuing operations
Losses/(income) from discontinued operations (74.6) (81.7) 146.7
Gain on disposal of discontinued operations - (365.1) -
Extraordinary loss from regulatory asset
impairment - 16.0 -
Write down of investments in energy development
companies - - 79.5
Depreciation and amortisation 440.5 481.5 460.1
Deferred income taxes and investment tax
credits--net 26.1 (55.5) (47.9)
Special charges - 170.4 123.4
Gain on sale of subsidiary and assets - (56.5) (11.0)
Other (25.6) 46.0 23.0
Accounts receivable and prepayments (154.1) (135.5) (34.2)
Materials, supplies, fuel stock and inventory 26.8 (6.5) 6.2
Accounts payable and accrued liabilities 144.4 159.1 (24.8)
- -------------------------------------------------- ------- ------- --------
Net cash provided by continuing operations 888.4 835.9 684.9
Net cash provided by/(used in) discontinued
operations 37.0 (217.3) (433.7)
- -------------------------------------------------- ------- ------- --------
Net Cash Provided by Operating Activities 925.4 618.6 251.2
- -------------------------------------------------- ------- ------- --------
Cash Flows from Investing Activities
Construction (528.1) (577.7) (609.9)
Operating companies and assets acquired (199.4) (65.6) (44.8)
Investments in and advances to affiliated
companies--net (148.4) (70.9) (11.9)
Proceeds from sales of assets 49.3 1,666.3 111.0
Proceeds from sales of finance assets and
principal payments 55.8 103.2 311.7
Other (10.5) (58.5) (31.8)
- -------------------------------------------------- ------- ------- --------
Net Cash Provided by/(used in) Investing
Activities (781.3) 996.8 (275.7)
- -------------------------------------------------- ------- ------- --------
Cash Flows from Financing Activities
Changes in short-term debt (247.6) (494.4) 71.5
Proceeds from long-term debt 567.6 726.4 1,829.0
Proceeds from issuance of common stock 223.9 37.4 10.8
Proceeds from issuance of preferred securities of
Trust holding solely PacifiCorp debentures 209.6 130.6 -
Dividends paid (346.4) (341.2) (337.3)
Repayments of long-term debt (284.5) (779.6) (1,731.6)
Redemptions of capital stock (221.6) (72.2) -
Other (52.5) (90.0) 24.4
- -------------------------------------------------- ------- ------- --------
Net Cash Used in Financing Activities (151.5) (883.0) (133.2)
- -------------------------------------------------- ------- ------- --------
Increase/(Decrease) in Cash and Cash Equivalents (7.4) 732.4 (157.7)
Cash and Cash Equivalents at Beginning of Year 15.8 8.4 740.8
- -------------------------------------------------- ------- ------- --------
Cash and Cash Equivalents at End of Year 8.4 740.8 583.1
- -------------------------------------------------- ------- ------- --------
</TABLE>
35
<PAGE>
New ScottishPower Summary Listing Particulars
3. Summary of differences between US GAAP and UK GAAP and unaudited summary
statement of PacifiCorp's financial information under UK GAAP
PacifiCorp prepares its financial statements in accordance with US GAAP. The
main differences between the accounting policies adopted by PacifiCorp under
US GAAP and those adopted by ScottishPower under UK GAAP are described below.
(a) Goodwill
Under US GAAP, goodwill and intangible assets arising from the purchase of
operating entities are held as intangible assets in the balance sheet and are
amortised over their expected useful lives.
Under UK GAAP, goodwill arising from the purchase of operating entities prior
to 31 March 1998 has been written off directly to reserves. Goodwill arising
on acquisitions subsequent to 31 March 1998 is capitalised and amortised
through the profit and loss account over its useful economic life. Under UK
GAAP intangible assets other than goodwill are recognised only where they are
separately identifiable, capable of reliable measurement and disposal
independent of the business of the entity to which they relate. Otherwise such
amounts are included as part of the purchased goodwill.
(b) Deferred taxation
Under US GAAP full provision for deferred tax is required to the extent that
accounting profit differs from taxable profit due to temporary timing
differences. Provision is made at future enacted rates.
Under UK GAAP provision for deferred tax is only required to the extent that
it is probable that a taxation liability or asset will crystallise, in the
foreseeable future, as a result of timing differences between taxable profit
and accounting profit. Provision is made at known rates of tax.
(c) Pension costs
The fundamental differences between US GAAP and UK GAAP are as follows:
(i)Under US GAAP, the aim is to accrue the cost of providing pension benefits
in the year in which the employee provides the related service. Under UK GAAP,
the annual pension charge is determined so that it is a substantially level
percentage of the current and expected future payroll.
(ii)Under US GAAP, pension liabilities are discounted using the current rates
at which the pension liability could be settled. Under UK GAAP, pension
liabilities are usually discounted using an interest rate that represents the
expected long term return on plan assets.
(iii)Under US GAAP, variations from plan must be amortised separately over
remaining service lives. Under UK GAAP, variations can be aggregated and
amortised over the remaining employee service lives.
(iv)Under US GAAP, plan assets should be valued at market or at market related
values. Under UK GAAP, alternative bases can be used.
(d) Other post retirement benefits
SFAS 106 "Employers" Accounting for Post-retirement Benefits other than
Pensions" requires the use of a discount rate which reflects current market
rates in determining the provision for post retirement benefits. UK GAAP
permits the use of longer term discount rates.
(e) Debt and equity finance costs
Under US GAAP, as applied by regulated electricity utilities, both the cost of
debt and the cost of equity applicable to domestic utility properties are
capitalised during construction. Under UK GAAP, only interest on the debt
funding attributable to capital projects may be capitalised during the period
of construction.
(f) Leveraged leases
Under US GAAP, lessors can offset borrowings used to acquire leased assets
against amounts receivable from lessees. It is also permissible to offset
finance charges receivable from lessees against the finance charges arising on
the borrowings used to fund the leased asset. This is referred to as "linked
presentation".
36
<PAGE>
New ScottishPower Summary Listing Particulars
Under UK GAAP, linked presentation is allowed only in specific circumstances
that are not met in respect of the assets of PacifiCorp that are the subject
of such leases. Accordingly the amounts due from lessees and related
indebtedness are disclosed separately in the balance sheet and the finance
charges receivable from lessees and finance charges payable are disclosed
separately in the profit and loss account. This treatment has no impact on net
profit.
(g) Regulatory assets
SFAS 71 establishes US GAAP for utilities whose regulators have the power to
approve and/or regulate rates that may be charged to customers. Provided that,
through the regulatory process, the utility is substantially assured of
recovering its allowable costs by the collection of revenue from its
customers, such costs not yet recovered are deferred as regulatory assets. Due
to the different regulatory environment, no equivalent GAAP applies in the UK.
Under UK GAAP regulatory assets established in accordance with SFAS 71 are
recognised where they comprise rights or other access to future economic
benefits which arise as a result of past transactions or events which have
created an obligation to transfer economic benefit to a third party.
Measurement of the past transaction or event and hence of the regulatory asset
is determined in accordance with UK GAAP. Where the application of UK GAAP
results in the non or partial recognition of an obligation compared to US
GAAP, any related regulatory asset is either not or partially recognised.
Increases/(decreases) in net income/profit for the financial year and total
stockholders' equity/shareholders' funds of PacifiCorp as a result of these
adjustments can be summarised as follows:
<TABLE>
- ---------------------------------------------------------------------------
<CAPTION>
PacifiCorp
Year ended 31 December
-------------------------
1996 1997 1998
$m $m $m
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income/(loss) under US GAAP 504.9 663.7 36.1
UK GAAP adjustments:
Goodwill 20.4 (39.4) 10.6
Deferred taxation 33.1 18.7 4.0
Pension costs 9.0 (2.8) (5.8)
Other post retirement benefits 6.8 5.1 2.7
Debt and equity finance costs 7.3 7.1 5.8
- ---------------------------------------------------- ------- ------- ---
Profit for the financial year under UK GAAP 581.5 652.4 (18.8)
- ---------------------------------------------------- ------- ------- ---
- ---------------------------------------------------------------------------
<CAPTION>
PacifiCorp
At 31 December
-------------------------
1996 1997 1998
$m $m $m
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total shareholders' equity under US GAAP 4,345.8 4,562.3 4,197.7
UK GAAP adjustments:
Goodwill (450.6) (501.3) (471.2)
Deferred taxation 1,507.1 1,435.2 1,415.8
Pension costs -- 0.9 (4.9)
Other post retirement benefits 5.6 10.1 12.9
Debt and equity finance costs (51.5) (44.4) (38.6)
Regulatory assets (676.0) (650.1) (602.9)
- ---------------------------------------------------- ------- -------
Shareholders' funds under UK GAAP 4,680.4 4,812.7 4,508.8
- ---------------------------------------------------- ------- -------
</TABLE>
(i) Total shareholders' equity comprises common shareholders' capital,
retained earnings, accumulated other comprehensive income, preferred stock
subject to mandatory redemption and preferred stock.
37
<PAGE>
New ScottishPower Summary Listing Particulars
Part IV
Pro forma statement of net assets, indebtedness and working capital
A.Pro forma statement of net assets
The following Unaudited Pro Forma Statement of Net Assets of the Combined
Group has been prepared for illustrative purposes only to show the effects of
the Merger and the Scheme as if they had occurred on 31 March 1999. Because of
its nature the Unaudited Pro Forma Statement of Net Assets may not give a true
picture of the financial position of the Combined Group. It has been prepared
and reported upon in accordance with the Listing Rules.
The financial information for New ScottishPower has been extracted from the
extract from the Accountants' Report in Section B of Part II of this document.
The net assets of New ScottishPower at 31 March 1999 were (Pounds)50,000.
The financial information for ScottishPower at 31 March 1999 is based on the
audited consolidated balance sheet of ScottishPower and has been extracted
from paragraph 2 of Section C of Part II of this document.
The financial information for PacifiCorp at 31 December 1998 is based on the
audited consolidated balance sheet of PacifiCorp and has been extracted from
paragraph 2 of Section B of Part III of this document.
Unaudited Pro Forma Statement of Net Assets
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
New
ScottishPower ScottishPower PacifiCorp Acquisition
At 31 March At 31 March At 31 December 1998 Accounting Combined
1999 1999 --------------------------------- Adjustments Group
UK GAAP UK GAAP US GAAP Adjustments UK GAAP UK GAAP UK GAAP
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
- --------------------------------------------------------------------------------------------------------------
(Note 1) (Note 2) (Note 3)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets - 71.3 283.8 (283.8) - 1,124.7 1,196.0
Tangible assets - 5,295.1 5,606.7 (26.7) 5,580.0 - 10,875.1
Investments - 73.7 161.6 - 161.6 - 235.3
- ------------------------ ------- -------- -------- ------- -------- ------- --------
- 5,440.1 6,052.1 (310.5) 5,741.6 1,124.7 12,306.4
- ------------------------ ------- -------- -------- ------- -------- ------- --------
Current assets
Stocks - 125.8 150.2 - 150.2 - 276.0
Debtors: amounts falling
due after one year - 6.5 970.8 (89.0) 881.8 55.5 943.8
Debtors: amounts falling
due within one year - 552.8 529.8 17.7 547.5 - 1,100.3
Investments - - 348.9 - 348.9 - 348.9
Short term bank and
other deposits - 106.9 2.5 - 2.5 - 109.4
- ------------------------ ------- -------- -------- ------- -------- ------- --------
- 792.0 2,002.2 (71.3) 1,930.9 55.5 2,778.4
- ------------------------ ------- -------- -------- ------- -------- ------- --------
Creditors: amounts
falling due within one
year
Loans and other
borrowings - (843.6) (335.3) (17.7) (353.0) (147.0) (1,343.6)
Other creditors - (1,332.8) (797.3) 11.2 (786.1) - (2,118.9)
- ------------------------ ------- -------- -------- ------- -------- ------- --------
- (2,176.4) (1,132.6) (6.5) (1,139.1) (147.0) (3,462.5)
- ------------------------ ------- -------- -------- ------- -------- ------- --------
Net current
assets/(liabilities) - (1,384.4) 869.6 (77.8) 791.8 (91.5) (684.1)
- ------------------------ ------- -------- -------- ------- -------- ------- --------
Total assets less
current liabilities - 4,055.7 6,921.7 (388.3) 6,533.4 1,033.2 11,622.3
Creditors: amounts
falling due after one
year
Loans and other
borrowings - (1,684.5) (2,922.4) (274.2) (3,196.6) - (4,881.1)
Other creditors - - (34.5) - (34.5) - (34.5)
Provisions for
liabilities and charges - (30.8) (1,140.3) 849.9 (290.4) - (321.2)
Deferred income - (393.2) (296.5) - (296.5) - (689.7)
- ------------------------ ------- -------- -------- ------- -------- ------- --------
Net assets - 1,947.4 2,528.0 187.4 2,715.4 1,033.2 5,695.8
- ------------------------ ------- -------- -------- ------- -------- ------- --------
</TABLE>
Notes to the Unaudited Pro Forma Statement of Net Assets
Note 1. Reclassifications and translation of the PacifiCorp Statement of Net
Assets
Reclassifications have been made to the PacifiCorp historical financial
information presented under US GAAP to conform to ScottishPower's presentation
under UK GAAP. The information has been translated into pounds sterling at
$1.66: (Pounds)1.00, the effective Noon Buying Rate of the Federal Reserve
Bank of New York at 31 December 1998.
38
<PAGE>
New ScottishPower Summary Listing Particulars
Note 2. UK GAAP adjustments to historical PacifiCorp Net Assets
PacifiCorp prepares its financial statements in accordance with US GAAP. For
the purposes of preparing the Unaudited Pro Forma Statement of Net Assets,
PacifiCorp's Net Assets have been restated to conform with ScottishPower's
accounting policies under UK GAAP (which are those that will be adopted by the
Company).
Note 3. Acquisition accounting adjustments to the Unaudited Pro Forma
Statement of Net Assets
The actual acquisition accounting adjustments that will be made will reflect,
inter alia, the fair values of the consideration and the net assets of
PacifiCorp at completion. For the purposes of the Unaudited Pro Forma
Statement of Net Assets, no account has been taken of the possible financial
effect of the proposed buyback, prior to the Merger Date, of up to (Pounds)500
million of ScottishPower Shares and/or New Shares.
B.Indebtedness of the Combined Group
At the close of business on 31 March 1999, the total indebtedness of the
Combined Group (on the basis that the Merger and the Scheme had taken place)
was as follows:
<TABLE>
- -------------------------------------------------------------------------
<CAPTION>
Combined
ScottishPower PacifiCorp Group
(Pounds)m (Pounds)m (Pounds)m
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Secured loans - 2,132 2,132
Unsecured loans 1,770 534 2,304
Unsecured bank overdrafts 15 15 30
Other unsecured short-term borrowings 743 300 1,043
Finance lease obligations - 284 289
- ------------------------------------- ----- ----- -----
Total debt 2,528 3,265 5,798
- ------------------------------------- ----- ----- -----
</TABLE>
For the purpose of the preparation of the above table, amounts have been
translated into pounds sterling at AUS$2.5563: (Pounds)1.00 and US$1.6143:
(Pounds)1.00, being the mid market closing prices as at 31 March 1999.
At the close of business on 31 March 1999, The Combined Group had the
following contingent liabilities:
(a)ScottishPower had contingent liabilities under performance bonds and in
respect of actual and potential claims, the total amount of which cannot be
quantified but which, in the opinion of the Directors, are not likely to
have a material effect on the ScottishPower Group.
(b)ScottishPower has guaranteed that overdrafts of three subsidiary
undertakings up to an amount of (Pounds)0.7 million (1998: one subsidiary
undertaking for (Pounds)0.5 million).
(c)ScottishPower has guaranteed Manweb's liabilities to the Pool in England
and Wales. At 31 March 1999 these liabilities were (Pounds)30.9 million
(1998: (Pounds)37.4 million).
(d)PacifiCorp had contingent liabilities amounting to (Pounds)206 million,
principally guarantees relating to energy trading activities. In addition,
PacifiCorp had contingent liabilities in respect of environmental matters
and in respect of various legal claims, actions and complaints (including
those described in paragraph 14(b) of Part VII of this document), the total
amount of which cannot be quantified but which, in the opinion of
PacifiCorp, are not likely to have a material effect on the PacifiCorp
Group.
Save as disclosed above and, in respect of the Combined Group, apart from
intra-group indebtedness and guarantees at 31 March 1999 neither New
ScottishPower nor any member of the ScottishPower Group or of the PacifiCorp
Group had any outstanding loan capital (whether issued or created but
unissued), term loans, other borrowings or indebtedness in the nature of
borrowing (including bank overdrafts and liabilities under acceptances (other
than normal trade bills) or acceptance credits, mortgages, charges, hire
purchase commitments and obligations under finance leases), contingent
liabilities or material guarantees.
C.Working capital of the Combined Group
New ScottishPower is of the opinion that, taking into account bonds in issue
and available bank facilities, the Combined Group has sufficient working
capital for its present requirements, that is for at least 12 months from the
date of publication of this document.
39
<PAGE>
New ScottishPower Summary Listing Particulars
Part V
Further details of the Merger
A. Summary terms of the Merger
1. Introduction
1.1 On 23 February 1999, in accordance with the terms of the Merger Agreement
as a result of ScottishPower having determined to pursue the Scheme,
ScottishPower, New ScottishPower, NA General Partnership and PacifiCorp
entered into the Amended and Restated Merger Agreement to the effect that,
following the Scheme Date, New ScottishPower will become the party to the
Merger in place of ScottishPower.
1.2 The remainder of this Section A assumes that this will occur. However, if
ScottishPower gives written notice to PacifiCorp that the Scheme will not
become effective, the Merger will nonetheless proceed in accordance with the
terms and subject to the conditions of the Merger Agreement as if the Amended
and Restated Merger Agreement had not been entered into. In that event,
references in the remainder of this Section A to New ScottishPower, New Shares
and New ADSs should be read as references to, respectively, ScottishPower,
ScottishPower Shares and ScottishPower ADSs.
2. Terms
2.1 The Merger will be effected by a statutory merger under Oregon law whereby
MergerSub will be merged with and into PacifiCorp, which will survive the
Merger as a subsidiary of New ScottishPower. Subject to the terms, conditions
and procedures set out in the Merger Agreement, each issued and outstanding
share of PacifiCorp Common Stock (other than shares owned directly or
indirectly by New ScottishPower or PacifiCorp) will be converted into the
right to receive either (i) 0.58 fully paid New ADSs or, if the holder so
elects, (ii) 2.32 fully paid New Shares for each share so cancelled.
2.2 New ScottishPower will not issue fractional shares of New ADSs or
fractions of New Shares. Holders of PacifiCorp Common Stock will instead be
paid the cash equivalent of the market value (based on the market value of a
ScottishPower ADS or a ScottishPower Share on the last trading day immediately
preceding the Merger Date) of any fractional New ADSs or fractions of New
Shares such holders would otherwise have received.
2.3 Upon the Merger becoming effective, all employee options to acquire
PacifiCorp Common Stock will convert into options to acquire New Shares after
adjustment to take account of the conversion ratio referred to in paragraph
2.1 above.
2.4 New ScottishPower, ScottishPower and PacifiCorp have agreed to coordinate
with each other as regards the declaration of dividends in respect of New
Shares, ScottishPower Shares and PacifiCorp Common Stock, with the intention
that the holders of PacifiCorp Common Stock receive dividends in respect of
the PacifiCorp Common Stock for all periods prior to the Merger Date but do
not receive New ScottishPower dividends after the Merger Date in respect of
periods prior to the Merger Date.
3. Shareholder approval and other conditions
3.1 The obligations of New ScottishPower and PacifiCorp to effect the Merger
are subject to the fulfilment or waiver of certain conditions specified in the
Merger Agreement, including:
(a)the approval of the Merger by an ordinary resolution of the
ScottishPower Shareholders;
(b)the approval of the Merger by the holders of a majority of the
outstanding PacifiCorp Common Stock voting separately as a single class, by
the holders of a majority of the aggregate voting power of the outstanding
PacifiCorp Preferred Stock voting together as a single class and by a
majority of the aggregate voting power of all outstanding PacifiCorp stock
entitled to vote at a meeting of the PacifiCorp Shareholders;
(c)the London Stock Exchange having agreed to Admission (subject to
allotment) and the NYSE having authorised the New ADSs for listing on the
NYSE;
(d)the representations and warranties made by the respective parties in the
Merger Agreement being true and correct, in all material respects, taken as
a whole, as of the Merger Date or, in the case of representations and
warranties given as of an earlier date, as of such date;
(e)each of the respective parties having performed and complied with, in
all material respects, the agreements, covenants and obligations, taken as
a whole, which are required by the Merger Agreement to be so performed or
complied with by such party at or prior to the Merger Date;
40
<PAGE>
New ScottishPower Summary Listing Particulars
(f)since 6 December 1998, no material adverse effect having occurred with
respect to either New ScottishPower, ScottishPower and their respective
subsidiaries taken as a whole or PacifiCorp and its subsidiaries taken as a
whole and there existing no facts or circumstances arising after 6 December
1998, which in the aggregate would, or insofar as reasonably can be
foreseen, could, when taken together with any breaches or violations of any
representations, warranties, covenants and agreements of New ScottishPower
or PacifiCorp, as the case may be, contained in the Merger Agreement, have
a material adverse effect on either New ScottishPower, ScottishPower and
their respective subsidiaries taken as a whole or PacifiCorp and its
subsidiaries taken as a whole;
(g)except as provided in the Merger Agreement, all consents, approvals and
actions, filings with and notices to any governmental or regulatory
authority required of New ScottishPower, PacifiCorp and any of their
respective subsidiaries to consummate the Merger and the other matters
contemplated by the Merger Agreement having been made or obtained and
become final orders, and such final orders not, individually or in the
aggregate, containing any terms or conditions that would have, or would
reasonably be expected to have, a material adverse effect on PacifiCorp and
its subsidiaries after the Merger, taken as a whole;
(h)the consent or approval of each person (other than a governmental or
regulatory authority) whose consent or approval is required by New
ScottishPower, PacifiCorp and any of their respective subsidiaries under
any material contract in order to consummate the Merger and the other
transactions contemplated by the Merger Agreement having been obtained,
except for those consents and approvals which, if not obtained, would not
have, or would not reasonably be expected to have, a material adverse
effect on PacifiCorp and its subsidiaries taken as a whole or on the
ability of New ScottishPower or PacifiCorp to consummate the transactions
contemplated by the Merger Agreement and the Scheme;
(i) the absence of any law or order (whether temporary, preliminary or
permanent) being enacted, issued, promulgated or enforced by any
governmental or regulatory authority and having the effect of making
illegal or otherwise restricting, preventing or prohibiting consummation of
the Merger or the other transactions contemplated by the Merger Agreement;
(j) a clearance decision of the Secretary of State for Trade and Industry
under the Fair Trading Act 1973 and satisfactory indications from the DGES
and the DGWS as to the future regulatory treatment of the electricity and
water businesses of the ScottishPower Group which they regulate;
(k) the applicable period under the Hart Scott-Rodino Act having expired or
been terminated; and
(l) the delivery to New ScottishPower and PacifiCorp of written tax
opinions from Milbank, Tweed, Hadley & McCloy LLP, Stoel Rives LLP, and Le
Boeuf, Lamb, Greene & MacRae, LLP.
3.2In the Merger Agreement, any reference to any event, change or effect
having a "material adverse effect" on or with respect to an entity (or group
of entities taken as a whole) means such event, change or effect is materially
adverse to the business, properties, assets, liabilities, financial condition
or results of operations of such entity (or of such group of entities taken as
a whole).
4. Certain representations, warranties and covenants
4.1 The Merger Agreement contains certain customary representations and
warranties by PacifiCorp, ScottishPower and New ScottishPower.
4.2 The Merger Agreement also contains certain customary covenants regarding
the conduct of the respective businesses of New ScottishPower and PacifiCorp
and their respective subsidiaries prior to the Merger Date, including
undertakings from each of ScottishPower, New ScottishPower and PacifiCorp
that, unless otherwise previously consented to by PacifiCorp, ScottishPower or
New ScottishPower (as the case may be) in writing, it and its subsidiaries
will (unless otherwise expressly provided for in the Merger Agreement) conduct
its business only in the ordinary course substantially consistent with past
business practice.
4.3 In recognition of New ScottishPower's and ScottishPower's commitment to
the communities served by PacifiCorp, following completion of the Merger New
ScottishPower or ScottishPower will contribute to The PacifiCorp Foundation
the sum of $5 million.
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5. Directors and management of the Combined Group
5.1 New ScottishPower has agreed, subject to the exercise of fiduciary duties
and to the extent permitted by applicable law, to cause Keith McKennon (the
Chairman, Chief Executive Officer and President of PacifiCorp) to be appointed
as Deputy Chairman and a director of New ScottishPower at the Merger Date. In
addition to Mr McKennon, two non-executive members of the PacifiCorp board of
directors, Nolan Karras and Robert Miller, will become members of the Board at
the Merger Date. The decision as to which members of the PacifiCorp board
(other than Mr McKennon) would join the Board was made after the signing of
the original Merger Agreement.
5.2 New ScottishPower has agreed that, promptly following the Merger Date,
certain non-executive members of the PacifiCorp board of directors, together
with Richard O'Brien, will be elected and appointed to a PacifiCorp advisory
board, the function of which will be to advise the PacifiCorp directors with
respect to general business strategy, opportunities and activities in
PacifiCorp's market area and customer relationships. The PacifiCorp advisory
board will meet at least semi-annually and its members will be appointed for
two year terms. The decision as to the membership of the PacifiCorp advisory
board (other than Ian Robinson, Richard O'Brien, and Alan Richardson) will not
be made until after the completion of the Merger, and Ian Robinson and Keith
McKennon will jointly designate the other members of the advisory board.
Richard O'Brien will be appointed a member of the PacifiCorp board of
directors and President of PacifiCorp, in addition to his current position as
Chief Operating Officer of PacifiCorp.
5.3 The Merger Agreement includes obligations on New ScottishPower in respect
of compensation, incentive and employee benefit plans and arrangements of
PacifiCorp in effect on the date of the Merger Agreement (6 December 1998).
Further details are set out in paragraph 11(e) of Part VII.
5.4 New ScottishPower has agreed that, except to the extent changes may be
required by law, until the sixth anniversary of the Merger Date, it will not
take any action to amend, modify or repeal the provisions for indemnification
of directors and officers of PacifiCorp contained in the articles of
incorporation or bylaws (or other comparable charter documents) of PacifiCorp
and its subsidiaries in such a manner as would adversely affect the rights of
any individual who served as an officer or director of PacifiCorp or its
subsidiaries prior to the Merger Date. Furthermore, subject to the limitations
set out in the Merger Agreement, New ScottishPower has agreed that, until the
sixth anniversary of the Merger Date, it will cause to be maintained in effect
the policies of directors' and officers' liability insurance maintained by
PacifiCorp and its subsidiaries as of the date of the Merger Agreement with
respect to claims arising from facts or events that occurred on or prior to
the Merger Date.
6. Termination of the Merger Agreement
6.1 The Merger Agreement may be terminated by mutual written agreement of the
parties.
6.2 The Merger Agreement may be terminated by either PacifiCorp or New
ScottishPower if:
(a)the Merger has not been consummated on or before 6 September 1999 and
such failure is not caused by a breach of the Merger Agreement by the
terminating party. However, if on 6 September 1999, New ScottishPower and
PacifiCorp and their respective subsidiaries have not received all of the
approvals of governmental authorities required in order to satisfy the
regulatory approval condition set out in the Merger Agreement but all other
conditions to the Merger have been fulfilled or are capable of being
fulfilled, then, at the option of either New ScottishPower or PacifiCorp,
the term of the Merger Agreement will be extended until 6 June 2000;
(b)the PacifiCorp Shareholders have not approved the Merger Agreement or
the ScottishPower Shareholders have not approved the Merger by reason of
the failure to obtain the requisite vote on a vote of the shareholders;
(c)there has been a material breach of any representation, warranty,
covenant or agreement on the part of the non-terminating party set forth in
the Merger Agreement which breach is not curable or, if curable, has not
been cured within thirty days following the receipt by the non-terminating
party of notice of such breach from the terminating party and which breach,
when taken together with any other breaches of representations, warranties,
covenants and agreements of the non-terminating party contained in the
Merger Agreement, has or would reasonably be expected to have a material
adverse effect on PacifiCorp and its subsidiaries taken as a whole; or
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(d)any court of competent jurisdiction or other competent governmental or
regulatory authority shall have issued an order making illegal or otherwise
preventing or prohibiting the Merger and such order shall have become final
and non-appealable.
6.3 The Merger Agreement may be terminated by PacifiCorp if:
(a)the PacifiCorp board of directors determines in good faith that a
failure to terminate the Merger Agreement could reasonably be expected to
result in a breach of its fiduciary duties to shareholders imposed by law
by reason of an unsolicited bona fide Alternative Proposal (see paragraph
6.6 below) having been made; or
(b)the Board of ScottishPower withdraws or modifies in a manner materially
adverse to PacifiCorp its approval or recommendation of the Merger
Agreement or the Merger; or
(c)there has been a Change in Control (see paragraph 6.4 below) of New
ScottishPower.
6.4 For the purposes of the Merger Agreement, a "Change in Control" of New
ScottishPower shall occur if any of the following applies:
(a)any person, directly, or indirectly, acquires securities of New
ScottishPower representing 30% or more of the combined voting power of New
ScottishPower's outstanding capital stock;
(b)the shareholders of New ScottishPower approve a merger or other
consolidation of New ScottishPower with any other company, other than a
merger or consolidation effected to implement a recapitalisation of New
ScottishPower (or similar transaction) in which no person acquires more
than 30% of the combined voting power of New ScottishPower's outstanding
securities;
(c)a tender or exchange offer is made for the ordinary shares of New
ScottishPower (or securities convertible into ordinary shares of New
ScottishPower) and such offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is the
beneficial owner, directly or indirectly, of securities representing at
least 30% of the voting power of outstanding securities of New
ScottishPower; or
(d)New ScottishPower sells 30% or more of the shares of ScottishPower (or
under the original Merger Agreement, if applicable, ScottishPower sells 30%
or more of its operating assets) to a buyer that is not a member of New
ScottishPower's controlled group of corporations.
6.5 The Merger Agreement may be terminated by New ScottishPower if the
PacifiCorp board of directors:
(a)withdraws or modifies in a manner materially adverse to New
ScottishPower its approval or recommendation of the Merger Agreement or the
Merger;
(b)fails to reaffirm such approval or recommendation upon New
ScottishPower's request; or
(c)approves, recommends or takes no position with respect to an Alternative
Proposal to the shareholders of PacifiCorp; or
(d)resolves to take any of the foregoing actions.
6.6 In the Merger Agreement, an "Alternative Proposal" means any proposal or
offer (including, without limitation, any proposal or offer to the PacifiCorp
Shareholders) with respect to a merger, consolidation or other business
combination including PacifiCorp or any of its subsidiaries or any acquisition
or similar transaction (including, without limitation, a tender or exchange
offer) involving the purchase of (i) all or any significant portion of the
assets of PacifiCorp and its subsidiaries taken as a whole, (ii) 5% or more of
the outstanding shares of PacifiCorp Common Stock or (iii) 5% or more of the
outstanding shares of the capital stock of any subsidiary of PacifiCorp.
7. Termination payments
7.1 PacifiCorp will be obliged to pay to New ScottishPower a termination fee
of $250 million in the event that any person or group shall have made an
Alternative Proposal and thereafter:
(a)the Merger Agreement is terminated:
(i)by PacifiCorp pursuant to the PacifiCorp board's determination in
good faith, based upon the advice of outside counsel, that a failure to
terminate the Merger Agreement could reasonably be expected to result in
a breach of its fiduciary duties to shareholders imposed by law by
reason of an unsolicited Alternative Proposal;
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(ii)by New ScottishPower because PacifiCorp has materially breached any
representation, warranty, covenant or agreement (as described in
paragraph 6.2(c) above) or because the PacifiCorp board of directors (A)
withdraws or modifies in a manner materially adverse to New
ScottishPower its approval or recommendation of the Merger Agreement or
Merger, (B) fails to reaffirm such approval or recommendation upon New
ScottishPower's request, (C) approves, recommends or takes no position
with respect to an Alternative Proposal to its shareholders, or (D)
resolves to take any of the foregoing actions; or
(iii)by either party as a result of the approval and adoption of the
Merger Agreement by PacifiCorp Shareholders not being obtained; or
(b)the Merger Agreement is terminated for any other reason (other than by
reason of the breach of the Merger Agreement by New ScottishPower, or a
Change in Control of New ScottishPower, or as a result of ScottishPower
Shareholder approval of the Merger not being obtained or the Board
withdrawing or modifying in a manner materially adverse to PacifiCorp its
approval or recommendation of the Merger Agreement or the Merger) and a
definitive agreement with respect to such Alternative Proposal is executed
within one year after such termination.
7.2 New ScottishPower will be obliged to pay to PacifiCorp a termination fee
of $250 million in the event that the Merger Agreement is terminated by
PacifiCorp following a Change in Control of New ScottishPower.
7.3 In the event that the Merger Agreement is terminated by either PacifiCorp
or New ScottishPower due to the failure of the other to obtain the approval of
its shareholders and the termination fee described above is not payable:
(a)if the Merger Agreement is not approved by the PacifiCorp Shareholders
and is approved by the ScottishPower Shareholders, PacifiCorp shall pay to
New ScottishPower $10 million; or
(b)if the Merger is not approved by the ScottishPower Shareholders and is
approved by the PacifiCorp Shareholders, New ScottishPower shall pay to
PacifiCorp $10 million.
B. Factors considered by ScottishPower in assessing the Merger
ScottishPower's strategy for delivering shareholder value has two key
elements--a strong growing UK multi-utility business and the establishment of
a strong platform for growth in the US electricity sector. The Board believes
that significant benefits will be derived from the Merger and that the
Combined Group will be more efficient and stronger financially than either New
ScottishPower or PacifiCorp would be on its own.
In light of the Board's knowledge of the business and operations of
ScottishPower and its business judgment, the Board considered and evaluated
each of the factors listed below during the course of its deliberations prior
to approving the Merger Agreement.
. The expectation that the transaction would result in earnings accretion,
before amortisation of goodwill, for ScottishPower Shareholders from the
first full year after completion of the Merger compared to the
Directors' present expectations for the existing ScottishPower Group.
. Management's belief that the application of best practice across the
Combined Group has the potential to create substantial cost savings
following completion of the Merger.
. The fact that the Merger will further a key strategic objective of
ScottishPower, namely expansion of its core electricity business into
the rapidly evolving US market.
. The strategic fit between ScottishPower and PacifiCorp, including:
- the fact that both are vertically integrated electric utilities;
- the relevance of ScottishPower's UK experience in the emerging
competitive market in the US;
- the similarity of the companies' generation activities; and
- the potential for subsequent expansion for the Combined Group.
. The opinion of Morgan Stanley that, as at the date of the opinion (6
December 1998), the Exchange Ratio pursuant to the Merger Agreement was
fair from a financial point of view to ScottishPower.
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New ScottishPower Summary Listing Particulars
. Management's review of the business, operations and financial condition
of PacifiCorp as supported by the findings of due diligence.
. The terms of the Merger Agreement, including:
- the fixed Exchange Ratio and the absence of any mechanism for
adjusting the Exchange Ratio;
- the termination provisions and termination fees; and
- the covenants governing conduct of the businesses between
announcement and completion of the Merger.
. The merger consideration to be received by PacifiCorp Shareholders, its
relationship to market price and earnings, and the fact that it will be
tax-free to PacifiCorp Shareholders.
. The following potential risks related to the Merger:
- the fact that ScottishPower would have to register with, and be
regulated by, the SEC under the provisions of the US Public Utility
Holding Company Act of 1935;
- the potential for adverse movement in share prices, exchange rates or
interest rates;
- the size and international nature of the Merger, and attendant
potential burdens on ScottishPower management;
- the requirements to gain regulatory approvals from state and federal
regulators and the length of time this could take;
- potential legal and environmental exposures beyond those identified
in due diligence;
- possible impediments to achieving the estimated level of potential
cost savings; and
- potential for adverse regulatory rulings to impair the economic
rationale for the Merger.
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New ScottishPower Summary Listing Particulars
Part VI
Regulatory aspects of the Merger, certain regulatory reviews and environmental
matters
A. Regulatory aspects of the Merger
The Merger is subject to various regulatory approvals, of which those
outstanding are anticipated to be received later this year. The following is a
summary of the material regulatory requirements affecting the Merger and
approvals received.
1. UK approvals
In the UK, the Merger is conditional on clearance by the Secretary of State
for Trade and Industry under the merger control provisions of the Fair Trading
Act 1973 and satisfactory indications from the DGES and the DGWS as to the
future regulatory treatment of the businesses within the ScottishPower Group
which they regulate. On 13 April 1999, the Secretary of State for Trade and
Industry announced that it was not his intention to refer the Merger to the
Competition Commission. In making that decision, the Secretary of State for
Trade and Industry accepted certain assurances from ScottishPower to address
the regulatory concerns of the DGES. These include assurances relating to the
establishment of a holding company for the ScottishPower Group, to the
financial and management resources of ScottishPower and Manweb, and to
ensuring that the DGES continues to have access to the information which he
needs to carry out his duties.
ScottishPower has given assurances that it will secure that the holding
company will restructure its business in Great Britain as soon as is
reasonably practicable, and in any event within three years, so as to place
generation and any non-electricity activities in separate group companies.
ScottishPower has assured the Secretary of State for Trade and Industry that,
following restructuring, a financial ring-fence will be placed around the
electricity supply and transmission businesses currently carried on by
ScottishPower, on similar terms to the standard ring-fence terms developed by
the DGES.
To the extent that these assurances require licence modifications to be
implemented, ScottishPower has assured the Secretary of State for Trade and
Industry that it will agree to such modifications and will secure that Manweb
will do likewise.
ScottishPower has requested confirmation from the DGWS that he has no
regulatory concerns in relation to the Merger.
2. US and Australian approvals
PacifiCorp is a public utility and, upon the Merger becoming effective, will
remain subject to regulation by the FERC and state regulatory commissions in
California, Idaho, Oregon, Utah, Washington, and Wyoming with respect to rate
maters, the issue of securities and capital reorganisations. Applications in
connection with the proposed transaction have been filed with the FERC and
with the California Public Utilities Commission, the Idaho Public Utilities
Commission, the Oregon Public Utility Commission, the Utah Public Service
Commission, the Washington Utilities and Transportation Commission, and the
Wyoming Public Service Commission (the "Commissions"). The Commissions are
being requested to either disclaim jurisdiction over the Merger or approve it.
Generally, approval by the Commissions is subject to a finding that the
transaction is consistent with the public interest. The Commissions may attach
conditions to their approval. ScottishPower has proposed packages of
commitments in its filings with the Commissions (see paragraph 3 below). While
the outcome of regulatory proceedings can never be predicted with certainty,
it is currently anticipated that the regulatory process can be completed in
late 1999.
Testimony has been filed in Oregon, Idaho, Washington, Wyoming and Utah, and
hearings have been scheduled in those states in July and August 1999.
Testimony has been filed in California but a hearing has not been scheduled as
the only intervener has now withdrawn its protest and accordingly it currently
appears that all matters will be resolved in California without the need for
hearings.
Section 203 of the FPA provides that no public utility shall sell or otherwise
dispose of its jurisdictional facilities or directly or indirectly merge or
consolidate such facilities with those of any other person without having
first obtained authorisation from the FERC. Section 203 approval will be
granted if the FERC considers the transaction to be "consistent with the
public interest". PacifiCorp has filed an application with the FERC seeking
approval of the proposed transaction to the extent it constitutes an
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New ScottishPower Summary Listing Particulars
indirect transfer of control of its jurisdictional facilities and those of its
subsidiaries to the ScottishPower Group.
In recent proceedings under section 203 of the FPA, the FERC has focused on
the effect a proposed transaction may have on: (i) competition in domestic
power markets, (ii) the applicant's wholesale power and transmission rates and
(iii) state and federal regulation of the applicant. PacifiCorp also has FPA
hydro-electric licences subject to FERC jurisdiction. However, it does not
believe FERC approval with respect to its hydro-electric licences is required
for the Merger to become effective. The Directors do not expect that the
Merger will give rise to substantial FERC concern in any of these areas. The
FERC has authority to attach conditions to its approval.
SEC approval of the Merger under the US Public Utility Holding Company Act of
1935 (the "1935 Act") is not required. However, once the Merger becomes
effective, New ScottishPower will be required to register as a holding company
in accordance with section 5 of the 1935 Act.
New ScottishPower and ScottishPower plan to reorganise prior to the Merger to
put New ScottishPower over ScottishPower as a holding company by means of the
Scheme. If this reorganisation is completed, New ScottishPower would register
as the holding company under the 1935 Act. Following the Scheme, the US and UK
utility businesses of New ScottishPower will be in separate subsidiaries and
each of the UK subsidiaries will qualify for exemption from regulation as a
foreign utility under the 1935 Act. It is anticipated that registration will
not affect the conduct of New ScottishPower's non-utility businesses. If the
Scheme does not become effective, ScottishPower will register as a holding
company under the 1935 Act and operate its US businesses in separate
subsidiaries and its UK businesses, including those that are divisions, as if
they were separate subsidiaries subject to regulation under the 1935 Act.
ScottishPower will, in any event, implement a future reorganisation to place
certain divisions in separate group companies pursuant to the assurances given
to the Secretary of State for Trade and Industry described under "UK
approvals" above. The Scheme is not subject to SEC approval under the 1935
Act, but a future reorganisation would be. While New ScottishPower and
ScottishPower currently believe that the Scheme will become effective, it
cannot predict the outcome of the approvals or confirmations needed for the
Scheme or the regulatory proceedings for any future reorganisation.
Regulation under the 1935 Act will have various consequences, unless specific
subsidiaries or transactions are otherwise exempt by SEC rules or orders,
including:
. issues of securities by PacifiCorp and New ScottishPower will be
regulated but certain exemptions may be available to PacifiCorp. Foreign
utility companies held as separate subsidiaries of New ScottishPower
will be exempt;
. acquisitions of securities and utility assets by PacifiCorp and New
ScottishPower will be regulated;
. any affiliate transactions among members of the Combined Group after the
Merger would be regulated;
. later acquisitions of businesses by New ScottishPower and PacifiCorp
must be reasonably incidental, economically necessary or appropriate to
the operations of an integrated public utility system; and
. in certain cases, the payment of dividends and repurchase of securities
by PacifiCorp and New ScottishPower would be subject to regulation by
the SEC.
If the Scheme does not become effective, references in the preceding paragraph
to New ScottishPower should be construed as references to ScottishPower (which
would be the holding company).
As a non-operating 2.5% owner of the Trojan nuclear power plant, which is
currently being decommissioned, PacifiCorp must obtain approval from the
Nuclear Regulatory Commission in the event of a change of control of
PacifiCorp and must assure this Commission that all safety-related matters
remain under the control of the operator or under the supervision of United
States citizens.
Under the Omnibus Trade and Competitiveness Act of 1988 ("Exon-Florio") the
President of the United States may prohibit or suspend an acquisition of, or
investment in, a US company by a foreign person if the President finds, after
investigation, credible evidence that the foreign person might take action
that
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New ScottishPower Summary Listing Particulars
threatens to impair the national security of the US and that other provisions
of existing law do not provide adequate and appropriate authority to protect
the national security. Any determination that an investigation is called for
must be made within 30 days of notice of the proposed transaction. Any such
investigation must be completed within 45 days of the determination.
Thereafter, any decision to take action must be announced within 15 days of
completion of the investigation. Authority for administering Exon-Florio has
been delegated to the Committee on Foreign Investment in the United States
("CFIUS"). Each of PacifiCorp and ScottishPower or New ScottishPower will make
a voluntary filing with CFIUS seeking a finding that the Merger does not
impair the national security of the United States.
The Hart Scott-Rodino Act provides that the Merger may not become effective
until certain information has been submitted to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission and specified Hart Scott-Rodino Act waiting period requirements
have been satisfied. On 12 February 1999, ScottishPower and PacifiCorp were
granted early termination of the waiting period requirements of the Hart
Scott-Rodino Act. However, the early termination of the Hart Scott-Rodino Act
waiting period does not preclude the Antitrust Division or the Federal Trade
Commission from challenging the Merger on antitrust grounds. Neither New
ScottishPower nor PacifiCorp believes that the Merger will violate federal
antitrust laws. If the Merger is not completed within 12 months after the
expiration or earlier termination of the initial Hart Scott-Rodino Act waiting
period, New ScottishPower and PacifiCorp would be required to submit new
information to the Antitrust Division and the Federal Trade Commission, and a
new Hart Scott-Rodino Act waiting period would have to expire or be terminated
before the Merger could be completed.
PacifiCorp has environmental permits and licences with respect to which the
consent of the issuing authority may be required as a result of the Merger. In
addition, PacifiCorp and its subsidiaries own aircraft subject to regulation
by the Federal Aviation Administration and hold various communication licences
issued by the Federal Communications Commission. Consents or approvals from
these authorities will also be required as a result of the Merger. PacifiCorp
does not anticipate any difficulties at the present time in obtaining such
consents and approvals in connection with the Merger.
The Merger is subject to the Foreign Acquisitions and Takeovers Act 1975 in
Australia. Under that Act, the Treasurer of Australia has broad powers to
prohibit or place conditions on the acquisition of interests in Australian
business operations by foreign investors if such acquisitions are found to be
contrary to the national interest. The parties have notified the Australian
Foreign Investment Review Board of the proposed Merger as a result of
PacifiCorp's ownership of Powercor and an interest in the Hazelwood power
station and adjacent brown coal mine in Victoria. On 25 March 1999, the
Australian Federal Treasurer confirmed that he had no objection to the Merger.
3. General
Under the Merger Agreement, New ScottishPower and PacifiCorp have agreed to
proceed co-operatively and in good faith to obtain, as promptly as
practicable, all necessary material permits, licences, franchises and other
governmental authorisations necessary or advisable to effect the transactions
contemplated by the Merger Agreement. In its filings with the Commissions,
ScottishPower has proposed packages of commitments concerning customer
service, disclosure to state regulators, commitment to the environment,
commitment to communities and commitment to employees, in relation to
PacifiCorp's operations. These proposals are subject to further discussion
with the Commissions as part of the approval process. Various parties may seek
intervention in these proceedings to oppose the Merger or to have conditions
imposed upon the receipt of necessary approvals. While New ScottishPower and
PacifiCorp believe that they will receive the requisite regulatory approvals
for the Merger, there can be no assurance as to the timing of such approvals
or the ability of New ScottishPower and PacifiCorp to obtain such approval on
satisfactory terms or otherwise. It is a condition to the Merger that final
orders approving the Merger be obtained from the various regulatory
authorities and US federal and state commissions described above on terms and
conditions which would not have, or would not be reasonably likely to have, a
material adverse effect on the business, properties, assets, financial
condition or results of operations of PacifiCorp and its subsidiaries taken as
a whole. There can be no assurance that any such approvals will be
forthcoming, nor that they will not be subject to onerous terms or conditions.
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B. Certain regulatory reviews
1. ScottishPower
(a) Electricity
Price controls
All customers in the respective home (formerly called "franchise") areas are
now subject to competitive supply, although certain smaller customers remain
protected for a two-year period from April 1998. Tariff increases for these
smaller customers are subject to a maximum price restraint of RPI-3 in the
second year of this period. This restraint effectively caps the price
movements which arise from the individual price controls set out below.
Following reviews by the DGES, the price regime under which the two companies
operate has been determined as follows:
(i) Distribution
The maximum distribution revenue is calculated from a formula that is based
on customer numbers as well as units distributed. Annual price increases
for ScottishPower's distribution business will be limited to RPI minus 2%
per annum until 31 March 2000. From 1 April 1997 until 31 March 2000,
Manweb is restricted to an annual price increase of RPI minus 3% for the
provision of distribution services.
OFFER is expected to publish draft proposals on revised price controls for
all PESs in August 1999, and final proposals in November 1999, to allow
them to come into effect in April 2000 as part of the overall price review
exercise currently being carried out by OFFER.
(ii) Transmission
ScottishPower's transmission business was restricted under its existing
price control to a price increase of RPI minus 1% per annum in the year
ended 31 March 1999. The same level of total revenue in real terms will be
allowed in the year ending 31 March 2000. OFFER is currently reviewing the
scope and duration of the transmission price controls for Scotland
thereafter and is expected to publish draft proposals for revised price
controls in August 1999 and final proposals in November 1999, which will
come into effect in April 2000.
(iii) Supply
The restriction on supply prices was previously by way of a retail price
index minus X formula, and a correction factor which has taken into account
in each year the amount of any over or undercharging in the previous year.
The value of X for ScottishPower's supply price control from 1 April 1995
to 31 March 1998 was set at 2. The value of X for Manweb's supply price
control from 1 April 1994 to 31 March 1998 was also set at 2.
All customers are now subject to competitive supply, although certain
smaller customers remain protected: for a two-year period from April 1998,
the supply price control operates as a maximum price restraint on tariff
increases for ScottishPower's and Manweb's "designated customers" i.e.
customers with a maximum demand of less than 12,000 kWh per year.
The nature and extent of possible restraints from 1 April 2000 are being
reviewed at the same time as the distribution price controls. By way of
protection of the consumer, PES licence conditions prohibit discriminatory,
onerous or predatory pricing in areas in which a PES has been determined
dominant (currently in the PES's authorised area).
(iv) Fossil fuel levy
As part of the privatisation of the UK electricity industry, a "fossil fuel
levy" was imposed on PESs. The cost of the levy is passed onto customers to
meet the higher costs of compliance with the Non Fossil Fuel Obligation
incurred by the PESs in contracting with renewable energy sources. In
England and Wales, the levy was 0.9% from 1 April 1998 and was reduced to
0.7% on 1 January 1999. This levy will be reviewed later in 1999.
In Scotland, the Scottish Renewables Obligation (the "SRO") requires that
ScottishPower contract for specific amounts of electricity capacity at
generating stations powered by renewable sources. A levy is therefore
required to recover the additional cost to ScottishPower of the SRO. From
April 1998 until 31 March 1999, the levy had been set at 0.8%. It was
reduced to 0% from 1 April 1999 to 31 March 2000, and is predicted to stay
below 2% in subsequent years. The third Scottish Renewables Order ("SRO3")
came into force in February 1999.
49
<PAGE>
New ScottishPower Summary Listing Particulars
Future regulation
In March 1998, the Government published a Green Paper "A Fair Deal for
Consumers--Modernising the Framework for Utility Regulation". In July 1998 the
Government published a summary of the response to its consultations and in
October 1998 it published a further consultation paper which contains specific
proposals. The main proposals are:
. separate licensing of supply and distribution activities of the PESs
with the licences to be held by separate legal entities, though not
necessarily in separate ownership; and
. a new single, primary duty on utility regulation to protect the
interests of consumers, wherever possible and appropriate through the
promotion of effective competition.
Further proposals to revise the regulation of the electricity industry were
published by the Government and the DGES in 1998, the most important of which
include the following:
. the DGES published proposals in July 1998 to reform the trading
arrangements in England and Wales along the lines of commodity markets
and other energy markets. The DTI published an Energy White Paper in
October 1998, supporting the DGES's proposals, and setting out its
expectation that wholesale price falls of at least 10% in real terms,
and possibly more, can be expected in the medium term. In November 1998
a framework document on implementation of the new trading arrangements
was published by the DGES (encompassing the development of a balancing
market, a short-term bilateral market and a related settlement system).
The proposals set a target date of April 2000 and a Development and
Implementation Steering Group has been set up to develop other new
trading arrangements;
. revision of Scottish trading arrangements from April 2000. OFFER issued
a consultation paper on options for future Scottish trading arrangements
in December 1998, inviting comments on the creation of either a single
trading area in Scotland or unified UK-wide trading arrangements.
Further papers are expected to be published in May and August 1999 with
final proposals in November 1999; and
. separation of the supply, distribution, generation and transmission
activities of ScottishPower and Scottish Hydro-Electric plc into
separate companies. In May 1998 the DGES published a consultation paper
on the separation of the distribution and supply activities of PESs to
facilitate competition. It also considered the interface between
transmission and generation in Scotland. A further consultation paper
was published by OFFER in November 1998 proposing alternative scenarios
for operational separation. Following examination by consultants of the
costs of separation OFFER is expected to publish a further paper in May
1999. In addition, the operational separation of transmission from
generation in Scotland will be considered as part of the reviews of the
transmission price controls and Scottish trading arrangements. A likely
outcome will be a requirement for separate licensed businesses within
the same group to operate as separate legal entities.
The outcome of the proposals and reviews referred to in this paragraph and
their impact on the Group is uncertain.
(b) Water
Southern Water Services is allowed to increase its standard charges for the
provision of water supply and sewerage services by the percentage change in
the RPI plus an adjustment factor K. The value of K is currently set at 4% for
the period ending on 31 March 2000. In 1996, as a result of the takeover of
Southern Water Services by ScottishPower, ScottishPower undertook that the
average price increases of Southern Water Services in the three charging years
commencing 1 April 1997, would be lower than the allowed charging limits. This
undertaking was the subject of a licence condition modification which came
into effect on 28 September 1996, requiring Southern Water Services' average
prices to be 1% lower than they would otherwise have been in 1997 and 3% lower
than they would otherwise have been in the two years from April 1998.
50
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New ScottishPower Summary Listing Particulars
Infrastructure charges, being the amount that Southern Water Services can
charge when new properties are connected for a domestic supply of water or
sewerage services for each service, are also controlled. The infrastructure
charge was set at (Pounds)200 for 1995-96 and is permitted to rise in line
with inflation in subsequent charging years.
The DGWS reviews Southern Water Services' price controls on a 15 yearly basis.
The DGWS also has the power to make an interim determination to adjust price
limits between the five yearly periodic reviews. At present, price limits for
the water and sewage companies are being examined as part of such a periodic
review to be concluded in November 1999, when the DGWS will set new price
limits for the period from 1 April 2000 to 31 March 2005. In setting price
limits, the DGWS proposes to take into account compliance with environmental
and quality standards in assessing price limits for the period from 2000 to
2005. The DGWS will also consult each water company individually to discuss
responses to the review. In July 1999, he will publish his draft determination
of new price limits to run from 2000 to 2005, and his final decisions will be
made in November 1999. The outcome of this price review and its impact on the
Group is uncertain.
As part of the current review process, on 29 October 1998 the DGWS published a
consultation paper setting out proposed ranges for bills for the period from
2000 to 2005. In this paper, the DGWS has confirmed that, on the basis of past
efficiencies achieved by water companies, he considers there to be scope for
substantial price reductions in April 2000. However, the UK Government has
proposed a programme of capital expenditure by the water companies aimed at
environmental improvements which was included in the consultation paper. This
programme is estimated to cost some (Pounds)8.5 billion in the aggregate. The
water companies would be entitled to pass that cost through to customers with
the effect of increasing bills in the four years after 2000. In the
consultation paper, the DGWS estimated, in the case of Southern Water
Services, that expected average household bills could be reduced by more than
17.5% (in real terms) in 2000-01 on previous year levels. However, the DGWS
expected there to be an overall increase in the 1999/2000 level of bills in
the four year period up to 2005.
ScottishPower has responded to the DGWS's proposals by requesting an initial
price increase of 3.5% and a K factor of + 3% which would result in an average
regulated rate of return of 6.5%.
Large industrial users can now choose their own water and sewerage suppliers.
From 1 April 2000 fifteen water companies including Southern Water, will not
be able to recoup from other customers any amounts lost by offering lower
tariffs to such industrial users. The regulated charging base to which price
limits apply will no longer include tariffs to large industrial users.
Southern Water Services agreed to this change to its Appointment in February
1999.
2. PacifiCorp
During 1997, the Utah Public Service Commission ("UPSC") held hearings on the
proper method to be used in allocating common generation, transmission and
corporate related costs among PacifiCorp's jurisdictions. Under an order
issued in April 1998, differences in allocations associated with the merger of
Pacific Power & Light and Utah Power & Light were to be eliminated over five
years on a straight-line basis. The phase-out of the differences was to be
completed by 1 January 2001 and could have reduced Utah customer prices by
about US$50 to US$60 million annually once fully implemented. The order was to
be included in a general rate case, thereby combining it with all other cost
of service items in determining the ultimate impact on customer prices.
In 1998, the UPSC commenced a general rate case to consider the impact of the
April 1998 allocation order, other cost-of-service issues and the
appropriateness of PacifiCorp's authorised rate of return on equity. On 4
March 1999, an order was issued by the UPSC in the general rate case under
which PacifiCorp was required to reduce revenues in the state of Utah by $85
million, or 12% per annum. Additionally the UPSC ordered a refund of $40
million to be made through a credit on customer bills. The $85 million
reduction will commence on 1 March 1999. The order also reduced PacifiCorp's
authorised rate of return on equity from 12.1% to 10.5%. As a result of the
order, PacifiCorp recorded a $38 million reduction in revenues in 1998 in
respect of the $40 million refund and will record a further $2 million
reduction in 1999.
51
<PAGE>
New ScottishPower Summary Listing Particulars
C. Environmental matters
1. ScottishPower
The Group's activities are subject to numerous environmental laws and
regulations arising from EU directives and UK legislation relating to, among
other things, atmospheric pollution, water pollution and water quality. The
Group believes that it has taken and continues to take measures to comply with
applicable laws and regulations for the protection of the environment.
2. PacifiCorp
US federal, state and local authorities regulate many of PacifiCorp's
activities pursuant to laws designed to restore, protect and enhance the
quality of the environment. All of PacifiCorp's US mining operations are
subject to reclamation and closure requirements. Powercor is subject to
various Australian federal and Victorian state environmental regulations. The
operations of the Hazelwood plant are subject to environmental regulation and
a licensing regime.
52
<PAGE>
New ScottishPower Summary Listing Particulars
Part VII
Additional information
1. Responsibility
The Directors and the Proposed Directors, whose names are set out in paragraph
6 below, accept responsibility for the information contained in this document.
To the best of the knowledge and belief of the Directors and the Proposed
Directors (who have 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.
2. Incorporation and activity
New ScottishPower was incorporated and registered in Scotland on 19 February
1999 under the Act as a public company limited by shares with registered
number SC193794. The registered and head office of New ScottishPower is at 1
Atlantic Quay, Glasgow G2 8SP. Apart from entering into the Amended and
Restated Merger Agreement, New ScottishPower has not traded or presented to
its members or filed any accounts since its incorporation.
PricewaterhouseCoopers, whose address is Kintyre House, 209 West George
Street, Glasgow G2 2LW, have been the only auditors of New ScottishPower since
its incorporation.
3. Share capital of New ScottishPower
(a)The authorised, issued and fully paid share capital of New ScottishPower as
at 29 April 1999 (being the latest practicable date prior to the publication
of this document) is as follows:
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Authorised Issued
Number Amount Number Amount
- ---------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
1,699,900,004 (Pounds)849,950,002 New Shares of 50p each 4 (Pounds)2
Redeemable Shares of
49,998 (Pounds)49,998 (Pounds)1 each 49,998 (Pounds)49,998
New ScottishPower
1 (Pounds)1 Special Share - -
</TABLE>
- -------
The 49,998 Redeemable Shares have been issued to ScottishPower and are
fully paid up. New ScottishPower intends to redeem the Redeemable Shares
prior to the Merger Date.
(b)Before the Scheme Date, the Directors of New ScottishPower will, among
other matters, be granted substantially the same authority to issue and allot
ordinary shares, and to make purchases of its own ordinary shares, as will be
in existence in respect of ScottishPower following the conclusion of the
Merger EGM and its next annual general meeting (which is expected to be held
on 21 July 1999).
(c)New ScottishPower and its Directors will be granted before the Scheme Date
authority to issue and allot ordinary shares in connection with the Scheme.
(d)The proposed authorised, issued and fully paid share capital of New
ScottishPower as it will be following the Scheme Date will be as follows:
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
Authorised Issued
Number Amount Number Amount
- -----------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
2,999,900,004 (Pounds)1,499,950,002 New Shares of 50p each 1,199,323,636 (Pounds)599,661,818
Redeemable Shares of
49,998 (Pounds)49,998 (Pounds)1 each 49,998 (Pounds)49,998
New ScottishPower
1 (Pounds)1 Special Share 1 (Pounds)1
</TABLE>
- -------
The table set out above assumes no issues of shares by New ScottishPower
or ScottishPower after 27 April 1999 (being the latest practicable date
prior to the publication of this document) whether pursuant to the
exercise of options or otherwise, other than in connection with the
Scheme.
(e)The authorised, issued and fully paid share capital of New ScottishPower as
it will be following the Merger Date will be as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
Authorised Issued
Number Amount Number Amount
- --------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
3,000,000,000 (Pounds)1,500,000,000 New Shares of 50p each 1,889,133,539 (Pounds)944,566,769.50
New ScottishPower
1 (Pounds)1 Special Share 1 (Pounds)1
</TABLE>
- -------
The table set out above assumes no issues of shares by New ScottishPower,
ScottishPower or PacifiCorp after 27 April 1999 (being the latest
practicable date prior to the publication of this document) whether
pursuant to the exercise of options or otherwise, other than in connection
with the Scheme.
53
<PAGE>
New ScottishPower Summary Listing Particulars
(f)The exercise of all options and the vesting of all awards outstanding under
the PacifiCorp Stock Plans as at 27 April 1999 (being the latest practicable
date prior to the publication of this document) would following completion of
the Merger result in the issue of not more than approximately 14.6 million New
Shares.
(g)As at 27 April 1999 (being the latest practicable date prior to the
publication of this document) the following options granted to certain
directors and employees of the Group under the ScottishPower Share Option
Schemes and the Southern Water Sharesave Scheme were outstanding, all of which
have been granted for no consideration:
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Option Outstanding
Date of price shares under
grant (pence) Normal exercisable periods option
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scottish Power plc
Sharesave Scheme 22 Jun 1994 273.8 Sept 1999-March 2000 1,294,721
20 Jun 1995 262.1 Sept 2000-March 2001 1,171,521
20 Jun 1996 263.1 Sept 1999-March 2000 or 2002 9,871,739
20 Jun 1997 307.0 Sept 2000-March 2001 or 2003 4,671,202
12 Jun 1998 440.0 Sept 2001-March 2002 or 2004 4,180,109
----------
21,189,292
Southern Water Sharesave
Scheme 03 Feb 1992 74.0 March 1999-Sept 1999 3,642
26 Jan 1993 111.0 March 1999-Sept 2000 214,610
25 Jan 1994 154.9 March 1999-Sept 1999 or 2001 109,180
25 Jan 1995 136.1 March 2000-Sept 2000 or 2002 975,555
25 Jan 1996 160.2 March 2001-Sept 2001 or 2003 743,663
----------
2,046,650
Scottish Power plc Exec-
utive Share Option
Scheme 18 Dec 1991 227.4 Dec 1994-Dec 2001 128,303
25 Jun 1992 237.7 Jun 1995-Jun 2002 22,554
01 Jul 1993 310.0 Jun 1996-Jun 2003 59,641
17 Dec 1993 454.8 Dec 1996-Dec 2003 60,766
27 May 1994 354.0 May 1997-May 2004 18,191
18 Nov 1994 352.1 Nov 1997-Nov 2004 22,039
12 May 1995 335.0 May 1998-May 2005 72,026
10 Nov 1995 357.5 Nov 1998-Nov 2005 47,534
----------
431,054
- ---------------------------------------------------------------------------------------
</TABLE>
In accordance with past practice, ScottishPower intends to grant options under
the Sharesave Scheme (as defined in paragraph 8 below), in June 1999.
(h) As at 27 April 1999 (being the latest practicable date prior to the
publication of this document) awards in respect of 1,935,409 shares were
outstanding under the ScottishPower Long Term Incentive Plan ("the Plan"). In
accordance with past practice, ScottishPower intends to grant awards under the
Plan in May 1999.
(i) As at 27 April 1999 (being the latest practicable date prior to the
publication of this document), the total number of shares under option or the
subject of awards under the ScottishPower Share Schemes was therefore
25,602,405. At the same date 12,777,981 ScottishPower Shares were held by the
ScottishPower Qualifying Employee Share Trust (the "QUEST") to satisfy the
exercise of share options under the Sharesave Scheme. At the same date,
1,877,077 ScottishPower Shares were held by a trustee (Barclays Private Bank &
Trust (Isle of Man) Limited) for the purpose of awards under the Plan.
(j) During the three years immediately preceding the date of this document the
only change in the issued share capital of ScottishPower has been the issue of
126,386,570 ScottishPower Shares in connection with the offer for Southern
Water originally made on behalf of ScottishPower on 20 June 1996 and
95,961,203 ScottishPower Shares at an issue price of 250p each issued in
connection with a rights issue to assist the offer for Southern Water, and the
issue of 33,075,627 ScottishPower Shares in total as a result of the exercise
of share options under the ScottishPower Share Schemes.
54
<PAGE>
New ScottishPower Summary Listing Particulars
(k)Save as disclosed in this paragraph 3, (i) there has been no issue of share
or loan capital of New ScottishPower since its incorporation (ii) save for
options which may be granted over New Shares as a result of the release of
outstanding options under the ScottishPower Share Schemes or the PacifiCorp
Stock Plans, no share or loan capital of New ScottishPower is under option or
agreed to be put under option, and (iii) during the three years immediately
preceding the date of this document there has been no material issue of share
or loan capital of any member of the ScottishPower Group (otherwise than
intra-group issues by wholly-owned subsidiary undertakings and pro rata issues
by partly-owned subsidiary undertakings) for cash or other consideration.
(l)The New Shares issued in connection with the Scheme and the Merger will
when issued rank pari passu in all respects with the New Shares currently in
issue.
4.Limitations on shareholdings, summary of principal differences between the
New ScottishPower Articles and the ScottishPower Articles and future proposals
Limitations on shareholdings
The New ScottishPower Articles contain provisions whose purpose is to prevent
any person, other than a defined category of permitted persons, from owning or
controlling, directly or indirectly, shares which carry the right to cast on a
poll 15% or more of the votes at general meetings of New ScottishPower.
(i)For the purpose of these provisions, the expression "interest" in
relation to shares is deemed to mean any interest which would be taken into
account in determining for the purpose of Part VI of the Companies Act 1985
as in force at 29 May 1991 (the "Original Act") whether a person has a
notifiable interest (including any interest which he would be taken as
having for those purposes); and any interest referred to in section
209(1)(a), (b), (d) or (e) of the Original Act (except that of a simple
trustee under the law of Scotland and of a bare or custodian trustee under
the laws of England and Wales); and any interest mentioned in section
208(4)(b) of the Original Act which could arise under an agreement within
the meaning of section 204(5) and (6) of the Original Act.
(ii)Any person holding an interest of 3% or more in any class of New
ScottishPower's issued share capital carrying rights to vote in all
circumstances at general meetings ("relevant share capital") is required to
notify New ScottishPower of that interest and of any percentage point
change in the level of that interest.
(iii)If a person has, or appears to the Directors to have, an interest in
shares which carry 15% or more of the total votes attaching to the relevant
share capital of all classes (taken as a whole) of New ScottishPower and
capable of being cast on a poll or is deemed to have such an interest, the
Directors will give notice to all persons who appear to the Directors to
have interests in the shares concerned and, if different, to the holders of
those shares. The notice shall set out the restrictions referred to in (v)
below and will call for the interest concerned to be reduced to less than
15% by a disposal of shares within 21 days of the giving of such notice to
the holder (or such longer period as the Directors consider reasonable).
Except for the purpose of a disposal as required by the New ScottishPower
Articles or unless such notice is withdrawn, no transfer of any of the
shares to which the interest relates may be registered.
(iv)If such notice is not complied with in all respects to the satisfaction
of the Directors and has not been withdrawn, the Directors will, so far as
they are able, make such disposal through any officer or employee of New
ScottishPower and will give written notice of the disposal to those persons
on whom the notice was served. The terms of the sale, including the price,
are to be determined by the Directors on taking advice from professional
advisers.
Any such transfer will be as effective as if it had been executed by the
holder of the transferred shares and the title of the transferee will not
be affected by any irregularity or invalidity in the proceedings relating
to the transfer. The net proceeds of the disposal (without interest and
after deduction of the expenses of sale) will be paid to the former holder
and he will be given, if appropriate, a new certificate for the balance of
the shareholding, on the surrender of any certificate(s) for the shares
sold.
(v)The registered holder of shares to whom a notice, referred to in (iii)
above, has been given is not, in respect of any of the shares to which the
notice relates, entitled to attend or vote at any general or class meeting
of New ScottishPower or to exercise any other right as a shareholder in
55
<PAGE>
New ScottishPower Summary Listing Particulars
relation to any such meeting until such notice has been complied with to
the satisfaction of the Directors or withdrawn. Those rights vest in the
Chairman of any such meeting who may exercise or refrain from exercising
those rights entirely at his discretion. The Directors will inform the
Chairman of any such meeting of any shares in respect of which such a
notice as is referred to in (iii) above has been given.
(vi)Any resolution or determination of, or decision or exercise of any
discretion or power by, the Directors or by the Chairman of any meeting
under the limitations on shareholdings provisions will be final and
conclusive and any disposal or transfer made pursuant to such provision is
binding on all persons concerned and is not open to challenge. The
Directors will not be required to give any reasons for any decision,
determination or declaration taken or made in accordance with the
limitations on shareholdings provisions.
(vii)The Secretary of State is not subject to these limitations and there
are exceptions for a limited category of permitted persons, principally
recognised clearing houses, recognised investment exchanges, trustees of
employees' share schemes, ADS depositaries in their capacity as such and
persons whose holdings are of a fiduciary, contingent or temporary nature.
Principal differences
The principal differences between the New ScottishPower Articles and the
ScottishPower Articles are explained below. The numbering of the New
ScottishPower Articles (each an "article") referred to below corresponds to
the numbering of the ScottishPower Articles, other than article 6(E) which is
a new article and has no equivalent in the ScottishPower Articles. A copy of
the New ScottishPower Articles and of the ScottishPower Articles will be
available for inspection as referred to in paragraph 17 below. A copy of the
ScottishPower Articles (including amendments proposed to be made at the Scheme
EGM) will be available during, and for at least 15 minutes prior to, the
Scheme EGM.
(a) Article 6(E) (The Redeemable Shares)
This article was inserted to set out the rights attaching to the 49,998
Redeemable Shares issued to ScottishPower in order for it to obtain a trading
certificate under section 117 of the Act. By virtue of a special resolution of
New ScottishPower passed on 29 April 1999, this article will automatically be
deleted from the New ScottishPower Articles following redemption of all of the
Redeemable Shares.
(b) Article 7 (The New ScottishPower Special Share)
This article sets out the rights attaching to the New ScottishPower Special
Share and has been amended so that in addition to those matters which are
currently deemed in the ScottishPower Articles to be a variation of the rights
attaching to the ScottishPower Special Share and as such only effective with
the prior consent in writing of the Special Shareholder, the rights attaching
to the New ScottishPower Special Share provide that each of the following
matters is also deemed to be a variation requiring prior consent of the
Special Shareholder in writing:
(i)the giving by New ScottishPower of any consent or agreement to any
amendment, removal or alteration of the effect of article 7 of the
ScottishPower Articles (as amended in connection with the Scheme);
(ii)the giving by New ScottishPower of any consent or agreement to the
creation or issue of any shares in the capital of ScottishPower other than
an issue of shares following which New ScottishPower will own the full
legal and beneficial interest in, and control, shares in the capital of
ScottishPower carrying at least 85% of the voting rights exercisable on a
poll at general meetings of ScottishPower;
(iii)the disposal by New ScottishPower of any of the shares in
ScottishPower held by it or of any rights or interest in such shares or the
entering into by New ScottishPower of any agreement or arrangement with
respect to such shares or to the exercise of any voting or other rights
attaching to such shares, such that New ScottishPower would cease to own
the full legal and beneficial interest in, and control, shares in the
capital of ScottishPower carrying at least 85% of the voting rights
exercisable on a poll at general meetings of ScottishPower;
(iv)the giving by New ScottishPower of any consent or agreement to any
abrogation, variation, waiver or modification of any of the rights or
privileges attaching to any shares in ScottishPower such that New
ScottishPower would cease to own the full legal and beneficial interest in,
and
56
<PAGE>
New ScottishPower Summary Listing Particulars
control, shares in the capital of ScottishPower carrying at least 85% of
the voting rights exercisable on a poll at general meetings of
ScottishPower; and
(v)any other act or omission to act by New ScottishPower or the Directors
of New ScottishPower which results in New ScottishPower ceasing to own the
full legal and beneficial interest in, and control, shares in the capital
of ScottishPower carrying at least 85% of the voting rights exercisable on
a poll at general meetings of ScottishPower.
As set out in paragraph (f) of the resolution numbered 1 in the Notice of the
Scheme EGM, the existing article 7 of the ScottishPower Articles is to be
deleted and replaced after the Scheme Date by an article to the effect that
the events set out in paragraphs (i), (ii) and (iv) above may not occur
without the prior written consent of New ScottishPower.
(c) Article 98 (Number of directors to retire)
This article relates to the number of Directors to retire from office by
rotation and has been amended in accordance with the new London Stock Exchange
requirement that all directors shall retire by rotation at least every three
years.
(d) Article 123 (Borrowing powers)
This article relates to the borrowing powers of New ScottishPower and has been
amended to include an interim borrowing limit of (Pounds)8 billion up to the
date of publication of the audited accounts of New ScottishPower for the year
ended 31 March 2000, and to delete the provision which required goodwill and
intangible assets to be deducted from the Adjusted Capital and Reserves (as
defined in the New ScottishPower Articles). This deletion reflects the new UK
Financial Reporting Standard FRS10.
(e) Article 130 (Interim dividends)
This article relates to the ability of the Directors to pay interim dividends
and has been amended to provide that the Directors may declare and pay any
dividends, including final dividends, and not just interim dividends. This is
in order to facilitate the proposed move to quarterly dividend payments.
Future proposals
The Directors intend pursuant to the Merger Agreement to propose a resolution
at the 2000 annual general meeting of New ScottishPower to amend the New
ScottishPower Articles in order to provide (to the extent reasonably possible)
for the holders of ADSs, including New ADSs, to attend, vote and speak at
general meetings. It is intended that the amendments to be proposed will
provide for the appointment of multiple proxies by approved depositories
(including the Depositary), for such proxies themselves to be able to appoint
a proxy, for the holding of special and extraordinary resolutions on a poll
and for certain other minor amendments to the New ScottishPower Articles.
The Merger is not conditional upon the passing of this resolution although the
Merger Agreement requires that the resolution, if not passed, would again be
put forward for consideration at the next annual general meeting.
New ScottishPower, which will replace ScottishPower as the party to the
Deposit Agreement upon the Scheme becoming effective, also intends to seek to
amend the Deposit Agreement to reflect the changes proposed to be made to the
New ScottishPower Articles and to make certain other amendments.
5.PacifiCorp share capital
(a) PacifiCorp Common Stock
As at 27 April 1999 (being the latest practicable date prior to the
publication of this document), the number of shares of PacifiCorp Common Stock
issued and outstanding was 297,331,855. Other than pursuant to the exercise of
options or the grant of awards of restricted stock under the PacifiCorp Stock
Incentive Plan, it is not expected that any PacifiCorp Common Stock will be
issued prior to the Merger Date. Upon the Merger becoming effective, all of
the PacifiCorp Common Stock (other than any such shares held by ScottishPower,
New ScottishPower or any of their subsidiaries or by any subsidiary of
PacifiCorp) will be cancelled and converted into the right to receive New ADSs
and New Shares in accordance with the terms of the Merger.
(b) PacifiCorp Common Stock under option
As at 27 April 1999 (being the latest practicable date prior to the
publication of this document) not more than 6,080,085 options to acquire
unissued PacifiCorp Common Stock were outstanding under the
57
<PAGE>
New ScottishPower Summary Listing Particulars
PacifiCorp Stock Incentive Plan. Upon the Merger becoming effective, all such
options which are not yet exercisable will become exercisable and will convert
into options to acquire New Shares. These options will be exercisable for up
to 10 years from the date of the original grant.
On 9 February 1999, under the PacifiCorp Stock Incentive Plan, PacifiCorp
granted options to acquire 1,892,000 shares of PacifiCorp Common Stock at an
option price of US$19 with a three year vesting period (commencing one year
after the grant date) and a 10 year exercise period, and 39,275 restricted
stock awards with a four year vesting period (commencing one year after the
grant date). Such options and restricted stock awards do not automatically
vest upon a change in control, such as the Merger, but could vest within the
24 months following a change in control if the recipient's employment is
terminated under certain conditions.
In addition, on 9 February 1999, under the PacifiCorp Stock Incentive Plan,
PacifiCorp granted to Mr McKennon stock options to acquire 250,000 shares of
PacifiCorp Common Stock at an option price of US$19 with a three year vesting
period (commencing one year after the grant date) and a 10 year exercise
period, and 3,500 restricted stock awards with a four year vesting period
(commencing one year after the grant date). Such awards and options will not
vest upon a change in control and will not be forfeited upon employment
termination so long as Mr McKennon provides services to PacifiCorp, New
ScottishPower, or any subsidiaries or affiliates of either of them, as an
officer, director, consultant, agent, or otherwise.
PacifiCorp may grant further options to acquire shares of PacifiCorp Common
Stock or restricted shares of PacifiCorp Common Stock in the ordinary course
in the period prior to the Merger Date.
(c) Restricted PacifiCorp Common Stock
Awards of restricted PacifiCorp Common Stock have been made to PacifiCorp
employees under the PacifiCorp Stock Plans. Under individual agreements,
restricted PacifiCorp Common Stock is held in escrow for a specified period
pending satisfaction of performance conditions and subject to continued
employment with PacifiCorp. As at 27 April 1999 (being the latest practicable
date prior to the publication of this document), not more than 233,918
existing shares of restricted PacifiCorp Common Stock were outstanding under
unvested restricted stock awards made pursuant to the PacifiCorp Stock Plans.
Upon the Merger becoming effective, all unvested awards of restricted
PacifiCorp Common Stock will convert into awards of New ADSs or New Shares, as
the case may be, and all awards granted (other than awards granted on 9
February 1999 and all awards granted under the PacifiCorp Non-Employee
Directors Stock Compensation Plan) will become fully vested and free of
restrictions. Restricted stock grants to employees made on 9 February 1999
will not automatically vest upon a change in control but could vest within the
24 months following a change in control if the recipient's employment is
terminated under certain conditions.
(d) PacifiCorp Preferred Stock
PacifiCorp has three classes of preferred stock, 5.00% Preferred Stock, Serial
Preferred Stock (currently divided into seven series) and No Par Serial
Preferred Stock (currently divided into five series). The PacifiCorp Preferred
Stock will remain outstanding following the Merger Date and will not be
acquired or cancelled as part of the Merger. However, the Merger Agreement
requires PacifiCorp to redeem the $1.16, $1.18 and $1.28 series of its No Par
Serial Preferred Stock prior to the Merger Date. It is not expected that any
PacifiCorp Preferred Stock will be issued prior to the Merger Date.
(i)Dividends
Dividends on the Preferred Stock are payable pari passu without regard to
class or series, are cumulative and are payable quarterly on 15 February,
15 May, 15 August and 15 November each year, but only when and as declared
by the PacifiCorp board, out of funds legally available for the payment of
dividends, in preference to the PacifiCorp Common Stock.
(ii)Redemption and conversion
PacifiCorp may redeem all or any part of any one or more series of any
class of the Preferred Stock, other than the 6.00% Serial Preferred Stock
and the 7.00% Serial Preferred Stock, by paying the specified redemption
prices for such series. PacifiCorp must give shareholders of Preferred
Stock between 30 and 60 days' notice before redeeming Preferred Shares.
On 15 August 2001, PacifiCorp must redeem all outstanding shares of the
$7.70 No Par Serial Preferred Stock at a redemption price of $100 per
share, plus unpaid accumulated dividends, if any, to the date of
redemption.
58
<PAGE>
New ScottishPower Summary Listing Particulars
PacifiCorp must redeem on 15 June of each year (beginning on 15 June 2002
and ending on 15 June 2006) not less than 37,500 nor more than 75,000
shares of the $7.48 No Par Serial Preferred Stock at a redemption price of
$100 per share, plus unpaid accumulated dividends, if any, to the date of
redemption. The option to redeem in excess of 37,500 shares of such stock
is not cumulative. On 15 June 2007, PacifiCorp must redeem all outstanding
shares of the $7.48 No Par Serial Preferred Stock at a redemption price of
$100 per share, plus unpaid accumulated dividends, if any, to the date of
redemption.
None of the currently issued Preferred Stock is convertible into PacifiCorp
Common Stock.
(iii)Voting rights
The holders of the 5.00% Preferred Stock and the Serial Preferred Stock,
together with the PacifiCorp Common Stock, are entitled to one vote for
each share held on matters presented to shareholders generally. Holders of
the No Par Serial Preferred Stock have such voting rights as are
established at the time a series of No Par Serial Preferred Stock is
created. Each series of No Par Serial Preferred Stock now outstanding has
one vote per share, except for the $1.16, $1.18 and $1.28 series of No Par
Serial Preferred Stock which normally are non-voting but have one-quarter
vote per share on certain extraordinary matters on which all holders of
PacifiCorp Preferred Stock vote, as described below.
(A) If dividends payable on the Preferred Stock are in default in an
amount equal to four full quarterly payments or more per share, holders
of the relevant series of Preferred Stock, voting together as one class,
are entitled by majority vote to elect the smallest number of directors
necessary to constitute a majority of the full PacifiCorp board of
directors.
(B) The consent of the holders of at least two-thirds of the total votes
of a class of Preferred Stock is required in order to amend any of the
terms of that class in a manner substantially prejudicial to the holders
thereof.
(C) PacifiCorp must obtain the consent of the holders of a majority of
the total voting power of the outstanding Preferred Stock, voting
together as one class distinct from the PacifiCorp Common Stock, to:
(1) merge or consolidate with or into any other corporation;
(2) issue unsecured securities in amounts in excess of amounts
permitted by certain issuance tests; or
(3) issue, sell or otherwise dispose of any shares of Preferred
Stock unless PacifiCorp meets certain income levels and capital
surplus requirements.
(iv)PacifiCorp's repurchase and resale of shares
PacifiCorp may, subject to the restrictions noted above, purchase any of
its stock outstanding at such price as may be fixed by the PacifiCorp board
and accepted by the holders of the stock purchased, and may resell any
stock so purchased at a price fixed by its board. However, if the stock so
purchased is subject to redemption, the price paid may not exceed the price
at which it is redeemable.
(v)Other rights
No holder of any stock or other securities of PacifiCorp has any preemptive
or other right to subscribe for, purchase or receive any unissued shares,
treasury shares, or other shares of any class.
In general, on a liquidation PacifiCorp Preferred Shareholders have a
preferential right over PacifiCorp Common Shareholders to receive an amount
equal to the amounts payable under the optional redemption provisions
described above together with any unpaid dividends.
PacifiCorp Preferred Shareholders are entitled to dissent from, and to
obtain payment of the fair value of the shares held, in the event of a
merger, stock exchange, sale or exchange of all or substantially all of the
property of PacifiCorp other than in the usual and regular course of
business (with certain exceptions), or certain specified charter amendments
(only to the extent the holder is entitled to vote thereon). PacifiCorp
Preferred Shareholders have dissenters' rights in connection with the
Merger.
59
<PAGE>
New ScottishPower Summary Listing Particulars
(vi)Special Cash Payments
If the Merger is approved at the PacifiCorp annual meeting and all
regulatory approvals for the Merger required under the Merger Agreement
have been obtained, PacifiCorp will make a special cash payment of $1.00
per share ($0.25 per share for the $1.16, $1.18 and $1.28 series) to each
PacifiCorp Preferred Shareholder on the PacifiCorp Record Date that voted
in favour of the Merger. These special cash payments will be paid out of
PacifiCorp's general funds, promptly after receipt of the last regulatory
approval for the Merger but prior to the Merger. However, no accrued
interest will be paid on the special cash payments regardless of any delay
in making such payments.
Under the articles of incorporation of PacifiCorp, the amount of unsecured
debt that PacifiCorp may issue is limited to 30% of the total secured
indebtedness of PacifiCorp, its capital and surplus. PacifiCorp is seeking
consent of the PacifiCorp Preferred Shareholders to increase the amount of
unsecured indebtedness which PacifiCorp may issue from time to time.
PacifiCorp believes that the unsecured debt consent is key to meeting the
objectives of flexibility and favourable cost structure and therefore if
the unsecured debt consent is approved, PacifiCorp will make a special cash
payment in the amount of $1.00 per share ($0.25 per share for $1.16, $1.18
and $1.28 series) to each PacifiCorp Preferred Shareholder on the
PacifiCorp Record Date that voted in favour of the unsecured debt consent.
If the unsecured debt consent is approved, special cash payments will be
paid out of PacifiCorp's general funds, promptly after the PacifiCorp
annual meeting. However, no accrued interest will be paid on the special
cash payments regardless of any delay in making such payments. These
special cash payments will be made irrespective of the vote on any other
matters presented at the PacifiCorp annual meeting.
The special cash payments referred to above, in aggregate, would not exceed
approximately $5 million.
In addition, certain dealer solicitation fees will be payable by PacifiCorp
in relation to the resolutions referred to above which, in aggregate, would
not exceed approximately $4 million.
6. Directors of New ScottishPower
The Directors and their functions are set out below:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Function
- -------------------------------------------------------------------------------
<S> <C>
Charles Murray Stuart CBE Chairman (non-executive)
Ian Robinson Chief Executive
Ian Simon MacGregor Russell Deputy Chief Executive and Finance Director
Kenneth Leslie Vowles Executive Director UK Power Operations
Duncan Whyte Executive Director Multi-Utility
Charles Berry Executive Director, Customer Sales and Services
Alan Richardson Executive Director, US Responsibility
Mair Barnes Non-executive director
Sir Peter Lewis Gregson GCB Non-executive director
Ewen Cameron Stewart Macpherson Non-executive director
John Parnaby CBE Non-executive director
</TABLE>
The Directors are currently directors of ScottishPower and directors of New
ScottishPower in the same capacities. ScottishPower announced the resignation
of Sir Ronald Garrick as a non-executive director on 26 April 1999, which took
effect on 30 April 1999. Duncan Whyte, who is an executive director of
ScottishPower with responsibility for Multi-Utility, will resign as a Director
and will leave the ScottishPower Group on 31 May 1999 to become the Chief
Executive of The Weir Group plc.
It is proposed that, with effect from the Merger Date, Keith McKennon be
appointed as a director of New ScottishPower with the role of non-executive
Deputy Chairman. It is also proposed that from the same date Nolan Karras and
Robert Miller (currently non-executive directors of PacifiCorp) will be
appointed as non-executive directors of New ScottishPower.
7. Directors' and other interests in ScottishPower and New ScottishPower
(a) The interests, all of which are beneficial, of the Directors and the
Proposed Directors, in ScottishPower Shares as at 27 April 1999 (being the
latest practicable date prior to the publication of this document), in New
Shares following the Scheme Date (which in aggregate will represent
60
<PAGE>
New ScottishPower Summary Listing Particulars
approximately 0.02% of the issued ordinary share capital of New ScottishPower)
and in New Shares following the Merger Date (which in aggregate will represent
approximately 0.01% of the issued ordinary share capital of New
ScottishPower), are set out in the table below. In each case, the figures are
based upon the interests in ScottishPower Shares which have been notified by
each Director and the Proposed Directors to ScottishPower pursuant to section
324 or section 328 of the Act as at 27 April 1999 (being the latest
practicable date prior to the publication of this document) or are required
pursuant to section 325 of the Act to be entered into the register of
Directors' interests maintained under that section or are interests of a
connected person (within the meaning of section 346 of the Act) of a Director
or Proposed Director which would, if the connected person were a Director, be
required to be disclosed under such sections of the Act, and the existence of
which is known to or could with reasonable diligence be ascertained by that
Director or Proposed Director.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Scottish
Power
Director(1) Shares/ New Shares
- ---------------------------------------------------
<S> <C>
Charles Murray Stuart CBE 15,000
Ian Robinson 57,412
Ian Simon MacGregor Russell 15,612
Kenneth Leslie Vowles 117,327
Duncan Whyte 28,612
Charles Berry 0
Alan Richardson 295
Mair Barnes 0
Sir Peter Lewis Gregson GCB 905
Ewen Cameron Stewart Macpherson 5,000
John Parnaby CBE 6,692
Keith McKennon(/2/) 22,200
Nolan Karras(/3/) 478
Robert Miller(/4/) 7,953
</TABLE>
- -------
(1) The table set out above assumes no dealings by the Directors or the
Proposed Directors or such connected persons and that no further shares of
ScottishPower, New ScottishPower or PacifiCorp are issued, whether
pursuant to the exercise of options or otherwise, in each case after 27
April 1999 (being the latest practicable date prior to the publication of
this document).
(2) The interests of Keith McKennon arise as a result of his vested
interests in PacifiCorp Common Stock and represent the New Shares that
will be received in respect of those interests upon the Merger becoming
effective. For these purposes no account is taken of (a) the shares of
PacifiCorp Common Stock held beneficially for Mr McKennon under the
PacifiCorp Compensation Reduction Plan, which, as at 1 January, 1999 would
convert, under the Exchange Ratio, to approximately 78,262 New Shares, and
(b) the 3,500 shares of PacifiCorp Common Stock the subject of awards and
250,000 shares of PacifiCorp Common Stock the subject of options granted
to Mr McKennon on 9 February 1999 under the PacifiCorp Stock Incentive
Plan which, at the Exchange Ratio, would be converted into the right to
receive 8,120 New Shares subject to continuing restrictions (see paragraph
5(b), above) and into options to acquire 580,000 New Shares.
(3) The interests of Nolan Karras arise as a result of his vested
interests in PacifiCorp Common Stock and represent the New Shares that
will be received in respect of those interests upon the Merger becoming
effective. For these purposes no account is taken of the shares of
PacifiCorp Common Stock held beneficially for Mr Karras under the
PacifiCorp Compensation Reduction Plan and in a separate revocable trust,
which, as at 31 December 1998, would convert under the Exchange Ratio to
approximately 8,345 and 5,000 New Shares, respectively. Any unvested
shares of restricted PacifiCorp Common Stock previously awarded under the
Non-Employee Director Stock Compensation Plan which vest in the normal
course prior to the Merger Date will result in an increased beneficial
ownership of New Shares up to a maximum of 1,728 (assuming completion of
the Merger occurs in 1999 as anticipated).
(4) The interests of Robert Miller arise as a result of his vested
interests in PacifiCorp Common Stock and represent the New Shares that
will be received in respect of those interests upon the Merger becoming
effective. Any unvested shares of restricted PacifiCorp Common Stock
previously awarded under the Non-Employee Director Stock Purchase Plan
which vest in the normal course prior to the Merger Date will result in an
increased beneficial ownership of New Shares up to a maximum of 1,990
(assuming completion of the Merger occurs in 1999 as anticipated).
The interests of the Directors and the Proposed Directors (including those
interests referred to in notes (2), (3) and (4) to the table above) together
represent approximately 0.02% of the issued share capital of ScottishPower as
at 27 April 1999 (being the latest practicable date prior to the publication
of this document). Including options outstanding and awards under the
ScottishPower Share Schemes they represent 0.06%.
61
<PAGE>
New ScottishPower Summary Listing Particulars
(b) The following have options (all of which have been granted for no
consideration) under the Sharesave Scheme:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding
Date of Option price Normal exercise shares under
Name grant (pence) periods option
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ian Robinson 20.06.1995 262.1 01.09.2000-28.02.2001 6,581
Ian Russell 22.06.1994 273.8 01.09.1999-29.02.2000 6,300
Ken Vowles 20.06.1996 263.1 01.09.2001-28.02.2002 3,933
12.06.1998 440 01.09.2003-29.02.2004 1,568
Duncan Whyte 20.06.1996 263.1 01.09.1999-29.02.2000 2,223
12.06.1998 440 01.09.2001-28.02.2002 886
Charles Berry 22.06.1994 273.8 01.09.1999-29.02.2000 2,520
12.06.1998 440 01.09.2001-28.02.2002 1,329
Alan Richardson 22.06.1994 273.8 01.09.1999-29.02.2000 2,520
20.06.1995 262.1 01.09.2000-28.02.2001 1,316
12.06.1998 440 01.09.2003-29.02.2004 1,568
</TABLE>
(c) The following have options (all of which have been granted for no
consideration) under the ScottishPower Executive Share Option Scheme:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding
Date of Option price Normal exercise shares under
Name grant (pence) periods option
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles Berry 17.12.1993 454.8 17.12.1996-16.12.2003 659
12.05.1995 335 12.05.1998-11.05.2005 4,475
Alan Richardson 17.12.1993 454.8 17.12.1996-16.12.2003 1,450
</TABLE>
(d) The Plan provides for the grant of awards to Directors and senior
employees. An award consists of the right to receive, from the fourth
anniversary of the grant, a transfer or issue of ScottishPower Shares at nil
cost. Each award is subject to certain performance conditions which determines
whether, and the extent to which, an award may be exercised. No subsisting
award can be exercised unless certain performance conditions relating to
customer service and financial performance conditions are satisfied during the
period from the financial year prior to the grant of the award to the third
financial year following.
The following have outstanding awards under the Plan:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date of Number of
Name grant ScottishPower Shares
- ------------------------------------------------
<S> <C> <C>
Ian Robinson 09.08.1996 51,533
16.05.1997 53,846
07.05.1998 41,916
Ian Russell 09.08.1996 38,650
16.05.1997 36,923
07.05.1998 31,706
Ken Vowles 09.08.1996 27,607
16.05.1997 27,692
07.05.1998 22,570
Duncan Whyte 09.08.1996 35,889
16.05.1997 32,307
07.05.1998 25,257
Charles Berry 09.08.1996 13,458
16.05.1997 13,269
07.05.1998 11,083
Alan Richardson 09.08.1996 13,803
16.05.1997 14,423
07.05.1998 11,446
</TABLE>
(e) For the purposes of Part VI of the Act (which imposes obligations to
disclose interests in shares in certain circumstances) the Directors are in
addition technically treated as having an interest in the total number of
ScottishPower Shares held in the QUEST and in the employee benefit trust
linked to the Plan.
62
<PAGE>
New ScottishPower Summary Listing Particulars
(f) Save as disclosed above, none of the Directors nor the Proposed Directors
has any interest in the share or loan capital of ScottishPower.
(g) ScottishPower Share Scheme Trustees Limited, trustee of the QUEST and a
wholly owned subsidiary of ScottishPower, held 12,777,981 ScottishPower Shares
as at 27 April 1999 (being the latest practicable date prior to the
publication of this document).
(h) Details of Directors' service contracts with a period of notice or
contract period of one year or more are as follows:
(i)Ian Robinson has a service agreement (as subsequently varied) with
ScottishPower dated 1 March 1995 which, after an initial fixed period of
three years, is terminable by two years' written notice by ScottishPower
and one year's notice by Mr Robinson (ScottishPower also has power to make
a payment in lieu of any required period of notice). Mr Robinson's current
basic salary is (Pounds)420,000 per annum, reviewable annually by the
Board, save that his salary may not be revised downwards. Mr Robinson is
entitled to participate in ScottishPower's incentive bonus schemes and
share option schemes (from time to time in force) and is entitled to
membership of appropriate ScottishPower pension schemes. Mr Robinson is
provided with a company car (ScottishPower bears maintenance and running
costs) and cover under ScottishPower's private health scheme (for himself,
his wife and dependent children).
(ii)Ian Russell has a service agreement (as subsequently varied) with
ScottishPower dated 28 January 1994 which, after an initial fixed period of
three years from 1 September 1994, is terminable by two years' written
notice by ScottishPower and one year's written notice by Mr Russell
(ScottishPower also has power to make a payment in lieu of any required
period of notice). Mr Russell's current basic salary is (Pounds)340,000 per
annum, reviewable annually by the Board, save that his salary may not be
revised downwards. Mr Russell is entitled to participate in ScottishPower's
incentive bonus schemes and share option schemes (from time to time in
force) and is entitled to membership of appropriate ScottishPower pension
schemes. Mr Russell is provided with a company car (ScottishPower bears
maintenance and running costs) and cover under ScottishPower's private
health scheme (for himself, his wife and dependent children).
(iii)Ken Vowles has a service agreement (as subsequently varied) with
ScottishPower dated 1 April 1995 which, after an initial fixed period of
two years from 1 October 1994, is terminable by two years' notice by
ScottishPower and one year's written notice by Mr Vowles (ScottishPower
also has power to make a payment in lieu of any required period of notice).
Mr Vowles's current basic salary is (Pounds)250,000 per annum, reviewable
annually by the Board, save that his salary may not be revised downwards.
Mr Vowles is entitled to participate in ScottishPower's incentive bonus
schemes and share option schemes (from time to time in force) and is
entitled to membership of appropriate ScottishPower pension schemes. Mr
Vowles is provided with a company car (ScottishPower bears maintenance and
running costs) and cover under ScottishPower's private health scheme (for
himself, his wife and dependent children).
(iv)Duncan Whyte has a service agreement (as subsequently varied) with
ScottishPower dated 14 December 1990 which, after an initial fixed period
of three years from 31 March 1990, is terminable by two years' written
notice by ScottishPower and one year's written notice by Mr Whyte
(ScottishPower also has power to make a payment in lieu of any required
period of notice). Mr Whyte's current basic salary is (Pounds)235,000 per
annum, reviewable annually by the Board, save that his salary may not be
revised downwards. Mr Whyte is entitled to participate in ScottishPower's
incentive bonus schemes and share option schemes (from time to time in
force) and is entitled to membership of appropriate ScottishPower pension
schemes. Mr Whyte is provided with a company car (ScottishPower bears
maintenance and running costs) and cover under ScottishPower's private
health scheme (for himself, his wife and dependent children).
(v) Charles Berry will enter into a service agreement with ScottishPower
terminable by twelve months' written notice by ScottishPower and twelve
months' written notice by Mr Berry (ScottishPower will also have power to
make a payment in lieu of any required period of notice). Mr Berry's
current basic salary is (Pounds)170,000 per annum, reviewable annually by
the Board, save that his salary may not be revised downwards. Mr Berry is
entitled to participate in ScottishPower's incentive bonus schemes and
share option schemes (from time to time in force) and is entitled to
membership of appropriate ScottishPower pension schemes. Mr Berry is
provided with a company
63
<PAGE>
New ScottishPower Summary Listing Particulars
car (ScottishPower bears maintenance and running costs) and cover under
ScottishPower's private health scheme (for himself, his wife and dependent
children.
(vi) Alan Richardson will enter into a service agreement with ScottishPower
terminable by twelve months' written notice by ScottishPower and twelve
months' written notice by Mr Richardson (ScottishPower will also have power
to make a payment in lieu of any required period of notice). Mr
Richardson's current basic salary is (Pounds)170,000 per annum, reviewable
annually by the Board, save that his salary may not be revised downwards.
Mr Richardson is entitled to participate in ScottishPower's incentive bonus
schemes and share option schemes (from time to time in force) and is
entitled to membership of appropriate ScottishPower pension schemes. Mr
Richardson is provided with a company car (ScottishPower bears maintenance
and running costs) and cover under ScottishPower's private health scheme
(for himself, his wife and dependent children).
(i) Murray Stuart, Ian Robinson, Ian Russell, Ken Vowles, Charles Berry and
Alan Richardson will enter into new service contracts with New ScottishPower,
to be effective from the Scheme Date. The new service contracts will be on
substantially the same terms as the existing contracts. Duncan Whyte will not
enter into a new service contract as he plans to leave the ScottishPower Group
on 31 May 1999 to become the Chief Executive of The Weir Group plc.
(j) It is envisaged that each of the Proposed Directors will enter into a non-
executive letter of appointment with New ScottishPower, the terms of which
have yet to be resolved, effective from the Merger Date. In the case of Mr
McKennon, this will replace his existing service contract with PacifiCorp
(details of which are set out in paragraph 11(f) below).
(k) The aggregate remuneration (including salaries, fees, pension
contributions, bonus payments and benefits in kind) of the Directors for the
year ended 31 March 1999 amounted to (Pounds)1.9 million. The remuneration
policy of the ScottishPower Group will be reviewed by the Remuneration
Committee after the Merger, in the light of the responsibilities to be
undertaken by the Directors and Proposed Directors within the Combined Group.
Subject to this, it is estimated that for the year ending 31 March 2000 the
Directors of New ScottishPower will be paid a total of approximately
(Pounds)1.7 million by New ScottishPower and its subsidiaries. As stated in
paragraph 7(j) above, the terms of appointment of the Proposed Directors have
yet to be resolved. The Remuneration Committee comprises Ewen Macpherson
(Chairman), Mair Barnes, Sir Peter Gregson and John Parnaby.
(l) Save as set out below, as at 27 April 1999 (being the latest practicable
date prior to the publication of this document), no person, directly or
indirectly, was interested in 3% or more of the issued share capital of
ScottishPower. Following implementation of the Scheme and the Merger, New
ScottishPower is not aware of any person who, directly or indirectly, jointly
or severally could exercise control over New ScottishPower.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of Percentage of
share capital share capital
Percentage of of New of New
Number of existing share ScottishPower ScottishPower
ScottishPower capital of after the after the
Shares ScottishPower Scheme Merger
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prudential Portfolio
Fund Managers Limited 78,787,297 6.57 6.57 4.17
</TABLE>
The table set out above assumes (i) no dealings in ScottishPower, New
ScottishPower or PacifiCorp after 27 April 1999 (being the latest practicable
date prior to the publication of this document); (ii) ScottishPower
Shareholders have no interests in PacifiCorp Common Stock; and (iii) no issues
of shares by ScottishPower, New ScottishPower or PacifiCorp after 27 April
1999 (being the latest practicable date prior to the publication of this
document).
8. ScottishPower employee share schemes
(a) ScottishPower has the following schemes:
(i)a profit sharing scheme constituted by a trust deed made between the
relevant company and a wholly owned subsidiary as trustee (the "Trust
Scheme");
(ii)a savings-related share option scheme (the "Sharesave Scheme");
(iii)an executive share option scheme (the "Executive Scheme");
(iv)the Plan; and
(v)the QUEST.
64
<PAGE>
New ScottishPower Summary Listing Particulars
(b) No further options or awards will be granted under the ScottishPower Share
Schemes save as disclosed in paragraph 3 of this Part VII above, and save to
the extent necessary to use any New Shares remaining in the QUEST after the
Merger Date which are not needed to satisfy options granted under the
Sharesave Scheme and which have been exchanged for options over New Shares in
consequence of the Scheme as described in paragraph 11(a) below.
9. Effect of the Scheme on the ScottishPower Share Schemes
Details of the proposals to be made to participants in the ScottishPower Share
Schemes as a result of the Scheme will be sent to the participants in due
course. The following is a general summary of those proposals.
(a) ScottishPower Share Option Schemes
Holders of options under the ScottishPower Share Option Schemes and the
Southern Water Sharesave Scheme will be permitted to exchange their options
over ScottishPower Shares for options of equivalent value over New Shares
which will continue to be subject to the rules of the ScottishPower Share
Option Schemes and the Southern Water Sharesave Scheme (as appropriate) and
will be treated as if they had been granted on the same date as the options
for which they are exchanged. Alternatively, optionholders will be entitled to
exercise their options (and acquire ScottishPower Shares) within six months
from the date on which the Scheme is sanctioned. Options which are not
exchanged or exercised within six months from the date on which the Scheme is
sanctioned will lapse. ScottishPower Shares which are issued on exercise of
options after 5.30 p.m. on the Scheme Record Date will be automatically
acquired by New ScottishPower in consideration for an issue of New Shares on
the same terms as the Scheme by virtue of a proposed amendment to the
ScottishPower Articles.
(b) The Plan
The Remuneration Committee has resolved that any award granted under the Plan
shall not automatically become exercisable as a result of the Scheme but
instead shall be converted into an award to acquire New Shares. The
ScottishPower Shares required to satisfy all outstanding awards are held in an
employee trust. The Scheme will result in the employee trust holding New
Shares in place of the ScottishPower Shares.
(c) The QUEST
The QUEST holds ScottishPower Shares required to satisfy the majority of
options granted under the Sharesave Scheme. As a result of the Scheme these
shares will be replaced by New Shares. It will not, for technical reasons, be
possible to use the New Shares which will be held in the QUEST following the
Scheme to satisfy any exercises of options made during the six months
following the date of the Court's sanction of the Scheme. Accordingly,
ScottishPower Shares will be allotted and issued to an optionholder who
exercises an option in these circumstances and such shares will be immediately
acquired by New ScottishPower in consideration of the issue of New Shares to
the optionholder on the same terms as the Scheme by virtue of a proposed
amendment to the ScottishPower Articles. It is intended that any New Shares
remaining in the QUEST after the Merger Date will be used to satisfy the
exercise of options granted under the Sharesave Scheme which are exchanged for
options over New Shares in consequence of the Scheme as described in paragraph
(a) above and any new options which are granted in respect of New Shares after
the Merger Date under the Sharesave Scheme.
10. New ScottishPower Employee Share Schemes
From the Scheme Date New ScottishPower will operate two new employee share
schemes, being the New ScottishPower Sharesave Scheme and the New
ScottishPower Long Term Incentive Plan. The terms of these schemes closely
mirror the terms of the Sharesave Scheme and the Plan.
11. Certain interests of directors and Executives of PacifiCorp relating to
the Merger
(a) PacifiCorp stock options and awards of restricted PacifiCorp Common Stock
Upon the Merger becoming effective, all options to acquire PacifiCorp Common
Stock granted before 9 February 1999 under the PacifiCorp Stock Incentive Plan
not yet exercisable will become exercisable and all unexercised options will
convert into options to acquire New ADSs or New Shares, as the case
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may be, after adjustment to take account of the Exchange Ratio. Based on
PacifiCorp options granted as at 27 April 1999 (being the latest practicable
date prior to the publication of this document), this will result in a maximum
of approximately 14 million New Shares being placed under option. All unvested
awards of restricted PacifiCorp Common Stock granted under the PacifiCorp
Stock Plans, will be converted into awards of New ADSs or New Shares, as the
case may be, and all unvested awards (other than awards granted on 9 February
1999 and as described in paragraph 5(c) above and all awards granted under the
PacifiCorp Non-Employee Directors Stock Compensation Plan) will become fully
vested and free of restrictions. As of 27 April 1999, (being the latest
practicable date prior to the publication of this document) not more than
6,080,085 unissued shares of PacifiCorp Common Stock are under such options
and there are not more than 233,918 existing shares of restricted PacifiCorp
Common Stock. PacifiCorp may grant further options to acquire shares of
PacifiCorp Common Stock or shares of restricted PacifiCorp Common Stock in the
ordinary course in the period prior to the Merger Date.
(b) Change of control provisions affecting Executives
The PacifiCorp Executive Severance Plan, the Annual Incentive Plans, the
PacifiCorp Stock Incentive Plan, the PacifiCorp Long Term Incentive Plan, the
Supplemental Executive Retirement Plan and the Compensation Reduction Plan
contain "change in control" provisions which may trigger benefits for Messrs
McKennon, O'Brien, Steinberg, Bohling and Topham (the "Executives"). These are
described below:
(i)PacifiCorp Executive Severance Plan (the "Executive Plan").
The Executive Plan provides for the payment of enhanced severance benefits
to executives of PacifiCorp, including certain of the Executives, whose
employment with PacifiCorp is terminated during the 24-month period
following a "qualifying transaction" which will include the Merger. None of
the directors of PacifiCorp (other than Mr Topham) is a participant in the
Executive Plan. Mr McKennon has waived any rights to participate in the
Executive Plan.
Participants in the Executive Plan are eligible for enhanced severance
benefits if, during the 24-month protection period following completion of
a qualifying transaction, a participant (A) is terminated by PacifiCorp
without "cause" or (B) resigns within two months after a "material
alteration in position." In addition, Mr O'Brien is eligible for enhanced
severance benefits if he resigns for any reason no earlier than 12 months
and no later than 14 months after a qualifying transaction.
During the 24-month protection period under the Executive Plan, "cause"
means the participant's gross misconduct or gross negligence or conduct
which indicates a reckless disregard for the consequences and has a
material adverse effect on PacifiCorp or its affiliates, and "material
alteration in position" means the occurrence of any of the following: (A) a
change in reporting relationship to a lower level; (B) a material reduction
in the scope of duties and responsibilities; (C) a material reduction in
authority; (D) a "material reduction in compensation"; or (E) relocation of
participant's work location to an office more than 100 miles from the
participant's office or more than 60 miles from the participant's home. A
"material reduction in compensation" occurs when a participant's annualised
base salary is reduced by any amount or the annualised base salary and
target bonus opportunity combined is reduced by at least 15% of the
combined total opportunity before the change in compensation.
If an Executive qualifies for the payment of enhanced severance benefits
under the Executive Plan, the Executive will receive:
(A)severance pay in an amount equal to two and one-half times (three
times for Mr O'Brien) the Executive's "annual cash compensation";
(B)an additional payment to compensate the Executive for the effect of
any excise tax if change-in-control benefit payments would result in the
imposition of such excise tax under section 4999 of the Internal Revenue
Code;
(C)continuation of subsidised health insurance for the Executive, spouse
and qualified dependants from 6 to 24 months depending on length of
service; and
(D)a minimum of 12 months of executive officer level outplacement
services.
"Annual cash compensation" is defined as annualised base salary, target
annual incentive opportunity and annualised auto allowance in effect on a
material alteration or termination,
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whichever is greater. The estimated amount of change in control severance
benefit for each of the participating Executives (calculated based on
compensation as of 1 March 1999 and without regard to any additional
payment to compensate the Executive for the effect of any excise tax
described above) is as follows: Mr O'Brien--$1,832,400; Mr Steinberg--
$1,199,500; Mr Bohling--$1,129,500, Mr Topham--$1,129,500 giving a total of
$5,290,900. Mr McKennon has waived any entitlement to severance pay under
the Executive Plan.
(ii)Annual Incentive Plans
Each of the Executives is entitled to participate in an annual incentive
plan (a type of bonus scheme) based upon the achievement of specified
performance goals, including PacifiCorp's earnings per share, and
individually established performance criteria prescribed by the Personnel
Committee of the PacifiCorp board of directors. For 1999, the "target
annual incentive opportunity" set for Executives ranged from 40% to 50% of
annualised base salary. In the event of a change of control of PacifiCorp,
the Executives will receive payment of a bonus in an amount no less than
their target bonus award in the year the Merger is completed. Based on 1
March 1999 compensation levels, each Executive's target bonus would be as
follows: Mr McKennon--$312,000; Mr O'Brien--$200,000; Mr Steinberg--
$134,000; Mr Bohling--$126,000 and Mr Topham--$126,000 giving a total of
$898,000.
(iii)PacifiCorp Stock Plans
Each of the Executives is entitled to participate in the PacifiCorp Stock
Incentive Plan, and all the Executives other than Mr McKennon are
participants in the PacifiCorp Long Term Incentive Plan. Pursuant to the
terms of the PacifiCorp Stock Incentive Plan and PacifiCorp Long Term
Incentive Plan, and the agreements related thereto, any unvested restricted
PacifiCorp Common Stock and unvested options to purchase PacifiCorp Common
Stock held by the participants therein will vest upon completion of the
Merger; except that, (i) for the awards and options granted on 9 February
1999 to Executives other than Mr McKennon, such awards do not automatically
vest upon a change in control, but could vest within the 24 months
following a change in control if the recipient's employment is terminated
under certain conditions, and (ii) for the restricted stock awards granted
to Mr McKennon on 9 February 1999, such awards will remain subject to the
restrictions set forth in section (c) of paragraph 5, "PacifiCorp share
capital," above. As at 27 April 1999 (being the latest practicable date
prior to publication of this document), the number of shares of unvested
restricted PacifiCorp Common Stock held by Executives is as follows: Mr
McKennon--3,500, Mr O'Brien--34,068, Mr Steinberg--27,759, Mr Bohling--
11,252, and Mr Topham--16,892. The number of unvested options to purchase
PacifiCorp Common Stock held by Executives as at 27 April 1999 is as
follows: Mr McKennon--250,000; Mr O'Brien--241,334; Mr Steinberg--134,668;
Mr Bohling--121,334 and Mr Topham--126,668 giving a total of 874,004.
(iv)Supplemental Executive Retirement Plan ("SERP")
The Executives (other than Mr McKennon) are participants in the SERP. Under
the SERP, participants receive retirement benefits, payable for life, based
on the participant's length of service with PacifiCorp or its subsidiaries
and the participant's average pay in the 60 consecutive months of highest
pay out of the last 120 months prior to retirement. Benefits are based on
50% of the final average pay plus up to an additional 15% of final average
pay depending upon whether PacifiCorp meets certain performance goals set
for each calendar year by the Personnel Committee of the PacifiCorp board
of directors. Actuarially equivalent alternative forms of benefits are also
available at a participant's election. Retirement benefits are reduced to
reflect Social Security benefits as well as certain prior employer
retirement benefits. Participants are entitled to receive full benefits
upon retirement after the age of 60 with at least 15 years of service.
Participants are also entitled to receive reduced benefits upon early
retirement after the age of 55 or after the age of 50 and at least 15 years
of service.
The SERP provides change in control benefits for participants
"involuntarily terminated" during the 24 months following the Merger Date
in the form of enhanced supplemental retirement benefits. Enhanced
supplemental retirement benefits are also provided to participants who
resign for any reason effective no earlier than 12 months and no later than
14 months after the Merger Date. For the purposes of the SERP, a
termination of employment is "involuntary" if the participant is
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discharged or resigns under specified circumstances following a change of
control. A resignation is treated as an involuntary termination when any of
the following occurs: (A) the participant's annualised base salary or
target bonus opportunity is decreased; (B) the participant is reassigned to
a position in an office located more than 100 miles from the participant's
then-current office or 60 miles from the participant's residence, whichever
is greater; (C) the participant's reporting level in PacifiCorp is changed
and is lower after the change than it was before; (D) there is a material
reduction in the scope of the participant's duties or responsibilities; or
(E) there is a material reduction in the participant's authority.
If a participant qualifies for change-in-control benefits under the SERP,
then that SERP benefit is calculated with the following enhancements:
(A)supplemental benefits calculated as if the participant had three more
years of service than the participant's actual service;
(B)an additional 3% of final average pay added to the benefit which
would otherwise have only been provided upon PacifiCorp meeting certain
performance goals; and
(C)determination of final average pay under an alternate method if that
method produces a greater amount.
Based upon the Executives' compensation as of 1 January 1999 , the present
value of SERP enhancements in the event of a qualifying termination or
resignation within the 24 months following the Merger Date for each of the
Executives is as follows: Mr O'Brien--$620,000; Mr Steinberg-- $760,000; Mr
Bohling--$720,000 and Mr Topham--$470,000. Mr McKennon has waived any
rights to participate in the SERP.
(v)Compensation Reduction Plan
The Executives are eligible to participate in the Compensation Reduction
Plan under which participating executives of PacifiCorp may defer certain
compensation. After a change in control, the plan may not be terminated by
PacifiCorp without approval by participants with a majority of the
aggregate balance of the accounts thereunder.
(vi)Other Arrangements
Mr Topham retired as an employee of PacifiCorp (but not as a director) on 1
May 1999. PacifiCorp has agreed to provide him with the equivalent of
change in control benefits as set forth above upon the Merger Date. The
change in control enhancements to the retirement benefits would apply to
future retirement benefits beginning the month following the Merger Date.
The other change in control benefits would be offset by any severance
benefits he has received prior to the Merger Date. It is currently
anticipated that three other PacifiCorp executives will be offered similar
arrangements, although PacifiCorp may determine that additional
arrangements for a limited number of other executives will be appropriate.
The decision to make such payments was not made until after the Merger
Agreement was executed.
(c) Payments to Directors
Non-employee directors of PacifiCorp have been granted restricted stock under
the PacifiCorp Non-Employee Directors Stock Compensation Plan. Stock granted
under this plan vests over the five years of the plan following the grant, or
shorter period to retirement, and unvested shares are forfeited if the
recipient ceases to be a director. Because the PacifiCorp board of directors
will become an executive only board, the Non-Employee Directors Stock
Compensation Plan will not continue to be operated, and, promptly following
the Merger Date, each non-executive director will receive a special payment in
the amount of $50,000 in recognition of his or her years of service and
contributions to the PacifiCorp board of directors. The decision to make these
payments was not made until after the Merger Agreement was executed.
(d) Retention and bonus incentives
PacifiCorp anticipates providing retention incentives where necessary to
retain employees in key positions during the period prior to the completion of
the Merger. In addition, the PacifiCorp board of directors has established a
bonus pool to provide recognition and rewards for employees expected to
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make, and making, extraordinary efforts to accomplish the goals and objectives
of PacifiCorp, which may or may not be related to or conditional upon the
successful completion of the Merger. Therefore, certain executive officers of
PacifiCorp may receive bonuses or retention incentive awards. To date, several
officers (but not the Executives) have been offered retention agreements
establishing retention awards. Such bonuses or retention awards shall be made
at the discretion of Mr McKennon, as Chief Executive Officer of PacifiCorp;
provided, however, that any officer bonuses shall be reviewed by the Personnel
Committee of the PacifiCorp board of directors and any bonus to the Chief
Executive Officer shall be at the discretion of the PacifiCorp board of
directors.
(e) Ongoing employee compensation and benefits
The Merger Agreement provides that New ScottishPower will use its reasonable
best efforts to cause the compensation, incentive and employee benefits plans
and arrangements in effect on the date of the Merger Agreement to remain in
effect for two years after the Merger Date or to maintain until such date
plans or arrangements no less favourable in the aggregate to the employees
covered by such plans and arrangements. Therefore, the Executives and other
employees who continue employment with PacifiCorp will continue to receive
compensation, incentives and employee benefits that are at least as favourable
as those currently provided.
Any options and awards granted under the PacifiCorp Stock Incentive Plan after
the Merger Date will be rights to acquire or receive New Shares. PacifiCorp
will be authorised to operate such a plan subject to the prior approval of the
New ScottishPower Remuneration Committee and amendments considered necessary
or desirable to reflect English law and the rules of the London Stock
Exchange. Any New Shares placed under options or rights granted under the
PacifiCorp Stock Incentive Plan after the Merger Date (to the extent they are
subscribed) will be brought into account in calculating the limits on the
number of shares which may be acquired by subscription under employee share
schemes of the Group.
(f) Employment agreement with Keith McKennon
At the Merger Date, Mr McKennon will resign his positions as Chairman, Chief
Executive Officer and President of PacifiCorp and, as referred to in paragraph
8 above, is expected to be appointed as Deputy Chairman and a director of New
ScottishPower. It is anticipated that Mr McKennon's employment with PacifiCorp
will terminate at the later of the Merger Date or 2 September 1999. Currently,
Mr McKennon is a party to an employment agreement with PacifiCorp that
provides for an annual base salary of not less than $780,000 and a target
annual bonus opportunity equal to a percentage (20% in 1998, 40% in 1999, 50%
in 2000 and 60% in 2001) of the annual base salary. Mr McKennon has waived
participation in PacifiCorp's Executive Severance Plan and Supplemental
Executive Retirement Plan described above. Consequently, he is not eligible
for severance pay; nor will he qualify for any PacifiCorp retirement benefits
upon termination of his employment. As referred to in paragraph 7(k) above, it
is envisaged that Mr. McKennon will enter into a non-executive letter of
appointment with New ScottishPower.
12. Principal investments
(a) ScottishPower has invested internal funds in the following in the three
financial years ended 31 March 1999:
(i)approximately (Pounds)62.8m in a stormwater tunnel in Brighton and Hove
in England;
(ii)approximately (Pounds)41.5m in a waste treatment works in Eastbourne,
England;
(iii)approximately (Pounds)80.0m on the 1998 Change Programme covering the
mandatory processes and systems required to deliver the Electricity Trading
Arrangement.
(iv)approximately (Pounds)35.6m on the Asset Management 2000 programme.
(b) ScottishPower is currently investing internal funds in the following:
(i)approximately (Pounds)43.7m in the Hastings/Bexhill, England, Urban
Waste Water Directive scheme to treat flows, including a sludge treatment
centre;
(ii)approximately (Pounds)115.0m in Portsmouth, England on an Urban Waste
Water Directive scheme to transfer flows from Eastney to the Budds Farm
works for treatment. The project includes construction on a new sludge
treatment centre;
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(iii)approximately (Pounds)52.0m at Littlehampton and Bognor, in England,
on an Urban Waste Water Directive scheme to transfer flows to a new waste
treatment works. The project also includes construction of a new sludge
treatment centre;
(iv)approximately (Pounds)53.4m on a stormwater storage tunnel at Hastings
in England;
(v)approximately (Pounds)138.4m at Dover and Folkestone, in England, on a
bathing water scheme to transfer flows to a new waste treatment works;
(vi)approximately (Pounds)136.5m at Seaclean Wight, in England, on an Urban
Waste Water Directive scheme to transfer flows to a new waste treatment
works. The project also includes construction of a new sludge treatment
centre;
(vii)approximately (Pounds)65m on the systems and processes required to
deliver customer growth in the UK gas and electricity markets.
(c) The following principal investments have been authorised but are not yet
committed:
(i)approximately (Pounds)64.2m on an Urban Waste Water Directive scheme at
Portobello, England to treat flows, includes a sludge treatment centre;
(ii)approximately (Pounds)46.9m on an Urban Waste Water Directive scheme at
Margate/Broadstairs, England, to treat wastewater flows.
13. Material contracts
(a) Except for the Merger Agreement (a summary of which is set out in Part V)
the only contracts, other than contracts entered into in the ordinary course
of business, which have been entered into by any member of the ScottishPower
Group within the two years immediately preceding the date of this document
which are or may be material are as follows:
(i) A 364 day multi-currency revolving credit facility with term-out option
dated 12 March 1999 made between (1) ScottishPower as borrower (2) The
Royal Bank of Scotland ("RBS") as arranger (3) RBS as agent and (4) various
banks for up to (Pounds)600,000,000. Interest under the facility will be
charged at the London interbank offered rate plus an amount to reflect the
Bank of England's and the Financial Services Authority's requirements in
relation to banks' mandatory holdings of liquid assets plus a margin. The
margin will be set at 0.45% per annum. A commitment fee of 0.175% per annum
on the undrawn and uncancelled amount of the facility will be payable
quarterly in arrear from 12 March 1999 to 11 March 2000. A utilisation fee
of 0.05% per annum on the aggregate of any drawn amounts will be payable
quarterly in arrear for so long as more than (Pounds)200,000,000 is
outstanding. The facility is unsecured but a qualified negative pledge is
imposed upon ScottishPower.
(ii) A supplemental agreement dated 12 March 1999 made between (1)
ScottishPower as borrower and (2) RBS as agent which amends the terms of
the five year revolving credit facility dated 24 June 1996 made between (1)
ScottishPower as borrower (2) RBS and Union Bank of Switzerland as joint
arrangers (3) ING Barings as co-arranger (4) various banks and (5) RBS as
agent. The facility limit has been reduced from (Pounds)2,600,000,000 to
(Pounds)2,000,000,000. Interest under the facility will be charged at the
London interbank offered rate plus an amount to reflect the Bank of
England's and the Financial Services Authority's requirements in relation
to banks' mandatory holdings of liquid assets plus a margin. From 12 March
1999 the margin will be set at 0.45% per annum. A commitment fee of 0.20%
per annum on the undrawn and uncancelled amount of the facility will be
payable quarterly in arrears on the same dates as the original facility.
The facility is unsecured but a qualified negative pledge is imposed upon
ScottishPower.
(iii) A contract dated 30 April 1998, between (1) ScottishPower
Telecommunications Limited and (2) Clifford Martin Stanford and Others,
ScottishPower Telecommunications Limited purchased the entire issued share
capital of Demon Internet Limited ("Demon") for a total consideration of
(Pounds)66,000,000, which (save for a retention of (Pounds)100,000) was
paid in cash at completion. The contract includes warranties by certain of
the vendors (together the "Warrantors") in relation to the business and
assets of Demon. Claims under the warranties (other than those dealing with
tax) will be ineffectual to the extent that they are notified more than 24
months from the date of the contract
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and such claims would also be subject to financial limits. A tax
undertaking dated 30 April 1998 was also executed and delivered by the
Warrantors to ScottishPower Telecommunications Limited. Claims under the
tax undertaking and the tax warranties will be ineffectual to the extent
that they are notified more than 7 years from the date of the contract and
such claims would also be subject to financial limits. No individual
Warrantor can be required under the contract and/or the tax undertaking to
repay more than he received through the sale of his shares.
(iv) The contracts described as being available for inspection in the
ScottishPower Offering Circulars dated 4 November 1997 and 18 August 1998,
being a Trust Deed, a Programme Agreement (in the case of the 4 November
1997 Offering Circular) and an Agency Agreement each dated 4 November 1997
in connection with ScottishPower's $2 billion Debt Issuance Programme and
each pricing supplement and subscription agreement for notes that has been
issued by ScottishPower under such programme in the two years preceding the
publication of this document.
(v) The contracts described as being available for inspection in the
Offering Circular dated 6 November 1998, being a Supplemental Trust Deed, a
Supplemental Programme Agreement and a Supplemental Agency Agreement in
connection with the update of ScottishPower's $2 billion Debt Issuance
Programme and the increase in the programme limit to $4 billion and each
pricing supplement and subscription agreement for notes that has been
issued by ScottishPower under such programme in the two years preceding the
publication of this document.
(vi) An agreement (the "Sponsor's Agreement") dated 6 May 1999 and made
between New ScottishPower (1) ScottishPower (2) and Morgan Stanley (3),
whereby New ScottishPower has appointed Morgan Stanley to act as its
sponsor for the purpose of the application for Admission in respect of the
New Shares to be issued pursuant to the Scheme and the Merger. The
Sponsor's Agreement provides for the payment by New ScottishPower (or, if
the Scheme does not become effective or New ScottishPower fails to pay,
ScottishPower) of certain expenses incurred by Morgan Stanley in connection
with the Sponsor's Agreement and Admission, including legal fees and
printing and advertising expenses. The Sponsors' Agreement contains (i)
certain warranties by New ScottishPower and ScottishPower as to the
accuracy of the information contained in the Listing Particulars, and in
relation to other matters relating to the Group and its business; (ii) an
indemnity from New ScottishPower and, to the extent lawful, ScottishPower
in favour of Morgan Stanley; and (iii) certain undertakings from New
ScottishPower and ScottishPower relating, inter alia, to consultation with,
and the provision of information to, Morgan Stanley in its capacity as
sponsor. The Sponsor's Agreement also sets out certain circumstances in
which it will or may be terminated.
(b) Except for the Merger Agreement the only contracts, other than contracts
entered into in the ordinary course of business, which have been entered into
by any member of the PacifiCorp Group within the two years immediately
preceding the date of this document which are or may be material are as
follows:
(i) Stock Purchase Agreement dated 11 June 1997 between PacifiCorp
Holdings, PTI, Century Telephone Enterprises, Inc. ("Century"), and Century
Cellunet, Inc. for the sale and purchase of the stock of PTI, Pacific
Telecom Cellular, Inc, and Pacific Telecom Cellular of Alaska, Inc., as
amended. Pursuant to the Stock Purchase Agreement, Century acquired all of
the outstanding capital stock of PTI for $1.5 billion in cash and assumed
PTI's debt of approximately $713 million. PTI provided certain
representations and warranties in the Stock Purchase Agreement.
(ii) Stock Purchase Agreement between El Paso Field Services Company, a
Delaware corporation, as buyer, and TPC, as seller, dated 24 October 1997,
as amended, pursuant to which TPC sold all of the outstanding capital stock
of three TPC subsidiaries (TPC Gathering & Transmission Company, TPC
Services, Inc., and TPC Tomcat, Inc.) which collectively held its natural
gas gathering and processing systems for approximately $195 million in
cash. TPC provided certain representations and warranties in the Stock
Purchase Agreement.
(iii) Sale and Purchase Agreement between LNR Property Corporation, as
buyer, and Pacific Harbor Capital, Inc. ("PHC"), as seller, dated 18
February 1998, as amended pursuant to which, PHC agreed to sell its tax-
credit related investments in affordable housing for cash proceeds of
approximately $80 million and to assume debt of approximately $161 million.
PHC provided certain representations and warranties in the Sale and
Purchase Agreement.
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(iv) Stock Purchase Agreement dated 9 February 1999 between PacifiCorp
Holdings and NI Energy Services, Inc. ("NI") for the sale and purchase of
the stock of TPC. Pursuant to the Stock Purchase Agreement, NI purchased
all of the outstanding capital stock of TPC for approximately $150 million.
PacifiCorp Holdings provided certain representations and warranties in the
Stock Purchase Agreement.
14. Litigation
(a) ScottishPower Group
Manweb participates in the industry-wide Electricity Supply Pension Scheme.
Two other members of the scheme, National Power plc and National Grid plc,
have been the subject of legal proceedings in connection with the use of
surplus following an actuarial valuation at 31 March 1992 to fund early
retirement benefits. Manweb also applied surplus following that valuation and
the subsequent valuation at 31 March 1995 ((Pounds)6 million following the
1992 valuation and (Pounds)32 million following the 1995 valuation) for the
same purpose.
In a decision on 10 February 1999, the Court of Appeal decided that, without a
scheme amendment or trustee agreement, employers could not apply surplus
unilaterally to forgive an accrued liability. This could lead to employers
being required to make additional contributions to the scheme to meet that
liability. A further hearing is expected in May 1999 to clarify certain
aspects of the judgment, but it is expected that leave to appeal to the House
of Lords will be given and if an appeal is made, it is unlikely to be heard
before mid-2000.
There is a range of possible outcomes to the current National Grid litigation,
any of which could affect Manweb's own potential liability, if any, to
contribute to the scheme. If amendments can be made to the scheme to perfect
the past arrangements to use surplus, no employer contributions should be
required. If the courts in the National Grid case ultimately decide that
additional payments are due from employers to the scheme in respect of all or
any part of the surplus used since the 1992 valuation, Manweb may also be
required to make payments. However in this event two further points must be
determined before the ultimate cost to Manweb could be assessed: the effective
date for calculating the amounts due, and whether payments can be spread over
a number of years. Both these issues may affect significantly the ultimate
cost to Manweb.
No proceedings have been commenced against Manweb as at 27 April 1999 (being
the latest practicable date prior to the publication of this document) in
respect of the issues raised by the National Grid decisions.
Save as described above, there are no legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which
ScottishPower is aware) involving the ScottishPower Group which may have, or
have had, during the 12 months preceding the date of this document, a
significant effect on the ScottishPower Group's financial position.
(b) PacifiCorp Group
(i) On 9 October 1996, the Sierra Club (a non-profit, member-supported
public interest organisation that promotes conservation of the natural
environment) filed an action against PacifiCorp and the other joint owners
of Units 1 and 2 of the Craig Electric Generating Station in Colorado (the
"Station") under the citizen's suit provisions of the US Clean Air Act
alleging, based upon report from emissions monitors at the Station, that
over 14,000 violations of state and federal capacity standards have
occurred over a five-year period at Units 1 and 2 of the Station.
PacifiCorp has a 19.28% interest in Units 1 and 2 of the Station, which is
operated by Tri-State Generation and Transmission Association.
The action seeks injunctive relief requiring the defendants to operate the
Station in compliance with the applicable statutes and regulations, the
imposition of civil penalties, litigation costs, attorneys' fees and
mitigation. The US Clean Air Act provides for penalties of up to $27,500
per day for each violation, but the level of penalties imposed in any
particular instance is discretionary.
The complaint alleges that PacifiCorp and Public Service Company of
Colorado are responsible for the alleged violations beginning with the
second quarter of 1992, when they acquired their interests
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in the Station, and that the other owners are responsible for the alleged
violations during the entire period. The complaint alleges that there were
approximately 10,000 violations since the second quarter of 1992. On 18
March 1999, the district court issued its order regarding summary judgment
motions filed by the parties. The court ruled, among other things, that the
emission monitors may be used by the plaintiff to establish violations of
opacity standards, but that the plant owners are entitled to prove that the
reported information is flawed. A trial date has not yet been set.
PacifiCorp is unable to predict the level of penalties or other remedies
that may be imposed upon the joint owners of the Station or what portion of
such liability may ultimately be borne by PacifiCorp.
(ii) The PacifiCorp-operated Centralia plant, in which PacifiCorp owns a
47.5% interest, has been the subject of a series of lawsuits and regulatory
agency actions regarding emissions and visibility issues. In February 1998,
the Southwest Washington Air Pollution Control Authority ("SWAPCA") issued
a revised order that will require the Centralia plant to significantly
reduce SO\\2\\ and NOX emissions. Compliance with the new limits will
require the Centralia plant to install two scrubbers and low NOX burners at
a projected cost of $240 million. A private citizen has appealed the
decision asserting that it is not stringent enough. In addition, the
Northwest Environmental Advocates, an environmental citizen group, filed a
federal lawsuit against SWAPCA, the State of Washington and the US
Environmental Protection Agency alleging failure to enforce visibility
requirements throughout Washington, including requirements relating the
Centralia plant.
Save as described above, there are no legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which
ScottishPower or PacifiCorp is aware) involving the PacifiCorp Group which may
have, or have had, during the 12 months preceding the date of this document, a
significant effect on the PacifiCorp Group's financial position.
15. Significant change
There has been no significant change in the financial or trading position of
New ScottishPower since 31 March 1999, the date to which the Accountants'
Report extracts from which are set out in Section B of Part II of this
document was prepared. There has been no significant change in the financial
or trading position of the ScottishPower Group since 31 March 1999, the date
to which the latest financial statements of the ScottishPower Group, summary
information from which is set out in Section C of Part II, were prepared.
There has been no significant change in the financial or trading position of
the PacifiCorp Group since 31 December 1998, the date to which the last
audited consolidated financial statements of PacifiCorp, summary information
from which is set out in Section B of Part III of this document, were
prepared.
16. General
(a) The Merger values the PacifiCorp Common Stock at approximately
(Pounds)3.64 billion and each PacifiCorp Share at $19.37 ((Pounds)12.01) based
on the middle market quotation for a ScottishPower Share as quoted in the
Daily Official List, and on the fully diluted issued share capital of
PacifiCorp, on 27 April 1999 (being the latest practicable date prior to the
publication of this document).
(b) The cost and expenses of, and incidental to, the Merger and the Scheme
payable by New ScottishPower and ScottishPower are estimated to amount to
(Pounds)68 million excluding VAT, excluding stamp duty reserve tax payable by
PacifiCorp and excluding the cost to PacifiCorp of redeemimg Preferred Stock.
(c) The financial information relating to New ScottishPower and ScottishPower
set out in this document does not constitute statutory accounts within the
meaning of section 240 of the Act. No statutory accounts have been prepared
for New ScottishPower. Statutory accounts of ScottishPower for each of the
three financial years ended 31 March 1997, 1998 and 1999 have been prepared.
The auditors of ScottishPower (Coopers & Lybrand for the years ended 31 March
1997 and 1998 and PricewaterhouseCoopers for the year ended 31 March 1999)
have audited ScottishPower's consolidated accounts for such years and have
made reports under section 235 of the Act in respect of each set of statutory
accounts and each such report was unqualified and did not contain a statement
under section 237(2) or (3) of the Act. Statutory accounts of ScottishPower
for the years ended 31 March 1997 and 1998 have been, and those for the year
ended 31 March 1999 will be, delivered to the Registrar of Companies in
Scotland.
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New ScottishPower Summary Listing Particulars
17. Documents available for inspection
Copies of the following documents are available for inspection during usual
business hours on any weekday (Saturdays, Sundays and public holidays
excepted) at the offices of Freshfields, 65 Fleet Street, London EC4Y 1HS and
at New ScottishPower's registered office at 1 Atlantic Quay, Glasgow G2 8SP
until the Merger Date:
(a) the Listing Particulars;
(b) the Merger Circular;
(c) the Scheme Circular;
(d) the memorandum and articles of association of ScottishPower (as currently
in force, and as they will be following the proposed amendment at the
Scheme EGM);
(e) the memorandum and articles of association of New ScottishPower;
(f) the audited consolidated accounts of ScottishPower for the three financial
years ended 31 March 1997, 31 March 1998 and 31 March 1999;
(g) the audited consolidated accounts of PacifiCorp for the three financial
years ended 31 December 1996, 31 December 1997 and 31 December 1998;
(h) the US Prospectus;
(i) the letter from Morgan Stanley to ScottishPower dated 6 December 1998
giving its opinion that the Exchange Ratio is fair from a financial point
of view to ScottishPower;
(j) the Directors' service contracts referred to in paragraph 7(h) above and
the non-executive Directors' letters of appointment;
(k) the material contracts (including the Merger Agreement and the Amended and
Restated Merger Agreement) referred to in paragraph 13 above;
(l) consent letters from Morgan Stanley, PricewaterhouseCoopers and Deloitte &
Touche;
(m) a letter from PricewaterhouseCoopers regarding the summary of differences
between US GAAP and UK GAAP;
(n) a letter from PricewaterhouseCoopers regarding the pro forma financial
information;
(o) the accountants' report by PricewaterhouseCoopers on New ScottishPower an
extract from which is set out in Part III above;
(p) the Rules of the New ScottishPower Employee Share Schemes, the
ScottishPower Share Option Schemes, the Southern Water Sharesave Scheme,
the ScottishPower Long Term Incentive Plan and the Trust Deed and Rules of
the ScottishPower Trust Scheme;
(q) the Rules of the PacifiCorp Stock Plans.
Dated: 6 May 1999
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<PAGE>
New ScottishPower Summary Listing Particulars
Definitions
The following definitions apply throughout this document unless the context
requires otherwise:
"Act" the Companies Act 1985 (as amended)
"Admission" the admission to the Official List of the New
Shares
"Amended and Restated Merger the amended and restated agreement and plan of
Agreement" merger dated 6 December 1998 between New
ScottishPower, ScottishPower, PacifiCorp, NA
General Partnership, ScottishPower NA1 Limited
and ScottishPower NA2 Limited as amended on 29
January 1999 and 9 February 1999, and amended
and restated on 23 February 1999
"Appointment" the instruments appointing the holder or
appointee to be a water and sewerage
undertaker for the purposes of the Water
Industry Act
"Board" or "Directors" the board of directors of ScottishPower or,
following the Scheme becoming effective, of
New ScottishPower, as the context so requires
"business day" any day other than a Saturday or Sunday on
which banks are generally open for business in
Scotland, England and Wales
"Class Meeting" the separate general meeting of the
ScottishPower Shareholders to be held on 15
June 1999, notice of which is contained in the
Scheme Circular
"Combined Group" the ScottishPower Group as enlarged by the
Merger
"Competition Commission" the Competition Commission, formerly the
Monopolies and Mergers Commission
"Court" the Court of Session, Edinburgh
"Court Meeting" the meeting of ScottishPower Shareholders
convened pursuant to an order of the Court for
15 June 1999, notice of which is contained in
the Scheme Circular
"Daily Official List" the Daily Official List of the London Stock
Exchange
"Deposit Agreement" the agreement dated 18 December 1991 as
amended and restated on 4 September 1997
between ScottishPower, The Bank of New York
and the holders from time to time of
ScottishPower ADSs issued thereunder
"DGES"
the Director General of Electricity Supply
"DGWS"
the Director General of Water Services
"EU"
the European Union
"Exchange Ratio"
2.32 New Shares or 0.58 New ADSs for each
share of PacifiCorp Common Stock held as at
the Merger Date
"FERC"
the US Federal Energy Regulatory Commission
"the FPA"
the US Federal Power Act of 1935
"the Hart Scott-Rodino Act"
the Hart Scott-Rodino Antitrust Improvement
Act of 1976 and related rules and regulations
75
<PAGE>
New ScottishPower Summary Listing Particulars
"Listing Particulars" these listing particulars dated 6 May 1999
relating to New ScottishPower and the New
Shares prepared in accordance with the Listing
Rules
"Listing Rules" the listing rules of the London Stock
Exchange, made under section 142 of the
Financial Services Act 1986
"London Stock Exchange" London Stock Exchange Limited
"Manweb" Manweb plc
"Merger" the proposed merger with PacifiCorp, details
of which are set out in this document
"Merger Agreement" the agreement and plan of merger dated 6
December 1998 between ScottishPower,
PacifiCorp, NA General Partnership,
ScottishPower NA1 Limited and ScottishPower
NA2 Limited as amended by amendment agreements
dated 29 January 1999 and 9 February 1999 or
the Amended and Restated Merger Agreement, as
appropriate
"Merger Circular" the circular sent to ScottishPower
Shareholders dated 6 May 1999 containing
details of the Merger and the Notice of the
Merger EGM
"Merger Date" the date and time upon which the Merger
becomes effective
"Merger EGM" the extraordinary general meeting of
ScottishPower to be held on 15 June 1999,
notice of which is contained in the Merger
Circular
"MergerSub" MergerSub, a corporation to be incorporated
under Oregon law as a wholly owned subsidiary
of New ScottishPower
"Morgan Stanley " Morgan Stanley & Co. Limited
"New ADS"
an American Depositary Share of New
ScottishPower representing four New Shares or
an American Depositary Receipt evidencing such
American Depositary Share, as the context
requires
"New ScottishPower"
New Scottish Power plc
"New ScottishPower Articles"
the articles of association of New
ScottishPower
"New ScottishPower Employee
Share Schemes"
the New ScottishPower Sharesave Scheme and the
New ScottishPower Long Term Incentive Plan
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<PAGE>
New ScottishPower Summary Listing Particulars
"new ScottishPower Shares" new ordinary shares in ScottishPower to be
issued to New ScottishPower under the Scheme
"New ScottishPower Special the special rights non-voting redeemable
Share" preference share of (Pounds)1 in New
ScottishPower to be issued to the Special
Shareholder pursuant to the Scheme
"New Shares" ordinary shares of 50p each in the capital of
New ScottishPower
"NYSE" the New York Stock Exchange, Inc.
"Ofgas" The Office of Gas Supply
"OFFER" the Office of Electricity Regulation
"Official List" the Official List of the London Stock Exchange
"OFTEL" the Office of Telecommunications Regulations
"OFWAT" the Office of Water Regulation
"PacifiCorp" PacifiCorp, an Oregon corporation
"PacifiCorp Common holders of PacifiCorp Common Stock
Shareholders"
"PacifiCorp Common Stock" shares of PacifiCorp common stock
"PacifiCorp Group" PacifiCorp and its subsidiaries
"PacifiCorp Holdings" PacifiCorp Group Holdings Company, a wholly
owned subsidiary of PacifiCorp and a holding
company for various members of the PacifiCorp
Group
"PacifiCorp Preferred holders of PacifiCorp Preferred Stock
Shareholders"
"PacifiCorp Preferred Stock" the 5.00% Preferred Stock, the Serial
or "Preferred Stock" Preferred Stock and the No Par Serial
Preferred Stock of PacifiCorp
"PacifiCorp Record Date" 30 April 1999
"PacifiCorp Shareholders" PacifiCorp Common Shareholders and PacifiCorp
Preferred Shareholders
"PacifiCorp Stock Plans" the PacifiCorp Stock Incentive Plan, the
PacifiCorp Long Term Incentive Plan and the
PacifiCorp Non-Employee Directors Stock
Compensation Plan
"Powercor"
Powercor Australia Ltd, an indirect wholly
owned subsidiary of PacifiCorp
"Proposed Directors"
Keith McKennon, Nolan Karras and Robert Miller
"Record Date"
the business day immediately preceding the
Scheme Date
"Redeemable Shares"
redeemable shares of (Pounds)1 each in New
ScottishPower
"Registrar of Companies"
the Registrar of Companies in Edinburgh
"Scheme" or "Scheme of
Arrangement"
the scheme of arrangement pursuant to Section
425 of the Act set out in the Scheme Circular
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<PAGE>
New ScottishPower Summary Listing Particulars
"Scheme Circular" the circular sent to ScottishPower
Shareholders dated 6 May 1999 containing the
Scheme and Notices of the Court Meeting and
the Scheme EGM
"Scheme Date" the date on which the Scheme becomes
effective, expected to be 30 July 1999
"Scheme EGM" the extraordinary general meeting of
ScottishPower Shareholders to be held on 15
June 1999, notice of which is contained in the
Scheme Circular
"Scheme Record Date" the business day immediately preceding the
date of the hearing of the Court to sanction
the Scheme (or, if the hearing continues
beyond one day, the business day immediately
preceding the final day of the hearing)
"Scheme Shareholder" a holder of ScottishPower Shares as at 5.30
p.m. on the Record Date
"Scheme Shares" all ScottishPower Shares in issue at 5.30 p.m.
on the Scheme Record Date
"ScottishPower" Scottish Power plc
"ScottishPower ADS" an American Depositary Share representing four
ScottishPower Shares, or an American
Depositary Receipt evidencing such American
Depositary Share, as the context requires
"ScottishPower Articles" the articles of association of ScottishPower
"ScottishPower Group" or ScottishPower (or following the Scheme
"Group" becoming effective New ScottishPower) and its
subsidiary and associated undertakings
"ScottishPower Share Option the Scottish Power plc Sharesave Scheme and
Schemes" the Scottish Power plc Executive Share Option
Scheme
"ScottishPower Share
Schemes" the ScottishPower Share Option Schemes, the
ScottishPower Long Term Incentive Plan, the
ScottishPower Qualifying Employee Trust and
the Southern Water Sharesave Scheme
"ScottishPower Shareholders" holders of ScottishPower Shares
"ScottishPower Shares" or ordinary shares of 50p each in ScottishPower
"Shares"
"ScottishPower Special
Share"
the special rights non-voting redeemable
preference share of (Pounds)1 in ScottishPower
"ScottishTelecom"
ScottishPower Telecommunications Limited
"SEC"
the United States Securities and Exchange
Commission
"Secretary of State"
the Secretary of State for Scotland
"Southern Water"
Southern Water plc
"Southern Water Services"
Southern Water Services Limited
"Special Shareholder"
the holder of the ScottishPower Special Share
or the New ScottishPower Special Share as the
context so requires (currently the Secretary
of State)
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<PAGE>
New ScottishPower Summary Listing Particulars
"UK Regulator" each of the DGES, the DGWS, the Director
General of Gas Supply and the Director General
of Telecommunications
"United Kingdom" or "UK" the United Kingdom of Great Britain and
Northern Ireland
"United States" or "US" the United States of America, its territories
and possessions, any state of the United
States of America and the District of Columbia
"US Prospectus" the proxy statement/prospectus included in the
Form F-4 filed with the SEC by New
ScottishPower and ScottishPower and
distributed to PacifiCorp Shareholders to seek
their approval of the Merger and certain other
matters
"Water Industry Act" the Water Industry Act 1991 (as amended)
79
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Paragraph 159 of the Articles of Association of New Scottish Power plc and
paragraph 159 of the Articles of Association of Scottish Power plc provide as
follows:
Subject to the provisions of and so far as may be consistent
with the Statutes, but without prejudice to any indemnity to
which such person may otherwise be entitled, every Director,
auditor, Secretary, other officer or employee of the Company
shall be entitled to be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and
liabilities incurred by him in the actual or purported
execution and/or discharge of his duties and/or the exercise
or purported exercise of his powers and/or otherwise in
relation to or in connection with his duties, powers or office
including (without prejudice to the generality of the
foregoing) any liability incurred by him in defending any
proceedings, civil or criminal, which related to anything done
or omitted or alleged to have been done or omitted by him as
an officer, auditor or employee of the Company and in which
decree or judgment is given in his favour (or the proceedings
are otherwise disposed of without any finding or admission of
any material breach of duty on his part) or in which he is
acquitted or in connection with any application under any
statute for relief from liability in respect of any such act
or omission in which relief is granted to him by the Court.
Section 310 of the Companies Act 1985 (as amended by Section 137 of the
Companies Act 1989) provides as follows:
310. Provisions exempting officers and auditors from liability
(1) This section applies to any provision, whether contained in a
company's articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer or
not) employed by the company as auditor from, or indemnifying him against,
any liability which by virtue of any rule of law would otherwise attach to
him in respect of any negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the company.
(2) Except as provided by the following subsection, any such provision is
void.
(3) This section does not prevent a company
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability; or
(b) from indemnifying any such officer or auditor against any
liability incurred by him
(i) in defending any proceedings (whether civil or criminal) in
which judgment is given in his favour or he is acquitted, or
(ii) in connection with any application under Section 144(3) or
(4) (acquisition of shares by innocent nominee) or Section 727
(general power to grant relief in case of honest and reasonable
conduct) in which relief is granted to him by the court.
Section 727 of the Companies Act 1985 provides as follows:
727. Power of court to grant relief in certain circumstances:
(1) If in any proceedings for negligence, default, breach of duty or
breach of trust against an officer of a company or a person employed by a
company as auditor (whether he is or is not an officer of the
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<PAGE>
company) it appears to the court hearing the case that that officer or
person is or may be liable in respect of the negligence, default, breach of
duty or breach of trust, but that he has acted honestly and reasonably, and
that having regard to all the circumstances of the case (including those
connected with his appointment) he ought fairly to be excused for the
negligence, default, breach of duty or breach of trust, that court may
relieve him, either wholly or partly, from his liability on such terms as
the court thinks fit.
(2) If any such officer or person as above mentioned has reason to
apprehend that any claim will or might be made against him in respect of
any negligence, default, breach of duty or breach of trust, he may apply to
the court for relief; and the court on the application has the same power
to relieve him as under this section it would have had if it had been a
court before which proceedings against that person for negligence, default,
breach of duty or breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a
judge with a jury, the judge, after hearing the evidence, may, if he is
satisfied that the defendant or defender ought in pursuance of that
subsection to be relieved either in whole or in part from the liability
sought to be enforced against him, withdraw the case in whole or in part
from the jury and forthwith direct judgment to be entered for the defendant
of defender on such terms as to costs or otherwise as the judge may think
proper.
Scottish Power plc and New Scottish Power plc have obtained insurance
policies which provide for the indemnification of their respective directors
and officers in the event they are found liable for "Wrongful Acts." A
"Wrongful Act" is defined in the insurance policies as:
Any actual or alleged breach of duty, breach of trust,
neglect, error, misstatement, misleading statement, omission,
breach of warranty of authority or other act by the directors
or officers in their respective capacities as a director or
officer of the company or as a director or officer of any
outside entity or any matter claimed against them solely
because of their status as a director or officer of the
company.
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<PAGE>
Item 21. Exhibits and Financial Statements and Schedules.
(a) The following Exhibits are filed herewith unless otherwise indicated:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
2(a) Agreement and Plan of Merger, dated as of December 6, 1998, as
amended as of January 29, 1999 and February 9, 1999, by and
among Scottish Power plc, NA General Partnership, Scottish
Power NA1 Limited, Scottish Power NA2 Limited and PacifiCorp
(included as Annex A to the proxy statement/prospectus which
is part of this registration statement).
2(b) Amended and Restated Agreement and Plan of Merger dated as of
February 23, 1999, by and among New ScottishPower plc,
Scottish Power plc, NA General Partnership, Scottish Power NA1
Limited, Scottish Power NA2 Limited and PacifiCorp (included
as Annex B to the proxy statement/prospectus which is part of
this registration statement).
3(i)(a) Memorandum and Articles of Association of New Scottish Power
plc.
3(i)(b) Memorandum and Articles of Association of Scottish Power plc
(incorporated herein by reference to Exhibit 1a of the Annual
Report on Form 20-F for the fiscal year ended March 31, 1998
(File No. 1-14676)).
4(a) Form of Amended and Restated Deposit Agreement among New
Scottish Power plc, Scottish Power plc, The Bank of New York,
as depositary and the holders from time to time of New
Scottish Power American Depositary Receipts and/or Scottish
Power American Depositary Receipts issued thereunder
(incorporated herein by reference to Exhibit A of the
Registration Statement on Form F-6 filed on the date hereof).
4(b) See Exhibits 3(i)(a) and 3(i)(b) for provisions of the
Memoranda and Articles of Association of New Scottish Power
plc and Scottish Power plc defining rights of holders of New
Scottish Power ordinary shares and Scottish Power ordinary
shares.
5 Opinion of Shepherd & Wedderburn WS regarding validity of
securities being registered.
8(a) Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding
United States tax consequences of the merger if the scheme of
arrangement is adopted.
8(b) Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding
United States tax consequences of the merger if the scheme of
arrangement is not adopted.
8(c) Opinion of Stoel Rives LLP regarding United States tax
consequences of the merger if the scheme of arrangement is
adopted.
8(d) Opinion of Stoel Rives LLP regarding United States tax
consequences of the merger if the scheme of arrangement is
not adopted.
8(e) Opinion of LeBoeuf, Lamb, Greene & MacRae LLP regarding
United States tax consequences of the merger.
21 Subsidiaries (incorporated herein by reference to the Annual
Report on Form 20-F for the fiscal year ended March 31, 1998
(File No. 1-4676)).
23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Coopers & Lybrand.
23(c) Consent of PricewaterhouseCoopers.
23(d) Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
the opinions filed as Exhibits 8(a) and 8(b) to this
registration statement and incorporated herein by reference).
23(e) Consent of Stoel Rives LLP (included in the opinions filed as
Exhibits 8(c) and 8(d) to this registration statement and
incorporated herein by reference).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
23(f) Consent of LeBoeuf, Lamb, Green & MacRae LLP (included in the
opinion filed as Exhibit 8(e) to this registration statement and
incorporated herein by reference).
23(g) Consent of Morgan Stanley & Co. Limited.
23(h) Consent of Salomon Smith Barney Inc.
24 Powers of Attorney (included in the signature page of this
registration statement).
99(a) Opinion of Morgan Stanley & Co. Limited (included as Annex D to the
proxy statement/prospectus which is part of this registration
statement).
99(b) Opinion of Salomon Smith Barney Inc. (included as Annex C to the
proxy statement/prospectus which is part of this registration
Statement).
99(c) Form of letter from solicitation agents to brokers, dealers,
commercial banks, trust companies and other nominees regarding the
solicitation of proxies from holders of PacifiCorp preferred stock.
99(d) Form of letter from brokers, dealers, commercial banks, trust
companies and other nominees to their clients.
99(e) Forms of PacifiCorp's proxy cards.
</TABLE>
(b) Financial Statement Schedules. Schedules are omitted because they are
either not required, are not applicable or because equivalent information
has been included in the financial statements, the notes thereto or
elsewhere herein.
(c) Reports, Opinions and Appraisals. Omitted because they are included as
Annex B and Annex C to the proxy statement/prospectus which is part of
this registration statement.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE>
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19 of Regulation S-X at
the start of any delayed offering or throughout a continuous offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement will be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
(c)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question 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.
(e) The undersigned registrant hereby undertakes: (i) to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means; and (ii) to arrange or provide for a facility in
the United States for the purpose of responding to such requests. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the city of Glasgow, Country of
Scotland on May 5, 1999.
NEW SCOTTISH POWER plc
(Registrant)
/s/ Andrew Mitchell
By: ________________________________
Name: Andrew Mitchell
Title: Company Secretary
Each person whose signature appears below hereby constitutes and appoints
each director his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities to sign any and all amendments, including post-effective
amendments, and supplements to this registration statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby grants to such
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
following capacities on May 5, 1999.
Signature Title
/s/ Charles Murray Stuart Chairman of the Board
------------------------------------- and Director
Charles Murray Stuart CBE
/s/ Ian Robinson Chief Executive
------------------------------------- Officer and Director
Ian Robinson (Principal Executive
Officer)
/s/ Ian Simon MacGregor Russell Deputy Chief Executive
------------------------------------- and Finance Director
Ian Simon MacGregor Russell (Principal Financial
and Accounting
Officer)
/s/ Kenneth Leslie Vowles Director
-------------------------------------
Kenneth Leslie Vowles
/s/ Duncan Whyte Director
-------------------------------------
Duncan Whyte
/s/ Charles Berry Director
-------------------------------------
Charles Berry
II-6
<PAGE>
Signature Title
/s/ Alan Richardson Director
-------------------------------------
Alan Richardson
/s/ Ewen Cameron Stewart Macpherson Director
-------------------------------------
Ewen Cameron Stewart Macpherson
/s/ John Parnaby Director
-------------------------------------
John Parnaby CBE
/s/ Peter Gregson Director
-------------------------------------
Sir Peter Gregson
/s/ Mair Barnes Director
-------------------------------------
Mair Barnes
/s/ Donald J. Puglisi Authorized U.S.
------------------------------------- Representative
Puglisi & Associates
By: Donald J. Puglisi
Title: Managing Director
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the city of Glasgow, Country of
Scotland on May 5, 1999.
Scottish Power plc
(Registrant)
/s/ Andrew Mitchell
By: _________________________________
Name: Andrew Mitchell
Title: Company Secretary
Each person whose signature appears below hereby constitutes and appoints
each director his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities to sign any and all amendments, including post-effective
amendments, and supplements to this registration statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby grants to such
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
following capacities on May 5, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Charles Murray Stuart Chairman of the Board
___________________________________________ and Director
Charles Murray Stuart CBE
/s/ Ian Robinson Chief Executive Officer
___________________________________________ and Director (Principal
Ian Robinson Executive Officer)
/s/ Ian Simon MacGregor Russell Deputy Chief Executive
___________________________________________ and Finance Director
Ian Simon MacGregor Russell (Principal Financial
and Accounting Officer)
/s/ Kenneth Leslie Vowles Director
___________________________________________
Kenneth Leslie Vowles
/s/ Duncan Whyte Director
___________________________________________
Duncan Whyte
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Charles Berry Director
___________________________________________
Charles Berry
/s/ Alan Richardson Director
___________________________________________
Alan Richardson
/s/ Ewen Cameron Stewart Macpherson Director
___________________________________________
Ewen Cameron Stewart Macpherson
/s/ John Parnaby Director
___________________________________________
John Parnaby CBE
/s/ Peter Gregson Director
___________________________________________
Sir Peter Gregson
/s/ Mair Barnes Director
___________________________________________
Mair Barnes
/s/ Donald J. Puglisi Authorized U.S. Representative
___________________________________________
Puglisi & Associates
</TABLE>
<TABLE>
<S> <C>
By: Donald J. Puglisi
Title: Managing Director
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Pagination
by
Sequential
Exhibit Numbering
No. Description System
------- ----------- ----------
<C> <S> <C>
2(a) Agreement and Plan of Merger, dated as of December 6,
1998, as amended as of January 29, 1999 and February 9,
1999, by and among Scottish Power plc, NA General
Partnership, Scottish Power NA1 Limited, Scottish Power
NA2 Limited and PacifiCorp (included as Annex A to the
proxy statement/prospectus which is part of this
registration statement).
2(b) Amended and Restated Agreement and Plan of Merger dated
as of February 23, 1999, by and among New ScottishPower
plc, Scottish Power plc, NA General Partnership,
Scottish Power NA1 Limited, Scottish Power NA2 Limited
and PacifiCorp (included as Annex B to the proxy
statement/prospectus which is part of this registration
statement).
3(i)(a) Memorandum and Articles of Association of New Scottish
Power plc.
3(i)(b) Memorandum and Articles of Association of Scottish
Power plc (incorporated herein by reference to Exhibit
1a of the Annual Report on Form 20-F for the fiscal
year ended March 31, 1998 (File No. 1-14676)).
4(a) Form of Amended and Restated Deposit Agreement among
New Scottish Power plc, Scottish Power plc, The Bank
of New York, as depositary and the holders from time
to time of New Scottish Power American Depositary
Receipts and/or Scottish Power American Depositary
Receipts issued thereunder (incorporated herein by
reference to Exhibit A of the Registration Statement
on Form F-6 filed on the date hereof).
4(b) See Exhibits 3(i)(a) and 3(i)(b) for provisions of the
Memoranda and Articles of Association of New Scottish
Power plc and Scottish Power plc defining rights of
holders of New Scottish Power ordinary shares and
Scottish Power ordinary shares.
5 Opinion of Shepherd & Wedderburn WS regarding validity
of securities being registered.
8(a) Opinion of Milbank, Tweed, Hadley & McCloy LLP
regarding United States tax consequences of the merger
if the scheme of arrangement is adopted.
8(b) Opinion of Milbank, Tweed, Hadley & McCloy LLP
regarding United States tax consequences of the merger
if the scheme of arrangement is not adopted.
8(c) Opinion of Stoel Rives LLP regarding United States tax
consequences of the merger if the scheme of
arrangement is adopted.
8(d) Opinion of Stoel Rives LLP regarding United States tax
consequences of the merger if the scheme of
arrangement is not adopted.
8(e) Opinion of LeBoeuf, Lamb, Greene & MacRae LLP
regarding United States tax consequences of the
merger.
21 Subsidiaries (incorporated herein by reference to the
Annual Report on Form 20-F for the fiscal year ended
March 31, 1998 (File No. 1-4676)).
23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Coopers & Lybrand.
23(c) Consent of PricewaterhouseCoopers.
23(d) Consent of Milbank, Tweed, Hadley & McCloy LLP
(included in the opinions filed as Exhibits 8(a) and
8(b) to this registration statement and incorporated
herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pagination
by
Sequential
Exhibit Numbering
No. Description System
------- ----------- ----------
<C> <S> <C>
23(e) Consent of Stoel Rives LLP (included in the opinions
filed as Exhibits 8(c) and 8(d) to this registration
statement and incorporated herein by reference).
23(f) Consent of LeBoeuf, Lamb, Green & MacRae LLP (included
in the opinion filed as Exhibit 8(e) to this
registration statement and incorporated herein by
reference).
23(g) Consent of Morgan Stanley & Co. Limited.
23(h) Consent of Salomon Smith Barney Inc.
24 Powers of Attorney (included in the signature page of
this registration statement).
99(a) Opinion of Morgan Stanley & Co. Limited (included as
Annex D to the proxy statement/prospectus which is part
of this registration statement).
99(b) Opinion of Salomon Smith Barney Inc. (included as Annex
C to the proxy statement/prospectus which is part of
this registration Statement).
99(c) Form of letter from solicitation agents to brokers,
dealers, commercial banks, trust companies and other
nominees regarding the solicitation of proxies from
holders of PacifiCorp preferred stock.
99(d) Form of letter from brokers, dealers, commercial banks,
trust companies and other nominees to their clients.
99(e) Forms of PacifiCorp's proxy cards.
</TABLE>
<PAGE>
Exhibit 3(i)(a)
THE COMPANIES ACTS 1985 to 1989
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF NEW SCOTTISH POWER plc
1. The Company's name is NEW SCOTTISH POWER plc
2. The Company is to be a public company.
3. The Company's registered office is to be situated in Scotland.
4. The Company's objects are:-
4.1.1 To carry on the business of a holding company in all its branches,
and to acquire by purchase, lease, concession, grant, licence or
otherwise such businesses, options, rights, privileges, lands,
buildings, leases, underleases, stocks, shares, debentures,
debenture stock, bonds, obligations, securities, reversionary
interests, annuities, policies of assurance and other property and
rights and interests in property as the Company shall deem fit and
generally to hold, manage, develop, lease, sell or dispose of the
same; and to vary any of the investments of the Company, to act as
trustees of any deeds constituting or securing any debentures,
debenture stock or other securities or obligations; to enter into,
assist, or participate in financial, commercial, mercantile,
industrial and other transactions, undertakings and businesses of
every description, and to establish, carry on, develop and extend
the same or sell, dispose of or otherwise turn the same to account,
and to co-ordinate the policy and administration of any companies of
which this Company is a member or which are in any manner controlled
by, or connected with the Company, and to carry on all or any of the
businesses of capitalists, trustees, financiers, financial agents,
company promoters, bill discounters, insurance brokers and agents,
mortgage brokers, rent and debt collectors, stock and share brokers
and dealers and commission and general agents, merchants and
traders; and to manufacture, buy, sell, maintain, repair and deal in
plant, machinery, tools, articles and things of all kinds capable of
being used for the purposes of the above-mentioned businesses
<PAGE>
or any of them, or likely to be required by customers of or persons
having dealings with the Company.
4.1.2 To carry on any other trade or business whatever which can in the
opinion of the board of directors be advantageously carried on in
connection with or ancillary to the businesses.
4.2 To purchase or by any other means acquire and take options over
any property whatever, and any rights or privileges of any kind
over or in respect of any property.
4.3 To apply for, register, purchase, or by other means acquire and
protect, prolong and renew, whether in the United Kingdom or
elsewhere, any trade marks, patents, copyrights, trade secrets,
or other intellectual property rights, licences, secret
processes, designs, protections and concessions and to disclaim,
alter, modify, use and turn to account and to manufacture under
or grant licences or privileges in respect of the same, and to
expend money in experimenting upon, testing and improving any
patents, inventions or rights which the Company may acquire or
propose to acquire.
4.4 To acquire or undertake the whole or any part of the business,
goodwill, and assets of any person, firm, or company carrying on
or proposing to carry on any of the businesses which the Company
is authorised to carry on and as part of the consideration for
such acquisition to undertake all or any of the liabilities of
such person, firm or company, or to acquire an interest in,
amalgamate with, or enter into partnership or into any
arrangement for sharing profits, or for co-operation, or for
mutual assistance with any such person, firm or company, or for
subsidising or otherwise assisting any such person, firm or
company, and to give or accept, by way of consideration for any
of the acts or things aforesaid or property acquired, any shares,
debentures, debenture stock or securities that may be agreed
upon, and to hold and
-2-
<PAGE>
retain, or sell, mortgage and deal with any shares, debentures,
debenture stock or securities so received.
4.5 To improve, manage, construct, repair, develop, exchange, let on
lease or otherwise, mortgage, charge, sell, dispose of, turn to
account, grant licences, options, rights and privileges in
respect of, or otherwise deal with all or any part of the
property and rights of the Company.
4.6 To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined
and to hold or otherwise deal with any investments made.
4.7 To lend and advance money or give credit an any terms and with or
without security to any person, firm or company (including
without prejudice to the generality of the foregoing any holding
company, subsidiary or fellow subsidiary of, or any other company
associated in any way with, the Company), to enter into
guarantees, contracts of indemnity and suretyships of all kinds,
to receive money on deposit or loan upon any terms, and to secure
or guarantee in any manner and upon any terms the payment of any
sum of money or the performance of any obligation by any person,
firm or company (including without prejudice to the generality of
the foregoing any such holding company, subsidiary, fellow
subsidiary or associated company as aforesaid).
4.8 To borrow and raise money in any manner and to secure the
repayment of any money borrowed, raised or owing by mortgage,
charge, standard security, lien or other security upon the whole
or any part of the Company's property or assets (whether present
or future), including its uncalled capital, and also by a similar
mortgage, charge, standard security,
-3-
<PAGE>
lien or security to secure and guarantee the performance by the
Company of any obligation or liability it may undertake or which
may become binding on it.
4.9 To draw, make, accept, endorse, discount, negotiate, execute and
issue cheques, bills of exchange, promissory notes, bills of
lading, warrants, debentures, and other negotiable or
transferable instruments.
4.10 To apply for, promote, and obtain any Act of Parliament, order,
or licence of the Department of Trade Or other authority for
enabling the Company to carry any of its objects into effect, or
for effecting any modification of the Company's constitution, or
for any other purpose which may seem calculated directly or
indirectly to promote the Company's interests, and to oppose any
proceedings or applications which may seem calculated directly or
indirectly to prejudice the Company's interests.
4.11 To enter into any arrangements with any government or authority
(supreme, municipal, local, or otherwise) that may seem conducive
to the attainment of the Company's objects or any of them, and to
obtain from any such government or authority any charters,
decrees, rights, privileges or concessions which the Company may
think desirable and to carry out, exercise, and comply with any
such charters, decrees, rights, privileges, and concessions.
4.12 To subscribe for, take, purchase, or otherwise acquire, hold,
sell, deal with and dispose of, place and underwrite shares,
stocks, debentures, debenture stocks, bonds, obligations or
securities issued or guaranteed by any other company constituted
or carrying on business in any part of the world, and debentures,
debenture stocks, bands, obligations or
-4-
<PAGE>
securities issued or guaranteed by any government or authority,
municipal, local or otherwise, in any part of the world.
4.13 To control, manage, finance, subsidise, co-ordinate or otherwise
assist any company or companies in which the Company has a direct
or indirect financial interest, to provide secretarial,
administrative, technical, commercial and other services and
facilities of all kinds for any such company or companies and to
make payments by way of subvention or otherwise and any other
arrangements which may seem desirable with respect to any
business or operations of or generally with respect to any such
company or companies.
4.14 To promote any other company for the purpose of acquiring the
whole or any part of the business or property or undertaking or
any of the liabilities of the Company, or of undertaking any
business or operations which may appear likely to assist or
benefit the Company or to enhance the value of any property or
business of the Company, and to place or guarantee the placing
of, underwrite, subscribe for, or otherwise acquire all or any
part of the shares or securities of any such company as
aforesaid.
4.15 To sell or otherwise dispose of the whole or any part of the
business or property of the Company, either together or in
portions, for such consideration as the Company may think fit,
and in particular for shares, debentures, or securities of any
company purchasing the same.
4.16 To act as agents or brokers and as trustees for any person, firm
or company, and to undertake and perform sub-contracts.
-5-
<PAGE>
4.17 To remunerate any person, firm or company rendering services to
the Company either by cash payment or by the allotment of shares
or other securities of the Company credited as paid up in full or
in part or otherwise as may be thought expedient.
4.18 To distribute among the members of the Company in kind any
property of the Company of whatever nature.
4.19 To pay all or any expenses incurred in connection with the
promotion, formation and incorporation of the Company, or to
contract with any person, firm or company to pay the same, and to
pay commissions to brokers and others for underwriting, placing,
selling, or guaranteeing the subscription of any shares or other
securities of the Company.
4.20 To support and subscribe to any charitable or public object and
to support and subscribe to any institution, society, or club
which may be for the benefit of the Company or its directors or
employees, or may be connected with any town or place where the
Company carries on business; to give or award pensions,
annuities, gratuities, and superannuation or other allowances or
benefits or charitable aid and generally to provide advantages,
facilities and services for any persons who are or have been
directors of, or who are or have been employed by, or who are
serving or have served the Company, or any company which is a
subsidiary of the Company or the holding company of the Company
or a fellow subsidiary of the Company or the predecessors in
business of the Company or of any such subsidiary, holding or
fellow subsidiary company and to the wives, widows, children and
other relatives and dependants of such persons; to make payments
towards insurance including insurance for any director, officer
or auditor against any liability in respect of any negligence,
default, breach of duty or breach of trust (so far as permitted
by law); and to set up, establish, support and maintain
superannuation and other
-6-
<PAGE>
funds or schemes (whether contributory or non-contributory) for
the benefit of any of such persons and of their wives, widows,
children and other relatives and dependants; and to set up,
establish, support and maintain profit sharing or share purchase
schemes for the benefit of any of the employees of the Company or
of any such subsidiary, holding or fellow subsidiary company and
to lend money to any such employees or to trustees on their
behalf to enable any such schemes to be established or
maintained.
4.21 Subject to and in accordance with the provisions of the Act (if
and so far as such provisions shall be applicable) to give,
directly or indirectly, financial assistance for the acquisition
of shares or other securities of the Company or of any other
company or for the reduction or discharge of any liability
incurred in respect of such acquisition.
4.22 To procure the Company to be registered or recognised in any
part of the world.
4.23 To do all or any of the things or matters aforesaid in any part
of the world and either as principals, agents, contractors or
otherwise, and by or through agents, brokers, sub-contractors or
otherwise and either alone or in conjunction with others.
4.24 To do all such other things as may be deemed incidental or
conducive to the attainment of the Company's objects or any of
them.
4.25 AND so that:-
4.25.1 None of the objects set forth in any sub-clause of this clause
shall be restrictively construed but the widest interpretation
shall be given to each such object, and none of such objects
shall, except where the context expressly so requires, be in
any way limited or restricted by reference to or inference
from any other object or objects set forth in
-7-
<PAGE>
such sub-clause, or by reference to or inference from the
terms of any other sub-clause of this clause, or by reference
to or inference from the name of the Company.
4.25.2 None of the sub-clauses of this clause and none of the objects
therein specified shall be deemed subsidiary or ancillary to
any of the objects specified in any other such sub-clause, and
the Company shall have as full a power to exercise each and
every one of the objects specified in each sub-clause of this
clause as though each such sub-clause contained the objects of
a separate Company.
4.25.3 The word "company" in this clause, except where used in
reference to the Company, shall be deemed to include any
partnership or other body of persons, whether incorporated or
unincorporated and whether domiciled in the United Kingdom or
elsewhere.
4.25.4 In this clause the expression "the Act" means the Companies
Act 1985, but so that any reference in this clause to any
provision of the Act shall be deemed to include a reference
to any statutory modification or re-enactment of that
provision for the time being in force.
5. The liability of the members is limited.
6. The Company's share capital is (Pounds)50,000 divided into 50,000 shares of
(Pounds)1 each./1/
- --------------------------
/1/ On 22 February 1999 the Company's share capital was increased to
(Pounds)99,998 by the creation of 49,998 redeemable shares of (Pounds)1 each.
-8-
<PAGE>
THE COMPANIES ACTS 1985 AND 1989
========================================
ARTICLES OF ASSOCIATION
of
NEW SCOTTISH POWER PLC
As amended by a special resolution passed
on 29 April 1999
========================================
Company Number 193794
Incorporated on 19 February 1999
<PAGE>
<TABLE>
<CAPTION>
Clause Page
- ------ ----
<S> <C>
PRELIMINARY.........................................................................1
Non-application of statutory regulations..................................1
Definitions...............................................................1
Interpretation............................................................4
BUSINESS............................................................................6
Business activities.......................................................6
CAPITAL.............................................................................6
Share capital.............................................................6
Redeemable shares and shares with special rights..........................6
Uncertificated shares.....................................................7
Not separate class of shares..............................................7
Exercise of Company's entitlements in respect
of uncertificated shares.................................................7
The Redeemable Shares.....................................................8
THE SPECIAL SHARE...................................................................9
Issue, holding and transfer...............................................9
Variation of rights of the Special Share..................................9
Entitlement to receive notice............................................11
Participation in capital.................................................11
Redemption...............................................................11
VARIATION OF CLASS RIGHTS..........................................................11
Method of varying class rights...........................................11
When class rights deemed to be varied....................................12
ALTERATION OF CAPITAL..............................................................12
Increase in capital......................................................12
New shares...............................................................12
Alterations permitted by ordinary resolution.............................13
Fractions arising........................................................13
Power to purchase own shares.............................................13
Power to reduce capital..................................................14
SHARES.............................................................................14
Allotment................................................................14
Commissions..............................................................14
Renunciation.............................................................14
Interests not recognised.................................................14
Trusts may be recognised.................................................15
Issue of share warrants to bearer........................................15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Conditions of issue......................................................15
No right in relation to share............................................16
CERTIFICATES.......................................................................16
Authentication and form of certificates..................................16
Evidence of title to securities..........................................16
Members' rights to certificates..........................................16
Transfer of a part.......................................................17
Cancellation and replacement of certificates.............................17
CALLS ON SHARES....................................................................18
Power to make calls......................................................18
Time when call made......................................................18
Liability of and receipts by joint holders...............................18
Interest payable.........................................................18
Deemed calls.............................................................19
Differentiation in calls.................................................19
Payments of calls in advance.............................................19
FORFEITURE, SURRENDER AND LIEN.....................................................19
Notice requiring payment of call on default..............................19
Content of notice........................................................20
Forfeiture for non-compliance............................................20
Notice of forfeiture.....................................................20
Annulment of forfeiture..................................................20
Sale of forfeited shares.................................................20
Extinction of rights.....................................................21
Company to have lien on shares...........................................21
Enforcement of lien by sale..............................................22
Application of proceeds..................................................22
Giving effect to the sale................................................22
TRANSFER OF SHARES.................................................................23
Form and execution of transfers..........................................23
Suspension of registration...............................................23
Refusal to register......................................................23
Requirements for registration of transfer................................23
Notice of refusal to register............................................24
Retention of transfers...................................................24
No fee payable for registration of transfers.............................24
Renunciations recognised and new transfer procedures.....................24
DESTRUCTION OF DOCUMENTS...........................................................24
Permitted times for destruction..........................................24
Presumptions as to validity..............................................25
TRANSMISSION OF SHARES.............................................................26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Transmission.............................................................26
Registration on death, bankruptcy, etc...................................26
Elections required.......................................................26
Rights of persons entitled by transmission...............................27
DISCLOSURE OF INTERESTS IN SHARES..................................................27
Interpretation of and definitions for Article 50.........................27
Disenfranchisement.......................................................28
Service of notices on non-members........................................29
Service of notices on an ADR Depositary..................................29
Cessation of disenfranchisement..........................................29
Conversion of uncertificated shares......................................29
LIMITATIONS ON SHAREHOLDINGS.......................................................30
Limitation to less than 15% of voting capital............................30
Definitions for Article 51...............................................30
Extension of statutory disclosure requirements...........................33
Non-application of criminal sanctions....................................33
Disposal notices.........................................................33
Disposal by Directors if non-compliance..................................34
Disposal procedure and application of proceeds...........................34
Suspension of rights.....................................................35
Determination of Relevant Persons........................................35
Deemed notice............................................................35
Informing of co-Directors................................................35
Service of notices.......................................................36
Exercise of Directors' discretion........................................36
ADR depositaries.........................................................36
Recognised persons.......................................................37
Article 51 to take precedence............................................37
UNTRACED SHAREHOLDERS..............................................................37
Power to dispose of shares of untraced shareholders......................37
Power to dispose of additional shares....................................38
Transfer on sale.........................................................38
Sale procedure and application of proceeds...............................38
STOCK..............................................................................39
Conversion into stock....................................................39
Transfer of stock........................................................39
Rights of stockholders...................................................39
GENERAL MEETINGS...................................................................39
Types of general meetings................................................39
Extraordinary general meetings...........................................40
General meetings at more than one place..................................40
Interruption or adjournment where facilities inadequate..................40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Other arrangements for viewing/hearing proceedings.......................40
Controlling level of attendance..........................................41
Change in place and/or time of meeting...................................41
Meaning of participate...................................................42
Security.................................................................42
NOTICE OF GENERAL MEETINGS.........................................................42
Recipients of notice.....................................................42
Period of notice.........................................................42
Contents of notice.......................................................43
Routine business.........................................................43
Notice of resolutions....................................................44
PROCEEDINGS AT GENERAL MEETINGS....................................................44
Quorum...................................................................44
If quorum not present....................................................44
Chairman.................................................................45
Adjournments.............................................................45
Place and time of adjourned meetings.....................................45
Amendments to resolutions................................................46
Methods of voting........................................................46
Declaration of result and conduct of poll................................47
Chairman's casting vote..................................................47
When poll to be taken....................................................47
Continuance of meeting...................................................47
VOTES OF MEMBERS...................................................................48
Right to vote............................................................48
Votes of joint holders...................................................48
Member under incapacity..................................................48
Calls in arrears.........................................................48
ADMISSIBILITY OF VOTES.............................................................49
Objections to voting.....................................................49
Supplementary provisions on voting.......................................49
PROXIES............................................................................49
Proxy need not be member.................................................49
Appointment and form of proxy............................................49
Delivery of form of proxy................................................49
Issue of forms of proxy..................................................50
Validity of forms of proxy...............................................50
Revocation of proxy etc..................................................50
INCORPORATED MEMBERS ACTING BY REPRESENTATIVES.....................................51
Authority of representatives.............................................51
DIRECTORS..........................................................................51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Limits on number of directors............................................51
Director need not be member..............................................51
Directors' fees..........................................................51
Directors' expenses......................................................52
Directors' remuneration..................................................52
Retirement and other benefits............................................52
Insurance................................................................53
Directors' interests in contracts with the Company.......................53
Appointments with other undertakings.....................................53
Executive office.........................................................54
When termination of appointment automatic................................54
When termination of appointment not automatic............................54
Delegation of powers.....................................................54
APPOINTMENT AND RETIREMENT OF DIRECTORS............................................55
Age limit................................................................55
Disqualification of a director...........................................55
Number of directors to retire............................................56
Which directors to retire................................................56
When directors deemed to be re-appointed.................................56
Resolution...............................................................57
Eligibility for election.................................................57
Additional powers of the Company.........................................57
Appointment by ordinary resolution or by directors.......................58
ALTERNATE DIRECTORS................................................................58
Power to appoint alternate directors.....................................58
Termination..............................................................58
Alternate to receive notices.............................................58
Alternate may be paid expenses but not remuneration......................59
Alternate not an agent of appointor......................................59
PROCEEDINGS OF DIRECTORS...........................................................59
Meetings of directors....................................................59
Authority to vote........................................................60
Quorum...................................................................60
Directors' interests.....................................................60
Directors' powers to vote................................................61
Where interest does not prevent voting...................................61
Interests of connected persons and alternates............................62
Consideration of matters involving two or more directors.................62
Materiality of directors' interests......................................63
Power of directors if number falls below minimum.........................63
Chairman.................................................................63
Resolutions in writing...................................................63
Committees of directors..................................................64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Proceedings of committees................................................64
Use of designation Director..............................................64
Validity of proceedings..................................................65
GENERAL POWERS OF DIRECTORS........................................................65
Business to be managed by the directors..................................65
Exercise by Company of Voting Rights.....................................65
Local boards.............................................................65
Agents...................................................................66
Powers of attorney.......................................................66
Official seal for use abroad.............................................66
Overseas and local registers.............................................66
Execution by the Company.................................................67
BORROWING POWERS...................................................................67
General power to borrow..................................................67
Definitions for and interpretation of Article 123........................67
Maximum limit on borrowings..............................................69
Adjusted capital and reserves............................................69
Moneys borrowed..........................................................71
Fluctuating rates of exchange............................................74
Changes in legislation...................................................74
Validity of borrowing arrangements.......................................74
Certification by auditors................................................74
SECRETARY..........................................................................75
SEALS..............................................................................75
AUTHENTICATION OF DOCUMENTS........................................................75
MINUTES AND BOOKS..................................................................76
Keeping of minutes and books.............................................76
Safeguarding of minutes and books........................................76
DIVIDENDS..........................................................................77
Declaration of dividends.................................................77
Interim dividends........................................................77
Interest not payable.....................................................77
Permitted deductions.....................................................77
Retention of dividends...................................................78
Waiver of dividends......................................................78
Unclaimed dividends......................................................78
Forfeiture of unclaimed dividends........................................78
Dividends in specie......................................................78
Procedure for payment....................................................79
Payment by post..........................................................79
Discharge to Company and risk............................................79
Receipts where joint holders.............................................80
Scrip dividends..........................................................80
Record date..............................................................82
CAPITALISATION OF PROFITS AND RESERVES.............................................82
Capitalisation of profits and reserves...................................82
Avoidance of discounts on exercise of employees' share options...........83
ACCOUNTS...........................................................................83
Right to inspect accounts................................................83
Preparation and laying of accounts.......................................84
Accounts to be sent to members...........................................84
AUDITORS...........................................................................84
Validity of acts of auditors.............................................84
Rights of auditors.......................................................84
NOTICES............................................................................85
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Notice in writing........................................................85
Method of giving notice to members.......................................85
Signature on notices.....................................................85
Notice to joint holders..................................................85
Notice to persons entitled by transmission...............................85
Untraced members.........................................................86
Advertisement of notices.................................................86
Notices during disruption of postal services.............................86
Deemed notice............................................................86
Successors in title bound by notice to predecessor.......................87
Statutory requirements...................................................87
WINDING UP.........................................................................87
Liquidator may distribute in specie......................................87
Disposal of assets to trusts.............................................87
PROVISIONS FOR EMPLOYEES...........................................................87
INDEMNITY..........................................................................88
</TABLE>
<PAGE>
THE COMPANIES ACTS 1985 and 1989
A PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
of
NEW SCOTTISH POWER PLC
(As amended by a special resolution passed
on 29 April 1999)
Preliminary
Non-application of statutory regulations
1. None of any regulations set out in any schedule to any statute or any
statutory instrument concerning companies shall apply as regulations or articles
of the Company.
Definitions
2. In these Articles (if not inconsistent with the subject or context) the
words in the first column of the table below have the following meanings:
Words Meanings
- ----- --------
the 1985 Act the Companies Act 1985;
the 1989 Act the Companies Act 1989;
ADR Depositary means a custodian or depositary or his nominee,
approved by the Directors, under contractual
arrangements with the Company by which he or that
nominee holds shares in the Company and he or another
person issues American depositary receipts evidencing
rights in relation to those shares or a right to
receive them;
ADR Holder a person who has an interest in shares of the Company
evidenced by an American depositary receipt issued by
an ADR Depositary;
<PAGE>
these Articles these Articles of Association as may be from time to
time altered;
auditors the auditors for the time being of the Company;
certificated share a share in the capital of the Company that is not an
uncertificated share and references in these Articles
to a share being held in certificated form shall be
construed accordingly;
clear days in relation to a period of notice means that period
excluding the day when the notice is given or deemed to
be given and the day for which it is given or on which
it is to take effect;
Crest Member a person who has been admitted by CRESTCo Limited as a
system member;
Company Scottish Power plc (formerly called New Scottish Power
plc);
Directors the directors of the Company or those of such directors
present at a duly convened meeting of the directors of
the Company at which a quorum is present;
employees' share employees' share scheme as defined in Section 743 of
scheme the 1985 Act;
group group as defined in Section 53 of the 1989 Act;
holder in relation to shares, the member whose name is entered
in the register of members as the holder of shares;
in writing written or produced by any visible substitute for
writing, or partly one and partly another;
member a member of the Company;
month calendar month;
office the registered office of the Company for the time
being;
<PAGE>
paid paid or credited as paid;
parent company parent company as defined in Section 258 of the 1985
Act;
recognised clearing recognised clearing house as defined in Section
house 207(1) of the Financial Services Act 1986;
recognised investment recognised investment exchange as defined in
exchange Section 207(1) of the Financial Services Act 1986;
recognised person a recognised clearing house or a nominee of a
recognised clearing house or of a recognised investment
exchange
Redeemable Shares the limited voting redeemable shares of (Pounds)1 each
in the capital of the Company
register of members the register of members to be kept pursuant to Section
352 of the 1985 Act;
Regulations the Uncertificated Securities Regulations 1995;
ScottishPower UK Scottish Power UK plc (formerly called Scottish Power
plc) registered in Scotland, No. SC117120;
seal the common seal of the Company;
Secretary of State the Secretary of State for Scotland;
securities seal an official seal kept by the Company by virtue of
Section 40 of the 1985 Act;
Special Share the one Special Rights Non-Voting Redeemable Preference
Share of (Pounds)1;
Special Shareholder the holder of the Special Share;
the Statutes the 1985 Act, the 1989 Act and every other Act for the
time being in force concerning companies and affecting
the Company;
statutory reserve any statutory reserve of the Company as referred to in
Section 75 of the Electricity Act 1989;
<PAGE>
the London Stock London Stock Exchange Limited;
Exchange
subsidiary subsidiary as defined in Section 736 of the 1985 Act;
subsidiary undertaking subsidiary undertaking as defined in Section 258 of the
1985 Act and, for the avoidance of doubt, shall be
deemed to include a subsidiary;
transfer office the place where the register of members is situate for
the time being;
transmission event death, bankruptcy or any other event giving rise to the
transmission of a person's entitlement to a share by
operation of law;
uncertificated share a share in the capital of the Company which is recorded
on the register of members as being held in
uncertificated form and title to which may, by virtue
of the Regulations, be transferred by means of a
relevant system and references in these Articles to a
share being held in uncertificated form shall be
construed accordingly.
undertaking undertaking as defined in Section 259 of the 1985 Act;
the United Kingdom Great Britain and Northern Ireland; and
year calendar year.
Interpretation
3. In these Articles:
The expression the Company's bankers means the Company's bankers or, if the
Company engages more than one bank, the Company's principal bankers as may
be selected by the Directors;
The expressions debenture and debenture-holder shall include debenture
stock and debenture stockholder respectively;
The expression member present in person shall be deemed to include the
presence of a proxy of a member or an authorised representative of a
corporate member and cognate expressions shall be construed accordingly;
<PAGE>
The expression Secretary shall (subject to and in accordance with the
provisions of the Statutes) include any deputy secretary, assistant
secretary and any other person appointed by the Directors to perform any of
the duties of the Secretary and where two or more persons are appointed to
act as joint secretaries shall include any one of those persons;
Any reference to days of notice shall be construed as meaning clear days;
Words denoting the singular shall include the plural and vice versa. Words
denoting the masculine gender shall include the feminine gender;
Any reference to a person shall be construed as including a reference to an
undertaking;
Where any of the provisions of these Articles are stated to apply to an
Article referred to by its number only, those provisions shall apply (where
relevant) to all and any Articles designated by that number and a capital
letter;
Save as aforesaid, any words or expressions defined in the 1985 Act or the
1989 Act shall (if not inconsistent with the subject or context) bear the
same meaning in these Articles;
Save as aforesaid, words or expressions contained in these Articles which
are not defined in Article 2 but are defined in the Regulations have the
same meaning as in the Regulations (but excluding any modification of the
Regulations not in force at the date of adoption of these Articles) unless
consistent with the subject or context;
Subject to the preceding two paragraphs, references to any provision of any
enactment or of any subordinate legislation (as defined by section 21(1) of
the Interpretation Act 1978) include any modification or re-enactment of
that provision for the time being in force;
Where for any purpose an ordinary resolution of the Company is expressed to
be required under the provisions of these Articles, a special or
extraordinary resolution shall also be effective; and where an
extraordinary resolution is so expressed to be required, a special
resolution shall also be effective;
Article 51(A), the index, table of contents, headings and sub-headings to
Articles are inserted for convenience only and do not affect the
construction of these Articles;
Powers of delegation shall not be restrictively construed but the widest
interpretation shall be given to them and: (a) the word Directors in the
context of the exercise of any power contained in these Articles includes
any committee consisting of one or more Directors, any Director holding
<PAGE>
executive office and any local or divisional board, manager or agent of the
Company to which or, as the case may be, to whom the power in question has
been delegated; (b) no power of delegation shall be limited by the
existence or, except where expressly provided by the terms of delegation,
the exercise of that or any other power of delegation; and (c) except where
expressly provided by the terms of delegation, the delegation of a power
shall not exclude the concurrent exercise of that power by any other body
or person who is for the time being authorised to exercise it under these
Articles or under another delegation of the power; and
In relation to a share, any reference to a relevant system is a reference
to the relevant system in which that share is a participating security.
Business
Business activities
4. Any activity or kind of business which the Company is either expressly or
by implication authorised to undertake may be undertaken by the Directors at
such time or times as they shall think fit, and further may be suffered by them
to be in abeyance, whether such activity or kind of business may have been
actually commenced or not, so long as the Directors may deem it expedient not to
commence or proceed with the same.
Capital
Share capital
5. The authorised share capital of the Company at the date of the special
resolution adopting these Articles is (Pounds)99,998 divided into 50,000
Ordinary Shares of (Pounds)1 each and 49,998 Redeemable Shares of (Pounds)1
each.
Redeemable shares and shares with special rights
6.(A) Subject to the provisions of the Statutes:
(a) shares may be issued on the terms that they are, or are to be liable, to
be redeemed at the option of the Company or the holder on such terms and
in such manner as may be provided by these Articles save that the date on
or by which, or dates between which, any such shares are to be or may be
redeemed may be fixed by the Directors (and if so fixed the date or dates
must be fixed before the shares are issued);
(b) without prejudice to any rights attached to any existing shares and
subject to (a) above, any shares may be issued with such rights or
restrictions as the Company may by ordinary resolution determine (or, if
the Company does not so determine, as the Directors may determine).
<PAGE>
Uncertificated shares
6.(B) Subject to the provisions of the Regulations, the Directors may permit
the holding of shares in any class of shares in uncertificated form and the
transfer of title to shares in that class by means of a relevant system and may
determine that any class of shares shall cease to be a participating security.
Not separate class of shares
6.(C) Shares in the capital of the Company that fall within a certain class
shall not form a separate class of shares from other shares in that class
because any share in that class:
(a) is held in uncertificated form; or
(b) is permitted in accordance with the Regulations to become
a participating security.
Exercise of Company's entitlements in respect of uncertificated shares
6.(D) Where any class of shares is a participating security and the Company
is entitled under any provision of the Statutes, the Regulations or these
Articles to sell, transfer or otherwise dispose of, forfeit, re-allot, accept
the surrender of or otherwise enforce a lien over a share held in uncertificated
form, the Company shall be entitled, subject to the provisions of the Statutes,
the Regulations, these Articles and the facilities and requirements of the
relevant system:
(a) to require the holder of that uncertificated share by notice to change that
share into certificated form within the period specified in the notice and
to hold that share in certificated form so long as required by the Company;
(b) to require the holder of that uncertificated share by notice to give any
instructions necessary to transfer title to that share by means of the
relevant system within the period specified in the notice;
(c) to require the holder of that uncertificated share by notice to appoint any
person to take any step, including without limitation the giving of any
instructions by means of the relevant system, necessary to transfer that
share within the period specified in the notice; and
(d) to take any action that the board considers appropriate to achieve the
sale, transfer, disposal, forfeiture, re-allotment or surrender of that
share or otherwise to enforce a lien in respect of that share.
The Redeemable Shares
6.(E) The Redeemable Shares shall have the rights set out in this Article 6(E).
<PAGE>
(a) The holders of the Redeemable Shares shall not be entitled to receive or
participate in any of the profits of the Company available for distribution
by way of dividend or otherwise.
(b) On a winding-up or other return of capital, the holders of the Redeemable
Shares shall be entitled, in priority to any holder of any other class of
shares in the Company (other than the Special Share), to receive in full
the amounts paid up on such shares from the assets of the Company available
for distribution among the members.
(c) (i) Subject to the provisions of the Statutes, the Company may
redeem the Redeemable Shares at any time by giving the holders
of the Redeemable Shares to be redeemed notice in writing of
the date (the Redemption Date) when such redemption is to be
effective.
(ii) Any notice given under paragraph (i) of this Article 6(E)(c)
shall specify the number of shares to be redeemed, the
Redemption Date and the place at which the certificates for
such Redeemable Shares are to be presented for redemption.
Upon the Redemption Date, the Company shall redeem the
Redeemable Shares and the holder of the Redeemable Shares
shall be bound to deliver to the Company at such place the
certificates for such Redeemable Shares held by him. Upon such
delivery the Company shall pay to the holder in full the
amounts paid up on such shares.
(d) The holders of the Redeemable Shares shall not be entitled to receive
notice of or to attend or vote at any general meeting of the Company in
respect of their holding of Redeemable Shares save that if a resolution is
to be proposed:
(i) to wind up the Company;
(ii) which varies, modifies, alters or abrogates any of the rights
attaching to the Redeemable Shares,
the holders of the Redeemable Shares shall have the right to attend such a
meeting and to speak and vote only on such resolution or any motion for
adjournment of the meeting before such resolution is voted on.
<PAGE>
The Special Share
Issue, holding and transfer
7.(A) The Special Share may only be issued to, held by and transferred to
one of Her Majesty's Secretaries of State, another Minister of the Crown, the
Solicitor for the affairs of Her Majesty's Treasury or any other person acting
on behalf of the Crown.
Variation of rights of the Special Share
7.(B) Notwithstanding any provision in these Articles to the contrary, each
of the following matters shall be deemed to be a variation of the rights
attaching to the Special Share and shall accordingly be effective only with the
consent in writing of the Special Shareholder and without such consent shall not
be done or caused to be done:
(a) the amendment, or removal, or the alteration of the effect of (which, for
the avoidance of doubt, shall be taken to include the ratification of any
breach of) all or any of the following:
(i) in Article 2, the definitions of ADR Depositary, ADR Holder,
the Special Share and the Special Shareholder:
(ii) this Article 7;
(iii) the last sentence in Article 8(B);
(iv) Article 50(D); and
(v) Article 51;
(b) the creation or issue of any shares in the Company with voting rights
attached, not being:
(i) shares comprised (or shares which would, following issue, be
comprised) in the relevant share capital (as defined in
Section 198(2) of the 1985 Act) of the Company; or
(ii) shares which do not (or shares which, following issue, would
not) constitute equity share capital (as defined in Section
744 of the 1985 Act) and which, when aggregated with all other
such shares, carry (or would, if in issue, carry) the right to
cast less than 15 per cent of the maximum number of votes
capable of being cast on a poll on any resolution at any
general meeting of the Company (whether or not the votes could
be cast on a poll in relation to all resolutions at all
general meetings);
<PAGE>
(c) the variation of any voting rights attached to any shares in the Company
(and, for the avoidance of doubt, the creation or issue of shares falling
within sub-paragraphs (b)(i) or (ii) above shall not be regarded as a
variation for the purposes of this sub-paragraph);
(d) the giving by the Company of any consent or agreement to (including,
without limitation, the casting of any vote in favour of) any amendment,
removal or alteration of the effect of Article 7 of the Articles of
Association of ScottishPower UK;
(e) the giving by the Company of any consent or agreement to (including,
without limitation, the casting of any vote in favour of) the creation or
issue of any shares in the capital of ScottishPower UK other than an issue
of such shares following which the Company will own the full legal and
beneficial interest in, and control, shares in the capital of ScottishPower
UK carrying at least 85 per cent. of the voting rights exercisable on a
poll at general meetings of ScottishPower UK;
(f) the disposal by the Company of any of the shares in ScottishPower UK held
by it or of any rights or interests therein or the entering into by the
Company of any agreement or arrangement with respect to, or to the exercise
of any voting or other rights attaching to, such shares such that the
Company would cease to own the full legal and beneficial interest in, and
control, shares in the capital of ScottishPower UK carrying at least 85 per
cent. of the voting rights exercisable on a poll at general meetings of
ScottishPower UK. For the purposes of this paragraph, disposal shall
include any sale, gift, lease, licence, loan, mortgage, charge or the grant
of any other encumbrance or the permitting of any encumbrance to subsist
(other than a floating charge over the whole of the Company's assets), or
any other disposition to a third party;
(g) the giving by the Company of any consent or agreement to (including,
without limitation, the casting of any vote in favour of) any abrogation,
variation, waiver or modification of any of the rights or privileges
attaching to any shares of any class in ScottishPower UK such that the
Company would cease to own the full legal and beneficial interest in, and
control, shares in the capital of ScottishPower UK carrying at least 85 per
cent. of the voting rights exercisable on a poll at general meetings of
ScottishPower UK; and
(h) without limitation to any of the foregoing, any act or omission to act by
the Company or the Directors which results in the Company ceasing to own
the full legal and beneficial interest in, and control, shares in the
capital of ScottishPower UK carrying at least 85 per cent. of the voting
rights exercisable on a poll at general meetings of ScottishPower UK.
<PAGE>
Entitlement to receive notice
7.(C) The Special Shareholder shall be entitled to receive notice of, and to
attend and speak at, any general meeting or any separate meeting of the holders
of any class of shares, but the Special Share shall carry no right to vote nor
any other rights at any such meeting.
Participation in capital
7.(D) In a distribution of capital in a winding up of the Company, the
Special Shareholder shall be entitled to repayment of the capital paid up or
treated for the purposes of the Statutes as paid up on the Special Share in
priority to any repayment of capital to any other member. The Special Share
shall confer no other right to participate in the capital, and no right to
participate in the profits, of the Company.
Redemption
7.(E) The Special Shareholder may, after consulting the Company and subject
to the provisions of the Statutes, require the Company to redeem the Special
Share at par at any time by giving written notice to the Company at the office
and delivering the relevant share certificate to the office. Upon redemption of
the Special Share, the provisions of this Article shall cease to have effect.
Variation of Class Rights
Method of varying class rights
8.(A) Whenever the share capital of the Company is divided into different
classes of shares, the special rights attached to any class may, subject to and
in accordance with the provisions of the Statutes, be varied or abrogated either
with the consent in writing of the holders of not less than three-fourths of the
issued shares of the class or with the sanction of an extraordinary resolution
passed at a separate general meeting of the holders of the shares of the class
(but not otherwise) and may be so varied or abrogated either whilst the Company
is a going concern or during or in contemplation of a winding up. To every such
separate general meeting all the provisions of these Articles relating to
general meetings of the Company and to the proceedings thereat shall mutatis
mutandis apply, except that the necessary quorum shall be two members present in
person holding at least one-third in nominal amount of the issued shares of the
class (but so that, if at any adjourned meeting a quorum as above defined is not
present, any one holder of shares of the class present in person shall be a
quorum), that any holder of shares of the class present in person may demand a
poll and that every such holder shall on a poll have one vote for every share of
the class held by him. The foregoing provisions of this Article 8.(A) shall
apply to the variation or abrogation of the special rights attached to some only
of the
<PAGE>
shares of any class as if the shares concerned and the remaining shares of such
class formed separate classes.
When class rights deemed to be varied
8.(B) For the purposes of this Article 8, whenever the share capital is
divided into different classes of shares, and unless otherwise expressly
provided by the rights attached to any share or class of shares, those rights
shall be deemed to be varied by:
(a) the reduction of the capital paid up on that share or class of shares
otherwise than by a purchase or redemption by the Company of its own
shares; and
(b) the allotment of another share ranking in priority for payment of a
dividend or in respect of capital or which confers on its holder voting
rights more favourable than those conferred by that share or class of
shares,
but shall not be deemed to be varied by:
(c) the creation or issue of another share ranking equally with, or subsequent
to, that share or class of shares or by the purchase or redemption by the
Company of its own shares; or
(d) the Company permitting, in accordance with the Regulations, the holding of
and transfer of title to shares of that or any other class in
uncertificated form by means of a relevant system.
The rights of the Special Shareholder shall be deemed not to be varied except in
the circumstances described in Article 7.(B).
Alteration of Capital
Increase in capital
9. The Company may from time to time by ordinary resolution increase its
capital by such sum to be divided into shares of such amounts as the resolution
shall prescribe.
New shares
10. All new shares created by ordinary resolution pursuant to Articles 9 and 11
shall be:
(a) subject to the provisions of the Statutes and of these Articles with
reference to allotment, payment of calls, lien, transfer, transmission,
forfeiture; and
<PAGE>
(b) unclassified unless otherwise provided by these Articles, by the resolution
creating the shares or by the terms of allotment of the shares.
Alterations permitted by ordinary resolution
11.(A) The Company may by ordinary resolution:
(a) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(b) cancel any shares which, at the date of the passing of the resolution, have
not been taken, or agreed to be taken, by any person and diminish the
amount of its capital by the amount of the shares so cancelled;
(c) sub-divide its shares, or any of them, into shares of smaller amount than
is fixed by the Memorandum of Association (subject, nevertheless, to the
provisions of the Statutes), and so that the resolution whereby any share
is sub-divided may determine that, as between the holders of the shares
resulting from such sub-division, one or more of the shares may, as
compared with the others, have any such preferred, deferred or other
special rights, or be subject to any such restrictions, as the Company has
power to attach to unissued or new shares.
Fractions arising
11.(B) Whenever any fractions arise as a result of a consolidation or sub-
division of shares, the Directors may on behalf of the members deal with the
fractions as they think fit. In particular, without limitation, the Directors
may sell shares representing fractions to which any members would otherwise
become entitled to any person (including, subject to the provisions of the
Statutes, the Company) and distribute the net proceeds of sale in due proportion
among those members. Where the shares to be sold are held in certificated form
the Directors may authorise some person to execute an instrument of transfer of
the shares to, or in accordance with the directions of, the buyer. Where the
shares to be sold are held in uncertificated form, the Directors may do all acts
and things they consider necessary or expedient to effect the transfer of the
shares to, or in accordance with the directions of, the buyer. The buyer shall
not be bound to see to the application of the purchase moneys and his title to
the shares shall not be affected by any irregularity in, or invalidity of, the
proceedings in relation to the sale.
Power to purchase own shares
12. Subject to and in accordance with the provisions of the Statutes, the
Company may purchase any of its own shares (including without limitation any
redeemable shares) but not unless the purchase has been sanctioned by an
extraordinary resolution passed at a separate meeting of the holders of any
class
<PAGE>
of convertible shares in the Company carrying rights to convert into equity
share capital of the Company.
Power to reduce capital
13. Subject to and in accordance with the provisions of the Statutes and to any
rights attached to any shares, the Company may by special resolution reduce its
share capital or any capital redemption reserve, share premium account or other
undistributable reserve in any manner.
Shares
Allotment
14. Subject to the provisions of the Statutes relating to authority, pre-
emption rights and otherwise, of any resolution of the Company in general
meeting passed pursuant thereto and of these Articles, all unissued shares in
the Company shall be at the disposal of the Directors and they may allot (with
or without conferring a right of renunciation), grant options over or otherwise
dispose of them to such persons, at such times and on such terms as they think
proper.
Commissions
15. In addition to all other powers of paying commissions, the Company may
exercise the powers of paying commissions conferred by the Statutes to the full
extent thereby permitted. Any such commissions may be paid in cash or in fully
or partly paid shares of the Company, or partly in one way and partly in
another, as may be arranged. The Company may also on any issue of shares pay
such brokerage as may be lawful.
Renunciation
16. The Directors may at any time after the allotment of any share but before
any person has been entered in the register of members as the holder, recognise
a renunciation thereof by the allottee in favour of some other person and may
accord to any allottee of a share a right to effect such renunciation upon and
subject to such terms and conditions as the Directors may think fit to impose.
Interests not recognised
17.(A) Except as required by law or by these Articles, the Company shall not
be bound by or compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future or partial interest in any share, or
any interest in any fractional part of a share, or (except only as by these
Articles or by law otherwise provided) any other right in respect of any share,
except an absolute right to the entirety thereof in the holder or, in the case
of a share warrant, in the bearer of the warrant for the time being.
<PAGE>
Trusts may be recognised
17.(B) The Company shall be entitled, but except as required by law shall not
be bound, to recognise in such manner and to such extent as it may think fit any
trusts in respect of any of the shares of the Company. Notwithstanding any such
recognition, the Company shall not be bound to see to the execution,
administration or observance of any trust, whether express, implied or
constructive, in respect of any shares of the Company and shall be entitled to
recognise and give effect to the acts and deeds of the holders of such shares as
if they were the absolute owners thereof. For the purpose of this Article
17.(B), trust includes any right in respect of any shares of the Company other
than an absolute right thereto in the holder thereof for the time being or such
other rights in case of transmission thereof as are mentioned in these Articles.
Issue of share warrants to bearer
18.(A) The Company may, with respect to any fully paid shares, issue a
warrant to bearer (hereinafter called a share warrant) stating that the bearer
of the warrant is entitled to the shares specified in it and may provide (by
coupons or otherwise) for the payment of future dividends on the shares included
in a share warrant. The Directors may decide, either generally or in any
particular case or cases, that any signature on a share warrant may be applied
by mechanical means or printed on it or that the share warrant need not be
signed by any person.
Conditions of issue
18.(B) The powers referred to in Article 18.(A) may be exercised by the
Directors who may determine and vary the conditions upon which share warrants
shall be issued and in particular upon which:
(a) a new share warrant or coupon will be issued in the place of one damaged,
defaced, worn out or lost (provided that no new share warrant shall be
issued to replace one that has been lost unless the Directors are satisfied
beyond reasonable doubt that the original has been destroyed);
(b) the bearer of a share warrant shall be entitled to attend and vote at
general meetings;
(c) dividends will be paid; and
(d) a share warrant may be surrendered and the name of the holder entered in
the register of members in respect of the shares specified in it.
Subject to such conditions and to these Articles, the bearer of a share warrant
shall be deemed to be a member for all purposes. The bearer of a share warrant
shall be subject to the conditions for the time being in force and applicable
thereto whether made before or after the issue of such share warrant.
<PAGE>
No right in relation to share
18.(C) The Company shall not be bound or compelled in any way to recognise
any right in respect of the share represented by a share warrant other than the
bearer's absolute right to the share warrant.
Certificates
Authentication and form of certificates
19.(A) Every certificate for shares, warrants, debentures or other securities
of the Company and every certificate relating to a participation in an
employees' share scheme shall (except to the extent that the terms and
conditions for the time being relating thereto otherwise provide) either (a) be
issued under the seal (or under a securities seal or, in the case of shares on a
branch register, an official seal for use in the relevant territory) or (b) bear
the signature of one Director or the Secretary or a person authorised to
subscribe the certificate on behalf of the Company or (c) both, provided that
the Directors may by resolution determine, either generally or in any particular
case or cases, that any such signature shall be affixed by some method or system
of mechanical signature. Every such Certificate shall specify the number and
class of shares, debentures or other securities to which it relates and the
amount paid up thereon. No certificate shall be issued representing shares,
debentures or other securities of more than one class. No certificate need be
issued in respect of shares, debentures or other securities held by a recognised
clearing house or a nominee of a recognised clearing house or of a recognised
investment exchange in respect of which the Company is not required by law to
complete and have ready for delivery a certificate.
Evidence of title to securities
19.(B) Nothing in these Articles shall require title to any securities of the
Company to be evidenced or transferred by a written instrument, the regulations
from time to time made under the Statutes so permitting. The Directors shall
have power to implement any procedures as they may think fit and as may accord
with the Statutes and any regulations made thereunder for the recording and
transferring of title to securities and for the regulation of those procedures
and the persons responsible for or involved in their operation.
Members' rights to certificates
20. Every member, on becoming the holder of any certificated share (except a
recognised person in respect of whom the Company is not required by law to
complete and have ready for delivery a certificate) shall be entitled, without
payment, to one certificate for all the certificated shares of each class held
by him (and, on transferring a part of his holding of certificated shares of any
class, to a certificate for the balance of his holding of certificated shares).
He may elect to
receive one or more additional certificates for any of his certificated shares
if he pays for every certificate after the first a reasonable sum determined
from time to time by the board of Directors. Every certificate shall:
(a) be executed under the seal or otherwise in accordance with Article 125 or
in such other manner as the Directors may approve; and
(b) specify the number, class and distinguishing numbers (if any) of the shares
to which it relates and the amount or respective amounts paid up on the
shares.
The Company shall not be bound to issue more than one certificate for
certificated shares held jointly by more than one person and delivery of a
certificate to one joint holder shall be a sufficient delivery to all of them.
Shares of different classes may not be included in the same certificate.
Transfer of a part
21. Where a member transfers some only of the shares comprised in a share
certificate the old certificate shall be cancelled and a new certificate for the
balance of such shares issued in lieu without charge.
Cancellation and replacement of certificates
22.(a) Any two or more certificates representing shares of any one class held
by any member may, at his request, be cancelled and a single new
certificate for all such shares issued in lieu at a reasonable charge.
(b) If any member shall surrender for cancellation a share certificate
representing shares held by him and request the Company to issue in lieu
two or more share certificates representing such shares in such proportions
as he may specify, the Directors may, if they think fit, comply with such
request at a reasonable charge.
(c) If a share certificate shall be damaged, defaced, worn out, or alleged to
have been lost, stolen or destroyed, it may be replaced by a new
certificate on request subject to (in the case of damage, defacement or
wearing out) delivery up of the certificate or (if alleged to have been
lost, stolen or destroyed) compliance with such conditions (if any) as to
evidence and indemnity as the Directors think fit. Any such replacement
certificate shall be issued without charge save that, in the case of
alleged loss, theft or destruction, the person to whom a new certificate is
issued shall pay to the Company any exceptional out of pocket expenses
incidental to the investigation of evidence of loss, theft or destruction
and the preparation of the requisite form of indemnity as aforesaid.
(d) In the case of shares held jointly by several persons any such request may
be made by any one of the joint holders.
<PAGE>
Calls on Shares
Power to make calls
23. The Directors may, from time to time, make calls upon the members in
respect of any moneys unpaid on their shares (whether on account of the nominal
value of the shares or by way of premium) and not by the terms of issue thereof
made payable at fixed times. Each member shall (subject to being given at least
fourteen days' notice specifying the time or times and place of payment) pay to
the Company, at the time or times and place so specified, the amount called on
his shares. A call may be required to be paid in instalments and may be either
revoked or postponed by the Directors in whole or in part at any time before
receipt by the Company of a sum due thereunder. A person upon whom a call is
made shall remain liable for calls made upon him notwithstanding the subsequent
transfer of the shares in respect of which the call was made.
Time when call made
24. A call shall be deemed to have been made at the time when the resolution of
the Directors authorising the call was passed.
Liability of and receipts by joint holders
25. The joint holders of a share shall be jointly and severally liable to pay
all calls in respect thereof and any one of such persons may give an effectual
receipt for any return of capital payable in respect of such share.
Interest payable
26. If a sum called in respect of a share is not paid in whole or in part
before or on the day appointed for payment thereof, the person from whom the sum
is due shall pay interest on the sum from the day appointed for payment thereof
to the time of actual payment at the rate fixed by the terms of the allotment of
the share or in the notice of the call or, if no rate is fixed, the rate
determined by the Directors, not exceeding 15 per cent. per annum or, if higher,
the appropriate rate (as defined in the 1985 Act), and all expenses that may
have been incurred by the Company by reason of such non-payment, but the
Directors shall be at liberty, in any case or cases, to waive payment of such
interest and expenses, wholly or in part. No dividend, or other payment or
distribution, in respect of any such share shall be paid or distributed and no
other rights, which would otherwise normally be exercisable in accordance with
these Articles by a holder of fully paid shares, may be exercised by the holder
of any share so long as any such amount, or any interest, costs, charges or
expenses payable in accordance with this Article 26 in relation thereto, remains
unpaid.
<PAGE>
Deemed calls
27. Any sum (whether on account of the nominal value of the share or by way of
premium) which by the terms of issue of a share becomes payable upon allotment
or at any fixed date shall, for the purposes of these Articles, be deemed to be
a call duly made and payable on the date on which, by the terms of issue, the
same becomes payable. In the case of non-payment, all the relevant provisions of
these Articles as to payment of interest and expenses, forfeiture or otherwise
shall apply as if such sum had become due and payable by virtue of a call duly
made and notified.
Differentiation in calls
28. The Directors may, subject to the terms of the allotment, make arrangements
on the issue of shares to differentiate between the allottees or holders as to
the amount of calls to be paid and the times of payment.
Payments of calls in advance
29. The Directors may, if they think fit, receive from any member willing to
advance the same all or any part of the moneys (whether on account of the
nominal value of the shares or by way of premium) uncalled and unpaid upon the
shares held by him, and such payment in advance of calls shall extinguish pro
tanto the liability upon the shares in respect of which it is made. The Company
may pay interest upon the moneys so received (until and to the extent that the
same would but for such advance become payable) at such rate not exceeding
(unless the Company by ordinary resolution otherwise directs) 15 per cent. per
annum or, if higher, the appropriate rate (as defined in the 1985 Act) as the
member paying such sum and the Directors agree upon. No sum paid up in advance
of calls shall entitle the holder of a share in respect thereof to any portion
of a dividend, or other payment or distribution, subsequently declared in
respect of any period prior to the date upon which such sum would, but for such
payment, become payable.
Forfeiture, Surrender and Lien
Notice requiring payment of call on default
30. If a member fails to pay the whole or any part of any call or instalment of
a call on or before the day appointed for payment thereof, the Directors may, at
any time thereafter, serve a notice on him requiring payment of so much of the
call or instalment as is unpaid together with any accrued interest and any
costs, charges and expenses incurred by the Company by reason of such non-
payment.
Content of notice
31. The notice shall name a further day (not being less than fourteen days from
the date of service of the notice) on or before which, and the place where,
<PAGE>
the payment required by the notice is to be made and shall state that, in the
event of non-payment in accordance therewith, the shares on which the call was
made will be liable to be forfeited.
Forfeiture for non-compliance
32. If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which such notice has been given may, at any time
thereafter, before payment of all calls, interest, costs, charges and expenses
due in respect thereof has been received by the Company, be forfeited by a
resolution of the Directors to that effect. Such forfeiture shall include all
dividends, and other payments or distributions, declared in respect of the
forfeited share and not actually paid or distributed before forfeiture. The
Directors may accept a surrender of any share liable to be forfeited hereunder.
Notice of forfeiture
33. When any share has been forfeited in accordance with these Articles, notice
of the forfeiture shall forthwith be given to the holder of the share, or the
person entitled to the share by transmission as the case may be, and an entry of
such notice having been given, and of the forfeiture with the date thereof,
shall forthwith be made in the register of members opposite to the entry of the
share but no forfeiture shall be, in any manner, invalidated by any omission or
neglect to give such notice or to make such entry as aforesaid.
Annulment of forfeiture
34. Notwithstanding any such forfeiture or surrender as aforesaid, the
Directors may, at any time before the forfeited or surrendered share has been
otherwise disposed of, annul the forfeiture or surrender upon the terms of
payment of all calls and interest due upon and expenses incurred in connection
with the call and forfeiture proceedings and upon any further or other terms
they may think fit.
Sale of forfeited shares
35. A share so forfeited or surrendered shall become the property of the
Company and may (subject to and in accordance with the provisions of the
Statutes) be sold, re-allotted or otherwise disposed of, either to the person
who was, before such forfeiture or surrender, the holder thereof or entitled
thereto or to any other person upon such terms and in such manner as the
Directors shall think fit and whether with or without all or any part of the
amount previously paid on the share being credited as paid. Where, for the
purposes of its disposal, a forfeited share held in certificated form is to be
transferred to any person, the Directors may authorise any person to execute an
instrument of transfer of the share to that person. Where, for the purpose of
its disposal, a forfeited share held in uncertificated form is to be transferred
to any person, the Directors may
<PAGE>
exercise any of the Company's powers under Article 6(D). The Company may receive
the consideration given for the share on its disposal and may register the
transferee as holder of the share.
Extinction of rights
36. A person, all or any of whose shares have been forfeited or surrendered,
shall cease to be a member in respect of the forfeited or surrendered shares and
shall, if the share is a certificated share, surrender the certificate for any
share forfeited or surrendered to the Company for cancellation. Such person
shall remain liable to pay to the Company all moneys which, at the date of
forfeiture or surrender, were presently payable by him to the Company in respect
of the shares, with interest thereon the rate at which interest was payable on
those moneys before the forfeiture or surrender or, if no interest was payable,
at the rate determined by the Directors, not exceeding 15 per cent. per annum
or, if higher, the appropriate rate (as defined in the 1985 Act), from the date
of forfeiture or surrender until payment but the Directors may waive payment of
such interest either wholly or in part and the Directors may enforce payment
without any allowance for the value of the shares at the time of forfeiture or
surrender.
Company to have lien on shares
37. The Company shall have a first and paramount lien on every share (not being
a fully paid share) for all moneys (whether presently payable or not) called or
payable at a fixed time in respect of such share. The Company shall also,
insofar as is permitted by the Statutes, have a first and paramount lien on all
shares (other than fully paid shares) standing registered in the name of a
single member for all the debts and liabilities of such member, or his estate,
to the Company. The lien shall apply (a) notwithstanding that those debts and
liabilities have been incurred before or after notice to the Company of any
equitable or other interest of any person other than such member; (b) whether or
not the period for the payment or discharge of the same shall have actually
arrived; and (c) notwithstanding that the same are joint debts or liabilities of
such member, or his estate, and any other person, whether a member of the
Company or not. The Company's lien (if any) on a share shall extend to all
dividends and other payments or distributions payable or distributable thereon
or in respect thereof. The Directors may waive any lien which has arisen and may
declare any share to be exempt, wholly or partially, from the provisions of this
Article 37.
Enforcement of lien by sale
38. The Company may sell, in such manner as the Directors think fit, any share
on which the Company has a lien, but no sale shall be made unless some sum, in
respect of which the lien exists, is presently payable nor until the expiration
of fourteen days after a notice in writing stating and demanding
<PAGE>
payment of the sum presently payable, and giving notice of the intention to sell
in default, shall have been given to the holder for the time being of the share
or the person entitled thereto by reason of a transmission event. To give effect
to that sale the Directors may, if the share is a certificated share, authorise
any person to execute an instrument of transfer in respect of the share sold to,
or in accordance with the directions of, the buyer. If the share is an
uncertificated share, the Directors may exercise any of the Company's powers
under Article 6(D) to effect the sale of the share to, or in accordance with the
directions of, the buyer. The buyer shall not be bound to see to the application
of the purchase money and his title to the share shall not be affected by any
irregularity in or invalidity of the proceedings in relation to the sale.
Application of proceeds
39. The net proceeds of such sale, after payment of the costs of such sale,
shall be applied in or towards payment or satisfaction of the debts or
liabilities in respect whereof the lien exists, so far as the same are presently
payable, and any residue shall (if the share sold is a certificated share, on
surrender to the Company for cancellation of the certificate in respect of the
share sold and, whether the share sold is a certificated or uncertificated
share, subject to a like lien for debts or liabilities not presently payable as
existed upon the shares prior to the sale) be paid to the person entitled to the
shares at the time of the sale.
Giving effect to the sale
40. A statutory declaration in writing that the declarant is a Director or the
Secretary of the Company and that a share has been duly forfeited or surrendered
or sold to satisfy a lien of the Company on a date stated in the declaration
shall be conclusive evidence of the facts therein stated as against all persons
claiming to be entitled to the share. Such declaration, and the receipt of the
Company for the consideration (if any) given for the share on the sale, re-
allotment or disposal thereof together with, in relation to certificated shares,
the share certificate delivered to a purchaser or allottee thereof, shall
(subject if necessary to the execution of an instrument of transfer or transfer
by means of a relevant system, as the case may be) constitute a good title to
the share and the person to whom the share is sold, re-allotted or disposed of
shall be registered as the holder of the share, and shall not be bound to see to
the application of the purchase money (if any), nor shall his title to the share
be affected by any irregularity or invalidity in the proceedings in reference to
the forfeiture, surrender, sale, re-allotment or disposal of the share, and the
remedy of any person aggrieved in respect thereof shall be in damages only and
against the Company exclusively.
<PAGE>
Transfer of Shares
Form and execution of transfers
41. Except as may be provided by any procedures implemented pursuant to Article
19(B), all transfers of certificated shares shall be effected by instrument in
writing in any usual or common form, or in any other form acceptable to the
Directors. The instrument of transfer shall be executed by, or on behalf of,
the transferor and (except in the case of fully paid shares) by, or on behalf
of, the transferee. The transferor shall be deemed to remain the holder of the
shares concerned until the name of the transferee is entered in the register of
members in respect thereof. All transfers of uncertificated shares shall be
effected in accordance with the Regulations.
Suspension of registration
42. The registration of transfers may be suspended and the register of members
closed, at such times and for such period as the Directors may from time to time
determine and either generally or in respect of any class of shares provided
that the register of members shall not be closed for more than thirty days in
any year, except that the Directors may not suspend the registration of
transfers of any participating security without the consent of the Operator of
the relevant system.
Refusal to register
43. The Directors may, in their absolute discretion and without assigning any
reason therefor, decline to register any transfer of a certificated share which
is not a fully paid share, provided that the refusal does not prevent dealings
in the shares in the Company from taking place on an open and proper basis.
Requirements for registration of transfer
44.(A) The Directors may, in their absolute discretion and without assigning
any reason therefor, decline to register the transfer of a certificated share
unless the instrument of transfer (a) is in respect of only one class of share;
(b) is duly stamped, or adjudged or certified as not chargeable to stamp duty,
and is deposited at the transfer office, or at such other place as the Directors
may from time to time determine, accompanied by the relevant share
certificate(s) and such other evidence as the Directors may reasonably require
to show the right of the transferor to make the transfer (and, if the instrument
of transfer is executed by some other person on his behalf the authority of that
person so to do); and (c) is in favour of not more than four transferees
jointly. In the case of a transfer by a recognised clearing house or a nominee
of a recognised clearing house or of a recognised investment exchange, the
lodgment of share certificates will only be necessary if, and to the extent
that, certificates have been issued in respect of the shares in question.
<PAGE>
Notice of refusal to register
44.(B) If the Directors refuse to register a transfer of a share, they shall
send the transferee notice of their refusal within two months after the date on
which the instrument of transfer was lodged with the Company or the Operator-
instruction was received, as the case may be.
Retention of transfers
45. All instruments of transfer which are registered may be retained by the
Company, but any instrument of transfer which the Directors refuse to register
shall (except in the case of fraud) be returned to the person lodging it when
notice of refusal is given.
No fee payable for registration of transfers
46. No fee will be charged by the Company in respect of the registration of any
instrument of transfer, confirmation, probate, letters of administration,
certificate of marriage or death, power of attorney or other document relating
to or affecting the title to any shares or otherwise for making any entry in the
register of members affecting the title to any shares.
Renunciations recognised and new transfer procedures
47. Nothing in these Articles shall preclude the Directors:
(a) from recognising a renunciation of the allotment of any share by the
allottee in favour of some other person; or
(b) if empowered by these Articles to authorise any person to execute an
instrument of transfer of a share, from authorising any person to transfer
that share in accordance with any procedures implemented pursuant to
Article 19(B).
Destruction of Documents
Permitted times for destruction
48.(A) The Company shall be entitled to destroy:
(a) all share certificates which have been cancelled at any time after the
expiration of one year from the date of such cancellation;
(b) all notifications of change of name and address and all dividend mandates
which have been cancelled or have ceased to have effect at any time after
the expiration of two years from the date of the recording of such
notification or, as the case may be, the date of such cancellation or
cessation;
<PAGE>
(c) all instruments of transfer of shares which have been registered at any
time after the expiration of six years from the date of registration
thereof;
(d) all paid dividend warrants and cheques at any time after the expiration of
two years from the date of actual payment;
(e) all instruments of proxy which have been used for the purpose of a poll at
any time after the expiration of one year from the date of use;
(f) all instruments of proxy which have not been used for the purpose of a poll
at any time after one month from the end of the meeting to which the
instrument of proxy relates and at which no poll was demanded; and
(g) any other documents on the basis of which any entry in the register of
members has been made at any time after the expiration of six years from
the date of the first entry in the register of members in respect thereof.
Presumptions as to validity
48.(B) It shall conclusively be presumed in favour of the Company that (a)
every entry in the register of members purporting to have been made on the basis
of an instrument of transfer or other document so destroyed was duly and
properly made; (b) that every instrument of transfer so destroyed was a valid
and effective instrument duly and properly registered; (c) every share
certificate so destroyed was a valid and effective document duly and properly
cancelled; and (d) every other document hereinbefore mentioned so destroyed was
a valid and effective document in accordance with the recorded particulars
thereof in the books or records of the Company.
Provided always that:
(i) the provisions aforesaid shall apply only to the destruction of a document
in good faith and without express notice of any claim (regardless of the parties
thereto) to which the document might be relevant;
(ii) nothing herein contained shall be construed as imposing upon the Company
any liability in respect of the destruction of any such document earlier
than as aforesaid, or in any other circumstances, which would not attach to
the Company in the absence of this Article 48;
(iii) references herein to the destruction of any document include references to
the disposal thereof in any manner.
Transmission of Shares
Transmission
49.(A) In case of the death of a member, the survivors or survivor where the
deceased was a joint holder, or the executors or administrators of the deceased
where he was a sole or only surviving holder, shall be the only persons
recognised by the Company as having any title to his interest in the shares, but
nothing in this Article 49 shall release the estate of a deceased holder
(whether sole or joint) from any liability in respect of any share solely or
jointly held by him.
Registration on death, bankruptcy, etc.
49.(B) Subject to the provisions of Article 49(A), any person becoming
entitled to a share in consequence of a transmission event may (subject as
hereinafter provided), upon such evidence being produced as may from time to
time properly be required by the Directors, elect either to become the holder of
the share or to have another person nominated by him registered as the
transferee. The Directors shall, in any case, have the same right to decline or
suspend registration as they would have had in the case of a transfer of the
share by that member before the occurrence of the transmission event.
Elections required
49.(C) If a person becoming entitled by transmission to a share elects to
become the holder he shall give notice to the Company to that effect. If he
elects to have another person registered and the share is a certificated share,
he shall execute an instrument of transfer of the share to that person. If he
elects to have himself or another person registered and the share is an
uncertificated share, he shall take any action the Directors may require
(including without limitation the execution of any document and the giving of
any instruction by means of a relevant system) to enable himself or that person
to be registered as the holder of the share. All the limitations, restrictions
and provisions of these Articles relating to the right to transfer and the
registration of transfers of shares shall be applicable to any such notice or
transfer as aforesaid as if the transmission event as aforesaid, had not
occurred and the notice or transfer were a transfer signed by that member. The
Directors may at any time give notice requiring a person becoming entitled to a
share on a transmission event to elect to be registered himself or to transfer
the share and, if the notice is not complied with within sixty days, the
Directors may withhold payment of all dividends and other moneys payable in
respect of the share until the requirements of the notice have been complied
with.
<PAGE>
Rights of persons entitled by transmission
49.(D) Save as otherwise provided by or in accordance with these Articles, a
person becoming entitled to a registered share in consequence of a transmission
event (upon supplying to the Company such evidence as the Directors may
reasonably require to show his title to the share) shall be entitled to the same
dividends and other advantages as those to which he would be entitled if he were
the holder of the share. That person may give a discharge for all dividends and
other moneys payable in respect of the share, but he shall not, before being
registered as the holder of the share, be entitled (except with the authority of
the Directors) to receive notices of or to attend or vote at meetings of the
Company, or (save as aforesaid) to any of the rights or privileges of a member,
unless and until he shall have become a member in respect of the share.
Disclosure of Interests in Shares
Interpretation of and definitions for Article 50
50.(A) For the purposes of this Article 50:
(a) a person other than the member holding a share shall be treated as
appearing to be interested in that share if the member has informed the
Company that the person is, or may be, so interested, or if the Company
(after taking account of any information obtained from the member or,
pursuant to a Section 212 notice, from anyone else) knows or has reasonable
cause to believe that the person is, or may be, so interested;
(b) interested shall be construed as it is for the purpose of Section 212 of
the 1985 Act;
(c) reference to a person having failed to give the Company the information
required by a notice, or being in default as regards supplying such
information, includes (i) reference to his having failed or refused to give
all or any part of it and (ii) reference to his having given information
which he knows to be false in a material particular or having recklessly
given information which is false in a material particular;
(d) the prescribed period means fourteen days;
(e) an approved transfer means, in relation to any shares held by a member:
(i) a transfer by way of or pursuant to acceptance of a take-over
offer for the Company (within the meaning of Section 428(1) of
the 1985 Act); or
(ii) a transfer in consequence of a sale made through a recognised
investment exchange or recognised clearing house or any other
<PAGE>
stock exchange or market outside the United Kingdom on which
the Company's shares are normally traded; or
(iii) a transfer which is shown to the satisfaction of the Directors
to be made in consequence of a bona fide sale of the whole of
the beneficial interest in the shares to a person who is
unconnected with the member and with any other person
appearing to be interested in the shares.
Disenfranchisement
50.(B) If a member, or any other person appearing to be interested in shares
held by that member, has been given notice under Section 212 of the 1985 Act and
has failed in relation to any shares (the default shares, which expression shall
include any further shares which are allotted or issued in respect of such
shares) to give the Company the information thereby required within the
prescribed period from the date of service of the notice, then the Directors
may, in their absolute discretion at any time thereafter, by notice (a direction
notice) to such member (which shall be conclusive against such member and its
validity shall not be questioned by any person) direct, with effect from the
service of the notice (and subject to Article 50(D)), that:
(a) the member shall not be entitled in respect of the default shares to attend
or vote (either in person or by proxy or (if the member is a corporation)
by authorised representative) at any general meeting or at any separate
meeting of the holders of that class of shares or on a poll; and
(b) where the default shares represent 0.25 per cent or more in nominal value
of the issued shares of their class:
(i) no payment shall be made by way of dividend and no share shall
be allotted pursuant to Article 140 below;
(ii) no transfer of any shares held by the member shall be
registered unless:
(aa) the member is not himself in default as regards
supplying the information required and the member
provides evidence to the satisfaction of the Directors
that no person in default as regards supplying such
information is interested in any of the shares which are
the subject of the transfer;
(bb) the transfer is an approved transfer; or
(cc) registration of the transfer is required by the
Regulations.
<PAGE>
Service of notices on non-members
50.(C) The Company shall send to each other person appearing to be interested
in the shares which are the subject of a direction notice, a copy of such notice
at the same time as the notice is given to the relevant member, but the failure
or omission to do so, or the non-receipt by that person of the copy, shall not
invalidate or otherwise affect the application of Article 50(B).
Service of notices on an ADR Depositary
50.(D) Where the member on whom the notice under Section 212 of the 1985 Act
is served is an ADR Depositary acting in its capacity as such:
(a) the obligations of the ADR Depositary as a member pursuant to the preceding
provisions of this Article 50 shall be limited to disclosing to the Company
such information relating to the shares in question as has in each such
case been recorded pursuant to the terms of any agreement entered into
between the ADR Depositary and the Company, provided that nothing in this
Article 50(D) shall in any other way restrict the powers of the Directors
under this Article 50; and
(b) the sanctions under Article 50(B) and the directions contained in any
direction notice served under Article 50(B) shall not be effective unless
the relevant direction notice served upon the ADR Depositary states that a
specified ADR Holder or Holders, as the case may be, is or are believed to
be interested in a specified number of shares, and that those shares are
default shares (as defined in Article 50(B) above).
Cessation of disenfranchisement
50.(E) The sanctions under Article 50(B) above shall have effect for so long
as the default in respect of which the direction notice was issued continues and
shall cease to have effect:
(a) if the shares are transferred by means of an approved transfer; or
(b) when the Directors are satisfied that the information required by the
notice mentioned in that Article has been received in writing by the
Company (such determination to be made within a period of one week of the
default being duly remedied with written notice thereof being given
forthwith to the member).
The Directors may at any time give notice cancelling a direction notice.
Conversion of uncertificated shares
50.(F) The Company may exercise any of its powers under Article 6(D) in
respect of any default share that is held in uncertificated form.
<PAGE>
Limitations on Shareholdings
Limitation to less than 15% of voting capital
51.(A) The purpose of this Article 51 is to prevent any person (other than a
Permitted Person as defined in paragraph (d) of Article 51(B)) directly or
indirectly owning or controlling the right to cast on a poll 15 per cent or more
of the votes at general meetings of the Company.
Definitions for Article 51
51.(B) In this Article 51:
(a) Additional Interest means any such interest as is referred to in sub-
paragraphs (b)(ii) and (b)(iii) below;
(b) interest, in relation to shares, means:
(i) any interest which would be taken into account in determining
for the purposes of Part VI of the Original Act whether a
person has a notifiable interest (including any interest which
he would be taken as having for those purposes);
(ii) any interest mentioned in Section 209(1)(a), (b), (d) or (e)
of the Original Act (except that of a simple trustee under the
law of Scotland and of a bare or custodian trustee under the
laws of England and Wales); and
(iii) any interest mentioned in Section 208(4)(b) of the Original Act
(but on the basis that the entitlement there referred to could
arise under an agreement within the meaning of Section 204(5)
and (6) of the Original Act),
and interested shall be construed accordingly;
(c) the Original Act means the Companies Act 1985 as in force at 29 May 1991
and notwithstanding any repeal, modification or re-enactment thereof after
that date (including for the avoidance of doubt, any amendment, replacement
or repeal by regulations made pursuant to Section 210A of that 1985 Act to
the definition of relevant share capital in Section 198(2) or to the
provisions as to what is taken to be an interest in shares in Section 208
or as to what interests are to be disregarded in Section 209 or the
percentage giving rise to a notifiable interest in Section 199(2));
(d) Permitted Person means:
(i) an ADR Depositary, acting in his capacity as such;
<PAGE>
(ii) a recognised clearing house or a nominee of a recognised
clearing house or of a recognised investment exchange, acting
in its capacity as such;
(iii) the chairman of a meeting of the Company or of a meeting of
the holders of Relevant Share Capital or of any class thereof
when exercising the voting rights conferred on him under
Article 51(H);
(iv) a trustee (acting in that capacity) of any employees' share
scheme of the Company;
(v) the Crown or one of Her Majesty's Secretaries of State,
another Minister of the Crown, the Solicitor for the affairs
of Her Majesty's Treasury and any other person acting on
behalf of the Crown;
(vi) any person who has an interest but who, if the nature of his
interest were governed by the law of Scotland, would in the
opinion of the Directors be regarded as a simple trustee of
that interest but in respect of that interest only;
(vii) an underwriter or sub-underwriter in respect of interests in
shares which exist only by virtue of a contingent obligation
to purchase or subscribe for such shares pursuant to an
underwriting or sub-underwriting agreement approved by the
Directors or during the period from the date or last date of
execution of the relevant underwriting or sub-underwriting
agreement until such date as is six months following the date
on which the contingent obligation becomes unconditional, in
respect of interests in shares purchased or subscribed for by
it pursuant to such an obligation;
(viii) any other person who (pursuant to arrangements approved by the
Directors) subscribes for or otherwise acquires Relevant Share
Capital (or interests therein) which has been allotted or
issued with a view to that person (or purchasers from that
person) offering the same to the public, for a period not
exceeding six months from the date of the relevant allotment
or issue (and in respect only of the shares so subscribed for
or otherwise acquired);
(ix) Japan Securities Clearing Corporation and/or its nominee
acting in its capacity as a clearing house in respect of
dealings on the Tokyo Stock Exchange;
(x) Depository Trust Company and/or its nominee acting in the
capacity of a clearing agency in respect of dealings in
American depositary receipts;
<PAGE>
(xi) any person who has an interest, and who shows to the
satisfaction of the Directors that he has it, by virtue only
of being entitled to exercise or control the exercise (within
the meaning of Section 203(4) of the Original Act) of one-
third or more of the voting rights at general meetings of a
company which is a Permitted Person within (i) to (x) above;
or
(xii) a CREST member acting as trustee of shares in respect of which
no other person (other than a Permitted Person) is or becomes
a Relevant Person (including, without limitation, by virtue of
being deemed to be one).
(e) Relevant Person means any person (whether or not identified) who has, or
who appears to the Directors to have, an interest in shares which carry the
right to cast 15 per cent or more of the total votes attaching to Relevant
Share Capital of all classes (taken as a whole) and capable of being cast
on a poll, or who is deemed for the purposes of this Article 51 to be a
Relevant Person;
(f) Relevant Share Capital means the relevant share capital (as defined in
Section 198(2) of the Original Act) of the Company;
(g) Relevant Shares means all shares comprised in the Relevant Share Capital in
which a Relevant Person has, or appears to the Directors to have, an
interest or which are deemed for the purposes of this Article 51 to be
Relevant Shares; and
(h) Required Disposal means a disposal or disposals of such a number of
Relevant Shares or interests therein as will cause a Relevant Person to
cease to be a Relevant Person, not being a disposal to another Relevant
Person (other than a Permitted Person) or a disposal which constitutes any
other person (other than a Permitted Person) a Relevant Person; and, for
the purposes of this Article 51, where the Directors resolve that they have
made reasonable enquiries and that they are unable to determine:
(i) whether or not a particular person has an interest in any
particular shares comprised in Relevant Share Capital, or
(ii) who is interested in any particular shares so comprised,
the shares concerned shall be deemed to be Relevant Shares and all persons
interested in them to be Relevant Persons.
Extension of statutory disclosure requirements
51.(C) Subject to Articles 51 (D), (N), (O) and (P) below and without
prejudice to Article 50, the provisions of Part VI of the Original Act shall
apply in relation to the Company as if those provisions extended to Additional
Interests and
<PAGE>
accordingly the rights and obligations arising under that Part shall apply in
relation to the Company, its members and all persons interested in Relevant
Share Capital, as extended by this Article 51(C); but so that Additional
Interests shall, when disclosed to the Company, be entered in a separate
register kept by the Company for that purpose. The rights and obligations
created by this Article 51(C) in respect of interests in shares (including, but
not limited to, Additional Interests) are in addition to and separate from those
arising under Part VI of the 1985 Act.
Non-application of criminal sanctions
51.(D) Sections 210(3) to (6), 211(10), 213(3) (so far as it relates to
Section 211(10)). 214(5), 215(8), 216(1) to (4), 217(7), 218(3), 219(3) and (4),
454, 455, 732 and 733 of the Original Act shall not apply in respect of
Additional Interests.
Disposal notices
51.(E) If, to the knowledge of the Directors, any person other than a
Permitted Person is or becomes a Relevant Person (including, without limitation,
by virtue of being deemed to be one), the Directors shall give notice to all
persons (other than persons referred to in Article 51(J) below) who appear to
the Directors to have interests in the Relevant Shares and, if different, to the
holders of those shares. The notice shall set out the restrictions referred to
in Article 51(H) below and call for a Required Disposal to be made within 21
days of the giving of the notice to the holder or such longer period as the
Directors consider reasonable. If the Relevant Shares are held by an ADR
Depositary, the notice shall state that:
(a) a specified ADR Holder or Holders (the Relevant ADR Holder(s)) is or are
believed or deemed to be a Relevant Person or Persons or is or are a person
or persons through whom a Relevant Person or Persons is or are believed or
deemed to be interested in shares of the Company, in either case as
specified in the notice; and
(b) the Directors believe that each Relevant ADR Holder or the Relevant Person
or Persons believed or deemed to have interests through such Relevant ADR
Holder, as the case may be, is or are deemed to be interested in a
specified number of shares.
The Directors may extend the period in which any such notice is required to be
complied with and may withdraw any such notice (whether before or after the
expiration of the period referred to) if it appears to them that there is no
Relevant Person in relation to the shares concerned. After the giving of such a
notice, and save for the purpose of a Required Disposal under this Article 51(E)
or Article 51(F), no transfer of any of the Relevant Shares may be registered
<PAGE>
until either the notice is withdrawn or a Required Disposal has been made to the
satisfaction of the Directors and registered.
Disposal by Directors if non-compliance
51.(F) If a notice given under Article 51(E) has not been complied with in
all respects to the satisfaction of the Directors and has not been withdrawn,
the Directors shall, so far as they are able, make a Required Disposal (or
procure that a Required Disposal is made) and shall give written notice of the
disposal to those persons on whom the notice was served. The Relevant Person(s)
and the holder(s) of the shares duly disposed of shall be deemed to have
irrevocably and unconditionally authorised the Directors to make such Required
Disposal. The manner, timing and terms of any such Required Disposal made or
sought to be made by the Directors (including but not limited to the price or
prices at which the same is made and the extent to which assurance is obtained
that no transferee, except a Permitted Person, is or would become a Relevant
Person) shall be such as the Directors determine, based on advice from bankers,
brokers or other appropriate persons consulted by them for the purpose, to be
reasonably practicable having regard to all the circumstances, including but not
limited to the number of shares to be disposed of and the requirement that the
disposal be made without delay and the Directors shall not be liable to any
person for any of the consequences of reliance on such advice. If, in relation
to a Required Disposal to be made by the Directors, Relevant Shares are held by
more than one holder (treating joint holders of any Relevant Shares as a single
holder) the Directors shall cause as nearly as practicable the same proportion
of each holding (so far as known to them) of the Relevant Shares to be sold.
Disposal procedure and application of proceeds
51.(G) For the purpose of effecting any Required Disposal, the Directors may
authorise in writing any officer or employee of the Company to execute any
necessary transfer on behalf of any holder and may enter the name of the
transferee in the register of members in respect of the transferred shares,
notwithstanding the absence of any share certificate, and may issue a new
certificate to the transferee and an instrument of transfer executed by such
person shall be as effective as if it had been executed by the holder of the
transferred shares and the title of the transferee shall not be affected by any
irregularity or invalidity in the proceedings relating thereto. The net
proceeds of the disposal shall be received by the Company whose receipt shall be
a good discharge for the purchase money, and shall be paid (without any interest
being payable in respect of it and after deduction of any expenses incurred by
the Directors in the sale) to the former holder (or, in the case of joint
holders, the first of them named in the register of members) upon surrender by
him or on his behalf of any certificate in respect of the Relevant Shares sold
and formerly held by him and, if appropriate, a new certificate in respect of
the balance of the Relevant Shares of which he is the holder shall be sent to
him at the same time.
<PAGE>
Suspension of rights
51.(H) A holder of a Relevant Share to whom a notice has been given under
(and complying with) Article 51(E) above shall not in respect of that share be
entitled, until such time as the notice has been complied with to the
satisfaction of the Directors or withdrawn, to attend or vote at any general
meeting of the Company or meeting of the holders of Relevant Share Capital or of
any class thereof, or to exercise any other right conferred by membership in
relation to any such meeting; and the rights to attend (whether in person or by
proxy or (in the case of a corporation) by authorised representative) to speak
and to demand and vote on a poll which would have attached to the Relevant
Share, had it not been a Relevant Share, shall vest in the chairman of any such
meeting. The manner in which the chairman exercises or refrains from exercising
any such rights shall be entirely at his discretion. The chairman of any such
meeting shall be informed by the Directors of any share becoming or being deemed
to be a Relevant Share to which this Article 51(H) applies.
Determination of Relevant Persons
51.(I) Without prejudice to the provisions of the Statutes and subject to
paragraph (e) of Article 51(B), the Directors may assume, without enquiry, that
a person is not a Relevant Person unless the information contained in the
registers kept by the Company under Part VI of the 1985 Act, or under Part VI of
the Original Act, as applied and extended by this Article 51, including the
separate register to be kept under Article 51(C), appears to the Directors to
indicate to the contrary or the Directors have reason to believe otherwise, in
which circumstances the Directors shall make reasonable enquiries to discover
whether any person is a Relevant Person.
Deemed notice
51.(J) The Directors shall not be obliged to give any notice required under
this Article 51 to be given to any person if they do not know either his
identity or his address. The absence of such a notice in those circumstances
and any accidental error in, or failure to give, any notice to any person to
whom notice is required to be given under this Article 51 shall not prevent the
implementation of, or invalidate, any procedure under this Article 51.
Informing of co-Directors
51.(K) If any Director has reason to believe that a person (not being a
Permitted Person) is a Relevant Person, he shall inform the other Directors.
Service of notices
51.(L) Save as otherwise provided in this Article 51, the provisions of these
Articles applying to the giving of notice of meetings to members shall apply to
the giving to a member of any notice required by this Article 51. Any notice
<PAGE>
required by this Article 51 to be given to a person who is not a member, or who
is a member whose registered address is not within the United Kingdom and who
has not given to the Company an address within the United Kingdom at which
notices may be given to him, shall be deemed validly served if it is sent
through the post in a prepaid envelope addressed to that person at the address
(or if more than one, at one of the addresses), if any, at which the Directors
believe him to be resident or carrying on business or to his last known address
as shown on any of the register of members and the list of members maintained by
an ADR Depositary. The notice shall in such a case be deemed to have been given
on the day following that on which the envelope containing the same is posted,
unless it was sent by second class post or there is only one class of post, in
which case it shall be deemed to have been given on the day next but one after
it was posted. Proof that the envelope was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given.
Exercise of Directors' discretion
51.(M) Any resolution or determination of, or decision or exercise of any
discretion or power by, the Directors or any Director or by the chairman of any
meeting under or pursuant to the provisions of this Article 51 (including
without prejudice to the generality of the foregoing as to what constitutes
reasonable enquiry or as to the manner, timing and terms of any Required
Disposal made by the Directors under Article 51(F)) shall be final and
conclusive; and any disposal or transfer made, or other thing done, by or on
behalf of, or on the authority of, the Directors or any Director pursuant to the
foregoing provisions of this Article 51 shall be conclusive and binding on all
persons concerned and shall not be open to challenge, whether as to its validity
or otherwise on any ground whatsoever. The Directors shall not be required to
give any reasons for any decision, determination or declaration taken or made in
accordance with this Article 51.
ADR depositaries
51.(N) Article 51(C) above shall not apply to an ADR Depositary in its
capacity as such. An ADR Holder shall be deemed, for the purposes of this
Article 51, to have an interest in the number of shares in the Company in
respect of which rights are evidenced by the relevant American depositary
receipt and not (in the absence of any other reason why he should be so treated)
in the remainder of the shares in the Company held by the ADR Depositary.
Recognised persons
51.(O) Article 51(C) shall not apply to a recognised person acting in its
capacity as such, nor shall it apply to a CREST member acting as trustee. Where
in that capacity interests in shares in the Company are held by a recognised
person or a CREST member acting as trustee under arrangements recognised by the
Company for the purposes of this Article 51 any person who has rights in
<PAGE>
relation to shares in the Company in which such a recognised person or CREST
member has such an interest shall be deemed to be interested in the number of
shares in the Company for which such a recognised person or CREST member is or
may become liable to account to him and any interest which (by virtue of his
being a tenant in common in relation to interests in shares in the Company so
held by such a recognised person or CREST member) he would otherwise be treated
for the purposes of this Article as having in a larger number of shares in the
Company shall (in the absence of any other reason why he should be so treated)
be disregarded.
Article 51 to take precedence
51.(P) This Article 51 shall apply notwithstanding any provision in any other
of these Articles which is inconsistent with or contrary to it.
Untraced Shareholders
Power to dispose of shares of untraced shareholders
52.(A) The Company shall be entitled to sell, in such manner as the Directors
see fit and at the best price reasonably obtainable, any share held by a member
or any share to which a person is entitled by transmission if:
(a) for a period of 12 years before the giving of notice pursuant to sub-
paragraph (c) no cheque or warrant for amounts payable in respect of the
share, sent and payable in a manner authorised by these Articles has been
cashed and no communication in respect of the share has been received by
the Company from the member or person concerned;
(b) during that period at least three dividends in respect of the share have
become payable;
(c) the Company has, after the expiration of that period, by advertisement in
one Scottish and one leading national newspaper and in a newspaper
circulating in the area to which the cheques or warrants were sent, and by
notice to the Quotations Department of The London Stock Exchange if shares
of the class concerned are listed or dealt in on that exchange, given
notice of its intention to sell such share; and
(d) the Company has not, during the further period of three months after the
date of the advertisement and prior to the sale of the share, received any
communication in respect of the share from the member or person concerned.
Power to dispose of additional shares
52.(B) The Company shall also be entitled to sell, in the manner provided for
in this Article 52, any share (additional share) issued during the said period
or
<PAGE>
periods of 12 years and 3 months in right of any share to which Article 52(A)
applies or in right of any share issued during either of such periods, provided
that the requirements of sub-paragraphs (a) (but modified to exclude the words
"for a period of 12 years before the giving of notice pursuant to sub-paragraph
(c)"), (c) (but modified to exclude the words "after the expiration of that
period") and (d) of Article 52(A) are satisfied in respect of such additional
share.
Transfer on sale
52.(C) To give effect to any sale pursuant to Article 52(B), the Directors
may:
(a) where the shares are held in certificated form, appoint any person to
execute as transferor, an instrument of transfer of the shares to, or in
accordance with the directions of, the buyer; or
(b) where the shares are held in uncertificated form, do all acts and things
they consider necessary or expedient to effect the transfer of the shares
to, or in accordance with, the directions of the buyer.
Sale procedure and application of proceeds
52.(D) An instrument of transfer executed in accordance with Article
52.(C)(a) shall be as effective as if it had been executed by the registered
holder of, or person entitled by transmission to, such shares and the title of
the transferee shall not be affected by any irregularity or invalidity in the
proceedings relating thereto. An exercise by the Company of its powers in
accordance with Article 52(C)(b) shall be as effective as if exercised by the
registered holder of or the person entitled by transmission to the shares. The
Company shall be indebted to the former member or other person previously
entitled to the said shares for an amount equal to the net proceeds of sale, but
no trust shall be created and no interest shall be payable in respect of the
proceeds of sale. The Company shall not be required to account for any money
earned on the net proceeds of sale, which may be used in the Company's business
or invested in such a way as the Directors may from time to time think fit.
Stock
Conversion into stock
53. Subject to the provisions of these Articles, the Company may, from time to
time, by ordinary resolution, convert any fully paid shares into stock or
reconvert any stock into fully paid shares of any denomination. If and whenever
any shares of any class in the capital of the Company for the time being shall
have been issued and be fully paid, and at that time the shares of that class
previously issued shall stand converted into stock, such further shares, upon
being fully paid, shall ipso facto be converted into stock transferable in the
same units as the existing stock of that class.
<PAGE>
Transfer of stock
54. The holders of stock may transfer the same or any part thereof, unless
otherwise directed by ordinary resolution of the Company, in the same manner and
subject to the same regulations as those subject to which the shares from which
the stock arose might, previously to conversion, have been transferred (or as
near thereto as circumstances admit), but no stock shall be transferable except
in such units (not being greater than the nominal amount of the shares from
which the stock arose) as the Directors may from time to time determine.
Rights of stockholders
55. The holders of stock shall according to the amount of the stock held by
them have the same rights, privileges and advantages as regards dividend, return
of capital, voting and other matters as if they held the shares from which the
stock arose, but no such right, privilege or advantage (except as regards
participation in the dividends, profits or assets of the Company) shall be
conferred by an amount of stock which would not, if existing in shares, have
conferred such right, privilege or advantage. All the provisions of these
Articles applicable to paid up shares shall apply to stock, and the words share
and member shall include stock and holder of stock respectively.
General Meetings
Types of general meetings
56. An annual general meeting shall be held once in every year, at such time
(within a period of not more than fifteen months after the holding of the last
preceding annual general meeting) and place as may be determined by the
Directors. All other general meetings shall be called extraordinary general
meetings.
Extraordinary general meetings
57. The Directors may whenever they think fit, and shall on requisition in
accordance with the Statutes, proceed to convene an extraordinary general
meeting in accordance with the Statutes.
General meetings at more than one place
58.(A) The Directors may resolve to enable persons entitled to attend a
general meeting to do so by simultaneous attendance and participation at another
place designated by the Directors as a satellite meeting place. The members
present in person or by proxy at any satellite meeting place shall be counted in
the quorum for, and be entitled to vote at, the general meeting in question, and
that meeting shall be duly constituted and its proceedings valid if the chairman
of the general meeting is satisfied that adequate facilities are available
throughout the general meeting to ensure that members attending at all the
meeting places are able to:
<PAGE>
(a) participate in the business for which the meeting has been convened;
(b) hear and see all persons who speak (whether by the use of microphones,
loudspeakers, audio-visual communications equipment or otherwise) in the
principal meeting place and any satellite meeting place; and
(c) be heard and seen by all other persons so present in the same way.
The chairman of the general meeting shall be present at, and the meeting shall
be deemed to take place at, the principal meeting place.
Interruption or adjournment where facilities inadequate
58.(B) If it appears to the chairman of the general meeting that the
facilities at the principal meeting place or any satellite meeting place have
become inadequate for the purposes referred to in Article 58(A), then the
chairman may, without the consent of the meeting, interrupt or adjourn the
general meeting. All business conducted at that general meeting up to the time
of that adjournment shall be valid. The provisions of Article 66 shall apply to
that adjournment.
Other arrangements for viewing/hearing proceedings
58.(C) The Directors may make arrangements for persons entitled to attend a
general meeting or an adjourned general meeting to be able to view and hear the
proceedings of the general meeting or adjourned general meeting and to speak at
the meeting (whether by the use of microphones, loudspeakers, audio-visual
communications equipment or otherwise) by attending at a venue anywhere in the
world not classified as a satellite meeting place. Those attending at any such
venue shall not be regarded as present at the general meeting or adjourned
general meeting and shall not be entitled to vote at the meeting at or from that
venue. The inability for any reason of any member present in person or by proxy
at such a venue to view or hear all or any of the proceedings of the meeting or
to speak at the meeting shall not in any way affect the validity of the
proceedings of the meeting.
Controlling level of attendance
58.(D) The Directors may from time to time make such arrangements for
controlling the level of attendance at any venue for which arrangements have
been made pursuant to Article 58(C) (including without limitation the issue of
tickets or the imposition of some other means of selection) as they in their
absolute discretion consider appropriate, and may from time to time change those
arrangements. If a member, pursuant to those arrangements, is not entitled to
attend in person or by proxy at a particular venue, he shall be entitled to
attend in person or by proxy at any other venue for which arrangements have been
made pursuant to Article 58(C). The entitlement of any member to be present at
such venue in person or by proxy shall be subject to any such
<PAGE>
arrangement then in force and stated by the notice of meeting or adjourned
meeting to apply to the meeting.
Change in place and/or time of meeting
58.(E) If, after the giving of notice of a general meeting but before the
meeting is held, or after the adjournment of a general meeting but before the
adjourned meeting is held (whether or not notice of the adjourned meeting is
required), the Directors decide that it is impracticable or unreasonable for a
reason beyond their control to hold the meeting at the declared place (or any of
the declared places, in the case of a meeting to which Article 58(A) applies)
and/or time, it may change the place (or any of the places, in the case of a
meeting to which Article 58(A) applies) and/or postpone the time at which the
meeting is to be held. If such a decision is made, the Directors may then
change the place (or any of the places, in the case of a meeting to which
Article 58(A) applies) and/or postpone the time again if they decide that it is
reasonable to do so. In either case:
(a) no new notice of the meeting need be given, but the Directors shall, if
practicable, advertise the date, place and time of the meeting in at least
one leading Scottish and one leading national daily newspaper and shall
make arrangements for notices of the change of place and/or postponement to
appear at the original place and/or at the original time; and
(b) notwithstanding Article 82, an instrument of proxy in relation to the
meeting may be deposited at any time not less than 48 hours before any new
time appointed for holding the meeting.
Meaning of participate
58.(F) For the purposes of this Article 58, the right of a member to
participate in the business of any general meeting shall include without
limitation the right to speak, vote on a show of hands, vote on a poll, be
represented by a proxy and have access to all documents which are required by
the Statutes or these Articles to be made available at the meeting.
Security
58.(G) The Directors and, at any general meeting, the chairman may make any
arrangement and impose any requirement or restriction they or he considers
appropriate to ensure the security of a general meeting including, without
limitation, requirements for evidence of identity to be produced by those
attending the meeting, the searching of their personal property and the
restriction of items that may be taken into the meeting place. The Directors
and, at any general meeting, the chairman are entitled to refuse entry to a
person who refuses to comply with these arrangements, requirements or
restrictions.
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Notice of General Meetings
Recipients of notice
59.(A) Subject to the provisions of these Articles and to the restrictions
imposed on any shares, notice of a general meeting shall be given to all
members, to each of the Directors and to the auditors.
Period of notice
59.(B) An annual general meeting and any extraordinary general meeting at
which it is proposed to pass a special resolution or (save as provided by the
Statutes) a resolution of which special notice has been given to the Company,
shall be called by twenty one clear days' notice in writing at the least, and
any other extraordinary general meeting by fourteen clear days' notice in
writing at the least given in manner hereinafter mentioned to the auditors and
to all members other than such as are not under the provisions of these Articles
entitled to receive such notices from the Company; provided that a general
meeting, notwithstanding that it has been called by shorter notice than that
specified above, shall be deemed to have been duly called if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of an extraordinary general meeting, by a majority in number of
the members having a right to attend and vote thereat, being a majority
together holding not less than 95 per cent. in nominal value of the shares
giving that right.
Provided also that the accidental omission to give notice to, or the non-receipt
of notice by any person entitled thereto, shall not invalidate the proceedings
at any general meeting.
A Director shall be entitled to receive notice of, and to attend and speak at,
any general meeting or class meeting, notwithstanding that he is not a member of
the Company.
Contents of notice
60.(a) Every notice calling a general meeting shall specify the place and the
day and hour of the meeting (including without limitation any satellite
meeting place arranged for the purposes of Article 58(A), which shall be
identified as such in the notice), and there shall appear with
reasonable prominence in every such notice a statement that a member
entitled to attend and vote is entitled to appoint one or more proxies
to attend and, on a poll, vote instead of him and that a proxy need not
be a member of the Company.
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(b) In the case of an annual general meeting, the notice shall also specify the
meeting as such.
(c) In cases where instruments of proxy are sent out with notices, the
accidental omission to send such instruments of proxy to, or the non-
receipt of such instruments of proxy by, any person entitled to receive
notice shall not invalidate the proceedings at any general meeting.
(d) In the case of any general meeting at which business other than routine
business is to be transacted, the notice shall specify the general nature
of such business, and if any resolution is to be proposed as an
extraordinary resolution or as a special resolution, the notice shall
contain a statement to that effect.
(e) The notice shall include details of any arrangements made for the purpose
of Article 58(C) (making clear that participation in these arrangements
will not amount to attendance at the meeting to which the notice relates).
Routine business
61. Routine business shall mean and include only business transacted at an
annual general meeting of the following classes, that is to say:
(a) sanctioning or declaring dividends;
(b) receiving and/or adopting the accounts, the reports of the Directors and
auditors and other documents required to be annexed to the accounts;
(c) appointing or re-appointing the retiring auditors (unless they were last
appointed otherwise than by the Company in general meeting);
(d) fixing the remuneration of the auditors or determining the manner in which
such remuneration is to be fixed; and
(e) appointing or re-appointing directors to fill vacancies arising at the
meeting on retirement by rotation or otherwise.
Notice of resolutions
62. The Directors shall, on the requisition of members in accordance with the
provisions of the Statutes, but subject as therein provided:
(a) give to the members entitled to receive notice of the next annual general
meeting, notice of any resolution which may properly be moved and is
intended to be moved at that meeting;
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(b) circulate to the members entitled to have notice of any general meeting,
any statement of not more than one thousand words with respect to the
matter referred to in any proposed resolution or the business to be dealt
with at that meeting.
Proceedings at General Meetings
Quorum
63. No business, other than the appointment of a chairman of the meeting, shall
be transacted at any general meeting unless a quorum is present at the time when
the meeting proceeds to business and during the transaction of business. Three
persons entitled to vote upon the business to be transacted, each being a
member, the proxy of a member or a duly authorised representative of a
corporation which is a member shall be a quorum.
If quorum not present
64. If within fifteen minutes from the time appointed for a general meeting (or
such longer time not exceeding one hour as the chairman of the meeting may
determine to wait) a quorum is not present, the meeting, if convened on the
requisition of members, shall be dissolved. In any other case, or if during the
transaction of business the quorum ceases to be present, the meeting shall stand
adjourned to the same day in the next week, at the same place and time, or to
such other day and at such other place and time as the chairman of the meeting
may determine, and if at such adjourned meeting a quorum is not present within
fifteen minutes from the time appointed for holding the meeting, the meeting
shall be dissolved.
Chairman
65. The chairman of the Directors, failing whom one of the deputy chairmen,
failing whom one of any vice-chairmen (to be chosen, if more than one are
present and in default of agreement amongst themselves, by lot) shall preside as
chairman at a general meeting. If there be no such chairman or deputy chairman
or vice-chairman, or if at any meeting none of them be present within fifteen
minutes after the time appointed for holding the meeting and willing to act, the
Directors present shall choose one of their number (or, if no Director is
present or if all the Directors present decline to take the chair, the members
present shall choose one of their number) to be chairman of the meeting.
Adjournments
66. The chairman of the meeting may with the consent of any general meeting at
which a quorum is present (and shall if so directed by the meeting) adjourn the
meeting from time to time (or sine die) and from place to place, but no business
shall be transacted at any adjourned meeting except business which might
lawfully have been transacted at the meeting from which the adjournment
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took place. In addition (and without prejudice to the chairman's power to
adjourn a meeting conferred by Article 58(B)), the chairman may adjourn the
meeting to another place and time without such consent if it appears to him
that:
(a) it is likely to be impracticable to hold or continue that meeting because
of the number of members wishing to attend who are not present; or
(b) the unruly conduct of persons attending the meeting prevents or is likely
to prevent the orderly continuation of the business of the meeting; or
(c) an adjournment is otherwise necessary so that the business of the meeting
may be properly conducted.
Place and time of adjourned meetings
67. Any such adjournment pursuant to Article 66 may be to such other place (or,
in the case of a meeting held at a principal meeting place and a satellite
meeting place, such other places) and for such time as the chairman may, in his
absolute discretion determine, notwithstanding that by reason of such
adjournment some members may be unable to be present at the adjourned meeting.
Any such member may nevertheless execute a form of proxy for the adjourned
meeting which, if delivered by him to the chairman or the secretary, shall be
valid even though it is given at less notice than would otherwise be required by
these Articles. When a meeting is adjourned for 30 days or more or for an
indefinite period, at least seven clear days' notice shall be given specifying
the place and time (or places, in the case of a meeting to which Article 58(A)
applies) of the adjourned meeting and the general nature of the business to be
transacted. Otherwise it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting.
Amendments to resolutions
68. No amendment to a resolution duly proposed as an ordinary resolution may be
considered or voted on (other than a mere clerical amendment to correct a patent
error) unless either (a) at least 48 hours before the time appointed for holding
the meeting or adjourned meeting at which the ordinary resolution is to be
considered, notice of the terms of the amendment and the intention to move it
has been lodged at the registered office of the Company, or (b) the chairman in
his absolute discretion decides that the amendment may be considered and voted
on. If an amendment shall be proposed to any resolution under consideration,
but shall in good faith be ruled out of order by the chairman of the meeting,
the proceedings on the resolution shall not be invalidated by any error in such
ruling. In the case of a resolution duly proposed as a special or extraordinary
resolution no amendment thereto (other than a mere clerical amendment to correct
a patent error) may in any event be considered or voted upon.
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Methods of voting
69. At any general meeting a resolution put to the vote of the meeting shall be
decided on a show of hands unless a poll is (before or on the declaration of the
result of the show of hands or on the withdrawal of any other demand for a poll
as hereinafter mentioned) demanded by either:-
(a) the chairman of the meeting; or
(b) not less than five persons having the right to vote at the meeting;
(c) a member or members present in person holding not less than one tenth of
the total voting rights of all the members having the right to vote at the
meeting; or
(d) a member or members present in person holding shares in the Company
conferring a right to vote at the meeting, being shares on which an
aggregate sum has been paid up equal to not less than one tenth of the
total sum paid up on all the shares conferring that right.
A demand by a person as a proxy for the member shall be the same as a demand by
the member.
Declaration of result and conduct of poll
70. A demand for a poll may be withdrawn at any time before the conclusion of
the meeting or the taking of the poll, whichever is the earlier. Unless a poll
is duly demanded (and the demand is not withdrawn) a declaration by the chairman
of the meeting that a resolution has been carried, or carried unanimously, or by
a particular majority, or lost and an entry to that effect in the minute book of
the Company shall be conclusive evidence of that fact without proof of the
number or proportion of the votes recorded for or against such resolution. If a
poll is duly demanded (and the demand is not withdrawn), it shall be taken in
such manner (including the use of ballot or voting papers or tickets) as the
chairman of the meeting may direct, and the result of a poll shall be deemed to
be the resolution of the meeting at which the poll was demanded. The chairman
of the meeting may (and if so directed by the meeting shall) appoint scrutineers
and may adjourn the meeting to some place and time fixed by him for the purpose
of declaring the result of the poll.
Chairman's casting vote
71. In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting at which the show of hands takes place or at
which the poll is demanded shall be entitled to a casting vote in addition to
the votes to which he may be entitled as a member or as a proxy or authorised
representative of a member.
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When poll to be taken
72. A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other question
shall be taken either immediately or at such subsequent time (being not more
than thirty days after the date of the meeting at which the poll was demanded)
and place as the chairman may direct. No notice need be given of a poll not
taken immediately.
Continuance of meeting
73. The demand for a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which the poll has
been demanded. If a poll is demanded before the declaration of the result of a
show of hands and the demand is duly withdrawn, the meeting shall continue as if
the demand had not been made.
Votes of Members
Right to vote
74. Subject to any special rights or restrictions as to voting attached by or
in accordance with these Articles to any class of shares, on a show of hands
every member present in person (but excluding for this purpose, the proxy of a
member) and entitled to vote shall have one vote, and on a poll every member
present in person and entitled to vote shall have one vote for every share held
by him.
Votes of joint holders
75. In the case of joint holders of a share the vote of the senior who tenders
a vote, whether in person or by proxy or (if such senior member is a
corporation) by authorised representative, shall be accepted to the exclusion of
the votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names stand in the register of members in
respect of the joint holding.
Member under incapacity
76. A member who is a patient for any purpose of any statute relating to mental
health or in respect of whom an order has been made by any court having
jurisdiction (whether in the United Kingdom or elsewhere) for the protection or
management of the affairs of persons incapable of managing their own affairs,
may vote, whether on a show of hands or on a poll, by his committee, receiver,
curator bonis or other person in the nature of a committee, receiver or curator
bonis appointed by such court, and any such committee, receiver, curator bonis
or other person may, on a poll, vote by proxy, provided that such evidence as
the Directors may require of the authority of the person
<PAGE>
claiming to vote shall have been deposited at the transfer office, or at such
other place (if any) as is specified for the delivery of instruments of proxy in
accordance with these presents, not less than forty eight hours before the time
appointed for holding the meeting or adjourned meeting or (in the case of a poll
taken otherwise than at, or on the same day as, the meeting or adjourned
meeting) for the taking of the poll at which it is desired to vote.
Calls in arrears
77. No member shall, unless the Directors otherwise determine, be entitled in
respect of shares held by him to attend or vote at a general meeting either
personally or by proxy or (if the member is a corporation) by authorised
representative to exercise any other right conferred by membership in relation
to meetings of the Company if any call or other sum presently payable by him to
the Company in respect of shares in the Company remains unpaid.
Admissibility of Votes
Objections to voting
78. If (a) any objection shall be raised to the qualification of any person to
vote or to the admissibility of any vote or (b) any votes have been counted
which ought not to have been counted or which might have been rejected or (c)
any votes are not counted which ought to have been counted, the objection or
error shall not vitiate the decision of the meeting or adjourned meeting on any
resolution unless the same is raised or pointed out at the meeting or, as the
case may be, the adjourned meeting at which the vote objected to is given or
tendered or at which the error occurs. Any objection or error raised or pointed
out in due time shall be referred to the chairman of the meeting and shall only
vitiate the decision of the meeting on any resolution if the chairman decides
that the same may have affected the decision of the meeting. The decision of the
chairman on such matters shall be final and conclusive.
Supplementary provisions on voting
79. On a poll votes may be given either personally or by proxy or (if the
member is a corporation) by authorised representative and a person entitled to
more than one vote need not use all his votes or cast all the votes he uses in
the same way.
Proxies
Proxy need not be member
80. A proxy need not be a member of the Company.
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Appointment and form of proxy
81. An instrument appointing a proxy shall be in writing in any usual or common
form, or in any other form which the Directors may prescribe or accept, and
shall be executed by, or on behalf of, the appointor. A corporation may execute
a proxy under its common seal and/or the hand of a duly authorised officer or
person. The Directors may, but shall not be bound to, require evidence of the
authority of any person executing an instrument appointing a proxy on behalf of
the appointor.
Delivery of form of proxy
82. An instrument appointing a proxy (together with any evidence of authority
required by the Directors pursuant to Article 81) must be delivered by post or
personal delivery (or such other means as may be approved by the Directors) to
such place or one of such places (if any) as may be specified for that purpose
in or by way of note to or in any documents accompanying the notice convening
the meeting or any notice of any adjournment (or, if no place is so specified,
to the transfer office) not less than forty eight hours before the time
appointed for the holding of the meeting or adjourned meeting or (in the case of
a poll taken otherwise than at, or on the same day as, the meeting or adjourned
meeting) for the taking of the poll at which it is to be used, and in default
shall not be treated as valid, provided that an instrument of proxy relating to
more than one meeting (including any adjournment thereof) having once been so
delivered for the purposes of any meeting shall not require again to be
delivered in relation to any subsequent meetings to which it relates. No
instrument appointing a proxy shall be valid after the expiration of twelve
months from the date stated in it as the date of its execution, except a power
of attorney containing a power to act and vote for a member at meetings of the
Company, and such a power, if once duly intimated to the Company, shall not
require to be again deposited at the transfer office of the Company. When two
or more valid instruments of proxy are delivered in respect of the same share
for use at the same meeting, the one which was executed last shall be treated as
replacing and revoking the other as regards that share; if the Company is unable
to determine which was executed last, none of them shall be treated as valid in
respect of that share.
Issue of forms of proxy
83. Subject to the provisions of the Statutes, the Directors may, if they think
fit, at the expense of the Company, issue forms of proxy for use by the members
with or without prepaid postage and with or without inserting therein the names
of any of the Directors or any other person as proxies.
<PAGE>
Validity of forms of proxy
84. An instrument appointing a proxy shall be deemed to include the right to
demand or join in demanding a poll but shall not confer any further right to
speak at the meeting, except with the permission of the chairman of the meeting,
and shall be deemed to confer authority to vote on any amendment of a resolution
put to the meeting for which it is given as the proxy thinks fit. An instrument
appointing a proxy shall, unless the contrary is stated thereon, be valid as
well for any adjournment of the meeting as for the meeting to which it relates.
Revocation of proxy etc.
85. A vote cast or poll demanded by proxy or by the duly authorised
representative of a corporation shall not be invalidated by the revocation of
the authority of the person voting or demanding a poll (such revocation being
deemed to include the death or insanity of the appointing member) unless notice
of the revocation shall have been received by the Company at the transfer office
or such other place (if any) as is specified for the delivery of instruments of
proxy in accordance with these Articles at least forty eight hours before the
commencement of the meeting or adjourned meeting or (in the case of a poll taken
otherwise than at, or on the same day as, the meeting or adjourned meeting) the
time appointed for the taking of the poll at which the vote is cast.
Incorporated Members acting by Representatives
Authority of representatives
86. Any corporation which is a member of the Company (in this Article, the
grantor) may (by resolution of its directors or other governing body or by
authority to be given under the hand of any officer duly authorised by it)
authorise such person as it thinks fit to act as its representative at any
meeting of the Company, or at any separate meeting of the holders of any class
of shares. A person so authorised shall be entitled to exercise the same power
on behalf of the grantor of the authority (in respect of that part of the
grantor's holding to which his authorisation relates, in the case of an
authorisation of more than one person) as the grantor could exercise if it were
an individual member of the Company, and the grantor shall for the purposes of
these Articles be deemed to be present in person at any such meeting if a person
so authorised is present at it. For the purpose of this Article 86, the
expression corporation shall include a company whether incorporated in the
United Kingdom or overseas.
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Directors
Limits on number of directors
87. The number of Directors (other than alternate directors) shall not be less
than four or more than sixteen. The Company may, by ordinary resolution, from
time to time vary the minimum and/or maximum number of Directors.
Director need not be member
88. A Director shall not be required to hold a share qualification but a
Director who is not a member of the Company shall nevertheless be entitled to
receive notice of and to attend and speak at all general meetings of the Company
and all separate meetings of the holders of any class of shares of the Company.
Directors' fees
89. The fees paid to the Directors who do not hold executive office for their
services in the office of director shall not exceed in aggregate (Pounds)250,000
per annum or such higher amount as the Company may from to time by ordinary
resolution determine. Subject thereto, each such Director shall be paid a fee
(which shall be deemed to accrue from day to day) at such rate as may from time
to time be determined by the Directors. Any fee payable pursuant to this Article
89 shall be distinct from any salary, remuneration or other amounts payable to a
Director pursuant to other provisions of these Articles or any contract or
arrangement between the Company and the relevant Director.
Directors' expenses
90. The Directors may repay to any Director all such proper and reasonable
expenses as he may incur in attending and returning from meetings of the
Directors or of any committee or general meetings or otherwise in or about the
business of the Company.
Directors' remuneration
91. Any Director who is appointed to any executive office (including for this
purpose the office of chairman or deputy chairman or vice-chairman whether or
not such office is held in an executive capacity) or who serves on any committee
or who acts as trustee of a retirement benefits scheme or employees' share
scheme or who otherwise performs services which, in the opinion of the Board or
any committee thereof, are outside the scope of the ordinary duties of a
Director or who makes any special exertions in going or residing abroad or
otherwise in or about the business of the Company, may be paid such extra
remuneration by way of salary, commission or otherwise as the Board may
determine.
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Retirement and other benefits
92.(A) Without prejudice to the general power of the Directors under these
Articles to exercise on behalf of the Company (by establishment or maintenance
of schemes or otherwise) all the powers of the Company to give, or procure the
giving of, retirement, death or disability benefits, annuities or other
allowances, emoluments or benefits to, or for the benefit of, any person, and
without restricting the generality of their other powers, the Directors shall
have power to pay, and agree to pay, retirement, death or disability benefits,
annuities or other allowances, emoluments or benefits to any Director, ex-
Director, officer or ex-officer of the Company or of its predecessors in
business or of any other undertaking which is (a) the parent undertaking of the
Company or (b) a subsidiary undertaking of the Company or of such parent
undertaking or (c) otherwise allied to or associated with the Company or any
such parent undertaking or subsidiary undertaking or in which the Company or
such parent undertaking or subsidiary undertaking has any interest whether
directly or indirectly and to the husbands, wives, widowers, widows, children,
families, dependants and personal representatives of any such Director, ex-
Director, officer or ex-officer, and, for the purpose of providing any such
benefits, annuities, allowances or emoluments, to establish or contribute to any
trust, scheme, association, arrangement or fund or to pay premiums, and shall
have power to establish trusts, schemes, associations, arrangements or funds
considered to be for the benefit of any such persons aforesaid. A Director, ex-
Director, officer or ex-officer shall not be accountable to the Company or the
members for any such benefit, annuities, allowances or emoluments, and the
receipt of the same shall not disqualify any person from being or becoming a
Director of the Company.
Insurance
92.(B) Without prejudice to the provisions of Article 159, 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 of the
Company, or of any other undertaking which is (a) the parent undertaking of the
Company or (b) a subsidiary undertaking of the Company or of such parent
undertaking or (c) otherwise allied to or associated with the Company or any
such parent undertaking or subsidiary undertaking or in which the Company or
such parent undertaking or subsidiary undertaking has any interest whether
directly or indirectly or who are or were at any time trustees of any retirement
benefits scheme or employees' share scheme in which employees of the Company or
of any such other 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 the exercise or purported
exercise of their powers and/or otherwise in relation to their duties,
<PAGE>
powers or offices in relation to the Company or any such other undertaking,
retirement benefits scheme or employees' share scheme.
Directors' interests in contracts with the Company
93.(A) Subject to the provisions of the Statutes and to Article 109, a
Director or alternate Director may be a party to, or in any way interested in,
any contract or arrangement or transaction to which the Company is a party, or
in which the Company is in any way interested, and he may hold and (in addition
to any other remuneration provided for by, or pursuant to, any other Article) be
remunerated in respect of any office or place of profit (other than the office
of auditor of the Company or of any subsidiary undertaking of the Company) under
the Company or any other undertaking in which the Company is in any way
interested, and he (or any firm of which he is a member) may act in a
professional capacity for the Company, or any such other undertaking, and be
remunerated therefor, and in any such case as aforesaid (unless otherwise
agreed), the Director may retain, for his own absolute use and benefit, all
profits and advantages accruing to him thereunder or in consequence thereof.
Appointments with other undertakings
93.(B) Subject to any agreement to the contrary between the Company and the
Director, a Director of the Company may be or become a director or other officer
of, or otherwise interested in, any undertaking promoted by the Company or in
which the Company may be interested, and (unless otherwise agreed) shall not be
accountable to the Company or the members for any remuneration, profit or other
benefit received by him as a director or officer of, or from his interest in,
such other undertaking. The Directors may also cause the voting power conferred
by the shares in any other undertaking held or owned by the Company or interest
or right in such undertaking to be exercised in such manner in all respects as
they think fit, including the exercise thereof in favour of any resolution or
decision appointing themselves or any of them to be directors, officers or
servants of, or to any other position in, such other undertaking, or voting or
providing for the payment of remuneration to the directors, officers or servants
of, or any holders of any other position in, such other undertaking.
Executive office
94.(A) The Directors may from time to time appoint one or more of their
number to be the holder of any executive office or make any appointment by them
of a Director conditional upon his accepting any executive office (including,
where considered appropriate, the office of chairman, deputy chairman or vice-
chairman, managing, joint managing, deputy or assistant managing director or
chief, deputy chief or assistant chief executive) on such terms, and for such
period, as they may (subject to and in accordance with the provisions of the
Statutes) determine and, without prejudice to the terms of any
<PAGE>
contract entered into in any particular case, may at any time revoke any such
appointment.
When termination of appointment automatic
94.(B) The appointment of any Director to any of the executive offices
specifically mentioned in Article 94(A) above shall automatically determine if
he ceases to be a Director but without prejudice to any claim for damages for
broach of any contract of service between him and the Company.
When termination of appointment not automatic
94.(C) The appointment of any Director to any other executive office shall
not automatically determine if he ceases from any cause to be a Director, unless
the contract or resolution under which he holds or is removed from office shall
expressly state otherwise, in which event the termination of his office if he
ceases to be a Director shall be without prejudice to any claim for damages for
breach of any contract of service between him and the Company.
Delegation of powers
95. The Directors may entrust to, and confer upon, any Director any of the
powers exercisable by them as Directors upon such terms and conditions and with
such restrictions as they think fit, and either collaterally with, or to the
exclusion of, their own powers, and may from time to time revoke, withdraw,
alter or vary all or any of such powers.
Appointment and Retirement of Directors
Age limit
96. Any provisions of the Statutes which, subject to the provisions of these
Articles, would have the effect of rendering any person ineligible for
appointment as a Director or liable to vacate the office of Director on account
of his having reached the age of seventy or any other age or of requiring
special notice or any of the special formalities in connection with the
appointment of any Director over a specified age shall not apply to the Company,
provided that, in the case of the appointment of a Director who has attained the
age of seventy, his age shall be stated in the notice convening the general
meeting (or in any document accompanying the same) at which he is proposed to be
elected or re-elected.
Disqualification of a director
97. The office of Director shall be vacated in any of the following events,
namely:
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(a) if, pursuant to any provisions of the Statutes, he is removed or prohibited
from being a director;
(b) if he becomes bankrupt, insolvent, apparently insolvent or makes any
arrangement or composition with his creditors generally or shall apply to
the court for an interim order under section 253 of the Insolvency Act 1986
in connection with a voluntary arrangement under that Act; or
(c) if he is, or may be, suffering from mental disorder and/or either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or,
in Scotland, an application for admission under the Mental
Health (Scotland) Act 1984; or
(ii) an order is made by a court having jurisdiction (whether in
the United Kingdom or elsewhere) in matters concerning mental
disorder for his detention or for the appointment of a
receiver, curator bonis or other person to exercise powers
with respect to his property or affairs; or
(d) if he resigns his office by notice to the Company or, having been appointed
for a fixed term, the term expires or his office as a director is vacated
pursuant to Article 104; or
(e) if he shall be absent from meetings of the Directors for six consecutive
months without leave and his alternate Director (if any) shall not, during
such period, have attended in his stead and the Directors shall resolve
that his office be vacated; or
(f) if he shall be removed from office by notice in writing served upon him
signed by all his co-Directors, but so that in the case of a Director
holding an executive office which automatically determines on his ceasing
to be a Director such removal shall be deemed an act of the Company and
shall have effect without prejudice to any claim for damages in respect of
the consequent termination of his executive office.
Number of directors to retire
98. At the annual general meeting in every year one-third of the Directors who
are subject to retirement by rotation or, if their number is not three or a
multiple of three, the number nearest to one-third shall retire from office;
but:
(a) if any director has at the start of the annual general meeting been in
office for more than three years since his last appointment or re-
appointment, he shall retire; and
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(b) if there is only one director who is subject to retirement by rotation, he
shall retire.
Which directors to retire
99. Subject to the provisions of the Statutes and these Articles, the Directors
to retire by rotation shall include (so far as necessary to obtain the number
required) any Director who wishes to retire and not to offer himself for re-
election. Any further Directors so to retire shall be those of the other
Directors subject to retirement by rotation who have been longest in office
since their last re-election or appointment and so that, as between persons who
became or were last re-elected Directors on the same day, those to retire shall
(unless they otherwise agree among themselves) be determined by lot. The
Directors to retire on each occasion (both as to number and identity) shall be
determined by the composition of the Board of Directors of the Company at the
date of the notice convening the annual general meeting and no Director shall be
required to retire, or be relieved from retiring, by reason of any change in the
number or identity of the Directors after the date of such notice but before the
close of the meeting. A retiring Director shall be eligible for re-election.
When directors deemed to be re-appointed
100. The Company at the meeting at which a Director retires under any provision
of these Articles may (subject to Article 102) by ordinary resolution fill up
the office being vacated by electing thereto the retiring Director or some other
person eligible for appointment. If the Company, at the meeting at which a
Director retires by rotation, does not fill the vacancy the retiring Director
shall, if willing to act, be deemed to have been reappointed unless at the
meeting it is resolved not to fill the vacancy or a resolution for the
reappointment of the Director is put to the meeting and lost. If he is not
reappointed or deemed to have been reappointed, be shall retain office until the
meeting appoints someone in his place or, if he does not do so, until the end of
the meeting.
Resolution
101. A resolution for the appointment of two or more persons as Directors by a
single resolution shall not be moved at any general meeting, unless a resolution
that it shall be so moved has first been agreed to by the meeting without any
vote being given against it and any resolution moved in contravention of this
provision shall be void.
Eligibility for election
102. No person other than a Director retiring at the meeting shall, unless
recommended by the Directors for election, be eligible for appointment as a
Director at any general meeting unless, not less than seven nor more than
twenty-eight days before the day appointed for the meeting, there shall have
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been left at the office, addressed to the Secretary, notice in writing signed by
some member (other than the person to be proposed) duly qualified to attend and
vote at the meeting for which such notice is given of his intention to propose
such person for election, and also notice in writing signed by the person to be
proposed of his willingness to be elected. The notice to be lodged by the
proposing member shall state the particulars of the nominee which would, if he
were appointed, be required to be included in the Company's register of
directors maintained by the Company in terms of Section 288 of the 1985 Act.
Additional powers of the Company
103. The Company may, in accordance with and subject to the provisions of the
Statutes, by ordinary resolution of which special notice has been given, remove
any Director from office notwithstanding any provision of these Articles or of
any contract between the Company and such Director (but without prejudice to any
claim he may have for damages for breach of any such contract) and by ordinary
resolution appoint another person in place of a Director so removed from office,
and any person so appointed shall be treated, for the purpose of determining the
time at which he or any other Director is to retire by rotation, as if he had
become a Director on the day on which the Director in whose place he is
appointed was last elected a Director. In default of such appointment, the
vacancy arising upon the removal of a Director from office may be filled by the
Directors as a casual vacancy.
Appointment by ordinary resolution or by directors
104. The Company may, by ordinary resolution, appoint any person to be a
Director either to fill a casual vacancy or as an additional Director and
without prejudice and in addition thereto, the Directors shall have power at any
time to appoint any person to be a Director either to fill a casual vacancy or
as an additional Director, but so that, in either case, the total number of
Directors shall not at any time exceed the maximum number (if any) fixed by, or
in accordance with, these Articles. Any person so appointed by the Directors
shall hold office only until the next annual general meeting and shall then be
eligible for election, but shall not be taken into account in determining the
number of Directors who are to retire by rotation at such meeting.
Alternate Directors
Power to appoint alternate directors
105.(A) Any Director (other than an alternate director) may at any time by
writing under his hand and deposited at the office, or received by the Secretary
or delivered at a meeting of the Directors, appoint any person (including
another Director) to be his alternate Director, and may, in like manner, at any
time terminate such appointment. If such alternate Director is not another
Director, such appointment, unless previously approved by the Directors, shall
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have effect only upon and subject to being so approved. Any of the Directors may
appoint the same alternate Director.
Termination
105.(B) The appointment of an alternate Director shall automatically determine
on the happening of any event which, if he were a Director, would cause him to
vacate such office or if his appointor ceases to be a Director or if the
approval of the Directors to his appointment is withdrawn, provided that if, at
any meeting, any Director retires by rotation or otherwise but is re-elected at
the same meeting, any appointment made by him pursuant to this Article 105 which
was in force immediately before his retirement shall remain in force as though
he had not retired. An alternate Director may, by writing under his hand left
at the office, resign such appointment.
Alternate to receive notices
105.(C) An alternate Director shall (except when absent from the United
Kingdom) be entitled, if his appointor so requests, to receive notices of
meetings of the Directors to the same extent as the Director appointing him and
shall be entitled to attend and vote as a Director and be counted for the
purposes of a quorum at any such meeting at which the Director appointing him is
not personally present and, generally, at such meeting to perform all functions,
powers and duties of his appointor as a Director and, for the purposes of the
proceedings at such meeting, the provisions of these Articles shall apply as if
he were a Director. If he shall himself be a Director, or shall attend any such
meeting as an alternate for more than one Director, his voting rights shall be
cumulative but he shall count as only one for the purpose of determining whether
a quorum is present. If his Appointor is for the time being absent from the
United Kingdom, or temporarily unable to act through ill-health or disability,
his signature to any resolution in writing of the Directors shall be as
effective as the signature of his appointor. To such extent as the Directors may
from time to time determine in relation to any committees formed under Article
114(A), this Article 105(C) shall also apply mutatis mutandis to any meeting of
any such committee of which his appointor is a member. An alternate Director
shall not (save as aforesaid) have power to act as a Director nor shall he be
deemed to be a Director for the purposes of these Articles.
Alternate may be paid expenses but not remuneration
105.(D) An alternate Director may be repaid expenses, and shall be entitled to
be indemnified, by the Company to the same extent mutatis mutandis as if he were
a Director, but he shall not be entitled to receive from the Company any
remuneration in respect of his services as an alternate Director, except only
such proportion (if any) of the remuneration otherwise payable to his appointor
as such appointor may by notice in writing to the Company from time to time
direct.
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Alternate not an agent of appointor
105.(E) Except as otherwise expressly provided in these Articles, an alternate
Director shall be deemed for all purposes to be a Director. Accordingly, except
where the context otherwise requires, a reference to a Director shall be deemed
to include a reference to an alternate Director. An alternate Director shall be
responsible for his own acts and defaults and he shall not be deemed to be the
agent of the Director appointing him.
Proceedings Of Directors
Meetings of directors
106. Subject to the provisions of these Articles, the Directors may meet
together for the despatch of business, adjourn and otherwise regulate their
meetings as they think fit. Questions arising at any meeting shall be
determined by a majority of votes. In case of an equality of votes, the
chairman of the meeting shall have a second or casting vote. A Director may, and
the Secretary on the requisition of a Director shall, at any time summon a
meeting of the Directors. Notice of a meeting of the Directors shall be deemed
to be properly given to a Director if it is given to him personally or by word
of mouth or sent in writing (including by facsimile or electronic mail) to him
at his last known address or any other address given by him to the Company for
this purpose. A Director absent or intending to be absent from the United
Kingdom may request the Directors that notices of meetings of Directors shall,
during his absence, be sent in writing to him at his last known address or any
other address given by him to the Company for this purpose but, in the absence
of any such request, it shall not be necessary to give notice of a meeting of
Directors to any Director for the time being absent from the United Kingdom. A
Director may waive notice of any meeting either prospectively or
retrospectively. Without prejudice to the first sentence of this Article 106, a
meeting of the Directors, or of a committee of the Directors, may consist of a
conference between Directors who are not all in one place, but of whom each is
able, directly or by telephonic or other communication, to speak to each of the
others and to be heard by each of the others simultaneously. A Director taking
part in such a conference shall be deemed to be present in person at the meeting
and shall be entitled to vote or be counted in a quorum accordingly. Such a
meeting shall be deemed to take place where the largest group of those
participating in the conference is assembled, or, if there is no such group,
where the chairman of the meeting then is. The word meeting in these Articles
shall be construed accordingly.
Authority to vote
107. A Director who is unable to attend any meeting of the Directors and has not
appointed an alternate Director may authorise any other Director to vote for him
at that meeting, and in that event the Director so authorised shall have a vote
for each Director by whom he is so authorised in addition to his own vote.
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Any such authority must be in writing or by cable, telegram, telex or facsimile
which must be produced at the meeting at which the same is to be used and be
left with the Secretary for retention.
Quorum
108. The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors and, unless so fixed at any other number, shall be
two. A meeting of the Directors, at which a quorum is present, shall be
competent to exercise all powers and discretions for the time being exercisable
by the Directors.
Directors' interests
109. A Director who is in any way, whether directly or indirectly, interested in
a contract or proposed contract (or any transaction or arrangement whether or
not constituting a contract) with the Company or any subsidiary undertaking of
the Company shall declare the nature of his interest in accordance with the
provisions of the Statutes. For the purposes of this Article 109:
(a) a general notice given to the Directors that a Director is to be regarded
as having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the Director
has an interest in any such transaction of the nature and extent so
specified; and
(b) an interest of which a Director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
Directors' powers to vote
110.(A) Save as herein provided, a Director shall not vote in respect of any
contract or arrangement or any other proposal whatsoever in which (together with
any interest of any person connected with him) he has any material interest
otherwise than by virtue of his interests in shares or debentures or other
securities of or otherwise in or through the Company. A Director shall not be
counted in the quorum at a meeting in relation to any resolution on which he is
debarred from voting.
Where interest does not prevent voting
110.(B) Subject to the provisions of the Statutes, a Director shall (in the
absence of some other material interest than is indicated below) be entitled to
vote (and be counted in the quorum) in respect of any resolution concerning any
of the following matters, namely:
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(a) the giving of any guarantee, security or indemnity to him in respect of
money lent or obligations incurred by him at the request of, or for the
benefit of, the Company or any of its subsidiary undertakings;
(b) the giving of any guarantee, security or indemnity in respect of a debt or
obligation of the Company or any of its subsidiary undertakings for which
he himself has assumed responsibility (in whole or in part and whether
alone or jointly with others) under a guarantee or indemnity or by the
giving of security;
(c) any proposal concerning the subscription or purchase by him of shares,
debentures or other securities of the Company pursuant to an offer or
invitation to members or debenture holders of the Company, or any class of
them, or to the public or any section of them;
(d) a contract, arrangement, transaction or proposal concerning an offer of
shares or debentures or other securities of or by the Company or any of its
subsidiary undertakings for subscription or purchase, in which offer he is
or may be interested as a participant in the underwriting or sub-
underwriting thereof;
(e) a contract, arrangement, transaction or proposal concerning any other body
corporate in which he is interested, directly or indirectly, and whether as
an officer or shareholder or otherwise howsoever, provided that he
(together with persons connected with him within the meaning of Section 346
of the 1985 Act) does not hold an interest (as that term is used in
Sections 198 to 211 of the 1985 Act) representing 1 per cent. or more of
the issued shares of any class of the equity share capital of such body
corporate (or of any third body corporate through which his interest is
derived) or of the voting rights available to members of the relevant body
corporate (any such interest being deemed for the purposes of this Article
110 to be a material interest in all circumstances). For the purpose of
this sub-paragraph (e) there shall be disregarded any shares held by a
Director as simple trustee under the law of Scotland and of a bare or
custodian trustee under the laws of England and Wales and in which he has
no beneficial interest and any shares comprised in any authorised unit
trust scheme in which the Director is interested only as a unit holder;
(f) a contract, arrangement, transaction or proposal for the benefit of
employees of the Company or of any of its subsidiary undertakings which
does not award him any privilege or benefit not generally accorded to the
employees to whom the contract or arrangement relates; and
(g) a contract, arrangement, transaction or proposal concerning insurance which
the Company is empowered to purchase and/or maintain for or
<PAGE>
for the benefit of any Directors of the Company or for persons who include
Directors of the Company.
Interests of connected persons and alternates
110.(C) For the purpose of this Article 110, an interest of a person who is,
for the purpose of the 1985 Act, connected with (which words shall have the
meaning given thereto by Section 346 of the 1985 Act) a Director shall be
treated as an interest of the Director and, in relation to an alternate, an
interest of his appointor shall be treated as an interest of the alternate
without prejudice to any interest which the alternate has otherwise.
Consideration of matters involving two or more directors
110.(D) Where proposals are under consideration concerning the appointment
(including fixing or varying the terms of appointment) of two or more Directors
to offices or employments with the Company or any undertaking in which the
Company is interested, such proposals may be divided and considered in relation
to each Director separately and in such case each of the Directors concerned (if
not debarred from voting under paragraph (e) of Article 110(B) or otherwise
precluded from voting) shall be entitled to vote (and be counted in the quorum)
in respect of each resolution, except that concerning his own appointment.
Materiality of directors' interests
110.(E) If any question shall arise at any meeting as to the materiality of a
Director's interest, or as to the entitlement of any Director to vote, and such
question is not resolved by his voluntarily agreeing to abstain from voting,
such question shall be referred to the chairman of the meeting (or, if the
Director concerned is the chairman, to the other Directors at the meeting) and
his ruling in relation to any Director other than himself (or, as the case may
be, the ruling of the majority of the other Directors in relation to the
chairman) shall be final and conclusive, except in a case where the nature or
extent of the interests of such Director (or, as the case may be, the chairman)
has not been fairly disclosed.
Power of directors if number falls below minimum
111. The continuing Directors may act notwithstanding any vacancies in their
number, but if, and so long as, the number of Directors is reduced below the
number fixed by, or in accordance with, these Articles as the necessary quorum
of Directors the continuing Directors or Director may act for the purpose of
filling up such vacancies or of summoning general meetings of the Company, but
not for any other purpose. If there are no Directors or Director able or
willing to act, then any two members may summon a general meeting for the
purpose of appointing Directors.
<PAGE>
Chairman
112. The Directors may elect a chairman (or make any appointment by them of a
Director conditional upon his becoming the chairman) and one or more deputy
chairmen and determine the period for which each is to hold office. The
chairman or, in his absence, one of any deputy chairmen shall preside at
meetings of the Directors, but if no chairman or deputy chairman shall have been
appointed, or if at any meeting none of them be present within five minutes
after the time appointed for holding the same, the Directors present may choose
one of their number to be chairman of the meeting. If at any time there is more
than one deputy chairman or vice-chairman, the right to preside at a meeting of
Directors shall in the absence of the chairman be determined as between the
deputy chairmen present (if more than one) by seniority in length of appointment
or otherwise as resolved by the Directors.
Resolutions in writing
113. A resolution in writing, signed by all the Directors for the time being in
the United Kingdom and all the alternate Directors (if any) for the time being
in the United Kingdom whose appointors are for the time being absent from the
United Kingdom (provided that their number is sufficient to constitute a quorum)
or by all the members of a committee formed under Article 114(A) for the time
being, shall be as valid and effective as a resolution passed at a meeting of
the Directors or, as the case may be, of such committee duly convened and held
and may consist of several documents in the like form, each signed by one or
more of the Directors or alternate Directors or members of the committee
concerned.
Committees of directors
114.(A) The Directors may delegate any of their powers or discretions
(including, for the avoidance of doubt, any powers or discretions relating to
the remuneration of Directors) to committees consisting of one or more of the
Directors and (if thought fit) one or more other persons co-opted as hereinafter
provided. Any such delegation shall, in the absence of express provision to the
contrary in the terms of delegation, be deemed to include authority to sub-
delegate to one or more Directors (whether or not acting as a committee) or to
any employee or agent of the Company all or any of the powers delegated and may
be made subject to such conditions as the Directors may specify, and may be
revoked or altered. Any committee so formed shall, in the exercise of the
powers so delegated, conform to any regulations which may from time to time be
imposed by the Directors. Any such regulations may provide for, or authorise,
the co-option to the committee of persons other than Directors and for such co-
opted members to have voting rights as members of the committee, but so that (a)
the number of co-opted members shall be less than one half of the total number
of members of the committee and (b) no resolution of the
<PAGE>
committee shall be effective unless a majority of the members of the committee
present at the meeting are Directors or alternates of Directors.
Proceedings of committees
114.(B) The meetings and proceedings of any such committee shall be governed
by the provisions of these Articles regulating the meetings and proceedings of
the Directors so far as the same are applicable and are not superseded by any
regulations made by the Directors under Article 114(A).
Use of designation Director
115. The Directors may appoint any person to any office or employment having a
designation or title including the word Director, or attach to any existing
office or employment with the Company such a designation or title, and may
terminate any such appointment or the use of any such designation or title.
Unless the appointment of the holder has been recorded in the register of
directors maintained by the Company in terms of Section 288 of the 1985 Act, the
inclusion of the word Director in the designation or title of any such office or
employment shall not imply that the holder is a Director of the Company, nor
shall the holder thereby be empowered in any respect to act as, or be deemed to
be, a Director of the Company for any of the purposes of these Articles.
Validity of proceedings
116. All acts done by any meeting of Directors or of any such committee or by
any person acting as a Director shall, as regards all persons dealing in good
faith with the Company, notwithstanding that there was some defect in the
appointment or continuance in office of any such Directors (or their
alternates), or member of the committee, or person acting as aforesaid, or that
they or any of them were disqualified or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a Director (or alternate Director) or
member of the committee and had been entitled to vote.
General Powers of Directors
Business to be managed by the directors
117.(A) The business and affairs of the Company shall be managed by the
Directors who, subject to and in accordance with the provisions of the Statutes,
the Memorandum of Association of the Company (the Memorandum) and these Articles
and to any directions given by special resolution, may exercise all the powers
of the Company. No alteration of the Memorandum or these Articles and no such
direction shall invalidate any prior act of the Directors which would have been
valid if that alteration had not been made or that direction had not been given.
The general powers given by this Article 117 shall not be limited, or
<PAGE>
restricted, by any special authority or power given to the Directors by these
Articles and a meeting of the Directors at which a quorum is present may
exercise all powers exercisable by the Directors.
Exercise by Company of Voting Rights
117.(B) The Directors may exercise the voting power conferred by the shares in
any body corporate held or owned by the Company in such manner in all respects
as they think fit (including without limitation the exercise of that power in
favour of any resolution appointing its members or any of them directors of such
body corporate, or voting or providing for the payment of remuneration to the
directors of such body corporate).
Local boards
118.(A) The Directors may make such arrangements as they think fit for the
management and transaction of the Company's affairs in any specified locality,
whether in the United Kingdom or elsewhere, and, without prejudice to the
generality of the foregoing, may at any time, and from time to time, (a)
establish any regional, divisional or local boards, committees or agencies for
managing any of the affairs of the Company, either in the United Kingdom or
elsewhere; (b) appoint any one or more of the Directors, or any other person or
persons, to be members of such regional, divisional or local boards or
committees, or any managers or agents, and may fix their remuneration; (c)
delegate to any regional, divisional or local board or committee, manager or
agent any of the powers, authorities and discretions vested in the Directors
with power to sub-delegate; (d) authorise the members of any regional,
divisional or local boards or committees or any of them, to fill any vacancies
therein, and to act notwithstanding vacancies and any such appointment or
delegation may be made upon such terms and subject to such conditions as the
Directors may think fit; and (e) remove any person so appointed, may fix the
quorum of the said regional, divisional or local boards or committees, and may
annul or vary any such delegation, but no person dealing in good faith and
without notice of any such annulment or variation shall be affected thereby.
Agents
118.(B) The Directors may, by power of attorney or otherwise, appoint any
person to be the agent of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the Directors determine, including without limitation
authority for the agent to delegate all or any of his powers, authorities and
discretions, and may revoke or vary such delegation.
<PAGE>
Powers of attorney
119. The Directors may, from time to time and at any time, by power of attorney
or otherwise, appoint any person or undertaking, whether nominated directly or
indirectly by the Directors, to be the attorney or attorneys of the Company for
such purposes and with such powers, authorities and discretions (not exceeding
those vested in or exercisable by the Directors under these Articles) and for
such period, and subject to such conditions, as they may think fit, and any such
power of attorney may contain such provisions for the protection and convenience
of persons dealing with any such attorney as the Directors may think fit, and
may also authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him. The Directors may delegate all or
any of their powers under this Article 119.
Official seal for use abroad
120. The Company may exercise the powers conferred by the Statutes with regard
to having an official seal for use abroad and such powers shall be vested in the
Directors.
Overseas and local registers
121. Subject to and to the extent permitted by the Statutes and the Regulations,
the Company, or the Directors on behalf of the Company, may cause to be kept in
any territory outside the United Kingdom a branch register of members resident
in such territory, and the Directors may make and vary such regulations as they
may think fit in respect of the keeping of any such register.
Execution by the Company
122. All cheques, promissory notes, drafts, bills of exchange, and other
negotiable or transferable instruments, and all receipts for moneys paid to the
Company, shall be signed, drawn, accepted, endorsed, or otherwise executed, as
the case may be, in such manner as the Directors or any duly authorised
committee of the Directors shall from time to time determine.
Borrowing Powers
General power to borrow
123.(A) Subject as hereinafter provided, the Directors may exercise all the
powers of the Company to borrow money and to pledge or grant any security over
all or any part of its undertaking, property and assets (present and future) and
uncalled capital and, subject to and in accordance with the Statutes, to issue
debentures, debenture stock and other securities whether terminable, redeemable
or perpetual and whether outright or as collateral security for any guarantee,
debt, liability or obligation of the Company or of any third party.
<PAGE>
Definitions for and interpretation of Article 123
123.(B) For the purposes of this Article 123:
Adjusted Capital and Reserves shall be interpreted in accordance with
Article 123(D);
equity share capital has the same meaning as in Section 744 of the 1985
Act;
Excepted Foreign Currency Borrowings means moneys borrowed denominated or
repayable in a currency other than sterling which have the benefit of an
exchange cover scheme;
exchange cover scheme means HM Treasury exchange cover scheme, forward
currency contract, currency option, back-to-back loan, swap or other
arrangement taken out or entered into to reduce the risks associated with
fluctuations in the exchange rates;
finance lease means a contract between a lessor and a member of the Group
as lessee or sub-lessee where substantially all the risks and rewards of
the ownership of the asset leased or sub-leased are to be borne by the
lessee or sub-lessee;
Group means the Company and its subsidiary undertakings for the time being;
hire purchase agreement means a contract of hire between a hire purchase
lender and a member of the Group as hirer;
Investments means at any time the aggregate of:
(a) cash at bank and in hand;
(b) deposits (including for the avoidance of doubt, certificates
of deposit) for a term not exceeding six months and money at
call; and
(c) securities issued by the Government of the United Kingdom
which are traded on a recognised investment exchange.
Latest Accounts means in the case where:
(a) the Company has no subsidiary undertakings, the latest
published audited balance sheet of the Company; or
(b) the Company has subsidiary undertakings but there is no
audited consolidated balance sheet of the Group, the
respective latest
<PAGE>
published audited balance sheets of the undertakings
comprising the Group;
(c) the Company has subsidiary undertakings some only of whose
audited balance sheets are consolidated in the latest
published audited balance sheet of the Group, the latest
published consolidated audited balance sheet of the Group
together with the latest published audited balance sheets of
those subsidiary undertakings whose audited balance sheets are
not included in the consolidated audited balance sheet of the
Group; and
(d) the Company has subsidiary undertakings all of whose audited
balance sheets are consolidated in the latest published
audited consolidated balance sheet of the Group, the latest
published consolidated audited balance sheet of the Group
and in this Article 123 references to balance sheets shall be construed as
balance sheets prepared for the purposes of the Statutes in accordance with
the historical cost convention or that convention with modifications
provided that if balance sheets prepared for the purposes of the Statutes
have not been prepared in accordance with the historical cost convention
but have been prepared in accordance with the current cost convention
references to balance sheets are to be taken as references to balance
sheets prepared for the purpose of the Statutes in accordance with the
current cost convention but adjusted as the Auditors, after consultation
with the Directors, consider appropriate to enable the aggregate amount
referred to in Article 123 (C) below to be calculated as though derived
from a balance sheet prepared in accordance with the historical cost
convention or that convention as applied with such modifications as may be
appropriate in the circumstances and references to the Latest Accounts
shall be construed accordingly;
moneys borrowed shall be interpreted in accordance with Article 123(E);
outside interests means the proportion of the nominal amount of the issued
equity share capital of a partly owned subsidiary undertaking which is not
attributable, directly or indirectly, to the Company; and
subsidiary undertaking shall be construed as a subsidiary undertaking of
the Company.
Maximum limit on borrowings
123.(C) The Directors shall restrict the moneys borrowed by the Company and
exercise all voting and other rights or powers of control exercisable by the
Company in relation to its subsidiary undertakings so as to secure (so far, as
regards subsidiary undertakings, as by such exercise they can
<PAGE>
secure) that the aggregate principal amount (including any fixed or minimum
premium payable on final repayment) at any one time outstanding in respect of
all moneys borrowed (whether secured or not) by the Group (exclusive of moneys
borrowed by any member of the Group from any other member of the Group, subject
to paragraph (c) of Article 123(E)) for the time being, subject as hereinafter
provided, shall not without the previous sanction of an ordinary resolution of
the Company exceed (i) at any time prior to the date of publication of the
audited accounts of the Company for the accounting period current at the date of
adoption of these Articles (Pounds)8,000,000,000 and (ii) at any time thereafter
a sum equal to two and a half (2 1/2) times the Adjusted Capital and Reserves;
Adjusted capital and reserves
123.(D) For the purposes of this Article 123, the expression Adjusted Capital
and Reserves shall mean at the relevant time the aggregate of:
(a) the amount for the time being paid up or credited as paid up on the issued
share capital of the Company and such of the share capital as has been
unconditionally allotted but not issued; and
(b) the total of the amounts standing to the credit of the reserves of the
Group (including any share premium account, capital redemption reserve,
revaluation reserve and statutory reserve and after adding any credit
balance or deducting any debit balance on the profit and loss account),
all based on the Latest Accounts after:
(i) making such adjustments as may be appropriate to reflect any variations
since the date of the Latest Accounts in such share capital or reserves and
so that for this purpose (aa) if the Company proposes to issue or has
issued any shares for cash and the issue has been underwritten then the
amount (including any premium) of the subscription moneys so underwritten
(not being moneys payable later than six months after the date the
underwriting becomes unconditional) shall be deemed to have been paid up on
the date when the issue of such shares was underwritten (or if such
underwriting was conditional, on the date when the underwriting becomes
unconditional) and (bb) subject as aforesaid, share capital (including any
premium) shall be deemed to have been paid up as soon as it has been
unconditionally agreed to be subscribed or taken up by any person (provided
it is to be so subscribed or taken up within six months of such agreement);
(ii) excluding any sums attributable to outside interests in any subsidiary
undertaking and making such adjustments as may be appropriate in
<PAGE>
respect of any variation in the interests of the Company in its subsidiary
undertakings since the date of the Latest Accounts;
(iii) deducting any distributions declared, recommended or made by a member
of the Group (other than attributable directly or indirectly to the
Company) out of profits earned up to and including the date of the Latest
Accounts to the extent that any such distributions are not provided for
therein;
(iv) making all such adjustments, if the calculation is required for the
purposes of, or in connection with, a transaction under or in connection
with which any undertaking is to become or cease to be a subsidiary
undertaking, as would be appropriate if such transaction had been carried
into effect; and
(v) making such other adjustments (if any) as the auditors may consider
appropriate to provide for the carrying into effect of the transaction
for the purposes of which the Adjusted Capital and Reserves requires to
be calculated or otherwise.
Moneys borrowed
123.(E) (a) For the purposes of this Article 123, moneys borrowed shall,
subject to paragraph (b) of this Article 123(E), be deemed to
include the following, except in so far as otherwise taken
into account:
(i) the principal amount for the time being outstanding and
owing by a member of the Group in respect of any debenture
(other than the debenture dated 30th April, 1991 issued in
favour of the Secretary of State pursuant to a direction
made under Section 71 of the Electricity Act 1989) whether
issued for cash or otherwise;
(ii) the principal amount raised by a member of the Group by
acceptances under any acceptance credit opened on its behalf
and in its favour by any bank or accepting house (not being
acceptances in respect of the purchase or sale of goods or
the provision of services in the ordinary course of business
which are outstanding for six months or less);
(iii) the nominal amount of any share capital and the principal
amount of any borrowings of any person (together in each
case with any fixed or minimum premium payable on final
repayment) the redemption or repayment of which is
guaranteed or wholly or (to the extent the same is partly
secured) partly secured by a member of the Group (but
excluding any such share capital which is for the time being
<PAGE>
beneficially owned by, and (as determined in accordance with
paragraph (c) of this Article 123(E)) any such borrowings
which are for the time being owed to, a member of the
Group);
(iv) the nominal amount of any share capital (not being equity
share capital) of any subsidiary undertaking owned otherwise
than by the Company or another subsidiary undertaking;
(v) any fixed or minimum premium payable on final redemption or
repayment of any debentures, share capital or other borrowed
moneys falling to be taken into account; and
(vi) any amount in respect of a hire purchase agreement or of a
finance lease payable in either case by a member of the
Group which would be shown as being so payable in a balance
sheet prepared in accordance with the accounting principles
used in the preparation of the Latest Accounts.
(b) For the purposes of this Article 123 moneys borrowed shall be
deemed not to include the following:
(i) borrowings incurred by a member of the Group for the purpose
of financing any contract in respect of which any part of
the price receivable under the contract by that or any other
member of the Group is guaranteed or insured by the Export
Credits Guarantee Department or by any other governmental
department or agency fulfilling a similar function, up to an
amount equal to that part of the price receivable under the
contract which is so guaranteed or insured;
(ii) borrowings by a member of the Group before, and outstanding
after, it becomes a subsidiary undertaking of the Company
and amounts secured on an asset before, and remaining so
secured after, it is acquired by a member of the Group until
six months after the undertaking becomes a subsidiary
undertaking or the asset is acquired, as the case may be;
(iii) any guarantee or indemnity given by any member of the group
in respect of any amount or obligation deemed not to be
moneys borrowed under any of the provisions of this Article
123; and
(iv) borrowings incurred by a member of the Group for the purpose
of complying with any direction issued by the
<PAGE>
Secretary of State under Section 34 or Section 96 of the
Electricity Act 1989;
(c) For the purposes of this Article 123:
(i) moneys borrowed by a partly owned subsidiary undertaking and
not owing to another member of the Group shall
(notwithstanding paragraph (a) of this Article 123(E)) be
taken into account subject to the exclusion of a proportion
of such moneys borrowed attributable to outside interests;
(ii) moneys borrowed and owing to a partly owned subsidiary
undertaking by another member of the Group shall, subject to
paragraph (a) of this Article 123(E) and sub-paragraph (iii)
below, be taken into account to the extent of the proportion
of such moneys borrowed attributable to the outside
interests in such partly owned subsidiary undertaking; and
(iii) in the case of moneys borrowed and owing to a partly owned
subsidiary undertaking by another partly owned subsidiary
undertaking, the proportion which would otherwise be taken
into account under sub-paragraph (ii) above shall be reduced
by excluding such part of such moneys borrowed as is
attributable to the outside interests in the borrowing
subsidiary undertaking;
(d) There shall be offset against the amount of moneys borrowed,
any amounts beneficially owned by a member of the Group which
represent the value of Investments which would be shown as
current assets in a balance sheet prepared in accordance with
the accounting principles used in the preparation of the
Latest Accounts, subject, in the case of Investments which are
beneficially owned by a partly owned subsidiary undertaking,
to the exclusion of a proportion thereof attributable to
outside interests.
(e) For the avoidance of doubt, no amount shall be taken into
account more than once in any calculation of moneys borrowed;
and
(f) When the aggregate principal amount of borrowings required to
be taken into account on any particular date is being
ascertained, any particular borrowing which is then
outstanding and which is denominated or repayable in a
currency other than sterling shall:
(i) with the exception of Excepted Foreign Currency Borrowings,
be translated into sterling at the rate of exchange
<PAGE>
prevailing in London at the close of business on the last
business day before that date or, if it would result in a
lower figure, at the rate of exchange prevailing in London
at the close of business on the last business day six months
before that time and so that, for these purposes, the rate
of exchange shall be taken as the spot rate in London
recommended by a London clearing bank selected by the
Directors as being the most appropriate rate for the
purchase by the Company of the currency and amount in
question for sterling at the time in question; and
(ii) in the case of any Excepted Foreign Currency Borrowings, at
the rate of exchange which would be applicable to such
moneys borrowed on their repayment to the extent that such
rate of exchange is fixed under any exchange cover scheme in
connection with such moneys borrowed, provided that, where
it is not possible to determine the rate of exchange
applicable at the time of repayment of such moneys borrowed,
they shall be translated into sterling under the terms of
the applicable exchange cover scheme on such basis as may be
agreed with, or determined by, the auditors or, if it is
agreed with the auditors not to be practicable, in
accordance with the provisions of sub-paragraph (f)(i)
above.
Fluctuating rates of exchange
123.(F) The Company shall not be in breach of the borrowing limit under this
Article 123 by reason of the limit being exceeded as a result only of any
fluctuation in rates of exchange provided that within six months of the
Directors becoming aware of any such fluctuation or change which would but for
this provision have caused such a breach, the aggregate principal amount as
aforesaid is reduced to an amount not exceeding the said limit.
Changes in legislation
123.(G) If, as a result of any change in legislation relating to or affecting
taxation matters, any amount payable by a member of the Group in respect of any
finance lease shall increase and, if in consequence the borrowing limit under
this Article 123 is exceeded, an amount of moneys borrowed equal to the excess
may be disregarded until the expiration of six months after the date on which
the Directors become aware that such a situation has arisen.
Validity of borrowing arrangements
123.(H) No person dealing with the Company or any of its subsidiary
undertakings shall, by reason of the foregoing provisions, be concerned to see
or inquire whether the said limits are observed, and no debt incurred or
security
<PAGE>
given in excess of such limit shall be invalid or ineffectual unless
the lender or the recipient of the security had, at the time when the debt was
incurred or security given, express notice that the said limit had been or would
thereby be exceeded. A certificate signed by two Directors that the amount of
any moneys borrowed is within the said limits shall for the purposes of this
Article 123(H) be conclusive evidence in any question between any such person
and the Company.
Certification by auditors
123.(I) A certificate or report by the auditors as to the amount of Adjusted
Capital and Reserves or as to the amount of moneys borrowed or to the effect
that the limit imposed by this Article 123 has or has not been or will or will
not be exceeded at any particular time or times shall be conclusive evidence of
the amount or of that fact.
Secretary
124. The Secretary shall be appointed by the Directors on such terms and for
such period as they may think fit. Any Secretary so appointed may, at any time,
be removed from office by the Directors, but without prejudice to any claim for
damages for breach of any contract of service between him and the Company. If
thought fit, two or more persons may be appointed as joint secretaries. The
Directors may also appoint, from time to time, on such terms as they may think
fit, one or more deputy secretaries and assistant secretaries. Anything by the
Statutes or by these Articles required or authorised to be done by or to the
Secretary may, if the office is vacant or there is for any other reason no
Secretary capable of acting, be done by or to any deputy or assistant secretary,
or if there is no deputy or assistant secretary capable of acting, by or to any
officer of the Company authorised generally or specially in that behalf by the
Directors.
Seals
125.(A) The Directors shall provide for the safe custody of the seal and any
securities seal and neither shall be used without the authority of the Directors
or a committee authorised by the Directors on their behalf.
(B) Every deed, contract, document, instrument or other writing to which the
seal shall be affixed shall (except as permitted by Article 19(A)) be
subscribed on behalf of the Company by two of the Directors of the Company,
or by a Director and the Secretary of the Company, or by two persons
authorised to subscribe such deed, contract, document, instrument or other
writing on its behalf.
(C) Any document may be executed under the seal by impressing the seal by
mechanical means or by printing the seal or a facsimile of it on the
document or by applying the seal or a facsimile of it by any other means to
the document. A
<PAGE>
document signed, with the authority of a resolution of the Directors, by a
Director and the secretary or by two Directors and expressed (in whatever
form of words) to be executed by the Company has the same effect as if
executed under the seal. For the purpose of the preceding sentence only,
secretary shall have the same meaning as in the 1985 Act.
(D) The securities seal shall be used only for sealing securities issued by the
Company and documents creating or evidencing securities so issued. Any
such securities or documents sealed with the securities seal shall not
require to be signed.
Authentication of documents
126. Any Director or the Secretary or any person appointed by the Directors or
by a duly authorised committee for the purpose shall have power to authenticate
any documents affecting the constitution of the Company, any resolutions passed
by the Company or the Directors or any committee, and any books, records,
documents and accounts relating to the business of the Company, and to certify
copies thereof or extracts therefrom as true copies or extracts. Where any
books, records, documents or accounts are elsewhere than at the office the
officer, servant or agent of the Company having the custody thereof shall be
deemed to be a person appointed by the Directors as aforesaid. A document
purporting to be a copy of a resolution, or an extract from the minutes of a
meeting, of the Company or of the Directors or any committee which is certified
as aforesaid shall be conclusive evidence in favour of all persons dealing with
the Company upon the faith thereof that such resolution has been duly passed or,
as the case may be, that such minutes or extract is a true and accurate record
of proceedings at a duly constituted meeting.
Minutes and Books
Keeping of minutes and books
127. The Directors shall cause minutes to be made in books to be provided for
the purpose:
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors or their alternates and any other persons
present at each meeting of Directors and of any committee formed under
Article 114(A); and
(c) of all resolutions and proceedings at all meetings of the Company and of
any class of members of the Company and of the Directors and of committees
formed under Article 114(A).
<PAGE>
Any such minutes shall be conclusive evidence of any such proceedings if they
purport to be signed by the chairman of the meeting at which the proceedings
were held or by the chairman of the next succeeding meeting.
Safeguarding of minutes and books
128. Any register, index, minute book, book of account or other book required by
these Articles or the Statutes to be kept by or on behalf of the Company may be
kept either by making entries in bound books or by recording them in any other
manner. In any case in which bound books are not used, the Directors shall take
adequate precautions for guarding against falsification and for facilitating
discovery of falsification.
Dividends
Declaration of dividends
129. The Company may, by ordinary resolution, declare dividends in accordance
with the respective rights of the members, but no dividend shall be payable
except out of the profits of the Company available for distribution under the
provisions of the Statutes and these Articles or in excess of the amount
recommended by the Directors. Unless and to the extent that the rights attached
to any shares or the terms of issue thereof otherwise provide, all dividends
shall (as regards any shares not fully paid throughout the period in respect of
which the dividend is paid) be apportioned and paid pro rata according to the
amounts paid on the shares during any portion or portions of the period in
respect of which the dividend is paid. For the purposes of this Article 129, no
amount paid on a share in advance of calls shall be treated as paid on the
share.
Interim dividends
130. Subject to the provisions of the Statutes, the Directors may pay dividends
(whether final or otherwise) if it appears to them that they are justified by
the profits of the Company available for distribution. If the share capital is
divided into different classes, the Directors may pay dividends on shares which
confer deferred or non-preferred rights with regard to dividend as well as on
shares which confer preferential rights with regard to dividend, but no dividend
shall be paid on shares carrying deferred or non-preferred rights if, at the
time of payment, any preferential dividend is in arrears. The Directors may
also pay, at intervals settled by them, any dividend payable at a fixed rate if
it appears to them that the profits available for distribution justify the
payment. If the Directors act in good faith, they shall not incur any liability
to the holders of shares conferring preferred rights for any loss they may
suffer by the lawful payment of a dividend on any shares having deferred or non-
preferred rights.
<PAGE>
Interest not payable
131. No dividend or other moneys payable on or in respect of a share shall bear
interest as against the Company, unless otherwise provided by the rights
attached to the share.
Permitted deductions
132. The Directors may deduct from any dividend or other moneys payable to any
member, whether alone or jointly with any other member, on or in respect of a
share all sums of money (if any) presently payable by him, whether alone or
jointly with any other member, to the Company on account of calls or otherwise
in relation to shares of the Company.
Retention of dividends
133. The Directors may retain any dividend or other moneys payable on or in
respect of a share on which the Company has a lien, and may apply the same in or
towards satisfaction of the debts, liabilities or other obligations in respect
of which the lien exists.
Waiver of dividends
134. The waiver, in whole or in part, of any dividend on any share by any
document shall be effective only if such document is signed by the holder (or
the person entitled to the share in consequence of a transmission event) and
delivered to the Company and if, or to the extent that, the same is accepted as
such or acted upon by the Company.
Unclaimed dividends
135. Without prejudice to the operation of Article 136, all dividends or other
moneys payable on, or in respect of, a share unclaimed after having been
declared may be invested or otherwise made use of by the Directors for the
benefit of the Company until claimed. The payment by the Directors of any
unclaimed dividend or other moneys payable on, or in respect of, a share into a
separate account shall not constitute the Company a trustee in respect thereof.
The Company shall be entitled to cease sending dividend warrants and cheques by
post or otherwise to a member if those instruments have been returned
undelivered to, or left uncashed by, that member on at least two consecutive
occasions, or, following one such occasion, reasonable enquiries have failed to
establish the member's new address. The entitlement conferred on the Company by
this Article in respect of any member shall cease if the member claims a
dividend or cashes a dividend warrant or cheque.
<PAGE>
Forfeiture of unclaimed dividends
136. Any dividend unclaimed after a period of twelve years from the date when it
became due for payment shall, if the Directors so resolve, be forfeited and
shall revert to the Company.
Dividends in specie
137. The Company may, upon the recommendation of the Directors, by ordinary
resolution direct payment of a dividend, in whole or in part, by the
distribution of specific assets (and in particular of paid-up shares or
debentures of any other company) and the Directors shall give effect to such
resolution, and where any difficulty arises in regard to such distribution, the
Directors may (a) settle the same as they think expedient and, in particular,
may issue fractional certificates or may authorise any person to sell and
transfer any fractions or disregard fractions altogether; (b) fix the value for
distribution of such specific assets or any part thereof; (c) determine that
cash payments shall be made to any members on the basis of the value so fixed in
order to adjust the rights of those entitled to participate in the dividend; and
(d) vest any such specific assets in trustees as may seem expedient to the
Directors.
Procedure for payment
138.(A) Any dividend or other moneys payable in respect of a share may be
paid:
(a) by cheque or warrant made payable to or to the order of the holder or
person entitled to payment; or
(b) by any direct debit, bank or other funds transfer system to the holder or
person entitled to payment or, if practicable, to a person designated in
writing by the holder or person entitled to payment; or
(c) by any other method approved by the Directors and agreed (in such form as
the Company thinks appropriate) by the holder or person entitled to payment
including (without limitation) in respect of an uncertificated share by
means of the relevant system (subject to the facilities and requirements of
the relevant system).
Payment by post
138.(B) A cheque or warrant may be sent by post:
(a) where a share is held by a sole holder, to the registered address of the
holder of the share; or
(b) if two or more persons are the holders, to the registered address of the
person who is first named in the register; or
<PAGE>
(c) if a person is entitled by transmission to the share, as if it were a
notice to be given under Article 150; or
(d) in any case, to such person and to such address as the person entitled to
payment may in writing direct.
Discharge to Company and risk
138.(C) Payment of a cheque or warrant by the bank on which it was drawn or
the transfer of funds by the bank instructed to make the transfer or, in respect
of an uncertificated share, the making of payment in accordance with the
facilities and requirements of the relevant system (which, if the relevant
system is CREST, shall be the creation of an assured payment obligation in
respect of the dividend or other moneys payable in favour of the settlement bank
of the member or other person concerned) shall be a good discharge to the
Company. Every cheque or warrant sent in accordance with these Articles shall
be at risk of the holder or person entitled. The Company shall have no
responsibility for any sums lost or delayed in the course of payment by any
other method used by the Company in accordance with Article 138(A).
Receipts where joint holders
139. If two or more persons are registered as joint holders of any share or are
entitled jointly to a share in consequence of a transmission event, any one of
them may give effectual receipts for any dividend or other moneys payable or
property distributable on or in respect of the share.
Scrip dividends
140. Subject to approval by the Company at any annual general meeting, the
Directors may, in respect of any dividend declared or proposed to be declared or
payable within a specified period expiring no later than the conclusion of the
fifth annual general meeting following the date of such approval (and provided
that an adequate number of unissued shares is available for the purpose),
determine and announce that shareholders will be entitled to elect to receive in
lieu of such dividend (or part thereof, as the directors shall determine) an
allotment of additional shares credited as fully paid. Any such announcement
shall, where practicable, be made prior to or contemporaneously with the
announcement of the dividend in question and any related information as to the
Company's profits for such financial period or part thereof. In any such case
the following provisions shall apply:
(a) the basis of allotment shall be determined by the Directors so that, as
nearly as may be considered convenient, the value calculated by reference
to the average quotation of the additional shares (including any fractional
entitlement) to be allotted in lieu of any amount of dividend shall equal
such amount. For such purpose the average quotation of a share shall be
<PAGE>
the average of the middle market quotations of the shares on the London
Stock Exchange, as derived from the Daily Official List of the London Stock
Exchange, on each of the first five consecutive business days on which such
shares are quoted ex the relevant dividend. A certificate or report by the
auditors as to the amount of the average quotation in respect of any
dividend shall be conclusive evidence of that amount;
(b) the Directors shall, after determining the basis of allotment, give notice
in writing to the members of the right of election accorded to them and
shall send with or following such notice forms of election specifying the
procedure to be followed and the place at which and the latest date and
time by which duly completed forms of election must be lodged in order to
be effective;
(c) the dividend (or that part of the dividend in respect of which a right of
election has been accorded) shall not be payable on shares in respect
whereof the share election has been duly exercised (the elected shares),
and in lieu thereof additional shares shall be allotted to the holders of
the elected shares on the basis of allotment determined as aforesaid and
for such purpose the Directors shall capitalise out of such of the sums
standing to the credit of reserves (including any share premium account or
capital redemption reserve) or profit and loss account as the Directors may
determine, a sum equal to the aggregate nominal amount of additional shares
to be allotted on such basis and apply the same in paying up in full the
appropriate number of unissued shares for allotment and distribution to and
amongst the holders of the elected shares on such basis;
(d) the additional shares so allotted shall rank pari passu in all respects
with the fully paid shares then in issue, save only as regards
participation in the relevant dividend (or share election in lieu);
(e) the Directors may do all acts and things considered necessary or expedient
to give effect to any such capitalisation, with full power to the Directors
to make such provisions as they think fit for the case of shares becoming
distributable in fractions (including provisions whereby, in whole or in
part, fractional entitlements are disregarded or rounded up or the benefit
of fractional entitlements accrues to the Company rather than to the
members concerned). The Directors may authorise any person to enter into,
on behalf of all the members interested, an agreement with the Company
providing for such capitalisation and matters incidental thereto and any
agreement made under such authority shall be effective and binding on all
concerned;
(f) notwithstanding the foregoing, the Directors may at any time prior to
payment of the relevant dividend determine, if it appears to them desirable
to do so because of a change in circumstances, that the dividend
<PAGE>
shall be payable wholly in cash after all and if they so determine then all
elections made shall be disregarded. The dividend shall be payable wholly
in cash if the ordinary share capital of the Company ceases to be listed on
the Official List of the London Stock Exchange at any time prior to the due
date of issue of the additional shares or if the listing is suspended and
not reinstated by the date immediately preceding the due date of such
issue; and
(g) the Directors may on occasion determine that rights of election shall not
be made available to any members with registered addresses in any territory
where, in the absence of a registration statement or other special
formalities, the circulation of an offer of rights of election would or
might be unlawful and in such event the provisions aforesaid shall be read
and construed subject to such determination.
Record date
141. Notwithstanding any other provision of these Articles, the Company or the
Directors may by resolution specify any date (the record date) as the date at
the close of business on which persons registered as the holders of shares or
other securities shall be entitled to receipt of any dividend, distribution,
interest, allotment, issue, notice, information, document or circular, and such
record date may be on, or at any time before, the date on which the same is paid
or made or (in the case of any dividend, distribution, interest, allotment or
issue) at any time after the same is recommended, resolved, declared or
announced, but without prejudice to the rights inter se in respect of the same
of transferors and transferees of any such shares or other securities.
Capitalisation of Profits and Reserves
Capitalisation of profits and reserves
142.(A) The Directors may, with the authority of an ordinary resolution of the
Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing to
the credit of any reserve or other fund including the Company's share
premium account and capital redemption reserve;
(b) appropriate the sum resolved to be capitalised to the members in proportion
to the nominal amounts of the shares (whether or not fully paid) held by
them respectively which would entitle them to participate in a distribution
of that sum if the shares were fully paid and the sum were then
distributable and were distributed by way of dividend and apply such sum on
their behalf either in or towards paying up the
<PAGE>
amounts, if any, for the time being unpaid on any shares held by them
respectively, or in paying up in full unissued shares or debentures of the
Company of a nominal amount equal to that sum, and allot the shares or
debentures credited as fully paid to those members or as they may direct,
in those proportions, or partly in one way and partly in the other, but the
share premium account, the capital redemption reserve, and any profits
which are not available for distribution may, for the purposes of this
Article 142(A), only be applied in paying up unissued shares to be allotted
to members credited as fully paid;
(c) resolve that any shares so allotted to any member in respect of a holding
by him of any partly paid shares shall, so long as such shares remain
partly paid, rank for dividend only to the extent that the latter shares
rank for dividend;
(d) make such provision by authorising the sale and transfer to any person of
shares or debentures representing fractions to which any members would
become entitled or by the issue of fractional certificates (or by ignoring
fractions) or by payment in cash or otherwise as they determine in the case
of shares or debentures becoming distributable in fractions;
(e) authorise any person to enter, on behalf of all the members concerned, into
an agreement with the Company providing for the allotment to them
respectively, credited as fully paid, of any further shares to which they
are entitled upon such capitalisation, any agreement made under such
authority being binding on all such members; and
(f) generally do all acts and things required to give effect to such resolution
as aforesaid.
Avoidance of discounts on exercise of employees' share options
142.(B) (a) Where, pursuant to an employees' share scheme, the Company has
granted options to subscribe for shares on terms which provide inter alia for
adjustments to the subscription price payable on the exercise of such options or
to the number of shares to be allotted upon such exercise in the event of any
increase or reduction in or other reorganisation of the Company's issued share
capital and an otherwise appropriate adjustment would result in the subscription
price for any share being less than its nominal value, then, subject to and in
accordance with the provisions of the Statutes, the Directors may, on the
exercise of any of the options concerned and payment of the subscription which
would have applied had such adjustment been made, capitalise any such profits or
other sum as is mentioned in Article 142(A) to the extent necessary to pay up
the unpaid balance of the nominal value of the shares which fall to be allotted
on the exercise of such options and apply such amount in paying up such balance
and allot shares fully paid accordingly.
<PAGE>
(b) The provisions of paragraphs (c) to (f) of Article 142(A) above shall apply
mutatis mutandis to this Article 142(B) (but as if the authority of an
ordinary resolution of the Company were not required).
Accounts
Right to inspect accounts
143. Accounting records sufficient to show and explain the Company's
transactions and otherwise complying with the Statutes shall be kept at the
office or, subject to and in accordance with the Statutes, at such other place
or places as the Directors think fit and shall always be open to the inspection
of the Directors. No member (other than a Director) shall have any right of
inspecting any account or book or document of the Company except as conferred by
statute or ordered by a court of competent jurisdiction or authorised by the
Directors.
Preparation and laying of accounts
144. The Directors shall, from time to time, in compliance with the provisions
of the Statutes, cause to be prepared and to be laid before a general meeting of
the Company such profit and loss accounts, balance sheets, group accounts (if
any) and reports as may be required by the Statutes.
Accounts to be sent to members
145. A copy of every balance sheet and profit and loss account which is to be
laid before a general meeting of the Company (including every document required
by law to be attached or annexed thereto) and of the Directors' and auditors'
reports or, where permitted by the Statutes, a summary financial statement in
the form specified by the Statutes or any regulations made thereunder shall, not
less than twenty one days before the date of the meeting, be sent to every
member of, and every holder of debentures of, the Company and to every other
person who is entitled to receive notices of meetings from the Company under the
provisions of the Statutes or of these Articles, provided that this Article 145
shall not require a copy of these documents to be sent to more than one of joint
holders or to any person who is not entitled to receive notices of meetings and
of whose address the Company is not aware. Whenever a listing or quotation on
any stock exchange for all or any of the shares or debentures or other
securities of the Company shall for the time being be in force, there shall be
forwarded to the appropriate officer of such stock exchange such number of
copies of such documents as may for the time being be required under its
regulations or practice.
<PAGE>
Auditors
Validity of acts of auditors
146. Subject to the provisions of the Statutes, all acts done by any person
acting as an auditor shall, as regards all persons dealing in good faith with
the Company, be valid notwithstanding that there was some defect in his
appointment or that he was at the time of his appointment not qualified for
appointment or subsequently became disqualified.
Rights of auditors
147. The auditors shall be entitled to attend any general meeting and to receive
all notices of, and other communications relating to, any general meeting which
any member is entitled to receive and to be heard at any general meeting on any
part of the business of the meeting which concerns them as auditors.
Notices
Notice in writing
148.(A) Any notice to be given to or by any person pursuant to these Articles
shall be in writing, except that a notice calling a meeting of the directors
need not be in writing.
Method of giving notice to members
148.(B) Any notice or document (including a share certificate) may be served
on or delivered to any member by the Company either personally or by sending it
through the post in a prepaid cover addressed to such member at his registered
address. A member who (having no registered address within the United Kingdom)
has not supplied to the Company an address within the United Kingdom for the
service of notices shall not be entitled to receive notices from the Company.
Where a notice or other document is served or sent by post, service or delivery
shall be deemed to be effected at the expiration of twenty-four hours (or where
second-class mail is employed, forty-eight hours) after the time when the cover
containing the same is posted, and in proving such service or delivery, it shall
be sufficient to prove that such cover was properly addressed, stamped and
posted.
Signature on notices
148.(C) The signature on any notice required to be given by the Company may be
typed or printed or otherwise written.
<PAGE>
Notice to joint holders
149. In respect of joint holdings, all notices shall be given to that one of the
joint holders whose name stands first in the register of members and notice so
given shall be sufficient notice to all the joint holders in their capacity as
such.
Notice to persons entitled by transmission
150. A person entitled to a share in consequence of a transmission event, upon
such evidence being produced as may from time to time properly be required by
the Directors to show his title to the share and upon supplying an address
within the United Kingdom for the service of notices, shall, save as herein
otherwise expressly provided, be entitled to have served upon or delivered to
him at such address any notice or document to which the member but for the
transmission event would be entitled, and such service or delivery shall for all
purposes be deemed a sufficient service or delivery of such notice or document
on all persons interested (whether jointly with or as claiming through or under
him) in the share. Until such address has been supplied, a notice may be given
in any manner in which it might have been given if the transmission event had
not occurred.
Untraced members
151. If on three consecutive occasions notices have been sent through the post
to any member at his registered address or his address for the service of
notices but have been returned undelivered, or if, after any one such occasion,
the Directors or any committee authorised by the Directors on their behalf are
of the opinion, after the making of all reasonable enquiries, that any further
notices to such member would, if sent as aforesaid, likewise be returned
undelivered, such member shall not thereafter be entitled to receive notices
from the Company until he shall have communicated with the Company in respect of
his shares and supplied in writing to the transfer office a new registered
address or address within the United Kingdom for the service of notices.
Advertisement of notices
152. Any notice required to be given by the Company to the members or any of
them, and not expressly provided for by or pursuant to these Articles, shall be
sufficiently given if given by advertisement inserted once in at least one
leading Scottish and one leading national daily newspaper.
Notices during disruption of postal services
153. If at any time, by reason of the suspension or curtailment of postal
services within the United Kingdom, the Company is unable effectively to convene
a general meeting by notices sent through the post, a general meeting may be
convened by a notice advertised in at least one leading Scottish and one leading
national daily newspaper published on the same date and such notice
<PAGE>
shall be deemed to have been duly served on all members entitled thereto at noon
on the day when the advertisement appears. In any such case the Company shall
send confirmatory copies of the notice by post if at least seven days prior to
the meeting the posting of notices to addresses throughout the United Kingdom
again becomes practicable.
Deemed notice
154.(A) A member present in person at any meeting of the Company or of the
holders of any class of shares shall be deemed to have received notice of the
meeting and, where requisite, of the purposes for which it was called.
Successors in title bound by notice to predecessor
154.(B) Every person who becomes entitled to a share shall be bound by any
notice in respect of that share which, before his name is entered in the
register of members, has been given to the person from whom he derives his
title; but this Article 154(B) shall not apply to a notice given under Section
212 of the 1985 Act.
Statutory requirements
155. Nothing in any of Articles 148 to 154 inclusive shall affect any
requirement of the Statutes that any particular offer, notice or other document
be served in any particular manner.
Winding Up
Liquidator may distribute in specie
156. If the Company shall be wound up (whether the liquidation is voluntary,
under supervision or by the Court) the liquidator may, with the authority of an
extraordinary resolution and any other sanction required by the Insolvency Act
1986, divide among the members in specie the whole, or any part of, the assets
of the Company and whether or not the assets shall consist of property of one
kind or shall consist of properties of different kinds, and may for such purpose
set such value as he deems fair upon any one or more class or classes of
property and may determine how such division shall be carried out as between the
members or different classes of members.
Disposal of assets to trusts
157. The liquidator may, with the like authority referred to in Article 156,
vest any part of the assets in trustees upon such trusts for the benefit of
members as the liquidator with the like authority shall think fit but so that no
contributory shall be compelled to accept any shares or other property in
respect of which there is a liability.
<PAGE>
Provisions for Employees
158. The Directors may, by resolution, exercise any power conferred by Section
719 of the 1985 Act to make provision for the benefit of persons employed or
formerly employed by the Company or any of its subsidiary undertakings in
connection with the cessation, or the transfer to any person, of the whole, or
part of, the undertaking of the Company or that subsidiary undertaking.
Indemnity
159. Subject to the provisions of and so far as may be consistent with the
Statutes, but without prejudice to any indemnity to which such person may
otherwise be entitled, every Director, auditor, Secretary, other officer or
employee of the Company shall be entitled to be indemnified out of the assets of
the Company against all costs, charges, losses, expenses and liabilities
incurred by him in the actual or purported execution and/or discharge of his
duties and/or the exercise or purported exercise of his powers and/or otherwise
in relation to or in connection with his duties, powers or office including
(without prejudice to the generality of the foregoing) any liability incurred by
him in defending any proceedings, civil or criminal, which relate to anything
done or omitted or alleged to have been done or omitted by him as an officer,
auditor or employee of the Company and in which decree or judgment is given in
his favour (or the proceedings are otherwise disposed of without any finding or
admission of any material breach of duty on his part) or in which he is
acquitted or in connection with any application under any statute for relief
from liability in respect of any such act or omission in which relief is granted
to him by the Court.
<PAGE>
INDEX TO ARTICLES OF ASSOCIATION
MATTER ARTICLE NUMBER
Accounts 143-145
Auditors 146-147
Authentication of documents 126
Business activities 4
Capitalisation of profits and 142(A)
reserves
Definitions 2
Destruction of documents 48
Directors 87-123
- Alternate directors 105
- Appointment, 96-104
disqualification,
removal and retirement
- Authority to vote 107
- Borrowing powers 123
- Chairman 112
- Committees 114
- Delegation of powers 95
- Executive office 94(A)
- General powers 117-122
- Insurance 92(B)
- Interests 93(A), 109-110
- Meetings of Directors 106
<PAGE>
- Membership of the 88
Company
- Number 87, 111
- Other undertakings, 93(B)
Appointments with
- Quorum 108
- Remuneration and 89-91
expenses
- Retirement and other 92(A)
benefits
- Rotation 98-100
- Validity of 116
proceedings
Employees, Provisions for 158
Dividends 129-141
General Meetings 56-86
- Adjournments 58(B), 66-67
- Admissibility of votes 78-79
- Amendments to 68
resolutions
- Chairman 65
- Disclosure of 50
interests in shares
- Extraordinary general 57
meetings
- Location and time of 58
meeting
- Methods of voting, 69-73
polls and casting vote
- Notice 59-62
<PAGE>
- Proxies 80-85
- Quorum 63-64
- Representatives, 86
Incorporated members
acting by
- Satellite meetings 58(C)
- Types of general 56
meetings
Indemnity 159
Interpretation 3
Minutes and books 127-128
Notices 148-155
Secretary 124
Seals 125
Shares and share capital 5-52
- Allotment of shares 14
- Alteration of capital 9-13
- Calls on shares 23-29
- Capital 5-6
- Certificates 19-22
- Commissions 15
- Disclosure of 50
interests of shares
- Forfeiture, surrender 30-40
and lien
- interests not 17(A)
recognised
- Limitations on 51
shareholdings
<PAGE>
- Renunciation of shares 16
- Share warrants 18
Special share 7
- Transfers of shares 41-47
- Transmission of shares 49
- Trusts, Recognition of 17(B)
- Untraced shareholders 52
- Variation of class 8
rights
Statutory regulations, Non- 1
application of
Stock 53-55
Winding up 156-157
<PAGE>
EXHIBIT 5
SHEPHERD & WEDDERBURN WS LETTERHEAD
Dear Sirs
Scottish Power plc
- ------------------
I. General
We act for Scottish Power plc and New Scottish Power plc in connection with the
proposed scheme of arrangement under section 425 of the Companies Act 1985
between Scottish Power plc and its shareholders ("the Scheme").
In this opinion references to the "Company" shall mean Scottish Power plc or, if
the Scheme becomes effective, New Scottish Power plc.
This opinion is given in connection with the proposed registration under the
United States Securities Act of 1933, as amended, of 714,560,000 ordinary shares
of (Pounds)1 each in the Company (the "Ordinary Shares") in connection with the
proposed merger (the "Merger") between the Company and PacifiCorp.
We have examined the originals or copies of such corporate records of the
Company as we deem necessary as a basis for this opinion, including the
Certificate of Incorporation and Memorandum and Articles of Association of the
Company and a list of the current directors and secretary of the Company. We
have not examined the agreement governing the Merger or any amendment thereto
("Merger Agreement") and accordingly express no opinion on the Merger Agreement.
For the purpose of rendering this opinion we have assumed the genuineness of all
signatures, stamps and seals on and the authenticity and completeness of all
documents submitted to us as originals, and the conformity to originals of
documents supplied to us as certified, photostatic or faxed copies.
We have made such examination of Scots law at the date hereof as in our
judgement is necessary or appropriate for the purposes of this opinion. We do
not, however, purport to be qualified to comment or pass an opinion upon, and we
express no opinion as to, the laws of any jurisdiction other than those of
Scotland as such are in effect on the date hereof.
II. Opinion
Based upon and subject to the foregoing and any matters not expressly disclosed
to us by the Company or the other parties concerned and further subject to the
qualifications set out below, we are of the opinion that so far as the present
laws of Scotland are concerned when:
(a) the requisite shareholder and board resolutions of the Company have been
duly passed; and
(b) the Ordinary Shares have been duly allotted and issued,
then all necessary corporate action on the part of the Company will have been
taken to authorise the issue of such Ordinary Shares, such Ordinary Shares will
have been legally and validly issued
<PAGE>
and will be fully paid and no further contributions in respect thereof will be
required to be made to the Company by the holders thereof, by reason of being
such holders.
III. Qualifications
The opinion expressed in paragraph II above is subject to the following
qualifications:-
A. Our opinion is subject to the effect of any applicable bankruptcy,
insolvency, liquidation, reconstruction, receivership, reorganisation,
moratorium, administration or similar laws now in effect or any other laws
or principles of natural justice, public policy or equitable
considerations.
B. Our opinion is given only on the basis of and in respect of Scots law in
effect and as interpreted and applied by the courts as at the date of this
opinion.
We express no opinion as to any agreement, instrument or other document other
than as specified in this letter.
We consent to the filing of this opinion as an exhibit of the Company's
Registration Statement on Form F-4 dated May 6, 1999, as amended from time to
time, relating to the Ordinary Shares. We also consent to the reference to us
in the "Legal Experts" section of such Registration Statement.
Yours faithfully
Shepherd & Wedderburn WS
- ------------------------
<PAGE>
EXHIBIT 8(a)
MILBANK, TWEED, HADLEY & MCCLOY LLP LETTERHEAD
May 6, 1999
Scottish Power,plc
1 Atlantic Quay
Glasgow G2 8SP
United Kingdom
Ladies and Gentlemen:
We have acted as special counsel to Scottish Power plc
("ScottishPower") in connection with the merger (the "Merger") of an Oregon
corporation and indirect wholly-owned subsidiary of ScottishPower formed to
consummate the Merger ("Merger Sub") into PacifiCorp ("PacifiCorp"), an Oregon
corporation, pursuant to the Agreement and Plan of Merger between New Scottish
Power plc ("Holdco"), ScottishPower, NA General Partnership and PacifiCorp dated
as of December 6, 1998 (the "Restated Merger Agreement"). You have requested
our opinion regarding certain federal income tax consequences of the Merger.
Except as otherwise provided, capitalized terms used in this letter
have the meanings set forth in the Restated Merger Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
In giving our opinion, we have examined and relied upon (i) the
Restated Merger Agreement and related agreements, (ii) the Proxy
Statement/Prospectus (the "Prospectus") filed as part of the Registration
Statement on Form F-4, filed by ScottishPower with the Securities and Exchange
Commission, (iii) the written representations by Holdco, ScottishPower, Scottish
Power NA 1 Limited, Scottish Power NA 2 Limited, NA General Partnership and
PacifiCorp in letters dated May 6, 1999 (the "Representation Letters") and (iv)
such other documents, records or oral representations of ScottishPower,
PacifiCorp and their affiliates and representatives as we have deemed necessary.
We have assumed that (i) the Merger will qualify as a merger under
applicable state law, (ii) the transactions related to the Merger will be
consummated as described in the Prospectus, and (iii) the statements made in the
Representation Letters were accurate and complete when made and will be accurate
as of the Effective Time of the Merger.
<PAGE>
Scottish Power plc
May 6, 1999
Page 2
We also assume that all representations and facts set forth in the
Restated Merger Agreement are accurate and that the Restated Merger Agreement
will become effective according to its Section 9.03, and that the transaction
described in that Agreement will be carried out in accordance with its terms.
In addition, we assume that any United States person who is a "five-percent
transferee shareholder," as defined in Treasury Regulation (S) 1.367(a)-
3(c)(5)(ii), will enter into five-year gain recognition agreement as required by
Treasury Regulation (S) 1.367(a)-3(c)(1)(iii)(B).
Based upon and subject to the assumptions, representations and
limitations described above, we are of the opinion that:
(1) The Merger will constitute a reorganization within the meaning of
Code section 368(a);
(2) No gain or loss will be recognized by PacifiCorp stockholders upon
the exchange of PacifiCorp common stock for Holdco ADSs or Holdcor ordinary
shares pursuant to the Merger (except with respect to cash received in lieu of
fractional Holdco ADSs or Holdco ordinary shares);
(3) The aggregate tax basis to each PacifiCorp stockholder of the ADSs
or ordinary shares received, including fractional units for which cash is
received, will be the same as the aggregate tax basis of the PacifiCorp common
stock surrendered in exchange therefore in the Merger;
(4) Each Pacificorp stockholder's holding period of the ADSs or
ordinary shares received, including fractional units for which cash is received,
will include the holding period of PacifiCorp common stock held as a capital
asset surrendered in exchange therefor in the Merger;
(5) A PacifiCorp stockholder who receives cash in lieu of fractional
Holdco ADSs or fractional ScottishPower ordinary shares will recognize gain or
loss equal to the difference, if any, between such stockholder's tax basis
allocable to such fractional share and the amount of cash received;
(6) Statements in the Proxy Statement/Prospectus under the caption
"Material Tax Consequences--United States Tax Consequences," to the extent they
state matters of law or legal conclusions, are an accurate summary of the
material United States federal income tax consequences of the Merger in all
material respects.
These opinions are based upon existing statutory, regulatory and
judicial authority and administrative interpretations, any of which may be
changed with retroactive effect. These opinions are also based entirely on the
accuracy and veracity, as of the Effective Time of the Merger, of the
information obtained from the documents we have examined and the statements
contained in the Representation Letters. Our opinions cannot be relied upon if
any of the facts pertinent to the federal income tax consequences of the Merger
are different than we have assumed or the law changes with retroactive effect.
Although this letter represents our opinion
2
<PAGE>
Scottish Power plc
May 6, 1999
Page 3
concerning the matter specifically discussed, it is not binding on the courts or
on any administrative agency, including the Service, and a court or agency may
act or hold to the contrary. We undertake no obligation to update this letter or
our opinion at any time after the Closing Date. Finally, our opinions are
limited to the tax matters expressly set forth above and we express no opinion
on any other aspect of the Merger.
We hereby consent to the reference to Milbank, Tweed, Hadley & McCloy
LLP in the Prospectus under the caption "Material Tax Consequences--United
States Tax Consequences" and to the filing of this opinion as an exhibit to the
Registration Statement, but do not thereby admit that we are within the category
of persons whose consent is required by Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
Milbank, Tweed, Hadley & McCloy LLP
3
<PAGE>
EXHIBIT 8(b)
MILBANK, TWEED, HADLEY & MCCLOY LLP LETTERHEAD
May 6, 1999
Scottish Power,plc
1 Atlantic Quay
Glasgow G2 8SP
United Kingdom
Ladies and Gentlemen:
We have acted as special counsel to Scottish Power plc
("ScottishPower"), a United Kingdom public limited company ("ScottishPower") in
connection with the merger (the "Merger") of an Oregon corporation and indirect
wholly-owned subsidiary of ScottishPower formed to consummate the Merger
("Merger Sub") into PacifiCorp ("PacifiCorp"), an Oregon corporation, pursuant
to the Agreement and Plan of Merger between ScottishPower, Merger Sub and
PacifiCorp dated as of December 6, 1998 (the "Original Merger Agreement"). You
have requested our opinion regarding certain federal income tax consequences of
the Merger.
Except as otherwise provided, capitalized terms used in this letter
have the meanings set forth in the Original Merger Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
In giving our opinion, we have examined and relied upon (i) the
Original Merger Agreement and related agreements, (ii) the Proxy
Statement/Prospectus (the "Prospectus") filed as part of the Registration
Statement on Form F-4, filed by ScottishPower with the Securities and Exchange
Commission, (iii) the written representations by ScottishPower, Scottish Power
NA 1 Limited, Scottish Power NA 2 Limited, NA General Partnership and PacifiCorp
in letters dated May 6, 1999 (the "Representation Letters") and (iv) such other
documents, records or oral representations of ScottishPower, PacifiCorp and
their representatives as we have deemed necessary.
We have assumed that (i) the Merger will qualify as a merger under
applicable state law, (ii) the transactions related to the Merger will be
consummated as described in the Prospectus, and (iii) the statements made in the
Representation Letters were accurate and complete when made and will be accurate
as of the Effective Time of the Merger.
<PAGE>
Scottish Power plc
May 6, 1999
Page 2
We also assume that all representations and facts set forth in the
Original Merger Agreement are accurate, that the Amended and Restated Agreement
and Plan of Merger by and among New Scottish Power plc, ScottishPower, NA and
PacifiCorp does not become effective according to its Section 9.03, and that the
transaction described in the Original Merger Agreement will be carried out in
accordance with its terms. In addition, we assume that any United States person
who is a "five-percent transferee shareholder," as defined in Treasury
Regulation (S) 1.367(a)-3(c)(5)(ii), will enter into five-year gain recognition
agreement as required by Treasury Regulation (S) 1.367(a)-3(c)(1)(iii)(B).
Based upon and subject to the assumptions, representations and
limitations described above, we are of the opinion that:
(1) The Merger will constitute a reorganization within the meaning of
Code section 368(a);
(2) PacifiCorp stockholders will recognize no gain or loss upon the
exchange of PacifiCorp common stock for ScottishPower ADSs or ScottishPower
ordinary shares pursuant to the Merger (except with respect to cash received in
lieu of fractional ScottishPower ADSs or ScottishPower ordinary shares);
(3) The aggregate tax basis to each PacifiCorp stockholder of the ADSs
or ordinary shares received, including fractional units for which cash is
received, will be the same as the aggregate tax basis of the PacifiCorp common
stock surrendered in exchange therefore in the Merger;
(4) Each Pacificorp stockholder's holding period of the ADSs or
ordinary shares received, including fractional units for which cash is received,
will include the holding period of PacifiCorp common stock held as a capital
asset surrendered in exchange therefor in the Merger;
(5) A PacifiCorp stockholder who receives cash in lieu of fractional
ScottishPower ADSs or fractional ScottishPower ordinary shares will recognize
gain or loss equal to the difference, if any, between such stockholder's tax
basis allocable to such fractional share and the amount of cash received;
(6) Statements in the Proxy Statement/Prospectus under the caption
"Material Tax Consequences--United States Tax Consequences," to the extent they
state matters of law or legal conclusions, are an accurate summary of the
material United States federal income tax consequences of the Merger in all
material respects.
These opinions are based upon existing statutory, regulatory and
judicial authority and administrative interpretations, any of which may be
changed with retroactive effect. These opinions are also based entirely on the
accuracy and veracity, as of the Effective Time of the Merger, of the
information obtained from the documents we have examined and the statements
contained in the Representation Letters. Our opinions cannot be relied upon if
any of the facts pertinent to the federal income tax consequences of the Merger
are different than we have
2
<PAGE>
Scottish Power plc
May 6, 1999
Page 3
assumed or the law changes with retroactive effect. Although this letter
represents our opinion concerning the matter specifically discussed, it is not
binding on the courts or on any administrative agency, including the Service,
and a court or agency may act or hold to the contrary. We undertake no
obligation to update this letter or our opinion at any time after the Closing
Date. Finally, our opinions are limited to the tax matters expressly set forth
above and we express no opinion on any other aspect of the Merger.
We hereby consent to the reference to Milbank, Tweed, Hadley & McCloy
LLP in the Prospectus under the caption "Material Tax Consequences--United
States Tax Consequences" and to the filing of this opinion as an exhibit to the
Registration Statement, but do not thereby admit that we are within the category
of persons whose consent is required by Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
Milbank, Tweed, Hadley & McCloy LLP
3
<PAGE>
EXHIBIT 8(c)
STOEL RIVES LLP LETTERHEAD
May 6, 1999
PacifiCorp
700 NE Multnomah
Portland, Oregon 97232
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax issues
related to the Amended and Restated Agreement and Plan of Merger dated December
6, 1998, as amended January 29, 1999 and February 9, 1999, and amended and
restated February 23, 1999, by and among New Scottish Power plc ("HoldCo"),
Scottish Power plc ("ScottishPower"), NA General Partnership, and PacifiCorp
(the "Restated Merger Agreement"). Except as otherwise provided, capitalized
terms used in this letter have the meanings set forth in the Restated Merger
Agreement. All section references, unless otherwise indicated, are to the
Internal Revenue Code of 1986, as amended (the "Code" or "IRC").
This opinion is being delivered as an exhibit to PacifiCorp's Proxy
Statement on Schedule 14A relating to the Merger.
You have requested that we render the opinions set forth below. In forming
our opinion, we have relied with your consent as to factual matters upon
representations made by PacifiCorp, HoldCo, ScottishPower, Scottish Power NA 1
Limited, Scottish Power NA 2 Limited, and NA General Partnership (on its own
behalf and on behalf of Merger Sub) (the "Parties") to us in their letters dated
today. We have made no independent investigation with regard to statements made
in those letters. We assume those representations to be accurate and complete,
but we express no opinion as to their accuracy or completeness. With your
consent we also assume that all representations and facts set forth in the
Restated Merger Agreement are accurate, that the transaction described in the
Restated Merger Agreement will be carried out in accordance with its terms, and
that the Parties have complied with and will continue to comply with the
covenants in the Restated Merger Agreement. In addition, we assume that any
U.S. person who is a "five-percent transferee shareholder," as defined in
Treasury Regulation (S) 1.367(a)-3(c)(5)(ii), will enter into a five-year gain
recognition agreement as required by Treasury Regulation (S) 1.367(a)-
3(c)(1)(iii)(B).
In acting as counsel to PacifiCorp in connection with the Merger, we have
participated in preparing the Restated Merger Agreement and preparing and filing
with the Securities and Exchange Commission the Proxy Statement/Prospectus
contained in Schedule 14A.
<PAGE>
PacifiCorp
May 6, 1999
Page 2
Based upon and subject to the assumptions, representations, and limitations
described above, we are of the opinion that for U.S. federal income tax
purposes:
(1) The Merger will constitute a "reorganization" within the meaning of
IRC (S) 368(a);
(2) No gain or loss will be recognized by stockholders of PacifiCorp upon
exchange of PacifiCorp common stock for HoldCo ADSs or HoldCo ordinary shares
pursuant to the Merger (except with respect to cash received in lieu of
fractional HoldCo ADSs or HoldCo ordinary shares);
(3) The aggregate tax basis to each PacifiCorp stockholder of the HoldCo
ADSs or HoldCo ordinary shares received, including fractional units for which
cash is received, will be the same as the aggregate tax basis of the PacifiCorp
common stock surrendered in exchange therefor in the Merger;
(4) The holding period of the HoldCo ADSs or HoldCo ordinary shares
received, including fractional units treated as received in the Merger, will
include the holding period of PacifiCorp common stock held as a capital asset
surrendered in exchange therefor in the Merger;
(5) A PacifiCorp stockholder who receives cash in lieu of a fractional
HoldCo ADS or a fractional HoldCo ordinary share will recognize gain or loss
equal to the difference, if any, between such stockholder's tax basis in such
fractional share and the amount of cash received;
(6) The statements set forth in the Proxy Statement/Prospectus under the
caption "Material Tax Consequences -- United States Tax Consequences," to the
extent they state matters of law or legal conclusions, are an accurate summary
of the material United States federal income tax consequences of the Merger in
all material respects.
Our opinion is limited to the federal income tax matters addressed, and no
opinion is rendered with respect to any other issue, including any other tax
issues with respect to the transactions described in the Restated Merger
Agreement. In addition, our conclusions are based upon federal income tax law
currently in effect, including the Code and Treasury Regulations promulgated
thereunder, administrative pronouncements by the Internal Revenue Service (the
"Service"), judicial decisions, and such other legal authorities as we have
deemed necessary for purposes of this opinion, as each exists as of the date of
this letter. Existing federal income tax law is subject to change on a
prospective or retroactive basis. If the Restated Merger Agreement is not fully
in effect at the Closing of the Merger, or if any assumption or representation
described above or contained in the Restated Merger Agreement or the
Representation Letters is not true, correct, and complete on the Closing Date,
or in the event of a change in law adversely affecting the conclusions reached
in this letter, our opinion shall be void and of no force or effect. You should
be aware that although this letter represents our opinion concerning the matters
specifically discussed, it is not binding on the courts or on any administrative
agency, including the Service, and a court or agency may act or hold to the
contrary. We undertake no obligation to update this letter or our opinion at
any time after the Closing Date. Our opinion is provided to you as a legal
opinion only, and not as a guaranty or warranty, and is limited to the specific
transactions, documents, and matters described above. No opinion is implied or
may be inferred beyond that which is expressly stated in this letter.
<PAGE>
PacifiCorp
May 6, 1999
Page 3
This opinion is provided to PacifiCorp pursuant to Section 7.03(d) of the
Restated Merger Agreement. We consent to the filing of this opinion as an
exhibit to the Proxy Statement/Prospectus and to the use of our name under the
caption "United States Tax Consequences" in the Proxy Statement/Prospectus, but
do not thereby admit that we are within the category of persons whose consent is
required by Section 7 of the Securities Act of 1933, as amended. Without our
prior written consent, this opinion may not be furnished to any other person or
entity and may not be quoted in whole or in part or otherwise referred to in (or
be the basis for) any report or document furnished to any person or entity,
except in connection with inspection of the addressee's files by internal
company or governmental examiners or auditors.
Very truly yours,
Stoel Rives LLP
<PAGE>
EXHIBIT (8)(d)
STOEL RIVES LLP LETTERHEAD
May 6, 1999
PacifiCorp
700 N.E. Multnomah
Portland, Oregon 97232
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax issues
related to the Agreement and Plan of Merger dated as of December 6, 1998 by and
among Scottish Power plc ("ScottishPower"), NA General Partnership ("NA"), and
PacifiCorp (the "Original Merger Agreement"). Except as otherwise provided,
capitalized terms used in this letter have the meanings set forth in the
Original Merger Agreement. All section references, unless otherwise indicated,
are to the Internal Revenue Code of 1986, as amended (the "Code" or "IRC").
This opinion is being delivered as an exhibit to PacifiCorp's Proxy Statement on
Schedule 14A relating to the Merger.
You have requested that we render the opinions set forth below. In forming
our opinion, we have relied with your consent as to factual matters upon
representations made by PacifiCorp, ScottishPower, Scottish Power NA 1 Limited,
Scottish Power NA 2 Limited and NA General Partnership (on its own behalf and on
behalf of Merger Sub) (the "Parties") to us in their letters dated today. We
have made no independent investigation with regard to statements made in those
letters. We assume those representations to be accurate and complete, but we
express no opinion as to their accuracy or completeness. With your consent we
also assume that all representations and facts set forth in the Original Merger
Agreement are accurate, that the Amended and Restated Agreement and Plan of
Merger by and among New Scottish Power plc, ScottishPower, NA and PacifiCorp
does not become effective according to its Section 9.03(c), that the transaction
described in the Original Merger Agreement will be carried out in accordance
with its terms, and that the Parties have complied with and will continue to
comply with the covenants in the Original Merger Agreement. In addition, we
assume that any United States person who is a "five-percent transferee
shareholder," as defined in Treasury Regulation (S) 1.367(a)-3(c)(5)(ii), will
enter into a five-year gain recognition agreement as required by Treasury
Regulation (S) 1.367(a)-3(c)(1)(iii)(B).
<PAGE>
PacifiCorp
May 6, 1999
Page 2
In acting as counsel to PacifiCorp in connection with the Merger, we have
participated in preparing the Restated Merger Agreement and preparing and filing
with the Securities and Exchange Commission the Proxy Statement/Prospectus
contained in Schedule 14A.
Based upon and subject to the assumptions, representations and limitations
described above, we are of the opinion that for U.S. federal income tax
purposes:
(1) The Merger will constitute a "reorganization" within the meaning of
IRC (S) 368(a);
(2) No gain or loss will be recognized by stockholders of PacifiCorp upon
exchange of PacifiCorp common stock for ScottishPower ADSs or ScottishPower
ordinary shares pursuant to the Merger (except with respect to cash received in
lieu of fractional ScottishPower ADSs or ScottishPower ordinary shares);
(3) The aggregate tax basis to each PacifiCorp stockholder of the
ScottishPower ADSs or ScottishPower ordinary shares received, including
fractional units for which cash is received, will be the same as the aggregate
tax basis of the PacifiCorp common stock surrendered in exchange therefor in the
Merger;
(4) The holding period of the ScottishPower ADSs or ScottishPower ordinary
shares received, including fractional units treated as received in the Merger,
will include the holding period of PacifiCorp common stock held as a capital
asset surrendered in exchange therefor in the Merger;
(5) A PacifiCorp stockholder who receives cash in lieu of a fractional
ScottishPower ADS or a fractional ScottishPower ordinary share will recognize
gain or loss equal to the difference, if any, between such stockholder's tax
basis in such fractional share and the amount of cash received;
(6) The statements set forth in the Proxy Statement/Prospectus under the
caption "Material Tax Consequences -- United States Tax Consequences," to the
extent they state matters of law or legal conclusions, are an accurate summary
of the material United States federal income tax consequences of the Merger in
all material respects.
Our opinion is limited to the federal income tax matters addressed, and no
opinion is rendered with respect to any other issue, including any other tax
issues with respect to the transactions described in the Original Merger
Agreement. In addition, our conclusions are based upon federal income tax law
currently in effect, including the Code and Treasury Regulations promulgated
thereunder, administrative pronouncements by the Internal Revenue Service (the
"Service"), judicial decisions, and such other legal authorities as we have
deemed
<PAGE>
PacifiCorp
May 6, 1999
Page 3
necessary for purposes of this opinion, as each exists as of the date of
this letter. Existing federal income tax law is subject to change on a
prospective or retroactive basis. If any assumption or representation described
above or contained in the Original Merger Agreement or the Representation
Letters is not true, correct and complete on the Closing Date, or in the event
of a change in law adversely affecting the conclusions reached in this letter,
our opinion shall be void and of no force or effect. You should be aware that
although this letter represents our opinion concerning the matters specifically
discussed, it is not binding on the courts or on any administrative agency,
including the Service, and a court or agency may act or hold to the contrary.
We undertake no obligation to update this letter or our opinion at any time
after the Closing Date. Our opinion is provided to you as a legal opinion only,
and not as a guaranty or warranty, and is limited to the specific transactions,
documents and matters described above. No opinion is implied or may be inferred
beyond that which is expressly stated in this letter.
This opinion is provided to PacifiCorp pursuant to Section 7.03(d) of the
Original Merger Agreement. We consent to the filing of this opinion as an
exhibit to the Proxy Statement/Prospectus and to the use of our name under the
caption "United States Tax Consequences" in the Proxy Statement/Prospectus, but
do not thereby admit that we are within the category of persons whose consent is
required by Section 7 of the Securities Act of 1933, as amended. Without our
prior written consent, this opinion may not be furnished to any other person or
entity and may not be quoted in whole or in part or otherwise referred to in (or
be the basis for) any report or document furnished to any person or entity,
except in connection with inspection of the addressee's files by internal
company or governmental examiners or auditors.
Very truly yours,
Stoel Rives LLP
<PAGE>
EXHIBIT 8(e)
LeBoeuf, Lamb, Greene & MacRae, LLP Letterhead
May 6, 1999
PacifiCorp
700 N.E. Multnomah
Portland, Oregon 97232
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax issues
related to the transactions described in (i) the Agreement and Plan of Merger
dated as of December 6, 1998, by and among Scottish Power plc ("Parent"), NA
General Partnership, and PacifiCorp (the "Company") (the "Original Merger
Agreement") and (ii) Amended and Restated Agreement and Plan of Merger dated
December 6, 1998, as amended January 29, 1999 and February 9, 1999, and amended
and restated February 23, 1999, by and among New Scottish Power plc ("Holdco"),
Scottish Power plc ("ScottishPower"), NA General Partnership, and PacifiCorp
(the "Company") (the "Restated Merger Agreement"). Except as otherwise
provided, capitalized terms used in this letter have the meanings set forth in
the Original Merger Agreement and the Restated Merger Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
The transactions contemplated by the Restated Merger Agreement will proceed
as contemplated therein, if the Scheme of Arrangement becomes effective.
However, if Scottish Power gives written notice to PacifiCorp that the Scheme of
Arrangement will not become effective, the transactions contemplated by the
Original Merger Agreement will proceed as contemplated therein. Prior to the
Scheme Date, the Original Merger Agreement shall continue in full force and
effect.
In forming our opinion, we have relied as to factual matters upon
representations made by PacifiCorp, Scottish Power, Holdco, Scottish Power NA 1
Limited, Scottish Power NA 2 Limited and NA General Partnership (on its own
behalf and on behalf of Merger Sub) (the "Parties") to us in their letters dated
today. We have made no independent investigation with regard to statements made
in those representation letters. We assume those representations to be true,
complete and accurate, but we express no opinion as to their truth, accuracy or
completeness.
In connection with our opinion addressing the transactions contemplated by
the Original Merger Agreement, we also assume that all representations and facts
set forth in the Original Merger
<PAGE>
PacifiCorp
May 6, 1999
Page 2
Agreement are true, complete and accurate as of the date hereof, and that the
transactions described in the Original Merger Agreement will be carried out in
accordance with its terms if the Scheme of Arrangement does not become
effective. In connection with our opinion addressing the transactions
contemplated by the Restated Merger Agreement, we also assume that all
representations and facts set forth in the Restated Merger Agreement are true,
complete, and accurate as of the date hereof, and that the transactions
described in the Restated Merger Agreement will be carried out in accordance
with its terms if the Scheme of Arrangement becomes effective. In addition, we
assume that any United States person who is a "five-percent transferee
shareholder," as defined in Treasury Regulation (S) 1.367(a)-3(c)(5)(ii), will
enter into a five-year gain recognition agreement as required by Treasury
Regulation (S) 1.367(a)-3(c)(1)(iii)(B).
Based upon and subject to the assumptions, representations and limitations
described above, our examination of the Original Merger Agreement, the Restated
Merger Agreement, the Joint Proxy Statement-Prospectus of PacifiCorp, Scottish
Power and Holdco and the relevant legal authorities, we are of the opinion:
(1) if the Scheme of Arrangement becomes effective, (i) the Merger (as
that term is defined in the Restated Merger Agreement) will constitute
a "reorganization" within the meaning of Code (S) 368(a), (ii) no gain
or loss will be recognized for United States federal income tax
purposes by stockholders of the Company upon their exchange of Company
Common Stock for Holdco ADSs or Holdco Ordinary Shares pursuant to the
Merger (except with respect to cash received in lieu of fractional
Holdco ADSs or Holdco Ordinary Shares), (iii) the aggregate tax basis
of the Holdco ADSs or Holdco Ordinary Shares received, including
fractional units treated as received, by a Company stockholder will be
the same as the aggregate tax basis of the Company Common Stock
surrendered in exchange therefor in the Merger and (iv) the holding
period of the Holdco ADSs or Holdco Ordinary Shares received ,
including fractional units treated as received, will include the
holding period of the Company Common Stock held as a capital asset and
surrendered in exchange therefor in the Merger; and
(2) if the Scheme of Arrangement does not become effective, (i) the Merger
(as that term is defined in the Original Merger Agreement) will
constitute a "reorganization" within the meaning of Code (S) 368(a),
(ii) no gain or loss will be recognized for United States federal
income tax purposes by stockholders of the Company upon their exchange
of Company Common Stock for Parent ADSs or Parent Ordinary
<PAGE>
PacifiCorp
May 6, 1999
Page 3
Shares pursuant to the Merger (except with respect to cash received in
lieu of fractional Parent ADSs or Parent Ordinary Shares), (iii) the
aggregate tax basis of the Parent ADSs or Parent Ordinary Shares
received, including fractional units treated as received, by a Company
stockholder will be the same as the aggregate tax basis of the Company
Common Stock surrendered in exchange therefor in the Merger and (iv)
the holding period of the Parent ADSs or Parent Ordinary Shares
received, including fractional units treated as received, will include
the holding period of the Company Common Stock held as a capital asset
and surrendered in exchange therefor in the Merger.
Our opinion is limited to the federal income tax matters addressed, and no
opinion is rendered with respect to (i) the tax consequences of the transactions
described in the Original Merger Agreement or the Restated Merger Agreement
under state, local or foreign law, (ii) certain federal income tax consequences
applicable to special classes of taxpayers subject to special rules, including,
without limitation, foreign corporations, stockholders who are not citizens or
residents of the United States, estates the income of which is not subject to
United States taxation regardless of its source, trusts the administration of
which a court within the United States is not able to exercise primary
supervision and with respect to which one or more United States fiduciaries do
not have the authority to control all substantial decisions of such trust,
financial institutions, insurance companies, tax-exempt entities, dealers in
securities, persons who acquired their PacifiCorp stock pursuant to the exercise
of an employee option (or otherwise as compensation) persons holding PacifiCorp
stock as part of an integrated investment (including a straddle) comprised of
shares of PacifiCorp stock and one or more other positions or (iii) any other
issue, including any other tax issues with respect to the transactions described
in the Original Merger Agreement or the Restated Merger Agreement.
In addition, our conclusions are based upon federal income tax law
currently in effect, including the Code and Treasury Regulations promulgated
thereunder, administrative pronouncements by the Internal Revenue Service (the
"Service"), judicial decisions, and such other legal authorities as we have
deemed necessary for purposes of this opinion, as each exists as of the date of
this letter. Existing federal income tax law is subject to change on a
prospective or retroactive basis. If any assumption or representation described
above or contained in the Original Merger Agreement, the Restated Merger
Agreement or Representation Letters is not true, correct and complete, or in the
event of a change in law adversely affecting the conclusions reached in this
letter, our opinion shall be void and of no force or effect. You should be aware
that although this letter represents our opinion concerning the matter
specifically discussed, it is not binding on the courts
<PAGE>
PacifiCorp
May 6, 1999
Page 4
or on any administrative agency, including the Service, and a court or agency
may act or hold to the contrary. We undertake no obligation to update this
letter or our opinion at any time after the Closing Date. Our opinion is
provided to you as a legal opinion only, and not as a guaranty or warranty, and
is limited to the specific transactions, documents and matters described above.
No opinion may be implied or inferred beyond that which is expressly stated in
this letter.
We hereby consent to the filing of this opinion as an exhibit to the
Joint Proxy Statement- Prospectus of PacifiCorp, Scottish Power and Holdco and
the reference to the above mentioned opinion under "The Merger- Material Tax
Consequences" and "Legal Opinions." In giving such consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended. Without our prior written
consent, this opinion may not be furnished to any other person or entity and may
not be quoted in whole or in part or otherwise referred to in (or be the basis
for) any report or document furnished to any person or entity, except in
connection with inspection of the addressee's files by internal company or
governmental examiners or auditors.
Very truly yours,
LeBoeuf, Lamb, Greene & MacRae L.L.P.
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this proxy statement/prospectus
of ScottishPower on Form F-4 of our report dated March 5, 1999, appearing in the
Annual Report on Form 10-K of PacifiCorp and subsidiaries for the year ended
December 31, 1998 and to the reference to us under the headings "Selected
Historical Financial Information of PacifiCorp" and "Experts" in such proxy
statement/prospectus.
DELOITTE & TOUCHE LLP
Portland, Oregon
May 6, 1999
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form F-4 (File No. 1-14676) of our report dated July 22, 1998, on our audits of
the financial statements and financial statement schedules of Scottish Power
plc. We also consent to the reference to our firm under the caption "Experts"
and "Selected Historical Financial Information of ScottishPower".
Coopers & Lybrand
Glasgow, United Kingdom
May 6, 1999
<PAGE>
Exhibit 23(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation in this registration statement on Form F-4 (File
No. 1-14676) to the reference to our firm under the caption "Experts".
PricewaterhouseCoopers
Glasgow, United Kingdom
May 6, 1999
<PAGE>
EXHIBIT 23(g)
MORGAN STANLEY DEAN WITTER LETTERHEAD
Consent of Morgan Stanley & Co. Limited
We hereby consent to the use in the Registration Statement of ScottishPower plc
on Form F-4, and in the related Joint Proxy Statement Prospectus of
ScottishPower plc/PacifiCorp, which is part of the Registration Statement of our
opinion dated December 6, 1998 appearing as Annex D to such Joint Proxy
Statement/Prospectus, and to the description therein of such opinion and to the
references therein to us under the headings "SUMMMARY- Opinion of
ScottishPower's Financial Advisor" and "THE MERGER- Opinions of Financial
Advisors." In giving the foregoing consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended (the "Securities Act"), or the rules and
regulations promulgated thereunder, nor do we admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act or the rules and regulations
promulgated thereunder.
Morgan Stanley & Co. Limited
May 6, 1999
<PAGE>
EXHIBIT 23(h)
SALOMON SMITH BARNEY LETTERHEAD
CONSENT OF SALOMON SMITH BARNEY INC.
We hereby consent to the use in the Registration Statement of Scottish
Power plc on Form F-4, and in the related Joint Proxy Statement of Scottish
Power plc/PacifiCorp, of our opinion dated December 6, 1998 appearing as Annex
C to such Joint Proxy Statement/Prospectus, and to the description therein of
such opinion and to the references therein to us under the headings
"SUMMARY--Fairness Opinion of PacifiCorp's Financial Advisor" and "THE
MERGER--Opinion of PacifiCorp's Financial Advisor." In giving the foregoing
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended
(the "Securities Act"), or the rules and regulations promulgated thereunder, nor
do we admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
or the rules and regulations promulgated thereunder.
/s/ SALOMON SMITH BARNEY INC.
New York, New York
May 6, 1999
<PAGE>
EXHIBIT 99(c)
SOLICITATION OF PROXIES
FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS OF
PACIFICORP
FROM THE HOLDERS OF RECORD OF
<TABLE>
<CAPTION>
CUSIP
Series Number
------ -----------
<S> <C>
Serial Preferred Stock
4.52% Series 695114-20-7
4.56% Series 695114-30-6
4.72% Series 695114-40-5
5.00% Series 695114-60-3
5 40% Series 695114-70-2
6.00% Series 695114-80-1
7.00% Series 695114-88-4
No Par Serial Preferred Stock
$7.48 Series 695114-65-2
$7.70 Series 695114-67-8
$1.16 Series 695114-73-6
$1.18 Series 695114-74-4
$1.28 Series 695114-75-1
5% Preferred Stock 695114-50-4
</TABLE>
May 6, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by PacifiCorp, an Oregon corporation ("PacifiCorp"),
to act collectively as Solicitation Agents with respect to the solicitation of
proxies (the "Proxy Solicitation") from the holders of the PacifiCorp preferred
stock specified above (collectively, the "Preferred Stock"), in connection with
the 1999 annual meeting of shareholders of PacifiCorp (including any
adjournments thereof, the "Annual Meeting") to, among other things:
(i) consider and vote upon a proposal to approve alternate forms of an
agreement and plan of merger (the "Merger Agreement") among PacifiCorp,
Scottish Power plc and others (the "Merger Proposal"), and
(ii) obtain the consent of a majority of the voting power of the
Preferred Stock, voting together as a single class, to an increase of $5
billion in the amount of unsecured indebtedness permitted under
PacifiCorp's Third Restated Articles of Incorporation (the "Unsecured Debt
Consent").
The Annual Meeting is being held on June 17, 1999, and the record date for
the Annual Meeting is April 30, 1999 (the "Record Date").
Special Cash Payments to Preferred Shareholders
If, but only if, the Merger Proposal is approved at the Annual Meeting and
all regulatory approvals specified in the Merger Agreement have been obtained,
PacifiCorp will make a special cash payment in the amount of $ 1.00 per share
($0.25 per share for the $ 1.16, $ 1.18 and $1.28 Series of No Par Serial
Preferred Stock (collectively, the "$25 Preferred Stock")) to each holder of
record of Preferred Stock on the Record Date that voted FOR the Merger
Proposal.
<PAGE>
If, but only if, the Unsecured Debt Consent is approved at the Annual
Meeting, PacifiCorp will make a special cash payment in the amount of $ 1.00
per share ($0.25 per share for the $25 Preferred Stock) to each holder of
record of Preferred Stock on the Record Date that voted FOR the Unsecured Debt
Consent.
The Board of Directors of PacifiCorp recommends voting in favor of the
Merger Proposal and the Unsecured Debt Consent.
Solicitation Fees
If, but only if, the Merger Proposal is approved at the Annual Meeting and
all regulatory approvals specified in the Merger Agreement have been obtained,
PacifiCorp will pay to the designated Soliciting Dealer, including any of us, a
solicitation fee of $1.00 per share ($0.25 for the $25 Preferred Stock) for
each share of Preferred Stock that is voted "FOR" the Merger Proposal by a
beneficial owner holding 2,500 or fewer shares of Preferred Stock of any series
(unless such Preferred Stock is the $25 Preferred Stock, in which case 10,000
or fewer shares of $25 Preferred Stock of any series).
If, but only if, the Unsecured Debt Consent is approved at the Annual
Meeting, PacifiCorp will pay to the designated Soliciting Dealer, including any
of us, a solicitation fee of $ 1.00 per share ($0.25 per share for the $25
Preferred Stock) for each share of Preferred Stock that is voted "FOR" the
Unsecured Debt Consent by a beneficial owner holding 2,500 or fewer shares of
Preferred Stock of any series (unless such Preferred Stock is the $25 Preferred
Stock, in which case 10,000 or fewer shares of $25 Preferred Stock of any
series).
By accepting any solicitation fee, a person shall be deemed to have
represented that: (i) it has complied with the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the applicable rules and
regulations thereunder, in connection with such solicitation; (ii) it is
entitled to such compensation for such solicitation under the terms and
conditions of the Proxy Solicitation; (iii) in soliciting proxies, it has used
no soliciting materials other than those furnished by PacifiCorp; and (iv) if
it is a foreign broker or dealer not eligible for membership in the National
Association of Securities Dealers, Inc. (the "NASD"), it has agreed to conform
to the NASD's Conduct Rules in making solicitations of proxies.
A Soliciting Dealer is (i) any broker or dealer in securities, including
each of us in our capacity as a dealer or broker, that is a member of any
national securities exchange or of the NASD, (ii) any foreign broker or dealer
not eligible for membership in the NASD that agrees to conform to the NASD's
Conduct Rules in making solicitations of proxies, or (iii) any bank or trust
company.
A designated Soliciting Dealer will include any Soliciting Dealer even when
the activities of the Soliciting Dealer in connection with the Proxy
Solicitation consist solely of forwarding to clients materials relating to the
Annual Meeting, and voting "FOR" either the Merger Proposal or the Unsecured
Debt Consent as directed by beneficial owners. No Soliciting Dealer is required
to make any recommendation to holders of shares as to whether or not to vote
"FOR" either proposal. No assumption is made, in making payment to any
Soliciting Dealer, that its activities in connection with the Proxy
Solicitation included any activities other than those described above, and for
all purposes noted in all materials relating to the Proxy Solicitation, the
term "solicit" means no more than processing proxies or forwarding to customers
materials regarding the solicitation.
No solicitation fee, other than solicitation fees payable to us as described
in the Proxy Statement/Prospectus enclosed herewith, is payable to a Soliciting
Dealer with respect to a vote "FOR" the Merger Proposal or the Unsecured Debt
Consent unless the applicable Form of Proxy or Proxy Card-Preferred Stock
designates such Soliciting Dealer. No solicitation fee is payable to a
Soliciting Dealer in respect of shares registered in the name of the Soliciting
Dealer unless the shares are held by the Soliciting Dealer as nominee and a
vote is being made, or a proxy in respect thereof is being granted, with
respect to the shares of one or more beneficial owners identified on the
applicable Form of Proxy. No solicitation fee is payable to a Soliciting Dealer
if the Soliciting Dealer is required for any reason to transfer any portion of
the fee to a beneficial
<PAGE>
holder. No solicitation fee will be paid to a Soliciting Dealer with respect to
shares of Preferred Stock held for its own account or shares beneficially owned
by the Soliciting Dealer. No broker, dealer, commercial bank, trust company or
other nominee is an agent of PacifiCorp, the Information Agent or the Co-
Solicitation Agents for purposes of this solicitation.
All questions as to the validity, form and eligibility (including time of
receipt) of any designation of a Soliciting Dealer will be determined by
PacifiCorp, in its sole discretion, which determination will be final and
binding. Neither PacifiCorp nor any other person will be under any duty to give
notification of any defects or irregularities in any designation of a
Soliciting Dealer or incur any liability for failure to give such notification.
Miscellaneous
For your information and for forwarding to your clients, we are enclosing
the following:
1. The Notice of Annual Meeting and Proxy Statement/Prospectus, dated May
6, 1999.
2. A Form of Proxy relating to the Preferred Stock.
3. A form of letter that may be sent to your clients in order to obtain
your clients' instructions with respect to their vote and their designation
of a Soliciting Dealer.
4. Summary Listing Particulars, as amended.
5. PacifiCorp's Annual Report on Form 10-K/A for the year ended December
31, 1998.
6. A return envelope.
PLEASE BRING THE PROXY SOLICITATION TO THE ATTENTION OF YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PacifiCorp will reimburse you for your reasonable out-of-
pocket expenses.
Questions with respect to completing and submitting the Form of Proxy and
requests for additional copies of the enclosed materials should be directed to
the Information Agent, Innisfree M&A Incorporated, at 212-750-5833.
Questions regarding the terms of this proxy solicitation, including the
special cash payments, should be directed to the Co-Solicitation Agents,
Salomon Smith Barney (212-723-6106 or 800-558-3745), Donaldson, Lufkin &
Jenrette (212-892-2964 or 800-334-1604) and PaineWebber ( [or l).
Very truly yours,
Salomon Smith Barney Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
PaineWebber Incorporated
as Co-Solicitation Agents
<PAGE>
FORM OF PROXY
IN RESPECT OF
PACIFICORP PREFERRED STOCK
IN CONNECTION WITH THE
VOTE AND SPECIAL CASH PAYMENTS
RELATING TO
PACIFICORP
ANNUAL MEETING OF SHAREHOLDERS, JUNE 17, 1999
RECORD DATE: APRIL 30, 1999
To vote, this Form of Proxy must be delivered only to
PacifiCorp c/o Innisfree M&A Incorporated as Information Agent
<TABLE>
<S> <C> <C>
Facsimile Transmission Number: By Hand/Overnight Delivery By Registered or Certified Mail
(212) 750-5799
Confirm Receipt of PacifiCorp PacifiCorp
Facsimile by Telephone c/o Innisfree M&A Incorporated c/o Innisfree M&A Incorporated
(212) 750-5095 501 Madison Avenue, 20th Floor 501 Madison Avenue, 20th Floor
New York, NY 10022 New York, NY 10022
</TABLE>
For further information with respect to this proxy solicitation, please call
Innisfree M&A Incorporated toll-free at 877-750-2689 (banks and brokers call
collect at 212-750-5833)
________________________________________________________________________________
-IMPORTANT INFORMATION-
THIS FORM OF PROXY MUST BE RECEIVED BY THE INFORMATION AGENT NO LATER THAN JUNE
17, 1999 AT 11:30 AM, NEW YORK TIME (1:30 PM, UTAH TIME).
THE SPECIAL CASH PAYMENT FOR EACH OF ITEM 1 AND ITEM 4 WILL BE MADE TO THE
PREFERRED SHAREHOLDERS AS OF THE RECORD DATE ONLY IN RESPECT OF EACH SHARE OF
PREFERRED STOCK WHICH IS VOTED FOR THE APPROVAL OF THE APPLICABLE ITEM AND ONLY
IF SUCH APPLICABLE ITEM IS APPROVED AND ADOPTED, IN EACH CASE SUBJECT TO THE
TERMS AND CONDITIONS AS MORE FULLY DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS.
PLEASE REFER TO THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS FOR FULL DETAILS
REGARDING THE VOTE AND THE SPECIAL CASH PAYMENTS.
________________________________________________________________________________
This Form of Proxy should not be delivered to any person other than the above-
named Information Agent. HOLDERS SHOULD NOT TENDER OR DELIVER SECURITIES AT ANY
TIME.
<PAGE>
Proxy Solicited on Behalf of the Board of Directors for the Annual Meeting of
Shareholders
The undersigned hereby appoints Keith R. McKennon and Richard T. O'Brien, and
each of them, proxies with power of substitution, to vote in behalf of the
undersigned at the Annual Meeting of Shareholders of PacifiCorp on June 17,
1999, and at any adjournment thereof, all shares of the undersigned in
PacifiCorp. The shares represented by this proxy will be voted in accordance
with instructions, if given. If no instructions are given, they will be voted
FOR the approval of the merger proposal, FOR the directors, FOR the independent
auditor, and FOR the unsecured debt consent as described below. The proxies may
vote in their discretion as to other matters that may come before the meeting.
Item 1. Proposal to approve, as alternatives:
(1) The Agreement and Plan of Merger, dated as of December 6, 1998, by
and among Scottish Power plc, NA General Partnership and
PacifiCorp, as amended; and
(2) The Amended and Restated Agreement and Plan of Merger, dated as of
February 23, 1999, by and among New Scottish Power plc, Scottish
Power plc, NA General Partnership and PacifiCorp
FOR AGAINST ABSTAIN
Item 2. Election of two Directors in Class III
FOR WITHHOLD FOR ALL
EXCEPT
Nominees. Class III--Nancy Wilgenbusch and Peter I. Wold.
(To withhold your vote for a particular nominee, mark the
"For All Except" box and strike a line through the
nominee's name in the list above).
Item 3. Approval of Deloitte & Touche LLP as independent auditor
FOR AGAINST ABSTAIN
Item 4. Consent, under Article III, Section 18(b) of the Articles, to the
issuance by PacifiCorp from time-to-time of up to $5 billion of
unsecured notes, debentures or other securities representing unsecured
indebtedness, in addition to the amount of unsecured indebtedness
otherwise permitted thereunder.
FOR AGAINST ABSTAIN
IMPORTANT--READ CAREFULLY: Holder(s) must execute this Form of Proxy exactly as
their name(s) appear(s) on the securities. DTC Participant(s) must execute this
Form of Proxy exactly as their name(s) appear on the DTC position listing as of
the Record Date. If securities to which this Form of Proxy relates are held of
record by two or more joint holders, all such holders must sign this Form of
Proxy. If signature is 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 must be prepared to submit proper evidence satisfactory to
PacifiCorp of such person's authority to so act.
2
<PAGE>
________________________________________________________________________________
You must complete the following with respect to this Form of Proxy:
Name of Preferred Stock:______________________
CUSIP number of Preferred Stock:________________
Number of Shares:_____________________
________________________________________________________________________________
________________________________________________________________________________
SIGN HERE
Signature(s): _______________________________________________________________
Dated: ___________________________
Name(s): ______________________________________________________________________
______________________________________________________________________________
Capacity: _____________________________________________________________________
Address (include zip code): __________________________________________________
______________________________________________________________________________
Telephone Number ( ) ________________________
Tax Identification or Social Security No. _______________________
________________________________________________________________________________
COMPLETE ONLY IF APPLICABLE:
NOTICE OF SOLICITED PROXIES
As described in the Proxy Statement/Prospectus, dated May 6, 1999,
PacifiCorp will pay, in the amounts and on the terms and conditions set forth in
such Proxy Statement/Prospectus, solicitation fees to designated Soliciting
Dealers (as defined in such Proxy Statement/Prospectus). Soliciting Dealers are
only eligible for solicitation fees if they solicited the proxy of a beneficial
owner of 2,500 or fewer shares of PacifiCorp Preferred Stock of any series
(unless such Preferred Stock is the $1.16, $1.18 or $1.28 Series of No Par
Serial Preferred Stock, in which case 10,000 or fewer shares of any such
series).
The above signed represents that the Soliciting Dealer who solicited and
obtained this proxy is:
Name of Firm: _______________________________________________________________
Name of Broker: __________________________________
Telephone Number of Broker: ________________________________
Identification Number (if known): ____________________________________________
Address (include zip code): __________________________________________________
______________________________________________________________________________
3
<PAGE>
If the Soliciting Dealer specified above holds as a custodian the shares of
PacifiCorp Preferred Stock specified herein, please specify below each
beneficial owner of shares of PacifiCorp Preferred Stock (or applicable account
number) whose proxy you have solicited. Any questions as to what constitutes
beneficial ownership should be directed to the Information Agent. If the space
below is inadequate, attach a separate signed schedule using the same format.
Soliciting Dealers are only eligible for solicitation fees if they solicited the
proxy of a beneficial owner of 2,500 or fewer shares of PacifiCorp Preferred
Stock of any series (unless such Preferred Stock is the $1.16, $1.18 or $1.28
Series of No Par Serial Preferred Stock, in which case 10,000 or fewer shares of
any such series).
__________________________________________________________________________
Name or Account Number of Number of Shares
Beneficial Owner
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Securities Exchange Act of 1934, as amended, and the applicable rules and
regulations thereunder, in connection with such solicitation; (b) it is entitled
to such compensation for such solicitation under the terms and conditions of
such Proxy Statement/Prospectus; (c) in soliciting a proxy, it has used no
solicitation materials other than those furnished by PacifiCorp; and (d) if it
is a foreign broker or dealer not eligible for membership in the National
Association of Securities Dealers, Inc. (the "NASD"), it has agreed to conform
to the NASD's Conduct Rules in making solicitations of proxies.
SOLICITATION FEE PAYMENT INSTRUCTIONS
ISSUE CHECK TO:
Firm: ________________________________________________________________________
Attention: ___________________________________________________________________
Address (include zip code): __________________________________________________
______________________________________________________________________________
Phone Number: ________________________________________________________________
Taxpayer Identification or Social Security No. _______________________________
4
<PAGE>
EXHIBIT 99(d)
SOLICITATION OF PROXIES
FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS OF
PACIFICORP
FROM THE HOLDERS OF RECORD OF
<TABLE>
<CAPTION>
CUSIP
Series Number
------ -----------
<S> <C>
Serial Preferred Stock
4.52% Series...............695114-20-7.
4.56% Series.............. 695114-30-6
4.72% Series.............. 695114-40-5
5.00% Series.............. 695114-60-3
5.40% Series.............. 695114-70-2
6.00% Series.............. 695114-80-1
7.004% Series............. 695114-88-4
No Par Serial Preferred
Stock
$7.48 Series.............. 695114-65-2
$7.70 Series.............. 695114-67-8
$1.16 Series.............. 695114-73-6
$1.18 Series.............. 695114-74-4
$1.28 Series.............. 695114-75-1
5% Preferred Stock.......... 695114-50-4
</TABLE>
May 6, 1999
To Our Clients:
As an owner of shares of one or more of the issues of preferred stock of
PacifiCorp, an Oregon corporation ("PacifiCorp"), specified above
(collectively, the "Preferred Stock"), enclosed for your consideration is the
Proxy Statement/Prospectus, dated May 6, 1999 (the "Proxy Statement").
PacifiCorp is soliciting proxies in connection with the 1999 annual meeting of
shareholders (including any adjournments thereof, the "Annual Meeting") to,
among other things:
(i) consider and vote upon a proposal to approve alternate forms of an
agreement and loan of merger (the "Merger Agreement") among PacifiCorp,
Scottish Power plc and other (the "Merger Proposal"), with PacifiCorp
continuing as a subsidiary in the ScottishPower group, and
(ii) obtain the consent of a majority of the voting power of the
Preferred Stock, voting together as a single class, to an increase of $5
billion in the amount of unsecured indebtedness permitted under
PacifiCorp's Third Restated Articles of Incorporation (the "Unsecured Debt
Consent").
PacifiCorp's Board of Directors recommends voting in favor of the Merger
Proposal and the Unsecured Debt Consent.
If, but only if, the Merger Proposal is approved at the Annual Meeting and
all regulatory approvals specified in the Merger Agreement have been obtained,
PacifiCorp will make a special cash payment in the amount of $1.00 per share
($0.25 per share for the $1.16, $1.18 and $1.28 Series of No Par Serial
Preferred Stock (collectively, the "$25 Preferred Stock")) to each holder of
record of Preferred Stock as of the close of business on April 30, 1999 (the
"Record Date") that voted "FOR" the Merger Proposal.
In addition, if, but only if, the Unsecured Debt Consent is approved at
the Annual Meeting, PacifiCorp will make a special cash payment in the amount
of $1.00 per share ($0.25 per share for the $25 Preferred Stock) to each holder
of record of Preferred Stock on the Record Date that voted "FOR" the Unsecured
Debt Consent.
1
<PAGE>
These special cash payments will be paid out of PacifiCorp's general
funds. Payments with respect to the Merger Proposal will be made promptly after
receipt of the last regulatory approval for the Merger but prior to the
completion of the Merger while payments with respect to the Unsecured Debt
Consent will be made promptly after the Annual Meeting. However, no accrued
interest will be paid on the special cash payments regardless of any delay in
making payments.
WE ARE THE HOLDER OF RECORD OF SHARES OF PREFERRED STOCK HELD FOR YOUR
ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A VOTE OF SUCH SHARES CAN BE MADE ONLY
BY YOU AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. ANY PROXY
FURNISHED TO YOU IS SOLELY FOR YOUR INFORMATION AND CANNOT BE USED BY YOU TO
VOTE SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to vote any or all of
the shares of Preferred Stock held by us for your account, upon the terms and
subject to the conditions set forth in the Proxy Statement. An envelope to
return your instructions to us is enclosed.
PLEASE READ THE FOLLOWING INFORMATION CAREFULLY:
The Annual Meeting is scheduled to be held on June 17, 1999, at 1:30 p.m.,
local time, at the Salt Lake City Hilton Hotel, 150 West 300 South, Salt Lake
City, Utah. Your instructions to us should be forwarded to us in ample time to
permit us to submit a proxy on your behalf by the date of the Annual Meeting.
If you would like to revoke your proxy, you may do so, until the matters to be
considered are voted on at the Annual Meeting.
If you wish to have us vote any or all of your shares of Preferred Stock
held by us for your account upon the terms and subject to the conditions set
forth in the Proxy Statement, please so instruct us by completing, executing,
detaching and returning to us the instruction form on the detachable part
hereof. If you authorize the voting of your shares of Preferred Stock, all such
shares will be voted unless otherwise specified on the detachable part hereof.
In addition, if you own 2,500 or fewer shares of Preferred Stock of any
series (unless such Preferred Stock is the $25 Preferred Stock, in which case
10,000 or fewer shares of $25 Preferred Stock of any series) and wish to
designate a Soliciting Dealer (as referred to below) other than ourselves in
connection with the Merger Proposal and the Unsecured Debt Consent, please so
instruct us on the applicable portion of the instruction form.
A "Soliciting Dealer" shall include: (a) any broker in securities,
including each of the Co-Solicitation Agents in its capacity as a dealer or
broker, that is a member in good standing of any national securities exchange
or of the National Association of Securities Dealers, Inc. (the "NASD"), (b)
any foreign broker or dealer not eligible for membership in the NASD which
agrees to conform to the NASD's Conduct Rules in making solicitations, or (c)
any bank or trust company.
No solicitation fee, other than solicitation fees payable to the Co-
Solicitation Agents as described in the Proxy Statement, is payable to a
Soliciting Dealer with respect to a vote "FOR" the Merger Proposal or the
Unsecured Debt Consent unless the applicable Form of Proxy or Proxy Card-
Preferred Stock designates such Soliciting Dealers. No solicitation fee is
payable to a Soliciting Dealer in respect of shares of Preferred Stock
registered in the name of the Soliciting Dealer unless the shares of Preferred
Stock are held by the Soliciting Dealer as nominee and a vote is being made, or
a proxy in respect thereof is being granted, with respect to the shares of one
or more beneficial owners identified on the applicable Form of Proxy. No
solicitation fee is payable to a Soliciting Dealer if the Soliciting Dealer is
required for any reason to transfer any portion of the fee to a beneficial
holder. No solicitation fee will be paid to a Soliciting Dealer with respect to
shares of Preferred Stock held for its own account or shares beneficially owned
by the Soliciting Dealer. No broker, dealer, commercial bank, trust company or
other nominee is an agent of PacifiCorp, the Information Agent or the Co-
Solicitation Agents (each as defined in the Proxy Statement) for purposes of
this solicitation.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE PROXY SOLICITATION BY PACIFICORP
The undersigned acknowledges receipt of your letter and the Proxy
Statement/Prospectus, dated May 6, 1999 (the "Proxy Statement"), with respect to
a solicitation of proxies by PacifiCorp, an Oregon corporation ("PacifiCorp"),
for the 1999 annual meeting of shareholders of PacifiCorp (including any
adjournments thereof, the "Annual Meeting") to (i) consider and vote upon a
proposal to approve alternate forms of an agreement and plan of merger (the
"Merger Agreement") among PacifiCorp, Scottish Power plc and others (the "Merger
Proposal"), (ii) elect two Class III directors of PacifiCorp, each to serve for
a term of three years, and until their successors are duly elected and
qualified, (iii) act on the proposed ratification of the appointment of Deloitte
& Touche LLP to serve as independent auditor of PacifiCorp for the year 1999 and
(iv) obtain the consent of a majority of the voting power of the three classes
of PacifiCorp preferred stock (the "Preferred Stock"), voting together as a
single class, to an increase of $5 billion in the amount of unsecured
indebtedness permitted under PacifiCorp's Third Restated Articles of
Incorporation (the "Unsecured Debt Consent").
You are instructed to vote as designated hereunder all shares that the
undersigned is entitled to vote at the Annual Meeting in respect of the
following items:
1. Proposal to approve, as alternatives:
(1) The Agreement and Plan of Merger, dated as of December 6, 1998, by and
among Scottish Power plc, NA General Partnership and PacifiCorp, as amended; and
(2) The Amended and Restated and Plan of Merger, dated as of February 23,
1999, by and among New Scottish Power plc, Scottish Power plc, NA General
Partnership and PacifiCorp.
[_] FOR [_] AGAINST [_] ABSTAIN
2. Election of two Directors in Class III
[_] FOR [_] WITHHOLD [_] FOR ALL EXCEPT
Nominees: Class III--Nancy Wilgenbusch and Peter I. Wold
(To withhold your vote for a particular nominee, mark the "For All Except" box
and strike a line through the nominee's name in the list above)
3. Approval of Deloitte & Touche LLP as independent auditor
[_] FOR [_] AGAINST [_] ABSTAIN
3
<PAGE>
4. Consent, under Article III, Section 18(b) of the Articles, to the issuance
by PacifiCorp from time-to-time of up to $5 billion of unsecured notes,
debentures or other securities representing unsecured indebtedness, in addition
to the amount of unsecured indebtedness otherwise permitted thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
If, but only if, the Merger Proposal is approved at the Annual Meeting and
all regulatory approvals specified in the Merger Agreement have been obtained,
PacifiCorp will pay to the Soliciting Dealer designated below, if any, a
solicitation fee of $1.00 per share ($0.25 per share for the $1.16, $1.18 and
$1.28 Series of No Par Serial Preferred Stock (the "$25 Preferred Stock")) for
each share of Preferred Stock that is voted "FOR" the Merger Proposal by a
beneficial owner holding 2,500 or fewer shares of Preferred Stock of any series
(unless such Preferred Stock is the $25 Preferred Stock, in which case 10,000 or
fewer shares of $25 Preferred Stock of any series).
If, but only if, the Unsecured Debt Consent is approved at the Annual
Meeting, PacifiCorp will pay to the Soliciting Dealer designated below, if any,
a solicitation fee of $1.00 per share ($0.25 per share for the $25 Preferred
Stock) for each share of Preferred Stock that is voted "FOR" the Unsecured Debt
Consent by a beneficial owner holding 2,500 or fewer shares of Preferred Stock
of any series (unless such Preferred Stock is the $25 Preferred Stock, in which
case 10,000 or fewer shares of $25 Preferred Stock of any series).
The below signed beneficial owner of 2,500 or fewer shares of Preferred
Stock of any series (unless such Preferred Stock is the $25 Preferred Stock, in
which case 10,000 or fewer shares of $25 Preferred Stock of any series)
represents that the Soliciting Dealer specified below (if different than
ourselves) solicited and obtained this vote "FOR" the Merger Proposal and/or
"FOR" the Unsecured Debt Consent.
Name of Firm: ___________________________________________________________
Name of Broker or Financial Consultant:__________________________________
Telephone Number of Broker
or Financial Consultant:_________________________________________________
Identification Number (if known):________________________________________
Address (include zip code):______________________________________________
SIGN HERE
___________________________________
Signature(s):
4
<PAGE>
EXHIBIT 99(e)
PacifiCorp Proxy--PacifiCorp Common Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JUNE 17, 1999
The undersigned hereby appoints Keith R. McKennon and Richard T. O'Brien, and
each of them, proxies with power of substitution, to vote in behalf of the
undersigned at the Annual Meeting of Shareholders of PacifiCorp on June 17,
1999, and at any adjournment thereof, all shares of the undersigned in
PacifiCorp. The shares represented by this proxy will be voted in accordance
with instructions, if given. If no instructions are given, they will be voted
FOR the approval of the merger proposal, FOR the directors and FOR the
independent auditor, as described below. The proxies may vote in their
discretion as to other matters that may come before the meeting.*
Receipt is acknowledged of the Notice and Proxy Statement/Prospectus relating to
the 1999 Annual Meeting of the PacifiCorp Shareholders.
*PACORP, as custodian under the Company's Dividend Reinvestment and Stock
Purchase Plan and Bankers Trust Company of California, as trustee under the
Company's K-Plus Employee Savings and Stock Ownership Plan and Trust, are
instructed to execute a proxy, with identical instructions, for any shares held
for my benefit.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
Item 1. Proposal to approve, as alternatives:
(1) The Agreement and Plan of Merger, dated as of December 6, 1998, by
and among Scottish Power plc, NA General Partnership and
PacifiCorp, as amended; and
(2) The Amended and Restated Agreement and Plan of Merger, dated as of
February 23, 1999, by and among New Scottish Power plc, Scottish
Power plc, NA General Partnership and PacifiCorp
| | FOR AGAINST ABSTAIN
Item 2. Election of two Directors in Class III
FOR WITHHOLD FOR ALL EXCEPT
Nominees: Class III - Nancy Wilgenbusch and Peter I. Wold.
(To withhold your vote for a particular
nominee, mark the "For All Except" box
and strike a line through the nominee's
name in the list above).
Item 3. Approval of Deloitte & Touche LLP as independent auditor
FOR AGAINST ABSTAIN
Dated:_________________________, 1999
_____________________________________
Signature
_____________________________________
Signature if held jointly
IMPORTANT: Please sign exactly as your
name appears on your proxy. Joint owners
should each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title as such. THIS PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS. To facilitate
meeting arrangements, please indicate
number of persons in your party planning
to attend. _____
<PAGE>
PacifiCorp Proxy--PacifiCorp Preferred Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JUNE 17, 1999
The undersigned hereby appoints Keith R. McKennon and Richard T. O'Brien, and
each of them, proxies with power of substitution, to vote in behalf of the
undersigned at the Annual Meeting of Shareholders of PacifiCorp on June 17,
1999, and at any adjournment thereof, all shares of the undersigned in
PacifiCorp. The shares represented by this proxy will be voted in accordance
with instructions, if given. If no instructions are given, they will be voted
FOR the approval of the merger proposal, FOR the directors, FOR the independent
auditor and FOR the unsecured debt consent, as described below. The proxies may
vote in their discretion as to other matters that may come before the meeting.
Receipt is acknowledged of the Notice and Proxy Statement/Prospectus relating to
the 1999 Annual Meeting of the PacifiCorp Shareholders.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
Item 1. Proposal to approve, as alternatives:
(1) The Agreement and Plan of Merger, dated as of December 6, 1998,
by and among Scottish Power plc, NA General Partnership and
PacifiCorp, as amended; and
(2) The Amended and Restated Agreement and Plan of Merger, dated as
of February 23, 1999, by and among New Scottish Power plc,
Scottish Power plc, NA General Partnership and PacifiCorp
[_] FOR AGAINST ABSTAIN
Item 2. Election of two Directors in Class III
[_] FOR WITHHOLD FOR ALL EXCEPT
Nominees: Class III - Nancy Wilgenbusch and Peter I. Wold. (To
withhold your vote for a particular nominee,
mark the "For All Except" box and strike a line
through the nominee's name in the list above).
Item 3. Approval of Deloitte & Touche LLP as independent auditor
[_] FOR AGAINST ABSTAIN
Item 4. Consent, under Article III, Section 18(b) of the Articles, to the
issuance by PacifiCorp from time-to-time of up to $5 billion of
unsecured notes, debentures or other securities representing unsecured
indebtedness, in addition to the amount of unsecured indebtedness
otherwise permitted thereunder
[_] FOR AGAINST ABSTAIN
Dated: , 1999
--------------------------
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
IMPORTANT: Please sign exactly as your name
appears on your proxy. Joint owners should each
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS. To facilitate meeting
arrangements, please indicate number of persons in
your party planning to attend. _____
<PAGE>
Special Cash Payments to Preferred Shareholders
If, but only if, Item 1 is approved at the Annual Meeting and all
regulatory approvals specified in the merger agreement have been obtained,
PacifiCorp will make a special cash payment in the amount of $1.00 per share
($0.25 per share for the $1.16, $1.18 and $1.28 Series of No Par Serial
Preferred Stock (collectively, the "$25 Preferred Stock")) to you and any other
holder of record of PacifiCorp Preferred Stock as of the close of business on
April 30, 1999 (the "Record Date") that voted "FOR" Item 1. In addition, if,
but only if, Item 4 is approved at the Annual Meeting, PacifiCorp will make a
special cash payment in the amount of $1.00 per share ($0.25 per share for the
$25 Preferred Stock) to you and any other holder of record of PacifiCorp
Preferred Stock on the Record Date that voted "FOR" Item 4.
Notice of Solicited Proxies
Pursuant to the terms and conditions set forth in the Proxy
Statement/Prospectus dated May 6, 1999 (the "Proxy Statement"), fees to
Soliciting Dealers (as defined in the Proxy Statement) will be paid as follows.
If, but only if, Item 1 is approved at the Annual Meeting and all regulatory
approvals specified in the merger agreement have been obtained, PacifiCorp will
pay to the Soliciting Dealer designated below a solicitation fee of $1.00 per
share ($0.25 per share for the $25 Preferred Stock) for each share of PacifiCorp
Preferred Stock that is voted "FOR" Item 1 by a beneficial owner holding 2,500
or fewer shares of PacifiCorp Preferred Stock of any series (unless such
Preferred Stock is the $25 Preferred Stock, in which case 10,000 or fewer shares
of $25 Preferred Stock of any series). In addition, if, but only if, Item 4 is
approved at the Annual Meeting, PacifiCorp will pay to the Soliciting Dealer
designated below a solicitation fee of $1.00 per share ($0.25 per share for the
$25 Preferred Stock) for each share of PacifiCorp Preferred Stock that is voted
"FOR" Item 4 by a beneficial owner holding 2,500 or fewer shares of PacifiCorp
Preferred Stock of any series (unless such Preferred Stock is the $25 Preferred
Stock, in which case 10,000 or fewer shares of $25 Preferred Stock of any
series).
The above signed beneficial owner of 2,500 or fewer shares of PacifiCorp
Preferred Stock of any series (unless such Preferred Stock is the $25 Preferred
Stock, in which case 10,000 or fewer shares of $25 Preferred Stock of any
series) represents that the Soliciting Dealer who solicited and obtained this
vote in favor of Item 1 and/or Item 4 is:
Name of Firm:___________________________________________
Name of Broker or Financial Consultant:__________________________________
Telephone Number of Broker or Financial Consultant:_________________________
Identification Number (if known):___________________________
Address (include zip code):______________________________________
_______________________________________
